Puerto Rico’s Debt: Still Foreign in a Domestic Sense

Abstract

Puerto Rico, an unincorporated U.S. territory containing over three million American citizens, is suffering from a humanitarian and economic disaster unparalleled in United States history. After a decade of economic recession, Puerto Rico declared that its debts could not be repaid, setting the stage for the United States’ largest debt restructuring. In addition, the Caribbean island has been frequently assailed by natural disasters, including the ongoing COVID-19 pandemic. In response to the Commonwealth’s economic crises, Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) in 2016. That legislation established an Oversight Board to preside over the restructuring process and to reform core government processes. The Board’s task is to help Puerto Rico achieve fiscal responsibility and regain access to capital markets. This unprecedented solution faces numerous and ongoing constitutional challenges. Most recently, the Oversight Board overcame an existential challenge under the Appointments Clause. In Financial Oversight and Management Board for Puerto Rico v. Aurelius Investment, LLC, the Supreme Court upheld the Board’s constitutionality, but it also reminded Puerto Ricans that they, in effect, remain foreign to the United States in a domestic sense. In this vein, this Article addresses the antecedents of Puerto Rico’s economic collapse and its ongoing territorial relationship with the United States and discusses the extent to which the island’s economic collapse and quasi-sovereign debt restructuring are tied directly to this pseudo-colonial relationship.

Keywords: Territory Clause; Puerto Rico; Sovereign Debt; Debt; Colonial