The Jubilee Blog

Puerto Rico Debt Law Could Apply to US Virgin Islands

By Greg Williams

 A US law passed to address Puerto Rico's debt crisis could apply retroactively to the US Virgin Islands, another heavily indebted US territory. The US Virgin Islands has higher debt-per-person levels than Puerto Rico and ratings agencies downgraded its debt to "junk" status in December. The Puerto Rico Oversight, Management and Economic Stability Act became law in June and includes language allowing the government of the US Virgin Islands to opt into the law.

"People in the Virgin Islands are facing some of the same challenges that the people of Puerto Rico face," noted Eric LeCompte, executive director of the religious development coalition Jubilee USA. LeCompte testified to Congress and to Puerto Rico's oversight board on Puerto Rico's debt crisis. "What happens over the next few months with Puerto Rico will impact how other US territories deal with financial crisis."

Virgin Islands officials opposed last summer's Puerto Rico debt crisis legislation for fear that it could make it more difficult for the territory to borrow money. The territory has just over 100,000 residents compared to Puerto Rico's 3.5 million but owes $2.4 billion in debt, or $23,000 per person. 

Territory officials want Congress to amend federal law to treat territories and states equally on tax and health care issues. The Puerto Rico legislation created a Congressional task force to examine those issues. The task force released a report in December recommending that Congress pass many of those changes.

"There are some immediate steps Congress can take to help the Virgin Islands," stated LeCompte, who serves on United Nations expert groups on debt and finance. "Ultimately, the Virgin Islands will need to restructure its debt."

Read more about Puerto Rico debt crisis legislation

Read more about the Congressional Task Force on Puerto Rico's December 2016 report

Read more about Puerto Rico's debt restructuring process

Bahamas: Another Victim of Caribbean Debt Crisis

By Greg Williams

The ratings agency Standard & Poor's downgraded the Bahamas' debt to 'junk' status. The agency cited weakened economic growth due to hurricanes and high debt levels. The downgrade makes borrowing more expensive for the Bahaman government.

"Caribbean islands are at the forefront of an escalating global debt crisis," said Eric LeCompte, Executive Director of the religious development coalition Jubilee USA. LeCompte works with religious leaders to solve debt crises on several Caribbean islands, including Grenada and Puerto Rico. "Frequent hurricanes, unpredictable tourism revenues, high poverty levels and unsustainable debt levels make up a recipe for financial crisis."

Although many Caribbean nations are at high risk of debt crisis, only Haiti is classified as "low-income" and thus eligible for traditional debt relief initiatives from international financial institutions. Grenada's debt is 94% of the size of its economy and its poverty rate is 37%. Grenada's religious leaders, Jubilee USA and regional partners won over $100 million in debt relief in 2015 restructuring agreements between Grenada's government and its creditors. The agreements additionally included a "hurricane clause" to delay debt payments in the event of a major storm. Consecutive hurricanes in 2004-2005 caused damage equal to twice the size of Grenada's economy. The Bahamas' public debt rose 30% in the past four years and its poverty rate rose by one third over the past fifteen years.

"The Bahamas is another Caribbean example for why we need processes to resolve financial crisis," noted LeCompte, who serves on UN expert groups on debt and finance. "The Bahamas is the latest small island to face these challenges, but it won't be the last."

Read Standard & Poor's press release announcing the downgrade

Read more about Grenada's debt restructuring

Read Eric LeCompte's testimony to Puerto Rico's Oversight Board that recommends Grenada hurricane clause use

Puerto Rico Oversight Board Moves Forward on Debt Restructuring

By Greg Williams

Puerto Rico's "control" board sent a letter to current Governor Alejandro García Padilla and incoming Governor Ricardo Rossello stating areas for fiscal plan review and that debt restructuring talks are moving forward. TheFinancial Oversight and Management Board of Puerto Rico begins conversations with creditors this week.

"It's critical the board is moving forward with the process to restructure Puerto Rico's debt," said Jubilee USA Executive Director Eric LeCompte. LeCompte testified to the board in November and suggested the debt be reduced by as much as 60 percent. "I'm encouraged by statements from board members that a deep reduction of Puerto Rico's debt is needed."

The oversight board and debt restructuring process for the US territory are products of Congressional action this past summer. The Puerto Rico Oversight, Management and Economic Stability Act also temporarily prevents debt collection lawsuits against the heavily indebted island. Unless a formal debt restructuring process moves forward by February, the moratorium on lawsuits will expire.‎  

"If talks between creditors and Puerto Rico fail to achieve a deep cut in the debt, the oversight board needs to authorize the formal court arbitrated restructuring process," noted LeCompte. "Solving this crisis starts with restructuring the debt. Creating economic conditions for growth depends on a deep cut of the island's debt."

Read the letter

Read Eric LeCompte's testimony to the Financial Oversight and Management Board of Puerto Rico in November

Read a timeline of Puerto Rico's debt crisis

Congress Passes Anti-Corruption Act

By Greg Williams

The President can now impose economic sanctions on individuals involved in corruption or human rights abuses thanks to action by Congress. The so-called "Global Magnitzky Act" passed the Senate on December 8 as part of the National Defense Authorization Act. In 2012, an earlier version of the act passed that was specific to addressing corruption in Russia. The new legislation expands the President's powers to any individual no matter their country of origin. President Obama is likely to sign the bill into law soon.

"Congress is taking proactive, bi-partisan measures to fight corruption," said Eric LeCompte, executive director of the religious development group Jubilee USA. "Poor and vulnerable people are often the victims of corruption and human rights abuse."

The Magnitzky Act gives the President the authority to implement a number of penalties, including visa sanctions and asset freezes. The act is named for a Russian whistle-blower who died in prison in 2009. 

Congress is also considering other anti-corruption measures that would make it more difficult for foreign officials to launder money in the US financial system. The Incorporation Transparency and Law Enforcement Assistance Act would give law enforcement access to the names of the owners of so-called "anonymous shell companies" if they suspect those companies of criminal activity.

"There is more work for Congress to do on the global anti-corruption front and there's some interest on both sides of the aisle on moving forward," stated LeCompte.

According to a recent report from the research organization Global Financial Integrity, developing countries lose more money to corruption and tax evasion than they receive in loans, aid and from other sources combined. African countries lost a combined $862 billion to so-called "illicit financial flows" between 2004 and 2013.

Read the text of the Global Magnitzky Act

Read about the Incorporation Transparency and Law Enforcement Assistance Act