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Puerto Rico oversight board not doing enough for fiscal recovery, debt resolution, Bishop says

A protester holds a Puerto Rican flag during a demonstration in New York.

The Puerto Rico oversight board needs to engage with debt holders and move more aggressively to implement reforms that include funding public pensions, House Natural Resources Committee Chairman Rob Bishop, R-Utah, said in a letter Thursday to Jose Carrion, chairman of the federal Financial Oversight and Management Board.

Mr. Bishop oversaw legislation in 2016 creating the oversight process, which gives the board exclusive authority to enact and enforce fiscal plans and reforms, with the overall goal of improving access to capital markets. His committee has oversight authority on the board.

"I remain frustrated with the oversight board's inability and unwillingness to reach consensual restructuring agreements with holders of Puerto Rico's debt," Mr. Bishop said in the letter. The committee has been unsatisfied with the implementation of the Puerto Rico Oversight, Management and Economic Stability Act, and as the June 30 two-year anniversary approaches, a hearing "likely will be merited," he said.

Mr. Bishop stressed that the board has a statutory obligation to mandate reforms. The board's charter requires it to "respect the lawful priorities or lawful liens" of debt issued and work with creditors on holistic solutions, and any fiscal plans must "provide adequate funding for public pension systems," Mr. Bishop wrote.

On Wednesday, the board told Puerto Rico Gov. Ricardo Rossello that the commonwealth has until April 5 to submit a revised fiscal plan that includes 10% pension cuts and other reforms.

"One of the key tasks will be to ensure the government pension plans that so many Puerto Ricans rely on are properly maintained. A good start would be to determine what constitutes 'essential public services,' clearly defining where governmental cuts should occur," wrote Mr. Bishop, reminding the board that it has subpoena power to get accurate information from the commonwealth to increase transparency.

More accurate accounting of the commonwealth's resources could help negotiate a consensual agreement with debt holders "without delay and significant litigation expense," Dominic Frederico, president and CEO of Assured Guaranty, which insures debt holders, said in a statement Wednesday after the oversight board, governor and various agencies including Puerto Rico Electric Power Authority released fiscal plans.

"Each successive proposed fiscal plan reveals what many informed observers already suspected, that Puerto Rico had greater financial resources than it previously claimed.

"Every new fiscal plan paints a different picture, but they each continue to demonstrate a failure to comply with applicable law including the requirements of PROMESA, an unwillingness to repay debt obligations, a lack of recognition of the importance of capital market access for future economic growth, and the allocation of hundreds of millions of dollars to unnecessary litigation expenses," Mr. Frederico wrote.