Puerto Rico Votes For Statehood In Referendum Marred By Record Low Turnout

A little over a month after the island effectively filed for bankruptcy protection, Puerto Ricans have voted overwhelmingly for statehood in a nonbinding referendum that was marred by low voter turnout.

Nearly half a million votes were cast for statehood, more than 7,600 for free association/independence and nearly 6,700 for independence, according to preliminary results. The participation rate was just 23 percent with roughly 2.26 million registered voters, prompting opponents to question the validity of a vote that several parties had boycotted, Fox News reported.

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It was the lowest level of participation in any election in Puerto Rico since 1967, according to Carlos Vargas Ramos, an associate with the Center for Puerto Rican Studies at Hunter College in New York. He also said that even among voters who supported statehood, turnout was lower this year compared with the last referendum in 2012.

"Supporters of statehood did not seem enthusiastic about this plebiscite as they were five years ago," he said.

The vote is nonbinding: The US Congress has the final say on Puerto Rio’s status, and there’s little support for taking on the economically-troubled island as a full member of the union.

That reality was apparently lost on Gov. Ricardo Rossello, the island’s governor, who accused Washington DC of hypocrisy in not honoring the will of the Puerto Rican people as expressed through a democratic vote.  

"From today going forward, the federal government will no longer be able to ignore the voice of the majority of the American citizens in Puerto Rico," Rossello said. "It would be highly contradictory for Washington to demand democracy in other parts of the world, and not respond to the legitimate right to self-determination that was exercised today in the American territory of Puerto Rico," according to the Associated Press.

Some see statehood as the best way to pull Puerto Rico out of its economic crisis; others blame the U.S. for the malaise and would rather seek independence after five centuries of what they call colonial rule, according to CNBC.

Puerto Rico"s main opposition party rejected the pro-statehood result.

"The scant participation ... sends a clear message," Anibal Jose Torres, a party member, told Fox. "The people rejected it by boycotting an inconsequential event."

Puerto Rico previously voted in favor of becoming a state in 2012 during a vote that was also distorted by low turnout, the Hill reported.

Puerto Rico"s governor requested bankruptcy protection for a portion of the island"s $73 billion in debt back in May, setting up a showdown with Wall Street firms owed billions of dollars, in what will be the largest-ever U.S. municipal debt restructuring.

The island’s finances are presently under the control of a federal oversight board.

Puerto Rico Files For Bankruptcy Protection In Largest Ever US Municipal Debt Restructuring

Update: PUERTO RICO FEDERAL BOARD FILES BANKRUPTCY CASE IN U.S. COURT

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As per our report last night that following the expiration of the litigation freeze, Puerto Rico"s creditors had filed a barrage of lawsuits against the insolvent Commonwealth a bankruptcy was imminent,  moments ago Puerto Rico"s governor announced the commonwealth will request bankruptcy protection of a portion of the island"s $70 billion in debt, setting up a showdown with Wall Street firms owed billions of dollars, in what will be the largest-ever U.S. municipal debt restructuring and further complicating the U.S. territory’s efforts to pull itself out of a financial crisis.

The Puerto Rico restructuring would be far larger than Detroit’s record-setting bankruptcy, with little to no details how long a court proceeding would last or what cuts would are imposed on bondholders. The island’s financial recovery plan covers less than a quarter of the debt payments due over the next decade.

Cited by AP, Gov. Ricardo Rossello said Wednesday that a federal control board overseeing the island"s finances has agreed with his request to put the debts before a court. He told reporters that he has requested that the U.S. territory"s federal financial oversight board commence a Title III proceeding under last year"s Puerto Rico rescue law known as PROMESA. Title III is an in-court debt restructuring process similar to U.S. Bankruptcy.

"We have reached this decision because it protects the best interests of the people of Puerto Rico," Rossello said.

“The board has agreed to submit Title III protection immediately and they will submit it.”

According to the WSJ, "the governor said he would petition Puerto Rico’s federal oversight board to invoke a quasi-bankruptcy law that puts its standoff with creditors before a judge. His decision marks the start to what could be a lengthy legal fight as Wall Street watches closely to see how other indebted municipal governments may fare in confrontations with investors."

As a reminder, Puerto Rico and its agencies owe $73 billion to creditors, dwarfing the roughly $18 billion owed by the city of Detroit when it entered what was previously the largest municipal bankruptcy in 2013.

Finally, Bloomberg notes that the financial collapse promises to impose deep losses on bondholders who for years snapped up Puerto Rico’s securities, even as the government contended with a shrinking economy and chronic budget shortfalls. U.S. states can’t file for bankruptcy, and investors bought the bonds assured that it wasn’t a legal option for Puerto Rico either.

BBG further adds that Rossello’s latest offers to creditors last week shows the commonwealth believes general obligations should receive a better recovery than its sales-tax bonds. The latest proposal offered as much as 90 cents on the dollar to general-obligation bondholders. One such bond due in 2035, was among the most actively traded at a price of 66, up from 64.7 on Tuesday.

Muni Massacre - Puerto Rico Bonds Plunge Near Record Lows

The last 5 days have seen the biggest crash in Puerto Rico muni bonds since June 2015 when the Governor declared debts "unpayable." As Bloomberg notes, investor speculation about the scale of the losses Puerto Rico will foist on bondholders caused the price of the island’s most active bond to continue to slide in the heaviest trading in nearly four months.

As Bloomberg detailed previously, the Puerto Rico fiscal recovery plan that was approved by the island’s federal overseers isn’t good news for investors holding its $70 billion of debt. The proposal, which was redrawn by Governor Ricardo Rossello to address concern that he was relying on overly optimistic forecasts, would leave less than $7 billion for debt-service costs from 2018 through 2026, according to figures included in the most recently released proposal.

That’s less than a quarter of what’s coming due and nearly $4 billion less than in Rossello’s initial proposal last month, which the board said didn’t do enough to steady the territory’s finances.

John Oliver explained the PR disaster a year ago...it"s only got worse.