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 largest debt restructuring in U.S. history. In addition, the Caribbean island has been frequently assailed by natural disasters, including the recent COVID-19 pandemic. In response to the Commonwealth’s economic crises, Congress passed PROMESA in 2016 to establish an Oversight Board to oversee 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 the capital markets. This solution, however, is unprecedented, and has faced 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 in so doing, reminded Puerto Ricans that they in effect remain foreign in a domestic sense to the United States. In this vein, this Note addresses the antecedents of Puerto Rico’s economic collapse, 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.