Puerto Rico’s bankruptcy filing last week should not have an impact on the island’s cooperativa system, according to the Association of Cooperative Chief Executive Officers of Puerto Rico.
“The cooperative sector has been preparing for this for some time,” the association said, in a statement issued after the island’s government filed for a type of bankruptcy protection from creditor
Puerto Rico has more than 100 cooperativas insured by the territory’s Corporation for the Supervision and Insurance of Cooperatives. That is in addition to the island’s credit unions that are insured by the NCUA.
The association pledged its support for any cooperativas that face severe economic problems as a result of the bankruptcy filing.
“Even if individual credit unions face major complications, our commitment as a sector is to maintain solidarity and ensure the protection of the assets of all cooperative members,” the association said, in a statement. “We will be there for everyone, as the cooperative values demand.”
Last year, then-Governor Alejandro Garcia Padilla warned last year that the credit union system could collapse because of the financial crisis that faced the island.
But the association, whose official name is the Asociación de Ejecutivos de Cooperativas de Puerto Rico, said that the cooperative sector has tested financial stress using various scenarios and has “identified that we are able to cope with all those circumstances.”
The island insured credit unions are heavily invested in government bonds issued by Puerto Rico.
Last year, an attorney representing 25 cooperativas said that government officials had coerced the financial institutions into investing in government bonds.
The bankruptcy filing came as a moratorium on lawsuits, authorized by Congress last year in legislation known as PROMESA came to an end. Puerto Rico officials and officials from an oversight board created by PROMESEA have been negotiating with creditors about settlements, but those negotiations so far have not been successful.
In the filing, the oversight board said that the government will not be able to meet its $74 billion debt burden and continue to provide government services to residents. And the government cannot refinance its debt, the oversight board said.
“In short, Puerto Rico’s crisis has reached a breaking point,” the oversight board said.
The association said that despite the bankruptcy filing, representatives of creditor cooperativas and the island government are continuing.
