May 25, 2016 / 12:06 AM / a year ago

Lawmakers see path ahead for Puerto Rico rescue plan

Cars move in the afternoon traffic on the expressway Las Americas in San Juan, December 1, 2015.Alvin Baez

WASHINGTON (Reuters) - A Congressional plan to help Puerto Rico shed billions of dollars in bad debt can win enough support to make its way to a vote in the House of Representatives, U.S. lawmakers who support the measure said on Tuesday.

Under the rescue plan, an independent panel would erase some of Puerto Rico's $70 billion debt load that has crippled the island state already facing a 45 percent poverty rate and the Zika epidemic.

U.S. Speaker of the House Paul Ryan, a Republican, has endorsed the fix and the fate of the measure could help define his tenure as party leader which began in October.

But Ryan can rely on some Democrats who say the rescue will aid the ailing island even if some of the legislation's provisions are too punitive of Puerto Rico.

"This is the only bill that will attract enough support from our colleagues on the Republican side to pass in a Congress they control," said Rep. Raul Grijalva, the leading Democrat on the House Natural Resources Committee.

Grijalva of Arizona said he expects lawmakers will ratify the plan when they write the fine-print of the legislation at a hearing on Wednesday.

Rep. Rob Bishop, the panel's chairman, postponed a law-writing session in April because of opposition to the Puerto Rico rescue but on Tuesday he said he was hopeful.

Ryan and Democratic leaders stress the aid plan for the

island means relief without federal spending though investors will see a cut in their Puerto Rican bond holdings and they are fighting for terms that could limit the hit to their portfolios.

A leading voice for investors, the Securities Industry and Financial Markets Association (SIFMA), on Tuesday backed the plan which expects Puerto Rico to control deficit spending.

A Puerto Rico oversight panel, or control board, could veto Puerto Rico spending measures that it finds irresponsible and SIFMA endorsed such "broad powers to enforce and monitor fiscal discipline."

The oversight board would have the power to push creditors to accept a write-down of debt, even over the objections of holdout investors.

The plan would also ask the oversight board to protect the interests of Puerto Rico pensioners who rely on a system that is now under funded by at least $40 billion. 

Reporting By Susan Cornwell, Richard Cowan and Patrick Rucker; Editing by Bernard Orr

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