Puerto Rico Governor Petitions Congress for Bankruptcy
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Governor Alejandro Garcia Padilla begged the U.S. congress to pass a law allowing the territory to file bankruptcy, according to AFP. Puerto Rico owes more than $70 billion to creditors, and the governor maintains that bankruptcy will prove necessary to restructure bonds and avert political instability.
The governor urges Congress to permit the Caribbean island to file bankruptcy by the end of December, but President Obama and members of Congress remain resistant to the idea. The government concedes that Puerto Rico is in for another lost decade if the status quo continues.
Governor Alejandro Garcia Padilla begged the U.S. congress to pass a law allowing the territory to file bankruptcy, according to AFP. Puerto Rico owes more than $70 billion to creditors, and the governor maintains that bankruptcy will prove necessary to restructure bonds and avert political instability.
The governor urges Congress to permit the Caribbean island to file bankruptcy by the end of December, but President Obama and members of Congress remain resistant to the idea. The government concedes that Puerto Rico is in for another lost decade if the status quo continues.
The situation in Puerto Rico is dire to the point where the governor traveled to Washington, D.C. to address Congress, but his pleas may fall on deaf ears. U.S. law forbids Puerto Rico from filing bankruptcy protection or entering default. The problem began in 2006 with the elimination of exemptions for corporate income taxes, and these exemptions propped up the economy for decades.
Puerto Rico’s economy grew worse with the 2008 economic crisis, and analysts believe the island’s default remains inevitable in the short-term.
Circulating Bills
The chances of Puerto Rico getting its full wish are scant, but some congressional members have taken steps to remedy the situation. For instance, Congressman Sean Duffy introduced a bill giving Puerto Rico the option to restructure its municipal debt.
Moreover, his bill affords the same Chapter 9 proceedings as other states, upon the condition that Puerto Rico agrees to stricter oversight to maintain financial stability, notes Reuters. Senator Charles Schumer (NY-D) has a similar bill that would allow Puerto Rican municipalities to file bankruptcy, but Senator Orin Hatch (UT-R) blocked the bill, and Hatch plans to introduce his own version to the floor.
Societal Fallout
While Congress bickers over Puerto Rico’s future, many people are suffering and fleeing to the mainland. This is not good news for the Puerto Rican government, as officials need as many people as people to fuel the economy, and college graduates have left in droves.
Roughly, 48,000 people a year moved from Puerto Rico to the mainland between 2010 and 2013, and the current population on the island is at a 15-year low. Many exit due to massive cuts in public spending, resulting in poor sanitation and healthcare services, and the closing of schools and government agencies.
In addition, the public pension system has fallen $34 billion in the hole, and harsh austerity measures placed an extra burden on the citizenry. As of now, the country has no immediate plans to solve the downturn, but the U.S. and Puerto Rican governments plan to coordinate in improving infrastructure, fostering job creation, and reducing the island’s dependency on the United States.
