Wednesday, July 24, 2024

Puerto Rico Calls for Bankruptcy, Asks Creditors to Postpone Debt Payments

Puerto Rico debt

Governor Alejandro Garcia Padilla asked that his commonwealth be allowed to restructure its $73 billion in public debt under U.S. bankruptcy code, saying the island will soon run out of cash and will likely have an effect on the roughly 5 million people of Puerto Rican descent living in the mainland United States. Puerto Rico offered a dire report for its flailing economy, including a plea from Gov. Garcia Padilla for a debt payment moratorium which would allow for a supposed economic rebound. Under current U.S. law, Puerto Rico nor its public agencies may not file for bankruptcy.

“I will ask everyone for sacrifices,” the Governor said in a televised address. “If we don’t assume that responsibility today, we risk not having solutions within reach or, even worse, losing control over them, giving the power of decision to others.”

Though the White House has noted that they will not contemplate a bailout for the territory, they still urged Congress on Monday to consider changing the law to allow for Puerto Rico to file for bankruptcy. Legislators are currently debating a $9.8 billion government budget that calls for $674 million in cuts and sets aside $1.5 billion to address the debt – a plan that needs approval by the end of the day Tuesday. And amid global debt crises facing the European Union and Greece, obvious parallels were drawn.

“If we look at how the government operates, the lack of transparency of public finances, the bad quality of statistics, the massive tax evasion, the government corruption … it’s the same in Greece like in Puerto Rico,” Sergio Marxuach, policy director at the Puerto Rico-based consulting group Center for the New Economy said. “When it comes to the magnitude of the crisis, obviously Greece is at a much more complicated and deeper level … and I hope we don’t end up there.”

With the debt deemed “not payable,” a tax hike is expected to go into effect on Wednesday aimed at generating more revenue while the Puerto Rican and Federal governments continue to deal behind closed doors.

FOX News Latino