Editorial: The Puerto Rico Crisis
The island is doing everything it can to restructure the debt it has with its creditors on individual negotiations.
Los recortes en el gasto público y enorme deuda de la isla ha generado manifestaciones en Puerto Rico. Crédito: Getty
SPANISH VERSION
The time has come for Puerto Rico’s much-feared payment default. The island’s government failed to fulfill their commitment to pay $58 million to its creditors, unleashing the beginning of a financial crisis comparable to Greece’s, but without the resources to overcome it.
Governor Alejandro García Padilla’s warning that the $72 billion debt was impossible to pay as it is today, came true. The fact that only $628,000 – which came from previously approved funds – were paid, is a clear sign of what lies ahead. This incomplete payment was interpreted by Wall Street as a default on the commitment, while, on the island, it is seen as an effort not to default.
Puerto Rico’s difficulties to overcome the financial crisis are linked to numerous factors such as a recession that hit harder than in the rest of the continent, high emigration rates that significantly reduced tax revenue, and problems that arise from the island’s unique condition of Commonwealth of the United States. All this disqualifies the island from filing for bankruptcy under U.S. law – because it is not a state of the union – and from resorting to international financial institutions – because it is not an independent country.
The island is doing everything it can to restructure the debt it has with its creditors on individual negotiations. Still, this is insufficient, as it cannot meet the draconian requirements usually applied to debtors, including reducing public spending and raising taxes. Puerto Rico needs a release that can only be awarded by Congress, but the Republican majority is uninterested in the problem, considering it a failure of the Democrats. Only Jeb Bush has expressed concern for the island’s situation.
Puerto Rico’s payment default on Monday was only the beginning. The negative economic impact of this crisis on the U.S. and on pension funds should be enough to move Congress into action as soon as they returns from recess, even if they do not sympathize with the difficult situation faced by Puerto Ricans.
