Puerto Rico’s governor issues ‘distress call’ to Congress

The announcement from the Government Development Bank for Puerto Rico that the December 1 payment had been made came just as the Caribbean island’s governor, Alejandro Garcia Padilla, was telling a congressional hearing that it was facing a crisis with potentially “catastrophic” consequences.

Puerto Rico narrowly avoided default on all of its debts Tuesday, saving face in on Capitol Hill where Gov. Alejandro García Padilla is testifying today. If Puerto Rico defaults on debt guaranteed by the commonwealth, the chance of it making another GO bond payment due on January 1 “would drop precipitously”, Miller added.

“Starting today, the commonwealth of Puerto Rico will have to claw back revenues pledged to certain bond issues in order to maintain essential public services”, Garcia Padilla said before the committee.

The Senate Judiciary Committee met Tuesday to discuss whether Puerto Rico should receive Chapter 9 bankruptcy protection, something USA municipalities are eligible for. Puerto Rico owes roughly $72 billion to bondholders and at least $43 billion more to its governmental retirement system.

“The financial somersaults and headstands must end”, said Democratic Sen.

Hanson says Puerto Rico will meet constitutionally backed general obligation bond payments through the current fiscal year, but that creditors in bonds linked to Prepa, the island’s power authority, and the HTA, as well as other bonds, will likely lose full payment. Here’s a brief explanation of how Puerto Rico accumulated so much debt, how its territorial status complicates matters and how it could emerge from a almost decade-long economic slump. Richard Blumenthal (D-Conn.). “I’m open to any proposal that will actually solve the problem”.

Grassley asked no questions of the governor after his testimony.

Ahead of Puerto Rico’s scheduled payment of more than $350 million on its debt, there was widespread speculation that the USA territory would default again.

With 45 percent of its 3.5 million population in poverty, Puerto Rico is a meteorological paradise mired in economic purgatory. “We are simply requesting rule of law”, he said.

It does need Congress’ assistance to deal with its debt. It has proposed a territorial bankruptcy regime that would allow Puerto Rico to restructure its debt and impose new oversight on the island’s finances, expand Medicaid benefits and allow residents to qualify for the same low-income tax credits that are offered to other American citizens through the Earned Income Tax Credit.

What do you think?