Puerto Rico signaled Monday that bankruptcy would be a way to restructure its burdensome debt, even while U.S. official say there will be no bail out for the Caribbean island.
Puerto Rican governor Alejandro Garcia Padilla called for a moratorium that would postpone debt payments for years, allowing the country to catch up on payments while also investing at home in key areas like job creation. He also called for the U.S. to allow the country to file for bankruptcy to enabled debt restructuring.
RELATED: Puerto Rico Governor: Public Debt is Not Payable
"Puerto Rico needs a complete restructuring and development plan, comprehensive and inclusive, that takes care of the immense problem we face today, not on a short but on a long-term and definitive basis," said Garcia Padilla.
Although Puerto Rico is a U.S. territory, it is not eligible to file for bankruptcy, an option only open to U.S. municipalities.
Puerto Rico's debt to GDP from Krueger report #muniland pic.twitter.com/ZouEeDbzp9
— Cate Long (@cate_long)
June 29, 2015
Puerto Rico faces a Wednesday deadline to make a payment on its US$73 billion debt load, but the cash-strapped country will not be able to make the payment to creditors. Much of Puerto Rico’s debt is held by individual investors on the United States mainland, in mutual funds or other investment accounts.
“[Puerto Rico] can no longer pay its debts, it will soon run out of cash to operate, its residents and businesses will suffer," said prominent former U.S. bankruptcy judge Steven Rhodes in an assessment, adding that Puerto Rico “urgently needs” U.S. assistance.
Puerto Rico’s debt crisis is coming to the fore not only after years of fiscal struggle, but also an ongoing independence movement seeking to break with U.S. and transform the island’s political system.
RELATED: UN Committee to Review Puerto Rican Independence
A report released Sunday on the debt situation commissioned by Puerto Rico and co-authored by a former International Monetary Fund economist recommends austerity measures including spending cuts and tax hikes, as well as debt restructuring, to address to fiscal situation. The report also revealed that the country's debt crunch is worse than previously thought.
In response to the recommendations, Garcia Padilla has said he refuses to support minimum wage cuts.
The news comes as Greece also faces dire debt woes, denied an extension by creditors on its debt payment and forced to close banks as it faces a potential exit from the Eurozone.
U.S. officials have said they will not support a bail out for Puerto Rico.