The humanitarian crisis ravaging Puerto Rico is a result of the "behavior from some creditor groups just as we saw in Argentina and Greece,” Jubilee USA's Eric LeCompte told teleSUR.
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Puerto Rico’s Government skipped a US$422 million debt payment on Monday, with billions more still owed to hedge funds, credit unions and other bondholders.
LeCompte praised this decision in an interview Monday as important for the ordinary people of Puerto Rico as the government made the “significant choice” that “keeping schools and hospitals open” is more important than paying a debt. LeCompte argues this will help the government continue providing essential public services to its citizens, with around 45 percent of the U.S. territory's population living in poverty.
However, LeCompte fears that "a greater crisis" could hit the island in coming months. On July 1, Puerto Rico faces repayments to the “most challenging creditor groups," including Goldman Sachs, Oppenheimer and UBS Asset Management, who between them have “about US$10 billion stake in the debt” and believe that they say should be paid off first. “Paid before anyone else is paid, paid before other creditors, before pensions are paid and before teachers are paid," said LeCompte, who noted that such groups “have the lobyists on Capitol Hill” that regular people do not.
Puerto Rico has been faced with demands from creditors and others to undertake drastic spending cuts to create surpluses large enough to meet debt obligations.
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LeCompte is urging U.S. lawmakers to implement a variety of progressive reforms in order to “ensure the protection of the people of Puerto Rico, which—though a territory of the U.S., with its residents posessing U.S. citizenship— is denied the right that U.S states have to default on their debts
"Any solutions Congress moves forward should reduce child poverty and ensure strong provisions to restructure the debt,” LeCompte maintained.
In a speech on Sunday, Puerto Rican Governor Garcia Padilla announced that San Juan can’t pay creditors when it needs to fund public sector salaries, health, and education, saying Puerto Rico was facing the "worst financial and humanitarian crisis in its history."
The island’s missed payment puts pressure on investors to negotiate a broad debt restructuring agreement and pressures Congress to act on legislation to help ease the country’s financial crisis.
"I sure hope it creates a new sense of urgency for Congress to address this situation," White House spokesperson Josh Earnest said Monday.
Debate is swirling in Congress over how to aid Puerto Rico, which has a total of US$71 billion in bond debt.
Legislation to address the crisis is currently being delayed as lawmakers are now on a week-long recess. That bill would create a federal board to provide fiscal oversight and create a mechanism for the island to restructure its debts.