“The fact of the matter is the $73 billion in debt that Puerto Rico can’t resolve could lead to a humanitarian crisis unlike any Puerto Rico has ever seen”, Schumer said. In June 2015, Puerto Rico Governor Alejandro Garcia Padilla said the island can not repay the outstanding billions of debt.
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A Wednesday report from U.S. Bank Wealth Management’s fixed income team, recommended investors avoid Puerto Rico – especially until it is clear whether Congress will offer it any help. At a meeting on Monday in New York, Melba Acosta Febo, the president of the Government Development Bank for Puerto Rico, pleaded with 350 of San Juan’s creditors for more time to allow Puerto Rican officials to come up with a strategy to pay them.
“Action by Congress on Chapter 9 is necessary so that together we can solve this crisis”, Garcia Padilla said in an emailed statement. The total includes $9 billion owed by the island’s public utility, PREPA, and an array of mutual bond debts. As in Greece, the Puerto Rican economy has been destroyed by its participation in an unrealistic monetary system that it does not control and the failure of domestic politicians to confront their own insolvency.
The cause of this looming disaster, Blumenthal admitted, likely rests with Congress.
Whether Puerto Rico will still pay $36.3 million on bonds set to mature on August 1 remains to be seen as the supposed transfer meant to cover this.
If Puerto Rican officials were hoping the U.S. Federal Reserve would help alleviate its debt crisis, they’re now sorely disappointed.
“Congress really enabled, and perhaps encouraged, a lot of the debt that is now burdening Puerto Rico so heavily through the tax incentives that allowed businesses to move there and then move away”, Blumenthal said. The bill is expected to be part of a related proposal that was introduced by Puerto Rico Resident Commissioner Pedro Pierluisi (Democrat-Puerto Rico), the commonwealth’s Democrat representative in the U.S. House. Marco Rubio is from Florida and is seeking to be the GOP’s presidential nominee. Schumer said they have talked to a number of Republican colleagues, including Sen.
“We’re hopeful we can get this to be a bipartisan bill”, Schumer said during a news conference Wednesday. “It’s a workout that will restructure debts”, said Blumenthal. “The longer uncertainty persists, the more unstable the result”.
The Obama administration’s support of the bill may further discourage House Republicans from supporting it, Hanson said.
Hampton said the GDB had indicated that a supplemental request has been made to the legislature to provide an appropriation for the August 1 payment, “which could avert an actual default on the debt service payment”.
The Treasury Department urged Congress to quickly advance legislation that would provide an orderly way to manage the financial challenges of public corporations.
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Jaret Seiberg and Chris Krueger of Guggenheim Securities LLC said in a note Thursday that Republicans equate Chapter 9 bankruptcy “with a federal bailout of Puerto Rico’s excessive spending”.
