SAN JUAN, Puerto Rico (AP) — Puerto Rico’s financial future hung in limbo Tuesday as economists and officials warned that the U.S. territory could head down Greece’s path if it is not allowed to declare bankruptcy as it struggles with $72 billion in public debt.
The island prepared to close a troubled fiscal year amid intense investor scrutiny just hours before the first of several multimillion-dollar debt payments is due. It remained unclear whether the government would meet the roughly $400 million obligation due Wednesday, obtain yet another extension from creditors, or default.
Gov. Alejandro Garcia Padilla has said that the overall debt is unpayable and that he will seek a moratorium on payments, although it is still unknown whether bondholders will agree to that or opt to resolve the issue in court.
“The bombshells that have come down from Puerto Rico in the last two days have not been particularly well orchestrated,” said David Tawil, co-founder and portfolio manager of New York-based Maglan Capital. “You really don’t do those things without … wanting to shock the market … or preparing the market and gaining consensus.”
Unlike Greece, Puerto Rico cannot seek emergency financing from an institution because it’s a U.S. territory. Some economists say that leaves bankruptcy as the most financially sound alternative, something U.S. rule do not now allow.
“Both are in desperate need of a solution, but neither can access the solution they’re asking for, which is a bankruptcy process,” said Eric LeCompte, executive director of Jubilee USA Network.
Full article: Economists say Puerto Rico needs right to bankruptcy option (AP)