The root causes of Puerto Rico's debt crisis bear a striking resemblance to the financial collapse of Detroit, which filed for bankruptcy in 2013 to escape a crushing debt load amid a severely diminished tax base.
But there's one big difference between Puerto Rico and Detroit, aside from the obvious fact that one is a commonwealth and one is a city: Puerto Rico can't legally file for bankruptcy.
At least not yet.
The drumbeat for bankruptcy in Puerto Rico gained momentum Tuesday as investors and politicians grappled with the U.S. territory's downward spiral into insolvency and witness Greece's descent into financial anarchy amid a sovereign debt crisis.
Puerto Rico has racked up some $72 billion in bond debt and more than $50 billion in retiree promises, including pensions and health care, as population has fallen and politicians issued debt to pay the bills. One of the island's municipal entities may default on certain bonds as soon as Wednesday, analysts said.
Puerto Rico Gov. Alejandro Garcia Padilla has said that the island's debts are "unpayable" in full and repeated his call for Congress to change U.S. laws to allow the commonwealth to weigh Chapter 9 bankruptcy.
Padilla hired the former U.S. bankruptcy judge who oversaw Detroit's case, Steven Rhodes, to advise him on the commonwealth's pursuit of Chapter 9 bankruptcy. Although representatives for Puerto Rico's creditors and the government are negotiating potential settlements, Rhodes said it appears to be too difficult to bring all sides to the table without bankruptcy.Read the rest of the story HERE and find a link to a related story and a video below:
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