Puerto Rico is at the brink of disaster. The small commonwealth home to about 3.5 million residents has been in the grip of a $72 billion debt crisis that is starting to consume the island. On May 1, Puerto Rico was unable to make a $422 million debt payment. Even the governor of Puerto Rico, Alejandro Garcia Padilla says that "the debt is not payable." This debt crisis has negatively impacted people on the island; poverty levels have gone up, taxes have gone up greatly and essential services such as schools and even hospitals have been cut. So how did Puerto Rico even get into this crisis in the first place?
In the 1970's, Puerto Rico was a haven for manufacturing companies. Many tax breaks attracted companies to Puerto Rico that would have otherwise moved overseas. This did not last, though, as the U.S. eliminated these tax breaks to offset tax breaks in the States as well as try and recover from the 2008 recession. This caused much of the manufacturing industry in Puerto Rico to collapse. Puerto Ricans then began borrowing money through municipal bonds. People would buy into these bonds to help fund the government, which would then be paid back with interest later. This brought in a lot of money to Puerto Rico, but has also been the cause of this debt. Now, Puerto Rico has all of this debt and they are sinking.
Much of Puerto Rico's debt is now owned by hedge funds that are also known as vulture funds. These funds buy bonds in struggling areas to try and get a quick turnover of money and will not rest until they recieve payout, which is putting Puerto Rico in a dangerous situation. The island either needs to pay up or face lawsuits. Puerto Rico has been trying to figure legal routes to deal with their debt, but keep many of the laws that apply in the United Sates that do not apply in Puerto Rico. Puerto Rico is unable to declare Chapter 9 bankruptcy relief, because it only applies to the states. Congress has been exploring options on how to help Puerto Rico out of this hole, but so far, nothing has been done.
Puerto Rico is struggling. This debt is starting to consume Puerto Rico and could end in catastrophic consequences. The U.S. government and Puerto Rico need to work together to figure out how to fix this crisis. There have been many outspoken voices on the situation including Lin-Manuel Miranda, the writer and star of the Broadway hit "Hamilton." Also John Oliver, host of HBO's late night show "Last Week Tonight," talked about the Puerto Rican debt crisis and many of the issues surrounding it. The clip can be found on the show's YouTube channel. Hopefully a resolution will be in the future that will help Puerto Rico out of this crisis.
