Greece has received an overwhelming glut of attention over the summer for its financial woes, but the brewing debt crisis in Puerto Rico seems to have been underhyped. What consequences might Puerto Rico’s financial predicament have for the US? How has Puerto Rico’s unique status as a US Territory contributed to its economic stability? Could this debt quagmire change the conversation about the territory’s statehood potential? Join us as we delve into the causes, characteristics, and consequences of the Puerto Rican debt crisis.
“The debt is not payable… this is not politics, this is math.”
-Gov. Alejandro Garcia Padilla
The governor of Puerto Rico has stated that the territory is unable to repay most of its $72 billion in bond debts. Puerto Rico is a territory of the United States. While its political status gives Puerto Rico some advantages that states lack (such as no tax on corporate profits), there are some concurrent drawbacks that it wouldn’t face if it were a state. One of the most critical disadvantages is that the Puerto Rican government cannot file for bankruptcy, a right that the 50 states all enjoy. This restriction even applies to sub-territorial public entities on the island. Most of the debt in question, around 75%, is composed of a complex and overlapping tangle of public bonds issued by the Puerto Rican government, municipalities, and government-owned utilities. Additionally, because Puerto Rico is still within US legal jurisdiction, bondholders can sue the territory in US court and compel it to repay its outstanding debt. Without a bankruptcy option, Puerto Rico may be forced to make drastic cuts in services and public employee salaries to pay its debt.
It is important to remember that, because Puerto Rico is a US territory, Puerto Ricans have US citizenship no matter where they live, making it easier for many young people to leave the island to seek out better job opportunities on the mainland. More Puerto Ricans live on the US mainland (almost 5 million people) than on the island of Puerto Rico itself (3.5 million)!
Puerto Rican Statehood and the 2016 Election
It is unclear if Puerto Rico’s potential for statehood will become a significant issue in the 2016 election. The “Hispanic voting bloc” may not be as monolithic as is generally assumed in mainstream political analysis. There are a million Puerto Ricans living in Florida, which may explain Jeb Bush’s suggestions that he would support a path to statehood for Puerto Rico and would like for the territory to at least be able to file for bankruptcy. Ultimately, while the fate of Puerto Rican statehood will get lip service from contenders on both ends of the spectrum, the issue will probably not be among the most critical in the 2016 presidential campaign.
Still interested? Check out some of the sources we used to learn about this issue:
- Vox: The Puerto Rico crisis, explained
- Time: Everything You Should Know About Puerto Rico’s Economic Crisis
- Center for Strategic & International Studies (CSIS): Is Statehood the Solution to Puerto Rico’s Default?
Photo by Internet Archive Book Images.