Recent headlines have focused on Gov. Alejandro García Padilla's latest remarks that the debt is not payable. While it may have been a surprise to many in the U.S., many island residents were just counting the days until this happened.
“I think it was something we were all expecting,” says Caguas resident Jorge Vadell. “Past administrations just let the debt escalate uncontrollably.”
San Juan resident Antonio Gonzalez, who has a background in finance, says that Governor Padilla’s words on Monday mark a great step forward. “It was like a reality check for everybody. Now people can really understand where we’re standing.”
On the other hand, the recent news made Lizette Rodriguez from Caguas, Puerto Rico feel bad. “I don’t like that we always have to talk about our country’s economic situation so pessimistically. I know it’s sad that we have to face this debt payment, but Puerto Rico has a lot of people that are prepared and committed to moving things forward.”
Among Puerto Rico’s working and middle class, frustration prevails as the crisis worsens. For them, the problem is that nobody’s talking about Congress’ lack of proactive response. ”The federal government can and should do more to provide solutions to help local officials solve the crisis,” said Miguel Columna, who grew up in Puerto Rico and now oversees an economic development non-profit in the island.
Puerto Ricans say they know that the $73 billion debt is not payable as it is, and they’re not trying to avoid the billion-dollar debt payment, but the reality is the commonwealth lacks the legal tools needed to pay the debt.
“We have no legal protection, and we won’t get any economic help. Then where do we stand?” said Gonzalez, referring to the fact that Puerto Rico’s status as a U.S. commonwealth and not a state doesn’t allow them to declare bankruptcy.
Puerto Rico’s unique territorial relationship with the U.S. has sparked a fiery debate in Congress about which of these two legal actions is best to solve the economic crisis.
There’s the Puerto Rico Chapter 9 Uniformity Act (HR-870), which would allow Puerto Rico to restructure some of its public utilities - in particular its debt-ridden electric utility - using Chapter 9 bankruptcy filing, just like Detroit did.
“We have no legal protection, and we won’t get any economic help. Then where do we stand?” says one island resident who is frustrated at the lack of action in Congress on Puerto Rico.
“I think that filing for bankruptcy is the best chance we have to restructure our debt and improve how we manage it.” added Vadell, who works as a general manager at a federal credit union in Puerto Rico.
“Congress knows which are the legal tools that have worked for other states, but they don’t necessarily know how to make them work for Puerto Rico," he said.
Even though Antonio Gonzalez agrees with Vadell, that allowing Puerto Rico’s public corporations file bankruptcy under Chapter 9 is the best-case scenario, Gonzalez doesn’t think this bill will go through Congress that easily.
"The bill is a retroactive position, which means that they are asking for a change in the conditions in which bonds were sold in the first place. That’s going to be hard to pass because contracts are sacred, especially for people in the U.S. I think it’s unlikely for this to become a law, especially with the disadvantage we have already for not having a representative in Congress that can vote,” said Gonzalez, who is a financial advisor in Puerto Rico.
Even though the Chapter 9 bill has bipartisan support from the Puerto Rican government, Congress has not mirrored this consensus. There’s a push back movement to this bill, mostly driven by conservatives, called No Bailout for Puerto Rico.
One of the options advocated by some who oppose allowing Puerto Rico to restructure is a push for a financial board control. This would mean that an executive body of federal government officials would have power to make decisions at large in Puerto Rico.
“The same thing happened with DC when they had their crisis. Washington, DC is not a state and they were assigned a board control, but Puerto Rico is not even as small as DC and that’s not the biggest problem. These leaders will have absolute power to start making decisions in a territory in which they really don’t know much about. It’s not a good alternative,” said Gonzalez.
For Miguel Columna, who is also the co-founder of ConPRmetidos, Congress is very aware of the legal tools needed to make things better for Puerto Rico.“But the direct interests of many members of Congress align more closely with powerful interests that benefit from the status quo. They just haven’t done what they can do and is necessary to aid,” added Columna.
Residents like Lizette Rodriguez hope that Congress reaches a decision keeping in mind the hard-working spirit of the Puerto Rican people. She hopes that Congress allows them to restructure their own debt by filing for bankruptcy.
“Puerto Rico has so many professionals who are capable of restructuring our payment system, especially out of the partisan environment," said Rodriguez. "There are so many small businesses, so many people with the courage and drive to work and own businesses. We can’t keep penalizing the professionals that have to work and pay increasing taxes [and] can’t enjoy the benefits of all their hard-work.”