The Miami Herald has published an editorial recapping Puerto Rico’s debt crisis, concluding that “[f]ull statehood may be the only enduring solution that gives its people equality and establishes a framework for sustained prosperity after it emerges from crisis.”
Puerto Rico is deeply in debt, and the Governor of Puerto Rico has announced that the territory simply cannot pay back its debt. In these circumstances, restructuring of debts becomes a necessity and Puerto Rico is limited in its ability to do this because the territory is excluded from the use of chapter 9, the section of the bankruptcy code that allows restructuring of debts by municipalities and other public entities.
The editorial points out that Congress is considering allowing Puerto Rico to use chapter 9 to restructure its debt in an orderly fashion.
Already there is a move in Congress… to allow Puerto Rico’s municipalities and public corporations to seek protection under Chapter 9 bankruptcy. That could help the island avoid the worst consequences of the debt crisis and provide needed debt relief, but it’s only a partial remedy for Puerto Rico’s larger ills.
There are bills pending in the U.S. Senate and House of Representatives to make this possible.
The editorial also notes that Puerto Rico’s economy has issues apart from the debt. The chart below shows that from 2008 on, Puerto Rico’s GDP has generally been shrinking rather than growing.