On Wednesday, Puerto Rico neared insolvency as the troubled territory owned by the U.S. that has 3.4 million inhabitants started to buckle under the heavy load of debt that continues getting windowskeys.net bigger, which now has reached more than $73 billion.
The latest process taken by Puerto Rico is considered a prelude to eventual bankruptcy, but is set up for governments. Given the debt size, it would be the largest insolvency of its kind in U.S. history that would far exceed the $18 billion of restructuring Detroit needed in 2013.
The situation that Puerto Rico finds itself in is similar to that of Detroit, which followed years of stagnation in the economy and bad government policy.
Puerto Rico is a Caribbean Island approximately the same size as the state of Connecticut and half its GNP, requires billions of dollars to stimulate the economy and upgrade infrastructure, including its electrical and water delivery systems and its waste collection services. Huge pension obligations are also approaching.
A federal oversight board of seven members set the events on Wednesday into motion when it filed in courts in the U.S. to place the U.S. territory under protection from growing bondholder lawsuits.
This board had been empowered under federal legislation known as PROMESA or the Puerto Rico Oversight Management and Economic Stability Act. It will submit its plan to the court with power of imposing a settlement. A judge from a bankruptcy court will likely be appointed and oversee the entire process.
Investors bought bonds believing that Puerto Rico, as with states in the U.S., would not be given the opportunity to fail and that debt would always be protected.
However many agencies that issued the debt in the U.S. territory missed payments that put them into default.
A difficult maze of bonds issued by the government through a number of taxing authorities and different revenue streams have complicated the attempts by the government of Puerto Rico to settle with its bondholders.
Puerto Rico Governor Ricardo Rossello released information about the proceedings on Wednesday after his government could not persuade its creditors to accept less than the amount they are owed.
Some lawmakers in the U.S. remain hopeful. Rob Bishop a member of the U.S. House and the Chairman for the Natural Resources Committee, who last year led negotiations buy windows 10 key to form the oversight board for the territory’s finances, said that body must have space to work and does not want the U.S. Congress to superimpose over them and attempt to then micromanage the territory.