Puerto Rico Governor Alejandro Garcia Padilla wants the commonwealth’s $73 billion debt to be restructured under Chapter 9 the U.S. bankruptcy code.
Padilla spoke in a televised address Monday, the day after a group of former International Monetary Fund officials released a report concluding that Puerto Rico’s debt was unpayable.
The report found “antiquated methods of accounting, public corporations without their own form of income, and a lack of fiscal controls and reliable statistics, that among many other factors conspired against the goodwill of many public servants to produce the reality we now face,” the governor noted in his address.
According to the report, even if Padilla’s government increased taxes and cut spending, it would not solve the debt burden because of the magnitude of the amount owed.
“The only way that we can climb out of this mire is if we come together and are willing — bondholders included — to assume shared sacrifices today, so that tomorrow we may all share the benefits of a growing economy,” Padilla said.
Chapter 9 of the bankruptcy code providers distressed municipalities with protection from creditors. Padilla said, “It is time for us to ask for concerted actions from Washington … wherein changes can finally be made to Chapter 9, so that Puerto Rico can count on the same protections as other jurisdictions.”
A Reuters article Tuesday said the federal government is unlikely to get involved, despite months of talks between Puerto Rico and the U.S. Treasury about options for seeking financial help, according to a source familiar with the situation on Friday.
“There’s no one in the administration or in D.C. that’s contemplating a federal bailout of Puerto Rico,” a White House spokesman told Reuters.