On Friday, Puerto Rico suffered the latest setback in the island's ongoing debt crisis. Talks on restructuring the nearly $9 billion debt of its power company, a government-owned utility, reached an impasse. While the utility, PREPA, said Sunday that it had reached a forbearance agreement with lenders, negotiations on its debt restructuring still have not reached a resolution since the last deal expired Friday night.
Power company officials have warned that failure to make payments on that debt could lead to delays in fuel shipments and blackouts across the island, which is home to more than 3 million people.
It's just one financial problem of many for the U.S. territory, where government agencies have amassed a debt of $72 billion.
"This financial crisis is just an expression of a deeper crisis, which is the collapse of the economic structure," says Rosario Rivera, an economist and professor at the University of Puerto Rico at Cayey. Rivera tells NPR's Michel Martin that the island has been in a recession since 2006.
Puerto Rico's constitution requires the government present a balanced budget at the end of every fiscal year. But reports indicate that the island has masked the problem in the past by using loans to balance the budget.
Rivera says deficits could be covered by raising taxes, cutting spending or issuing debt.
"What has been happening for the past maybe 20 years is that we have been covering those deficits strictly with debt," she says. "And it just hits us in the face that all the debt we have accumulated is bigger than our capacity to raise taxes."
In December, the government made headlines by spending $120 million to pay Christmas bonuses to public employees. "We can no longer do those things because those are politically-motivated decisions," Rivera says. "It's those kinds of decisions that have brought us here."
Puerto Rico's fate is controlled by Congress, and Republicans and Democrats there have offered competing ideas on how to solve the debt crisis. Republicans generally favor having the federal government take over Puerto Rico's finances, while Democrats want to allow the island to restructure and shed some of its debt through bankruptcy, which federal law currently prohibits.
"The scenario of bankruptcy is considered more appealing to us, because it might make us able to pay attention to the economy," Rivera says. The other option "would mean that we are basically not able to dictate public policy anymore."
In the meantime, the crisis has weighed heavily on Puerto Rico's residents, Rivera says.
"It's very difficult because the weight of the tax system is only on the shoulders of the working class. And that is a shrinking class. So it's very hard on us."
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