Editorial: Crisis in Greece and Puerto Rico
The alternative for Puerto Rico is to declare bankruptcy under Chapter 9 of the U.S. Bankruptcy Code, like Detroit did.
SPANISH VERSION
Puerto Rico and Greece face similar problems. These problems resulted from the unequal relationship between the Greek and the European economies, and the undefined situation of Puerto Rico’s status in the United States. In both cases, the only solution to the crisis lies exactly where the problems originated.
Greece, for example, after a popular referendum rejected the draconian requirements of the International Monetary Fund (IMF) and European banks, has no choice but to go back to negotiations because it urgently needs funds. This will be a temporary solution that doesn’t solve the main problem: having very different economies and governmental cultures tied to the same currency, the euro.
Puerto Rico’s situation is more complex. It doesn’t have the structure of a politically sovereign nation like Greece, which would let it lead its own destiny. It also doesn’t have the financial options available to governments that are full members of the United States.
Puerto Rico already said that it isn’t in a position to pay its creditors. Like Greece, it rejects a solution that would be painful for its people and doesn’t include a way to reduce the debt and move the economy forward. Puerto Rico has less power than Greece when it comes to negotiating. It must negotiate with private banks, which lack incentives—unlike European banks, which are afraid of the effect that the Greek crisis can have on the European Union.
The alternative for Puerto Rico is to declare bankruptcy under Chapter 9 of the U.S. Bankruptcy Code, like Detroit did. For that to happen, a law that provides that option is needed. According to its Constitution, Puerto Rico must first pay its foreign debt before meeting its social commitments, like retirement payments.
Among those who support the legislative change are Senators Charles Schumer and Richard Blumenthal, presidential hopeful Hillary Clinton and the influential Rep. Steny Hoyer, all of them Democrats. The problem is that Republicans, who set the Congressional agenda, are paying no attention to this urgent matter that they consider a failure of Democratic policies.
Europeans recognized the danger of a domino effect if Greece fails. If the U.S. Congress doesn’t do the same and act, there could be very serious financial repercussions.
