With the U.S. island territory facing a rapidly approaching payment deadline on Aug. 1, the Obama administration is urging Congress to grant Puerto Rico federal aid.
“By granting Puerto Rico access to an orderly bankruptcy regime as soon as possible, Congress can help put Puerto Rico — and the millions of U.S. citizens who live there — on the best path to a sustained recovery,” said Treasury Secretary Jack Lew in a letter to Sen. Orrin Hatch (R-Utah), who chairs the Senate Finance Committee.
By the end of the month, Puerto Rico owes its creditors $5.4 billion, and that is just a small part of their total $72 billion debt load. Puerto Rico’s total annual budget is only $9.8 billion.
Victor Suarez, an assistant to Puerto Rican Governor Alejandro Garcia Padilla said that the government will prioritize its responsibilities to it’s citizens.
“The payment will hinge on ‘the liquidity the government has to attend to each of its obligations,” said Suarez. “The priority will always be to attend to the essential services to citizens, such as security, health care and education.”
Lew warned Hatch that if Congress fails to grant Puerto Rico aid that there could be consequences for the rest of the U.S. economy.
“The continued deterioration of Puerto Rico’s economic and financial conditions has the potential to further harm retiree investment portfolios across the country,” Lew said. “A significant portion of Puerto Rico’s debt is still held directly by individual retail investors or indirectly through the municipal bond funds they own.”
The Obama administration has already ruled out the possibility of a federal bailout for Puerto Rico.
Puerto Rico, as a territory, does not have access to Chapter Nine Bankruptcy Protection.