On August 3rd, the island of Puerto Rico officially went into default on its $72 billion in debt. The announcement is the culmination of several years of economic woes, but the island's debt has now become an urgent problem for the US territory — and therefore, for the US.
The problem is especially tricky because US bankruptcy laws don't allow government institutions in Puerto Rico to declare bankruptcy, as those in US states can. US policy did a lot to create the problem, and people on both sides of the debate — Puerto Ricans and the creditors who own their bonds — are Americans.
The worst news: The island's fate is in the hands of Congress.
1) Puerto Rico is sinking under $72 billion in debt
2) Puerto Rico's economy has been struggling since 2006, when the federal government stopped offering business incentives
3) People kept buying Puerto Rican bonds because of a quirk in the tax code
4) Hundreds of thousands of Puerto Ricans moved to the mainland, worsening the economic crunch
5) Puerto Rico is caught in a "death spiral" of emigration, tax hikes, and benefits cuts
6) An obscure federal law from 1920 makes everything more expensive
7) It's not just the central government that owes money — it's also utilities and other public corporations
8) Puerto Rico can't declare bankruptcy. Neither can its cities or utilities.
9) Democrats are pushing to allow limited bankruptcy; Republicans say it isn't enough
10) Creditors argue that changing the bankruptcy laws is unfair
11) But if nothing changes, Puerto Rico is looking at a slow, rolling fiscal disaster
Fonte: aqui
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