Bleeding to Debt: As With Detroit, So With Puerto Rico?
Puerto Rico is in a “death spiral,” Gov. Alejandro García Padilla has declared, unable to pay off an estimated $72 billion in debts. Padilla’s plea to creditors for concessions and more time on overdue notes isn’t playing well with bondholders, and Puerto Ricans have had it with government cutbacks and runaway increases in the cost of living to service the debt.
Padilla sees a way out—declaring bankruptcy. The problem is, by law only U.S. municipalities and states can seek bankruptcy protection from the courts, and Puerto Rico is a U.S. territory; it must first seek special dispensation from Congress.
Padilla has hired former federal judge Stephen Rhodes as a consultant on restructuring Puerto Rico’s debt. For many, it’s a troubling sign. Rhodes, now in private practice, was the judge who presided over Detroit’s contentious $18-billion bankruptcy, sanctioning wholesale plunder of the once-prosperous city.
Abayomi Azikiwe, editor in chief of Pan African News Wire and our correspondent on Detroit’s bankruptcy, says Padilla’s hiring of Rhodes is an indication that the Detroit bankruptcy model is about to be applied to Puerto Rico.