SAN JUAN, Puerto Rico -- Economists and officials warned Tuesday that Puerto Rico could head down Greece's path if the U.S. territory is not allowed to declare bankruptcy as it struggles with $72 billion in public debt.
The island prepared to close its fiscal year amid intense investor scrutiny just hours before the first of several multimillion-dollar debt payments is due. It remained unclear whether the government would meet the roughly $400 million obligation due today, obtain yet another extension from creditors, or default.
Gov. Alejandro Garcia Padilla has said the overall debt is unpayable and that he will seek a moratorium on payments, although it is still unknown whether bondholders will agree to that.
"The bombshells that have come down from Puerto Rico in the last two days have not been particularly well orchestrated," said David Tawil, co-founder and portfolio manager of New York-based Maglan Capital.
Unlike Greece, Puerto Rico cannot seek emergency financing from an institution because it's a U.S. territory. Some economists say that leaves bankruptcy as the most financially sound alternative.
"Both are in desperate need of a solution, but neither can access the solution they're asking for, which is a bankruptcy process," said Eric LeCompte, executive director of Jubilee USA Network.
He noted that if Puerto Rico were considered a developing country, it would be the eighth most heavily indebted country in the world. If the island does not obtain the right to declare bankruptcy, which would require legislation in Washington, D.C., allowing it access to a Chapter 9 filing, it will either restructure the debt or go into default, he said.
"That's going to happen," he said. "It's between a rock and a hard place in terms of how to move forward."
Business on 07/01/2015