What caused the economic crisis in Puerto Rico?

The crisis began in 2014 when three major credit agencies downgraded several bond issues by Puerto Rico to “junk status” after the government was unable to demonstrate that it could pay its debt. The downgrading, in turn, prevented the government from selling more bonds in the open market.

Who does Puerto Rico owe their debt to?

Cate Long, founder of research firm Puerto Rico Clearinghouse, told CNBC on Wednesday that 75\% of the territory’s debt is held by retail investors. The remainder is held by hedge funds, including Aurelius Capital Management and Autonomy Capital.

How much debt is Puerto Rico in to the US?

Puerto Rico’s $70 billion public debt could go down to $34 billion, while debt from the Public Buildings Authority and general obligations bonds could be reduced to $7.4 billion, from $18.8 billion.

Does Puerto Rico pay taxes to the US?

While the Commonwealth government has its own tax laws, Puerto Rico residents are also required to pay US federal taxes, but most residents do not have to pay the federal personal income tax.

How much does Puerto Rico owe?

Puerto Rico’s bankruptcy started in May 2017, when it sought to restructure most of the $74 billion of debt the commonwealth and its agencies owed at that time.

Why Puerto Rico is in trouble?

Puerto Rico is on course to default on some of its debts on Monday, deepening a crisis that has been escalating steadily for months. But the seemingly arcane dispute over the island’s public finances masks a struggle for wealth and power in which the peculiarities of Puerto Rico’s political status and Wall Street greed play a leading role.

Why is Puerto Rico in debt?

Why Puerto Rico’s Debt Is So Big Puerto Rico’s public debt has ballooned because of a failing economy and an inefficient government that has spent more than it has taken in. Parts of Puerto Rico’s debt. The government created a health insurance system for the poor in the 1990s, but did not identify a way to pay for it.

Did Puerto Rico file bankruptcy?

Due to its status as a territory, Puerto Rico cannot file for Chapter 9 bankruptcy — an option that is afforded to American municipalities and which has been employed in recent years by cities like Detroit, Michigan, and Stockton , California.

Why does Puerto Rico use the US dollar?

As a territory of the United States, Puerto Rico uses the United States dollar as its official currency. Being a former colony of Spain, the Puerto Rican peso and other Spanish currencies had served the monetary needs of Puerto Rico.