Puerto Rico files for Bankruptcy

WHAT IT IS

WHY IT MATTERS

Due to an almost two decade recession, last year the Puerto Rican government passed Title III which allowed Puerto Rico to file for bankruptcy. In the U.S., insolvent local governments file for Bankruptcy under Chapter 9 but since Puerto Rico is not a part of any state, Chapter 9 couldn’t be applied. This could set a precedent for economically struggling U.S. states.

  • GIVE THE PEOPLE THE MONEY: “We need a fresh start”

    • Cofina:   Some debt that Bondholders issued may be invalid.
    • Payment Structure:  Puerto Rico’s constitution calls for the certain parties to receive cash first and Wall Street should respect that
    • Statistics:   The majority of citizens want to push for a proposition to restructure the current debt obligations of the Puerto Rican Government.
  • GIVE WALL STREET THE MONEY: “You had your chance”

WHERE WE ARE NOW

THINGS TO THINK ABOUT

  • If conditions in Puerto Rico don’t improve, will citizens move to mainland USA and create a “Brain Drain”?
  • If Puerto Rico is successful in their filing for bankruptcy could financially strapped states like Illinois follow?
  • Could the financial loss of the financial institute at play affect U.S. and foreign stock market indexes?