Puerto Rico Defaults on $58 Million Debt, Needs Law Reform amongst Economic Crisis

Puerto Rico failed to make a $58 million debt repayment due on Aug. 3, causing one of the most important bond defaults in U.S. history.

This is the first time that the territory island has defaulted on payments, shining a spotlight on its steady economic decline of the past decade and lack of congressional support to reform its laws.

Puerto Rico is in need of federal aid through the amendment of laws to help spawn economic growth, if there is any hope for the future of its economy and welfare of the citizens.

The commonwealth territory only made a $628,000 payment toward its $58 million debt due towards its outstanding debt of $70 billion. Such minute payment reflects how severe times are in the island's declining economy but for now, it seems that the citizens of Puerto Rico are the ones who are looking to suffer the most consequences.

The payment that has been repaid goes to the creditors of its Public Finance Corporation, however the majority of debt is owned by Puerto Rican citizens from credit unions. The White House has declined the consideration of a bailout, leaving the island with little options.

Since citizens do not have the resources and legal power to take their claims to court, Gov. Alejandro Garcia Padilla has asked that the White House to consider restructuring law provisions that the island can be included in to help get its economy back on track before it is too late. In a June 29 television broadcast, via The New York Times, he stated, "We have to make the economy grow. If not, we will be in a death spiral."

Puerto Rico is on a similar boat as Detroit's previous bankruptcy filing -- the island is essentially bankrupt due to its high debt, unemployment rates and lack of economic growth. In contrast, being a territory and not a state, it is not protected under the municipal bankruptcy statutes to declare bankruptcy and ensure protection from creditors.

"This is the moment we call for concerted action from Washington, in a single voice, now," Gov. Padilla stated in his televised fiscal address, via NBC News. "Action so they will approve changes to Chapter 9 (of the U.S. bankruptcy code) so Puerto Rico has the same protection as other jurisdictions."

Hopefully, the U.S. Congress takes heed to the call for action, now that the default has been confirmed. Restructuring of the law is pivotal to avoid another decade of decline, filled with defaults on commonwealth debt. The citizens are continously faltering with the welfare of life on the island, especially with its current drought that has affected a vast number of communities and its staggering unemployment rate.

Puerto Rico's unemployment rate recently exceeded by 12%, doubling that of States inland, according to Trading Economics. On top of that, The National Drought Mitigation Center reported the citizens have been facing one of the most severe water droughts in the territory's history since June, which has in turn forced businesses and schools to temporarily close.

While many deal with the ongoing stuggle on the island, others have left for brighter pastures inland, in hopes of better job security, according to Pew Reserach Center of Hispanic Trends. 

Although Puerto Ricans do not have rights to vote for the president or vice president as residents of the commonwealth territory, they still want to have their voices heard and needs met by the White House and Congress. They are legal citizens of the U.S., but their welfare is not being covered by all of the same equal rights of other Americans by the current provisions of the law. In the dire times, they are hoping that the laws can be restructured to treat them as equal as Detroit's communities to be covered under the bankruptcy municipality or another reform that will alleve their economic struggles.

Padilla plans to organize a team that will better the island's security and growth but in the meantime, the citizens are waiting for a positive change to finally take action.