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Puerto Rico Is Running Out of Money

  • Before tackling a $74 billion debt, a liquidity crisis looms
  • If Congress doesn’t send money, ‘it will be a disaster’

Puerto Rico faces a government shutdown on Oct. 31, including halting its hurricane recovery, if Congress doesn’t provide billions in emergency funds, said Treasury Secretary Raul Maldonado.

The U.S. commonwealth’s bankrupt government is burning through the $1.6 billion it had on hand before Hurricane Maria ravaged the island, destroying decayed infrastructure and killing 34 people. With widespread damage to telecommunications systems and the electricity grid, Maldonado doesn’t expect to begin collecting sales tax for at least another month, he said Wednesday.

Raul Maldonado

Source: GDA via AP Photos

“I don’t have any collections, and we are spending a lot of money providing direct assistance for the emergency,” he said in an interview in San Juan. “Without the assistance from Congress, Puerto Rico’s government will not be able to operate next month.”

While attention has focused on the commonwealth’s staggering $74 billion debt, Puerto Rico faces a more immediate crisis in the wake of the storm. It’s running short of money for fuel, salaries of recovery workers and food aid. Meanwhile, only 8.6 percent of customers have electricity, mobile-phone service is sharply curtailed and many mountainous rural areas remain inaccessible.

System Stopped

“You have conservatively over 100,000 homes that are destroyed here,” Governor Ricardo Rossello said an interview Wednesday.

“Essentially you’re looking at zero revenue for the next couple of months,” he said. “While you have zero revenue, you still have expenditures, plus emergency expenditures. That means the money is going to run out very quickly."

Maldonado said he has requested between $6 billion and $8 billion in aid from Congress to keep the government running for “a few months.”

The treasurer said he has set aside funds to make payroll and pension payments in October. But if Congress fails to act, he said the island is facing a "total shutdown” on Nov. 1 that would curtail essential services and the distribution of aid.

Senate Majority Leader Mitch McConnell said in a press statement that the Senate stands ready to help. House Speaker Paul Ryan’s office didn’t respond to a request to discuss the Oct. 31 run-dry date.

Nancy Pelosi, the Democratic House minority leader, said earlier Wednesday that the Treasury Department should extend a loan to help Puerto Rico in the short term.

Tens of billions more will be needed for long-term recovery efforts. In Washington, the Trump administration is finalizing a $29 billion disaster-aid request covering a series of major storms in the U.S. But Puerto Rico’s control board, created by the law that allowed the commonwealth to enter bankruptcy, has said Maria may have caused as much as $95 billion in damages, more than the island’s annual gross domestic product.

The federally appointed board, which has broad oversight over the island’s finances, requested for immediate aid Tuesday. In a letter the panel sent congressional leaders, the officials asked the federal government to make low-interest loans available to ease the impending liquidity crisis.

“Failure to provide the greatest amount of federal aid and the emergency liquidity program will be potentially ruinous," chairman Jose Carrion wrote. "We must do all that we can to help Puerto Rico avert a tragedy of historic proportions."

The panel also asked that the federal government waive cost-sharing limits, disaster spending caps and grants for long-term relief.

“Our petition is for Congress to act as soon as possible,” Rossello said in a news conference Thursday morning. “Solidarity and support has been expressed in bipartisan fashion from several senators.”

He said the commonwealth had been in contact with senators Cory Booker, Tim Kaine, Marco Rubio and Ted Cruz.

If Congress doesn’t act, Maldonado said, “it will be a disaster.”

— With assistance by Rebecca Spalding, Erik Wasson, and Jonathan Levin

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