UPDATE 4-Puerto Rico insolvent, running out of cash -ex Detroit bankruptcy judge
(Recasts with comments from newly hired adviser, report co-author)
NEW YORK, June 29 (Reuters) - Puerto Rico is "insolvent" and will soon run out of cash, according to a newly appointed adviser to the commonwealth who was the judge who oversaw the historic bankruptcy of Detroit.
The U.S. territory's future hinges on gaining eligibility for debt restructuring under the U.S. bankruptcy code, a process it does not currently have access to, said Steven Rhodes, who retired as a U.S. Bankruptcy Court judge earlier this year and has been retained by Puerto Rico to help solve its problems. He stressed that bankruptcy would not be a "bailout".
Puerto Rico "urgently needs our help," Rhodes said on Monday at a meeting where a dire fiscal report on the island by former economists of the International Monetary Fund was presented to the government. "It can no longer pay its debts, it will soon run out of cash to operate, its residents and businesses will suffer," he said.
The report, which Puerto Rico commissioned last February to analyze its economic and financial stability and growth prospects, showed Puerto Rico faces tough decisions on brutal reforms and a possible debt restructuring to relieve its $73 billion debt burden.
"The situation is dire, and I mean really dire," said former IMF economist Anne Krueger, co-author of the report, as she presented it to the island's government on Monday. "The needed measures may face political resistance but failure to address the issues would affect even more the people of Puerto Rico."
Governor Alejandro Garcia Padilla said that over the next week leaders would host meetings and briefings and tell citizens the steps the commonwealth is taking to address Puerto Rico's problems.
Puerto Rico faces crunch time this week - ironically at the same time as does debt-laden Greece - with a Tuesday deadline to agree to a restructuring of its electric power utility PREPA or agree to extend the deadline. Another deadline looms on Wednesday, for paying various bonds including its general obligation debt.
Citizens of Puerto Rico could face tough measures such as fewer teachers, higher property taxes and suspension of the minimum wage, if Puerto Rico follows the report's recommendations of debt restructuring and austerity measures. Continuación...