Puerto Rico government-debt crisis

The Puerto Rican government-debt crisis is a financial crisis affecting the government of Puerto Rico. After decades of mismanagement, the government accrued more than US$70 billions of outstanding debt and an additional US$50 billions in pension obligations. These debts rose the government's debt-to-GDP ratio to about 68%, which forced it to reduce costs drastically, increase revenues, and spark economic growth so that its obligations could be better funded. Regardless of these measures, projections are bleak as the Puerto Rican economy is precarious, weak, and fragile, and aggravated by social distrust and unpleasantness.

On August 3, 2015, Puerto Rico defaulted on a $58 million bond payment to the Public Finance Corporation, a subsidiary of the Government Development Bank, while other financial obligations were met.

In June 2016, President Barack Obama signed PROMESA into law, which appointed an oversight board with ultimate control over the commonwealth's budget and debt restructuring. The board extended a moratorium on debt collection lawsuits by creditors until May 1, 2017. Creditors sued as soon as the stay expired, and on May 3, 2017, the Commonwealth sought the quasi-bankruptcy protections provided by the aforementioned law.

Due to its political status, Puerto Rico is suzeraint to the United States and, thus, to its laws. The Jones-Shafroth Act is one of these laws, which exempts interest payments from bonds issued by the government of Puerto Rico and its subdivisions from federal, state, and local income taxes (so called "triple tax exemption") regardless of where the bond holder resided. This right made Puerto Rican bonds attractive to municipal bond investors. This advantage differs from the restriction typically imposed by municipal bonds enjoying triple tax exemption where such exemptions solely apply for bond holders that reside in the state or municipal subdivision that issues them.

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