Cash crunch threatens to cut off gas and electricity supplies in Puerto Rico
SAN JUAN, Puerto Rico – Puerto Rico’s cash-strapped government and some institutions face a worsening cash crunch that threatens to cut off their access to gasoline and electricity amid the island’s economic crisis, according to officials.
The government’s lack of liquidity almost left the US island territory’s ambulances, police patrol cars, fire trucks and other public vehicles out of gas, a threat only dispelled by a renegotiation of the country’s debt to French oil giant Total.
The head of the Legal Department at Total Petroleum Puerto Rico Corporation, Denise Rodriguez, said the company agreed to keep the fleet running while the government looks for ways to reduce its debt, which currently exceeds US$16 million.
The deal is nevertheless only good if the government makes a US$4 million payment before month-end.
The objective is to keep the debt to the oil company below US$10 million, the limit Total set on the line of credit it conceded to Puerto Rican authorities.
The agreement highlights the serious liquidity problems weighing on Puerto Rico, which defaulted last week on US$37.3 million due to holders of non-General Obligation bonds.
Governor Alejandro Garcia Padilla said his administration had to prioritize among competing obligations and that incurring a US$37.3 million default allowed the government to pay public employees and issue income tax refunds.
Amid escalating indebtedness, Puerto Rico’s public power company also announced that it would cut electricity to three hospitals and clinics this week because they have not paid their multimillion-dollar bills.
Jose Daniel Echevarria, a spokesman with the Electric Power Authority, said that cuts in service can be avoided only if the hospitals and clinics agree to a payment plan in upcoming days.
The power company cut off supply to the government’s Highway and Transportation Authority last month because of unpaid bills. Service was restored when a payment plan was implemented.
Puerto Rico’s deteriorating financial situation comes as the island struggles through nine years of economic stagnation and faces US$72 billion in public debt that the governor says is unpayable and needs restructuring.
“We’re already seeing the first consequences of this situation,” Public Affairs Secretary Jesus Manuel Ortiz said at a press conference on Monday. “If we don’t address the reality of this crisis, it will only worsen.”
Ortiz renewed the government’s plea for the US Congress to give Puerto Rico access to some sort of bankruptcy mechanism. The government already faces its first lawsuit over how it has diverted funds to meet certain bond payments as its liquidity dwindles.
US House Speaker Paul Ryan, a Republican from Wisconsin, recently pledged the House will come up with “a responsible solution” for the island’s debt problems.
Meanwhile, the US Supreme Court is hearing an appeal on a ruling that barred Puerto Rico from giving municipalities the power to declare bankruptcy.