Updated 06:49 PM EST, Thu, Nov 26, 2020

Puerto Rico Debt Crisis: Governor Padilla Loses His Own Party's Support

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With the current debt crisis in Puerto Rico, Governor Alejandro Garcia Padilla is slowly losing the backing of his own party.

Reuters noted that this could increase the chances that he will not seek reelection for the polls next November. It added that his ratings dived to 12 percent and, worse, mayors and local politicians from his own party, the Popular Democratic Party (PPD), have withdrawn support for him.

"Support from such officials in Puerto Rico's towns is crucial for effective governance," noted the same report.

It may be bad for Padilla, but Reuters said this is great news for the opposition party, the New Progressive Party (PNP). It is expected to favor holders of the island's debt, amounting to $72 billion.

"Creditors would have higher priority in the minds of a PNP candidate," Height Securities analyst, Daniel Hanson, told Reuters.

According to Bloomberg, the country faces a dilemma to either pay bondholders $354 million by Dec. 1, "or hold on to the cash to ensure it can keep the government running."

It also explained that this may already become the turning point in the fiscal crisis, which has lasted for a long time.

Bondholders, if there will be a default in payments, may reportedly sue for repayment, which could lead to a legal battle and turn down efforts of the country on the debt-restructuring agreement negotiations.

"Talks with creditors are only just beginning, and Puerto Rico has yet to disclose the terms it will offer investors to exchange their debt for new securities," added Bloomberg.

Despite this financial crisis, former Puerto Rican governor, Rafael Hernandez Colon, believes that Padilla should seek reelection since he has established great initiatives and projects during his administration.

"To ensure that there is continuity and stability in initiatives that will help Puerto Rico to meet these challenges, not to weaken their management and be able to optimize their ability to seek the welfare of the country, the Governor must run," Hernandez Colon was quoted by Primera Hora as saying.

He added that it would be bad for the country if Padilla does not seek reelection, noting that this would reduce its ability to solve its problems and address the current financial crisis.

Certainly, the former leader in the country hopes that the incumbent governor will again overcome this adversity.

Reuters said Padilla has faced revolts in the past, with his party resisting his plan "to close a revenue gap by imposing a value-added tax and raising the sales tax."

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