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The Puerto Rican government-debt crisis was a
financial crisis A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and man ...
affecting the
government of Puerto Rico The government of Puerto Rico is a republican form of government with separation of powers, subject to the jurisdiction and sovereignty of the United States.several bond issues by Puerto Rico to "junk status" after the government was unable to demonstrate that it could pay its debt. The downgrading, in turn, prevented the government from selling more bonds in the open market. Unable to obtain the funding to cover its budget imbalance, the government began using its savings to pay its debt while warning that those savings would eventually be exhausted. To prevent such a scenario, the
United States Congress The United States Congress is the legislature of the federal government of the United States. It is Bicameralism, bicameral, composed of a lower body, the United States House of Representatives, House of Representatives, and an upper body, ...
enacted a law known as
PROMESA The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) is a U.S. federal law enacted in 2016 that established a financial oversight board, a process for restructuring debt, and expedited procedures for approving critical i ...
, which appointed an oversight board with ultimate control over the
Commonwealth A commonwealth is a traditional English term for a political community founded for the common good. Historically, it has been synonymous with "republic". The noun "commonwealth", meaning "public welfare, general good or advantage", dates from the ...
's budget. As the PROMESA board began to exert that control, the Puerto Rican government sought to increase revenues and reduce its expenses by increasing taxes while curtailing public services and reducing government pensions. These measures provoked social distrust and unrest, further compounding the crisis. In August 2018, a debt investigation report of the Financial Oversight and management board for Puerto Rico reported the Commonwealth had $74 billion in bond debt and $49 billion in unfunded pension liabilities as of May 2017. Puerto Rico officially exited bankruptcy on March 15, 2022.


Background

Puerto Rico is a
territory of the United States A territory is an area of land, sea, or space, particularly belonging or connected to a country, person, or animal. In international politics, a territory is usually either the total area from which a state may extract power resources or an ...
, acquired in 1898 through the
Spanish-American War Spanish Americans ( es, españoles estadounidenses, ''hispanoestadounidenses'', or ''hispanonorteamericanos'') are Americans whose ancestry originates wholly or partly from Spain. They are the longest-established European American group in th ...
. Unlike U.S. states it has no sovereignty, and all of its powers are delegated from the
United States Congress The United States Congress is the legislature of the federal government of the United States. It is Bicameralism, bicameral, composed of a lower body, the United States House of Representatives, House of Representatives, and an upper body, ...
under the
Territorial Clause Article Four of the United States Constitution outlines the relationship between the various states, as well as the relationship between each state and the United States federal government. It also empowers Congress to admit new states and admin ...
of the federal constitution. It has had an elected governor since 1948, and elected legislature since 1900. The federal Jones-Shafroth Act of 1917, 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 bondholder resided. This right made Puerto Rican bonds attractive to
municipal bond A municipal bond, commonly known as a muni, is a bond issued by state or local governments, or entities they create such as authorities and special districts. In the United States, interest income received by holders of municipal bonds is often, ...
investors. This factor led Puerto Rico to issue bonds that were always attractive to municipal investors, regardless of Puerto Rico's account balances. Puerto Rico thus began to issue debt to fund its expenses, a practice repeated for four decades since 1973. The island also began to issue debt to repay older debt, as well as refinancing older debt possessing low-interest rates with debt possessing higher interest rates. In 1984, Congress explicitly forbade Puerto Rico from declaring bankruptcy under
Chapter 9, Title 11, United States Code Chapter 9, Title 11, United States Code is a chapter of the United States Bankruptcy Code, available exclusively to municipalities and assisting them in the restructuring of their debt. On July 18, 2013, Detroit, Michigan became the largest ci ...
. Between 1996 and 2006, Congress eliminated the tax credits, contributing to the loss of 80,000 jobs on the island and causing its population to shrink and its economy to contract in all but one year since the
Great Recession The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...
. Because the
Constitution of Puerto Rico The Constitution of the Commonwealth of Puerto Rico ( es, Constitución del Estado Libre Asociado de Puerto Rico) is the controlling government document of Puerto Rico. It is composed of nine articles detailing the structure of the government ...
established that "all available resources" must first go towards payment of the Commonwealth's
general obligation bond A general obligation bond is a common type of municipal bond in the United States that is secured by a state or local government's pledge to use legally-available resources, including tax revenues, to repay bondholders. Most general obligation ple ...
s, in 2006, the Commonwealth began issuing
Puerto Rico Sales Tax Revenue Bonds Bonds issued by the government of Puerto Rico and its subdivisions are exempt from federal, state, and local taxes (so called "triple tax exemption"). However, unlike other triple tax exempt bonds, Puerto Rican bonds uphold such exemption regardl ...
, to avoid its constitution's limits by being paid directly into a separate urgent interest fund.
Sales tax A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a gove ...
was increased to 11%. The last property
tax assessment Tax assessment, or assessment, is the job of determining the value, and sometimes determining the use, of property, usually to calculate a property tax. This is usually done by an office called the assessor or tax assessor. Governments need ...
was done in 1958. It was not until Puerto Rico enlarged its outstanding debt to $71 billion—an amount approximately equal to 68% of Puerto Rico's
gross domestic product Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is of ...
(GDP)—that Puerto Rican bonds were downgraded to non-investment grade (better known as "junk status" or speculative-grade) by three
bond credit rating In investment, the bond credit rating represents the credit worthiness of corporate or government bonds. It is not the same as an individual's credit score. The ratings are published by credit rating agencies and used by investment professional ...
agencies between February 4 and 11, 2014. This downgrade triggered bond acceleration clauses that required Puerto Rico to repay certain debt instruments within months rather than years. Investors were concerned that Puerto Rico would eventually default on its debt. Such a default would reduce Puerto Rico's ability to issue bonds in the future. Puerto Rico currently states that it is unable to maintain its current operations unless it takes drastic measures that may lead to
civil unrest Civil disorder, also known as civil disturbance, civil unrest, or social unrest is a situation arising from a mass act of civil disobedience (such as a demonstration, riot, strike, or unlawful assembly) in which law enforcement has difficulty ...
. There have already been protests over the austerity measures. These events, along with a series of governmental financial deficits and a
recession In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...
, contributed to Puerto Rico's debt crisis.


Causes

In 1917, the United States Congress authorized the government of Puerto Rico to issue triple tax-exempt municipal bonds. These bonds were highly attractive to U.S. investors and very low cost for Puerto Rican local government to issue, laying the groundwork for the ballooning national debt, and a public infrastructure built on that debt. A constitutional amendment in 1952 relaxed balanced budget requirements for Puerto Rico in comparison to the states and another in 1961 loosened the reins on debt capacity, encouraging Puerto Rico to continue to fund fiscal shortfalls through the issuance of triple-exempt municipal bonds.


Cessation of federal subsidies

For much of the 20th century, Puerto Rico was subject to favorable tax laws from the US federal government, which essentially acted to subsidize the island's economy. In 1996, US President
Bill Clinton William Jefferson Clinton (né Blythe III; born August 19, 1946) is an American politician who served as the 42nd president of the United States from 1993 to 2001. He previously served as governor of Arkansas from 1979 to 1981 and again ...
signed legislation phasing out important parts of the favorable federal tax code over ten years ending in 2006. The end of the subsidies led to companies fleeing the island which itself subsequently led to tax shortfalls. At first, the Puerto Rican government tried to make up for the shortfall by issuing bonds. The government was able to issue an unusually large number of bonds, due to dubious underwriting from financial institutions such as
Santander Bank Santander Bank, N. A. (), formerly Sovereign Bank, is a wholly owned subsidiary of the Spanish Santander Group. It is based in Boston and its principal market is the northeastern United States. It has $57.5 billion in deposits, operates abo ...
,
UBS UBS Group AG is a multinational investment bank and financial services company founded and based in Switzerland. Co-headquartered in the cities of Zürich and Basel, it maintains a presence in all major financial centres as the largest Swi ...
,
Barclays Barclays () is a British multinational universal bank, headquartered in London, England. Barclays operates as two divisions, Barclays UK and Barclays International, supported by a service company, Barclays Execution Services. Barclays traces ...
,
Morgan Stanley Morgan Stanley is an American multinational investment management and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in more than 41 countries and more than 75,000 employees, the fir ...
, and
Citigroup Citigroup Inc. or Citi ( stylized as citi) is an American multinational investment bank and financial services corporation headquartered in New York City. The company was formed by the merger of banking giant Citicorp and financial conglomera ...
. Eventually, the debt burden became so great that the island was unable to pay interest on the bonds it had issued.


Mismanagement and disparity

Some newspapers, such as ''
El Vocero ''El Vocero de Puerto Rico'' is a Puerto Rico, Puerto Rican free newspaper that is published in San Juan, Puerto Rico, San Juan. Published since 1974, ''El Vocero'' was at first the third of the four largest Puerto Rico newspapers, trailing ''El M ...
'', have stated that the main problem is local government inefficiency rather than lack of funds. For example, the
Department of Treasury of Puerto Rico The Puerto Rico Department of Treasury (''Departamento de Hacienda'') is the executive department of the government of Puerto Rico responsible for the treasury A treasury is either *A government department related to finance and taxation, ...
is incapable of collecting 44% of the
Puerto Rico Sales and Use Tax Taxation in Puerto Rico consists of taxes paid to the United States federal government and taxes paid to the Government of the Commonwealth of Puerto Rico. Payment of taxes to the federal government, both personal and corporate, is done through ...
(or about $900 million), did not match what taxpayers reported to the department with the income reported by the taxpayer's employer through
Form W-2 Form W-2 (officially, the "Wage and Tax Statement") is an Internal Revenue Service (IRS) tax form used in the United States to report wages paid to employees and the taxes withheld from them. Employers must complete a Form W-2 for each employee ...
s, and did not collect payments owed to the department by taxpayers that submitted tax returns without their corresponding payments. The Department of Treasury also tends to publish its
comprehensive annual financial report An Annual Comprehensive Financial Report, formerly called Comprehensive Annual Financial Report (CAFR)) is a set of U.S. government financial statements comprising the financial report of a state, municipal or other governmental entity that compl ...
s late, sometimes 15 months after a fiscal year ends, and the government as a whole constantly fails to comply with its continuing disclosure obligations on a timely basis. The government's accounting, payroll, and fiscal oversight information systems and processes also have deficiencies that significantly affect its ability to forecast expenditures. Similarly, salaries for government employees tend to be quite disparate when compared to the private sector and other positions within the government itself. For example, a public teacher's base salary starts at $24,000, but that of a legislative advisor starts at $74,000. The government has also been unable to set up a system based on
meritocracy Meritocracy (''merit'', from Latin , and ''-cracy'', from Ancient Greek 'strength, power') is the notion of a political system in which economic goods and/or political power are vested in individual people based on talent, effort, and achiev ...
, with many employees, particularly executives and administrators, simply lacking the competencies required to perform their jobs. There are 78
municipalities of Puerto Rico The municipalities of Puerto Rico ( Spanish: ''municipios de Puerto Rico'') are the second-level administrative divisions in the Commonwealth of Puerto Rico. There are 78 such administrative divisions covering all 78 incorporated towns and citie ...
, which budget $2.2 billion a year, with mayors' salaries alone costing $4.8 million. 36 of these have a
budget deficit Within the budgetary process, deficit spending is the amount by which spending exceeds revenue over a particular period of time, also called simply deficit, or budget deficit; the opposite of budget surplus. The term may be applied to the budget ...
, putting 46% of the municipalities in financial stress. Each municipality's elected legislature, usually including 1,000 to 1,500 members, receive per diems and expense money. Just like the central government, municipalities would issue debt through the
Puerto Rico Municipal Financing Agency The Puerto Rico Municipal Financing Agency (MFA) — es, Agencia para el Financiamiento Municipal de Puerto Rico (AFM)— is the municipal bond issuer and an intragovernmental bank of the government of Puerto Rico The government of ...
to stabilize their finances, rather than make adjustments. In total, the combined debt carried by the municipalities of Puerto Rico accounts for $3.8 billion, or about 5.5% of Puerto Rico's outstanding debt. During the
New Deal The New Deal was a series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States between 1933 and 1939. Major federal programs agencies included the Civilian Con ...
, an appointed Governor,
Rexford Tugwell Rexford Guy Tugwell (July 10, 1891 – July 21, 1979) was an American economist who became part of Franklin D. Roosevelt's first "Brain Trust", a group of Columbia University academics who helped develop policy recommendations leading up to ...
, created the
Puerto Rico Electric Power Authority The Puerto Rico Electric Power Authority (PREPA; Spanish: ''LUMA'', ''AEE'') was an electric power company owned by the Commonwealth of Puerto Rico responsible for electricity generation, power distribution, and power transmission on the island ...
(PREPA) by nationalizing the island's private utilities. The
state monopoly In economics, a government monopoly or public monopoly is a form of coercive monopoly in which a government agency or government corporation is the sole provider of a particular good or service and competition is prohibited by law. It is a monopo ...
provides free electricity to local governments, which prompted the mayor of
Aguadilla, Puerto Rico Aguadilla (, ), founded in 1775 by Luis de Córdova, is a city and municipality located in the northwestern tip of Puerto Rico, bordered by the Atlantic Ocean to the north and west, north of Aguada, and Moca and west of Isabela. Aguadilla is s ...
, to build an ice-skating rink. PREPA uses oil-fired power plants, has had opaque purchasing practices, has resisted wind and solar power projects, and has a debt of $9 billion. PREPA has had poor bill collection practices, with
FTI Consulting FTI Consulting is a business advisory firm headquartered in Washington, D.C., United States. FTI is one of the largest financial consulting firms in the world and consistently ranks as one of the top global management consulting firms. The com ...
estimating that the utility had improperly given away $420 million of electricity and that the island's governments were $300 million delinquent in payments. In 2012, the
Puerto Rico Ports Authority The Puerto Rico Ports Authority (PRPA) ( es, Autoridad de los Puertos; AP) is a government-owned corporation of Puerto Rico charged with developing, operating, and overseeing all seaports and airports in Puerto Rico. The Authority is ascribed to ...
was forced to sell the
Luis Muñoz Marín International Airport Luis Muñoz Marín International Airport ( es, link=no, Aeropuerto Internacional Luis Muñoz Marín) is a joint civil-military international airport located in suburban Carolina, Puerto Rico, southeast of San Juan. It is named for Luis Muñoz ...
to private buyers after PREPA threatened to cut off power over unpaid bills. In 2014, the Puerto Rico Energy Commission was established. After the neglected power grid was destroyed by Hurricanes Irma and Maria, PREPA was privatized from 2018 to 2021.


Economic depression

Between 2007 and 2017 Puerto Rico's
gross national income The gross national income (GNI), previously known as gross national product (GNP), is the total domestic and foreign output claimed by residents of a country, consisting of gross domestic product (GDP), plus factor incomes earned by foreign ...
declined by 14 percent, and in 2015, 46 percent of the population lived below the federal poverty line, compared to the U.S. national average of 15 percent. Puerto Rican national debt is now approximately $74 billion, but unlike mainland municipalities, Puerto Rico is not protected by Chapter 9 of the U.S. Bankruptcy Code and cannot file for bankruptcy.


Tax policy

A federal statute that contributed to the crisis was the expiration of Section 936 of the
Internal Revenue Code The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 2 ...
, which had applied to Puerto Rico. The section was critical for the economy of the island, as it established tax exemptions for US corporations that settled in Puerto Rico and allowed its subsidiaries operating in the island to send their earnings to the parent corporation at any time without paying federal tax on corporate income. The economy of the island was significantly reliant on the additional investment and spending generated by companies taking advantage of that provision and has been unable to replace the benefit after its loss.


Disparity in federal social funding

More than 60% of Puerto Rico's population receives Medicare or
Medicaid Medicaid in the United States is a federal and state program that helps with healthcare costs for some people with limited income and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and per ...
services, with about 40% enrolled in Mi Salud, the Puerto Rican Medicaid program. There is a significant disparity in federal funding for these programs compared to the 50 states, a situation that Congress started in 1968, when it placed a cap on Medicaid funding for US territories. That has led to a situation in which Puerto Rico might typically receive $373 million in federal funding a year, but
Mississippi Mississippi () is a state in the Southeastern region of the United States, bordered to the north by Tennessee; to the east by Alabama; to the south by the Gulf of Mexico; to the southwest by Louisiana; and to the northwest by Arkansas. Miss ...
, a state with a population similar to that of Puerto Rico, receives $3.6 billion. The situation leads to an exodus of underpaid health care workers to the mainland, and the disparity has also had a major impact on Puerto Rico's finances.


Triple tax exemption

Interest income paid to owners of Puerto Rican government-issued bonds is exempt from federal, state, and local taxes, the so-called "triple tax exemption." Such bonds retain their tax exemption regardless of where the bondholder resides in the United States, unlike most other US triple tax-exempt bonds in which exemptions are available only to bondholders that reside within the state or municipality that issues the bonds. Triple tax-exempt bonds are considered to be subsidized because bond issuers can offer a lower interest rate to satisfy bondholders and so Puerto Rico is able to issue more debt.


2014 downgrade

Multiple bond-rating agencies downgraded Puerto Rico's debt to non-investment grade in early 2014. On February 4,
Standard & Poor's S&P Global Ratings (previously Standard & Poor's and informally known as S&P) is an American credit rating agency (CRA) and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities. S&P is con ...
downgraded Puerto Rico's general obligation debt (GO) from BBB- status to BB+, one level below investment grade. The agency cited
liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liq ...
concerns for its downgrade and maintained a negative outlook on its watch. Three days later,
Moody's Moody's Investors Service, often referred to as Moody's, is the bond credit rating business of Moody's Corporation, representing the company's traditional line of business and its historical name. Moody's Investors Service provides internationa ...
downgraded Puerto Rico's GO debt from Baa3 to Ba2, two levels below investment grade. Moody's, however, cited lack of economic growth for its downgrade while assigning a negative outlook to the government's ratings.
Fitch Ratings Fitch Ratings Inc. is an American credit rating agency and is one of the " Big Three credit rating agencies", the other two being Moody's and Standard & Poor's. It is one of the three nationally recognized statistical rating organizations (NRS ...
would be the last to downgrade on February 11, 2014, by downgrading Puerto Rico's GO debt from BBB- to BB, two levels below investment grade. Fitch cited both liquidity concerns and lack of economic growth for its downgrade while assigning a negative outlook to the government's ratings. These downgrades triggered several acceleration clauses, forcing Puerto Rico to repay certain debt instruments within months rather than years.


2015 forbearance

On June 28, 2015, Governor García Padilla admitted publicly that "the debt is not payable" and that if the government was unable to grow the economy, "we will be in a death spiral. Before Padilla's admission, various government instruments had already entered into
forbearance Forbearance, in the context of a mortgage process, is a special agreement between the lender and the borrower to delay a foreclosure. The literal meaning of forbearance is "holding back". This is also referred to as mortgage moratorium. Applica ...
agreements with their lenders, but the warning still provoked a drop in Puerto Rican bonds and stocks.


Reactions


Local market

Around $30 billion, or about 42% of Puerto Rico's outstanding debt, is owned by residents of Puerto Rico. They and local businesses are the parties that are most affected by the government cuts and the increased taxes that have been imposed to stabilize the island's finances. Michele Caruso from
CNBC CNBC (formerly Consumer News and Business Channel) is an American basic cable business news channel. It provides business news programming on weekdays from 5:00 a.m. to 7:00 p.m., Eastern Time, while broadcasting talk s ...
reported on January 24, 2014, "Taxes and fees went up on nearly everything and everyone. Personal income taxes, corporate taxes, sales taxes, sin taxes, and taxes on insurance premiums were hiked or newly imposed. Retirement age for teachers was raised from as low as 47 to at least 55 for current teachers, and 62 for new teachers." That is a significant cost to bear for a country with a
purchasing power parity Purchasing power parity (PPP) is the measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries' currencies. PPP is effectively the ratio of the price of a bask ...
(PPP) per capita of $16,300 and with 41% of its population living below the
poverty line The poverty threshold, poverty limit, poverty line or breadline is the minimum level of income deemed adequate in a particular country. The poverty line is usually calculated by estimating the total cost of one year's worth of necessities for ...
. The legislative assembly, together with the governor, also reduced operating deficits, and reformed the public employees', teachers', and judicial pension systems. They also announced the intent to further reduce appropriations in the current fiscal year by $170 million and budget for balanced operations for the upcoming fiscal year. As another countermeasure, the
17th Legislative Assembly of Puerto Rico The 17th Legislative Assembly of Puerto Rico was the 17th session of the Puerto Rican legislature that met from January 14, 2013 until January 1, 2017. All members of the House of Representatives and the Senate A senate is a delibera ...
enacted a bill on March 3, 2014, allowing the
Puerto Rico Government Development Bank The Government Development Bank for Puerto Rico (GDB) — es, Banco Gubernamental de Fomento para Puerto Rico (BGF)— is the government bond issuer, intragovernmental bank, fiscal agent, and financial advisor of the government of Puert ...
to issue $3.5 billion in bonds to recover its liquidity. The Governor promptly signed the bill the day after, effectively becoming law as Act 34 of 2014 (Pub.L. 2014–34).


US municipal market

Nearly 70% of US-based municipal bond funds own Puerto Rican bonds or have some kind of exposure to Puerto Rico. A notable cause for this tendency is the fact that Puerto Rican bonds are triple tax-exempt in all of the states regardless of where the bond holder resides. Despite the expected impact, pre-emptive measures slowed the damage of the downgrade's fallout. When the downgrade began to be perceived as imminent, investors were warned that it would affect the municipal market in general, and concerns of a worst-case default scenario were already being considered. However, by the end of February 2014, municipal bond funds that relied on specific debt had already experienced the backlash, which left
portfolio manager A portfolio manager (PM) is a professional responsible for making investment decisions and carrying out investment activities on behalf of vested individuals or institutions. Clients invest their money into the PM's investment policy for future gro ...
s with fewer options in the market. Organizations such as First Investors made it clear that they did not intend to invest in Puerto Rico for a prolonged period, at least until Puerto Rican bonds were restored to investment grade.


Skepticism

Several Puerto Rico senators have expressed that Puerto Rico's debt is simply impossible to repay and so they have stated that Puerto Rico should instead negotiate payback terms with bondholders. A different viewpoint emerged from others who were not senators, such as economist Joaquin Villamil, who deemed it necessary for Puerto Rico to issue debt at least once more to return liquidity to the
Puerto Rico Government Development Bank The Government Development Bank for Puerto Rico (GDB) — es, Banco Gubernamental de Fomento para Puerto Rico (BGF)— is the government bond issuer, intragovernmental bank, fiscal agent, and financial advisor of the government of Puert ...
and thus be able to repay its debt. Some, like
House Minority Whip Party leaders of the United States House of Representatives, also known as floor leaders, are congresspeople who coordinate legislative initiatives and serve as the chief spokespersons for their parties on the House floor. These leaders are ele ...
Jennifer González Jennifer or Jenifer may refer to: People *Jennifer (given name) * Jenifer (singer), French pop singer * Jennifer Warnes, American singer who formerly used the stage name Jennifer * Daniel of St. Thomas Jenifer * Daniel Jenifer Film and tele ...
, claim the crisis is mere
propaganda Propaganda is communication that is primarily used to influence or persuade an audience to further an agenda, which may not be objective and may be selectively presenting facts to encourage a particular synthesis or perception, or using loaded ...
, created so the incumbent political party could enact, amend, and repeal laws that it would otherwise be unable to justify. Others, such as the
President of the Senate of Puerto Rico The president of the Senate of Puerto Rico ( es, Presidente del Senado) is the highest-ranking officer and the presiding officer of the Senate of Puerto Rico. The president has voting powers as it is elected amongst the own members of the Senate ...
,
Eduardo Bhatia Eduardo Bhatia Gautier (born May 16, 1964) is a Puerto Rican attorney and politician. Bhatia is a former 15th President of the Senate of Puerto Rico and executive director of the Puerto Rico Federal Affairs Administration. Early life and educa ...
, claim the crisis was created by ruthless investors, who wish to profit from credit downgrades.


Proposed solutions


Restructuring of debt

In June 2015, Governor Padilla announced that the Commonwealth was in a "death spiral" and "the debt is not payable". The
government of Puerto Rico The government of Puerto Rico is a republican form of government with separation of powers, subject to the jurisdiction and sovereignty of the United States. The report called for structural and fiscal reforms as well as for a restructuring of outstanding debts. One month later, a report was published that rejected the need for debt restructuring. It was commissioned by a group of 34
hedge fund A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as ...
s that specialize in
distressed debt Distressed securities are securities over companies or government entities that are experiencing financial or operational distress, default, or are under bankruptcy. As far as debt securities, this is called distressed debt. Purchasing or holding s ...
—sometimes referred to as
vulture fund A vulture fund is a hedge fund, private-equity fund or distressed debt fund, that invests in debt considered to be very weak or in default, known as distressed securities. Investors in the fund profit by buying debt at a discounted price on a ...
s—who had hired economists with an
IMF The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glob ...
background. Their report indicated that Puerto Rico has a fixable deficit problem, not a debt problem. It recommended improvements to
tax collection A revenue service, revenue agency or taxation authority is a government agency responsible for the intake of government revenue, including taxes and sometimes non-tax revenue. Depending on the jurisdiction, revenue services may be charged with ...
and a reduction of
public spending Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting, the acquisition by governments of goods and services for current use, to directly satisfy the individual o ...
. The report also recommended consideration of
public private partnerships In public relations and communication science, publics are groups of individual people, and the public (a.k.a. the general public) is the totality of such groupings. This is a different concept to the sociological concept of the ''Öffentlichkei ...
and the monetization of government-owned buildings and ports. The report made use of data of the Krueger Report and warned that the costs of default would be high. One of the authors opined that Puerto Rico has been "massively overspending on education". Detractors remark that Puerto Rico's spending on education is only 79% of the U.S. average per pupil while supporters remark that, when compared to Puerto Rico's GDP, such spending is extraordinarily high. In response to the hedge fund report,
Víctor Suárez Meléndez Víctor A. Suárez Meléndez is a Puerto Rican lawyer and politician who was the 24th Secretary of State of Puerto Rico, as well as being the current executive director of the Puerto Rico Convention Center District Authority. Prior to his curr ...
, chief of staff of the governor of Puerto Rico, indicated that "extreme austerity
lone Lone may refer to: People * Lone (given name), a given name (including a list of people with this name) * Lone (musician), Matt Cutler, an electronic musician from Nottingham, United Kingdom *Lone (surname), a surname (including a list of people ...
is not a viable solution for an economy already on its knees". On October 14, 2015, the ''Wall Street Journal'' reported that "U.S. and Puerto Rican authorities were discussing the possibility of issuing a "superbond" as part of a restructuring package". This plan would have a designated third party administer an account holding some of the island's tax collections and those funds would be used to pay holders of the superbond. The existing Puerto Rican bondholders would take a haircut on the value of their current bond holdings.


Debt nullification

Several lawmakers—such as MVC representative Manuel Natal—have proposed to audit Puerto Rico's debt to see whether some of the debt was issued illegally so that such debt can be nullified. That strategy has been used elsewhere in the United States and might be challenged by creditors.


Change in autonomy

According to Carl Meacham, Puerto Rico's financial problems are closely related to its ambiguous legal status under U.S. law. Expanding on that argument, Meacham posits that the government-debt crisis can be solved by enhancing Puerto Rico's autonomy or by giving the island protections and rights similar to those bestowed by statehood.


Bankruptcy

On June 28, 2014, Governor Padilla signed into law the "Puerto Rico Public Corporation Debt Enforcement and Recovery Act", which sought to allow corporations owned by the Commonwealth, such as the
Puerto Rico Electric Power Authority The Puerto Rico Electric Power Authority (PREPA; Spanish: ''LUMA'', ''AEE'') was an electric power company owned by the Commonwealth of Puerto Rico responsible for electricity generation, power distribution, and power transmission on the island ...
, the
Puerto Rico Aqueducts and Sewers Authority The Puerto Rico Aqueducts and Sewers Authority (PRASA; Spanish: ''Autoridad de Acueductos y Alcantarillados de Puerto Rico'') is a water company and the government-owned corporation responsible for water quality, management, and supply in Puer ...
, and the
Puerto Rico Highways and Transportation Authority The Puerto Rico Highways and Transportation Authority (PRHTA) es, Autoridad de Carreteras y Transportación (ACT) is the government-owned corporation of Puerto Rico charged with constructing, operating, and maintaining roads, bridges, avenues ...
to declare
bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debto ...
. However, in February 2015, U.S. District Judge Francisco Besosa found the act was void because it was preempted by the U.S. Bankruptcy Code. In July 2015, that ruling was affirmed by the
United States Court of Appeals for the First Circuit The United States Court of Appeals for the First Circuit (in case citations, 1st Cir.) is a federal court with appellate jurisdiction over the district courts in the following districts: * District of Maine * District of Massachusetts ...
, with Justice
Juan R. Torruella Juan Rafael Torruella del Valle Sr. (June 7, 1933October 26, 2020) was a Puerto Rican jurist. He served as a United States circuit judge of the United States Court of Appeals for the First Circuit from 1984 until his death, and as chief judge of ...
concurring only in the judgment. The following June, in ''Puerto Rico v. Franklin California Tax-Free Trust'' (2016), that ruling was additionally affirmed by a U.S. Supreme Court in a vote of 5–2, with Justice
Sonia Sotomayor Sonia Maria Sotomayor (, ; born June 25, 1954) is an American lawyer and jurist who serves as an associate justice of the Supreme Court of the United States. She was nominated by President Barack Obama on May 26, 2009, and has served since ...
dissenting. Puerto Rico or any of its political subdivisions and agencies cannot file for debt relief under
Chapter 9, Title 11, United States Code Chapter 9, Title 11, United States Code is a chapter of the United States Bankruptcy Code, available exclusively to municipalities and assisting them in the restructuring of their debt. On July 18, 2013, Detroit, Michigan became the largest ci ...
because it applies only to municipalities on the mainland. Puerto Rico's nonvoting representative in the US House of Representatives,
Pedro Pierluisi Pedro Rafael Pierluisi Urrutia (born April 26, 1959) is a Puerto Rican politician and lawyer currently serving as governor of Puerto Rico. He has previously served as Secretary of Justice, Resident Commissioner, acting Secretary of State, i ...
, introduced H.R. 870 in February 2015 seeking to give Puerto Rico's public agencies and municipalities access to chapter 9. In the US Senate, members submitted similar legislation in July 2015, but neither bill was enacted. In December 2015, the ''New York Times'' addressed investments in Puerto Rico securities by major distressed-debt and other
hedge fund A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as ...
s.
John Paulson John Alfred Paulson (born December 14, 1955) is an American billionaire hedge fund manager. He leads Paulson & Co., a New York-based investment management firm he founded in 1994. He has been called "one of the most prominent names in high fina ...
's firm Paulson & Co.,
Appaloosa Management Appaloosa Management is an American hedge fund founded in 1993 by David Tepper and Jack Walton specializing in distressed debt. Appaloosa Management invests in public equity and fixed income markets around the world. History In 1993, David Teppe ...
founded by
David Tepper David Alan Tepper (born September 11, 1957) is an American billionaire hedge fund manager. He is the owner of the Carolina Panthers of the National Football League (NFL) and Charlotte FC in Major League Soccer (MLS). Tepper is the founder and p ...
,
Marathon Asset Management Marathon Asset Management, LP is an investment manager focused on opportunistic investing in credit and fixed income markets globally. Marathon manages a family of investment programs principally focused on credit strategies including hedge funds, ...
, BlueMountain Capital Management and
Monarch Alternative Capital Monarch Alternative Capital is an American investment fund with offices in London and New York founded in 2002 which specializes in distressed debt and bankrupt companies. The company was founded by Andrew Herenstein. It controls funds of $6.62 ...
were amongst purchasers of bonds in March 2014. The ''Times'' also traced opposition from the hedge funds, US Senator
Marco Rubio Marco Antonio Rubio (born May 28, 1971) is an American politician and lawyer serving as the Seniority in the United States Senate, senior United States Senate, United States senator from Florida, a seat he has held since 2011. A member of the ...
, and
Jenny Beth Martin Jenny Beth Martin (born July 2, 1970) is the co-founder and national coordinator of the Tea Party Patriots, and a columnist for ''The Washington Times''. In February 2010, ''Time'' magazine named her as one of its 100 Most Influential Leaders. S ...
of
Tea Party Patriots The Tea Party Patriots is an American conservative political organization founded in 2009 as part of the Tea Party movement. It is known for organizing citizen opposition to the Affordable Care Act during the presidency of Barack Obama, and more ...
to Congressional bills which would expand public-authority bankruptcy restructuring options.


Puerto Rico Oversight, Management and Economic Stability Act

On May 1, 2016, then-governor García Padilla "ordered a debt moratorium, blocking a $422 million payment due" the next day, its largest missed payment up until then. The next programmed payment was due July 1, when "nearly $2 billion asdue, roughly $800 million of which onsistedof general-obligation bonds that carry an explicit guarantee by the Puerto Rican Constitution," which would have permitted bondholders to file lawsuits if the Puerto Rico Oversight, Management and Economic Stability Act were not enacted into law. Following the
Berkshire Hathaway Berkshire Hathaway Inc. () is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States. Its main business and source of capital is insurance, from which it invests the float (the retained premiu ...
annual meeting, Warren Buffett told
CNBC CNBC (formerly Consumer News and Business Channel) is an American basic cable business news channel. It provides business news programming on weekdays from 5:00 a.m. to 7:00 p.m., Eastern Time, while broadcasting talk s ...
on May 2: On June 30, 2016, President
Barack Obama Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party (United States), Democratic Party, Obama was the first Af ...
signed the Puerto Rico Oversight, Management and Economic Stability Act, or PROMESA, which empowered him to appoint a seven-member Financial Oversight and management board, with ultimate control over the Commonwealth's budget and the power to negotiate the Commonwealth's debt restructuring. With the protection that the bill gave from lawsuits, the governor of Puerto Rico,
Alejandro Garcia Padilla Alejandro is the Spanish form of the name Alexander. Alejandro has multiple variations in different languages, including Aleksander (Czech, Polish), Alexandre (French), Alexandros ( Greek), Alsander (Irish), Alessandro (Italian), Aleksandr (Ru ...
, suspended payments due on July 1. PROMESA enables the island's government to enter a bankruptcy-like restructuring process and halts litigation in case of default. The task of the Oversight Board is to facilitate negotiations, or, if they fail, bring about a court-supervised process akin to a bankruptcy. The Board is also responsible for overseeing and monitoring sustainable budgets. The Oversight Board can also institute hiring freezes, prohibit the Commonwealth from entering contracts, and sell off assets such as (controversially) public parks. The Oversight Board meets in
New York City New York, often called New York City or NYC, is the List of United States cities by population, most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the L ...
.


2017 debt restructuring and effective bankruptcy

By mid-January 2017, the bond debt had reached $70 billion in a territory with a 45% poverty rate and a double-digit unemployment (12.4% in December 2016), more than twice the mainland US average. The debt had been increasing during a decade-long recession. The Commonwealth defaulted on many debts, including bonds, since 2015. By mid-January, the cash-strapped government was having difficulty maintaining health care funding. "Without action before April, Puerto Rico's ability to execute contracts for Fiscal Year 2018 with its managed care organizations will be threatened, thereby putting at risk beginning July 1, 2017 the health care of up to 900,000 poor U.S. citizens living in Puerto Rico," according to a letter sent to Congress by the Secretary of the Treasury and the Secretary of Health and Human Services. They also stated, "Congress must enact measures recommended by both Republicans and Democrats that fix Puerto Rico's inequitable health care financing structure and promote sustained economic growth." In January 2017, the newly elected Governor
Ricardo Rosselló Ricardo Antonio Rosselló Nevares (; born March 7, 1979) is a Puerto Rican politician who served as the governor of Puerto Rico from 2017 to 2019. He resigned on August 2, 2019, after protests related to the Telegramgate scandal. He is the s ...
entered office and was expecting a $3 billion budget deficit, only to discover that the deficit was $7.5 billion. He proposed
austerity Austerity is a set of political-economic policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. There are three primary types of austerity measures: higher taxes to fund spend ...
measures such as cutting payments to government pensioners, who do not receive
Social Security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...
, by 10%, which prompted criticism from the island's chapter of the
Service Employees International Union Service Employees International Union (SEIU) is a labor union representing almost 1.9 million workers in over 100 occupations in the United States and Canada. SEIU is focused on organizing workers in three sectors: healthcare (over half of members ...
. Governor Rosselló discussed the situation in an interview with the international ''
Financial Times The ''Financial Times'' (''FT'') is a British daily newspaper printed in broadsheet and published digitally that focuses on business and economic current affairs. Based in London, England, the paper is owned by a Japanese holding company, Nik ...
'' in January and indicated that he would seek an amicable resolution with creditors and also make fiscal reforms. "There will be real fiscal oversight and we are willing to sit down. We are taking steps to make bold reforms.... What we are asking for is runway to establish these reforms and have Washington recognize that they have a role to play." He had instructed Puerto Rican government agencies to cut operating expenses by 10% and reduce political appointees by 20%. With debt payments due, he faced the risk of a
government shutdown A government shutdown occurs when the legislative branch does not pass key bills which fund or authorize the operations of the executive branch, resulting in the cessation of some or all operations of a government. Government shutdowns in the Un ...
. Initially, the oversight board created under PROMESA called for Puerto Rico's governor to deliver a fiscal turnaround plan by January 28. Puerto Rico must reach restructuring deals with its creditors to avoid a bankruptcy-like process under PROMESA. In late January 2017, the control board extended the deadline to the government to February 28 for the latter present a fiscal plan which including negotiations with creditors for restructuring debt. A moratorium on lawsuits by debtors was extended to May 31. Rosselló hired investment expert
Rothschild & Co Rothschild & Co is a multinational investment bank and financial services company, and the flagship of the Rothschild banking group controlled by the French and British branches of the Rothschild family. The banking business of the firm covers th ...
in January 2017 to assist in convincing creditors to take deeper losses on Puerto Rico's debts than they had publicly expected. According to reliable sources, the company also explored the possibility of convincing insurers that had guaranteed some of the bonds against default to contribute more to the restructuring. The governor also planned to negotiate restructuring of about $9 billion of electric utility debt, a plan that could result "in a showdown with insurers." Political observers suggested that his negotiation of the electrical utility debt indicated Rosselló's intention to take a harder line with creditors. Puerto Rico received authority from the federal government to reduce its debt with legal action and this may make creditors more willing to negotiate instead of becoming embroiled in a long and costly legal battle. In late January, the Oversight Board set up under PROMESA gave the Commonwealth until February 28 to present a fiscal plan, including negotiations with creditors, to solve the problems. By the end of February, the Oversight Board's plan, with its focus on repayment of debts, was criticized by economists
Joseph E. Stiglitz Joseph Eugene Stiglitz (; born February 9, 1943) is an American New Keynesian economist, a public policy analyst, and a full professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the ...
and Martin Guzman, who claimed that the Board lacked "any understanding of basic economics and democratic accountability." With the Board's focus on debt service leading to a predicted 16.2% decline in gross national income for the next fiscal year with a further decline expected, "a social ndeconomic catastrophe" would be "all but guarantee " Stieglitz and Guzman proposed for steps to enhance economic growth, not repayments, to be at the center of a viable plan to solve the crisis. Similarly, an internal survey conducted by the Puerto Rican Economists Association revealed that most Puerto Rican economists rejected the policy recommendations of the Board and the Rosselló government on similar grounds. Owners of the Commonwealth's general obligation bonds, which are protected by the Puerto Rican Constitution, and
Puerto Rico Sales Tax Revenue Bonds Bonds issued by the government of Puerto Rico and its subdivisions are exempt from federal, state, and local taxes (so called "triple tax exemption"). However, unlike other triple tax exempt bonds, Puerto Rican bonds uphold such exemption regardl ...
, which are paid directly into a trust, rather than the Commonwealth's treasury, conflict on the holder of the
senior debt In finance, senior debt, frequently issued in the form of senior notes or referred to as senior loans, is debt that takes priority over other unsecured or otherwise more "junior" debt owed by the issuer. Senior debt has greater seniority in the is ...
. In March 2017, Rosselló was permitted by the Oversight Board to offer the creditors a plan that would repay less than a quarter of debts. On
May Day May Day is a European festival of ancient origins marking the beginning of summer, usually celebrated on 1 May, around halfway between the spring equinox and summer solstice. Festivities may also be held the night before, known as May Eve. Tr ...
, protesting residents, angry about the proposed subsidy cuts, shouted, "Ricky is selling the island!" As soon as a court stay expired on May 2, 2017, bondholders and a bond insurer sued the Commonwealth for full and timely debt repayment. On May 3, Rosselló reacted by asking the Oversight Board to file in federal district court for debt relief under PROMESA, proceedings, which would be very similar to bankruptcy. On May 5, Chief Justice
John Roberts John Glover Roberts Jr. (born January 27, 1955) is an American lawyer and jurist who has served as the 17th chief justice of the United States since 2005. Roberts has authored the majority opinion in several landmark cases, including '' Nat ...
assigned the case to Judge
Laura Taylor Swain Laura Taylor Swain (born November 21, 1958) is the Chief United States district judge of the United States District Court for the Southern District of New York. Education and career Born in Brooklyn, New York, Swain earned an Artium Baccalau ...
of the
United States District Court for the Southern District of New York The United States District Court for the Southern District of New York (in case citations, S.D.N.Y.) is a federal trial court whose geographic jurisdiction encompasses eight counties of New York State. Two of these are in New York City: New ...
. That day, the
Puerto Rico Department of Education The Puerto Rico Department of Education (PRDOE; ) is one of the statewide public education system in the United States, with (Hawaii being the other). The PRDOE is the state education agency in charge of managing public schools in Puerto Rico as ...
announced plans to close 184 schools. On May 17, 2017, Swain traveled to San Juan for the first day of hearings, and she ultimately agreed to allow the Oversight Board and the Commonwealth to pursue separate lawsuits at the same time in a joint adjudication. On July 2, 2017, the Puerto Rico Electric Power Authority filed for bankruptcy protections under PROMESA for its $9 billion in bond debt. On August 7, 2017, Aurelius Capital Management had
Theodore Olson Theodore Bevry Olson (born September 11, 1940) is an American lawyer, practicing at the Washington, D.C., office of Gibson, Dunn & Crutcher. Olson served as United States Assistant Attorney General of the Office of Legal Counsel (1981–198 ...
file another lawsuit, which now alleged that the selection of the Oversight Board violated the
Appointments Clause The Appointments Clause of Article II, Section 2, Clause 2, of the United States Constitution empowers the President of the United States to nominate and, with the advice and consent (confirmation) of the United States Senate, appoint public offi ...
of the
US Constitution The Constitution of the United States is the supreme law of the United States of America. It superseded the Articles of Confederation, the nation's first constitution, in 1789. Originally comprising seven articles, it delineates the nation ...
. After touring the damage from
Hurricane Maria Hurricane Maria was a deadly Category 5 hurricane that devastated the northeastern Caribbean in September 2017, particularly Dominica, Saint Croix, and Puerto Rico. It is regarded as the worst natural disaster in recorded history to affect ...
on October 3, 2017, US President
Donald Trump Donald John Trump (born June 14, 1946) is an American politician, media personality, and businessman who served as the 45th president of the United States from 2017 to 2021. Trump graduated from the Wharton School of the University of P ...
announced: "They owe a lot of money to your friends on
Wall Street Wall Street is an eight-block-long street in the Financial District of Lower Manhattan in New York City. It runs between Broadway in the west to South Street and the East River in the east. The term "Wall Street" has become a metonym for ...
. We're going to have to wipe that out." When markets opened the next day, the price on the Commonwealth's General Obligation bonds dropped to all-time lows of 32 cents on the dollar.
Mick Mulvaney John Michael Mulvaney (born July 21, 1967) is an American politician who served as director of the Office of Management and Budget (OMB) from February 2017 until March 2020, and as acting White House Chief of Staff from January 2019 until March ...
, the White House Director of the
Office of Management and Budget The Office of Management and Budget (OMB) is the largest office within the Executive Office of the President of the United States (EOP). OMB's most prominent function is to produce the president's budget, but it also examines agency programs, pol ...
, said that the president should not be taken literally and clarified, "We are not going to bail them out." The Commonwealth's $123 billion liabilities from debt ($74 billion) and unfunded pension obligations ($49 billion) are much larger than the $18 billion
Detroit bankruptcy The city of Detroit, Michigan, filed for Chapter 9 bankruptcy on July 18, 2013. It is the largest municipal bankruptcy filing in U.S. history by debt, estimated at $18–20 billion, exceeding Jefferson County, Alabama's $4-billion filing in ...
, the recordholder for municipal bankruptcies conducted under Chapter 9. The
debt restructuring Debt restructuring is a process that allows a private or public company or a sovereign entity facing cash flow problems and financial distress to reduce and renegotiate its delinquent debts to improve or restore liquidity so that it can continu ...
procedure will also be unprecedented in that it is governed by Title III of PROMESA, instead of Chapter 9 of the U.S. Bankruptcy Code. Gov.-elect Pedro Pierluisi started the public meetings by outlining his key areas of focus including COVID-19 response, infrastructure works and getting Puerto Rico out of Title III bankruptcy “as quickly as possible.”


See also

*
Greek government-debt crisis Greece faced a sovereign debt crisis in the aftermath of the financial crisis of 2007–2008. Widely known in the country as The Crisis ( Greek: Η Κρίση), it reached the populace as a series of sudden reforms and austerity measures that ...
*
Puerto Rican financial referendum, 1961 A referendum on financial issues was held in Puerto Rico on 10 December 1961. Nohlen, D (2005) ''Elections in the Americas: A data handbook, Volume I'', p552 The referendum was approved by 82.8% of voters. In 1961 the United States Congress ado ...


Notes


References

{{Authority control 2010s economic history 2014 in Puerto Rico 2015 in Puerto Rico 2016 in Puerto Rico 2017 in Puerto Rico Economy of Puerto Rico Financial crises
Puerto Rico Puerto Rico (; abbreviated PR; tnq, Boriken, ''Borinquen''), officially the Commonwealth of Puerto Rico ( es, link=yes, Estado Libre Asociado de Puerto Rico, lit=Free Associated State of Puerto Rico), is a Caribbean island and unincorporated ...
Crisis A crisis ( : crises; : critical) is either any event or period that will (or might) lead to an unstable and dangerous situation affecting an individual, group, or all of society. Crises are negative changes in the human or environmental affair ...