After nearly two years of missed payments and delayed actions, Puerto Rico is bumping up against another deadline as it tries to grapple with tens of billions of dollars of debt.
One proposal for partial repayment of the debt was rejected over the weekend. Another option is for the island to essentially declare bankruptcy, through a process created specifically for Puerto Rico.
After midnight on Monday, if some sort of deal has not been struck, the U.S. territory will be fair game for lawsuits by its creditors.
Meanwhile, thousands of protesters marched in San Juan on Monday, in May Day protests fueled by anger over the out-of-control-debt and resulting cuts in services.
The island is preparing to "cut public employee benefits, increase tax revenue, hike water rates and privatize government operations, among other things," The Associated Press reports. The unpopular steps are driven by the same oversight board that has been negotiating the future of Puerto Rico's debt payments.
The debt was born out of a 25-year economic disaster that left the territory running a deficit year after year, taking out loans just to keep the lights on. Economic woes drove residents off the island and to the mainland, which worsened the cash-flow problem.
In 2015, the island's governor declared the debt, more than $70 billion, "unpayable." Puerto Rico couldn't afford to make its loan payments and also pay for basic services like police, schools and hospitals.
The two years that followed were marked by defaults on loan payments, budget cuts and tax hikes. Austerity measures meant residents of Puerto Rico — who are U.S. citizens — experienced slashes in government services.
If Puerto Rico were a municipality in the U.S., it would be able to declare Chapter 9 bankruptcy — that's what cities like Detroit have done when their debts became unmanageable. But as a territory, it doesn't have that option.
In June 2016, Congress passed a law, PROMESA, that created a special oversight board to tackle Puerto Rico's debt problem.
The board took some control away from local government, which has prompted protests from Puerto Ricans, who say the board — which has been facilitating negotiations between Puerto Rico and its creditors — is valuing investors' interests over those of the islanders.
But the oversight board also gave Puerto Rico a new option for handling its debt: If voluntary talks fail, the board has the ability to initiate a mandatory, court-supervised debt restructuring process.
PROMESA doesn't call this "bankruptcy," and it's not identical to Chapter 9. But the underlying principles are the same.
"It mirrors conventional bankruptcy processes that are ordered and arbitrated through a court system," says Eric LeCompte, the executive director of Jubilee USA Networks, a religious development organization that supports debt relief and debt forgiveness.
The "Title III" process, as it's called in PROMESA, allows Puerto Rico to address all of its debts at once, in a comprehensive process — which even Chapter 9 doesn't allow, LeCompte says. It's essentially a bankruptcy process custom-built for Puerto Rico's debt crisis.
The other option has always been to strike a deal without involving the courts.
Late on Friday, Puerto Rico's governor made an offer to the island's creditors that would have done just that. Bloomberg reports that the proposal would have paid as much as 77 cents on the dollar to some creditors, and as little as 39 cents on the dollar.
That was a worse deal than the previous governor had suggested to creditors, the Wall Street Journal reports. Bondholders rejected the idea, sending the debt back to the negotiating table over the weekend.
These negotiations have been dragging on for years, but a new deadline loomed over the latest talks.
Puerto Rico has been protected from litigation through a temporary stay, designed to buy time for talks, that expires at midnight on Monday.
That stay has been extended before, but Congress has made no move to offer a reprieve this time.
President Trump, for his part, has recently criticized efforts to help Puerto Rico with its financial crisis. He tweeted that a Democratic push to send funding to the island's Medicaid program amounted to a "bailout" of the U.S. territory. (An omnibus bill, passed over the weekend, ultimately included nearly $300 million for the healthcare program.)