Puerto Rico Struggles with Debt Crisis
CURNOW: Welcome back to the INTERNATIONAL DESK. Now Puerto Rico's governor says the island is in a death spiral, unable to make payments Wednesday on its $73 billion debt. The White House (ph) says the U.S. Congress should consider allowing it to declare bankruptcy. Well, our business correspondent, Samuel Burke, now joins us from New York with more. So how did Puerto Rico get here?</s>SAMUEL BURKE, CNN CORRESPONDENT: Well, Robyn, if the terms "big spending, big lending and harsh austerity" sound familiar, we're not talking about what's happening in the Mediterranean; we're talking about what's happening in the Caribbean. On top of all those factors, Puerto Rico has suffered a series of unfortunate events looking back. In 2004, they had a major real estate crash, long before the real estate crash here in mainland United States. Then just two years later in 2006, they finished receiving a U.S. tax break for a factory there. And that had a devastating effect. And all along, Robyn, they have had -- they've enjoyed triple tax-free bonds, which have been very popular with investors because they don't have to pay local, state or federal tax. So investors have been pumping in the money to Puerto Rico while their debt just goes up and up.</s>CURNOW: But first of all, can you just also explain this relationship that the country has with the U.S.?</s>CURNOW: And will the U.S. have to bail out Puerto Rico?</s>BURKE: Well, Puerto Rico is a part of the United States. It's a commonwealth which is a type of territory. They don't pay federal taxes but they do have U.S. passports and that's contributed to the brain drain, people leaving this U.S. commonwealth and heading for the U.S. mainland, coming to places like New York. And so that's known as the exodus in Spanish there in Puerto Rico. So that's made it even harder for them to collect taxes, when people have come to the mainland United States. Now also important to note that 80 percent of Puerto Rico's debt is in municipal bond funds. So there is exposure because of this. A lot of big pensions, mutual funds, even some big banks and especially a lot of retirees may have money in Puerto Rico and they're waking up and realizing that there's exposure to this. Now unlike Greece, all of the economists with whom I've spoke have said there is no way the United States is going to bail out -- is going to bail out Puerto Rico. We hear the White House and some members of Congress pushing for Puerto Rico to get the status to declare bankruptcy. That's something that only U.S. states can do, not a territory, but that could change if the White House has its way.</s>CURNOW: OK. Thanks for that update there, Samuel Burke in New York, thank you. Now Apple is launching its streaming music service today. The company is giving consumers a free three-month trial of Apple Music but it'll cost about $10 a month after that. Apple is joining a crowded field and many competitors offer a free version of their service. Some people think users may ditch Apple Music once the subscription fee kicks in. Well, up next, we'll check on how world markets are doing as Greece lurches towards default.