Puerto Rico faces crisis

By ASSOCIATED PRESS
Published May 8, 2006

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SAN JUAN, Puerto Rico - Puerto Rico faced a possible downgrade of its credit rating as political leaders remained deadlocked Sunday over how to resolve the island's fiscal crisis seven days into a partial government shutdown.

The president of the U.S. Caribbean territory's Government Development Bank, Alfredo Salazar, was expected to fly to New York on Sunday to meet with analysts at Moody's Investors Service, who will begin today to evaluate Puerto Rico's credit rating - already on alert status.

Puerto Rico, which Moody's put on a watch list for a potential downgrade in late February, has a credit rating of "Baa2," two notches away from "junk" status.

A downgrade would likely force Puerto Rico to pay higher interest rates for its bonds because it would signal that the island's debt is a riskier investment.

Gov. Anibal Acevedo Vila and the opposition-dominated legislature continued to hash over possible solutions for the crisis on Sunday as hundreds of idled public employees and union officials protested outside the Capitol and the governor's mansion.

The two sides have floated competing proposals to close a $740-million budget gap that led last Monday to the closure of 43 government agencies and nearly 1,600 schools, sending home more than 95,000 government workers and 500,000 students.

Labor leaders representing truckers, electricians and other private-sector workers have threatened to call a general strike Tuesday in solidarity with temporarily out-of-work public employees.

But the United Public Servants union, representing roughly 25,000 government workers, said it opposed a general strike.