The Puerto Rican government continue to face economic hardships as the commonwealth carries $73 billion in public debt, Associated Press reports.

Puerto Rico's economy has seen some improvements. The government has balanced its budget for the first time in over 10 years, and sales tax revenues have increased. In addition, Puerto Rico Electric Power Authority, the territory's publicly owned power company, has been granted some extra time to manage its $9 billion debt. On July 1, creditors said they would extend the due date for about $800 million worth of the debt until the end of the month.

Amid an almost eight-year-long recession, however, the land's residents are still weary.

"Most people are very much in a watch-and-wait mode," David Tawil, co-founder and portfolio manager of Maglan Capital hedge fund, told AP.

On June 28, a law passed that allows creditors to work with some public corporations in order to make an agreement regarding their debts. If an agreement isn't made within nine months, the case goes to court.

"We stand behind the act and will defend it as a reasonable and necessary measure to protect the interests of all stakeholders of our public corporations," Treasury Secretary Melba Acosta said in a statement.

Some worry, however, that certain court rulings could cause investors to lose money. Investment funds companies Oppenheimer and Franklin Templeton filed lawsuits on June 28, saying the law is unconstitutional.

"[The law] has eroded the market's confidence in Puerto Rico's 'willingness to pay,' we feel, given strong protective language in Puerto Rico's Constitution, the possibility of a default by Puerto Rico's general obligation bonds does not appear imminent," Franklin Templeton wrote in an early July blog post according to Wall Street Journal.

Gov. Alejandro Garcia Padilla supports the law, as he says it will help public corporations that represent around 40 percent of Puerto Rico's public debt, which, if defaulted, could be detrimental to public services.

"This law -- its potential power, its unknown use and its unknown legality -- I think, carries a much heavier cloud over Puerto Rico's solvency and the potential recovery to creditors than any of the fundamental progress that is being made," Tawil said.
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Follow Scharon Harding on Twitter: @ScharHar.

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