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Last Updated: Thursday, 11 May 2006, 04:29 GMT 05:29 UK
Loan deal for Puerto Rico crisis
Protesters in Puerto Rico
The crisis has damaged Puerto Rico's financial rating
Puerto Rican officials have struck a deal on ending a budget crisis that has shut down many government offices and sparked massive street protests.

The deal calls for an emergency loan to finance a $740m (406m) shortfall in the US territory's budget.

The deal was brokered by a special commission set up to resolve a dispute between the governor and lower-house legislators on how to fix the deficit.

It is unclear if unions will still hold protests, planned for Thursday.

Members of the opposition-led lower house will continue debating the terms of a sales tax which Governor Anibal Acevedo Vila had proposed as a way of financing the loan.

The governor's earlier proposal - calling for the introduction of a 7% sales tax for the island - was rejected by lawmakers.

Rating downgraded

Governor Acevedo told the Associated Press news agency the deal reached on Wednesday would secure a loan to pay for government salaries for the rest of the fiscal year, until 30 June.

He said public sector employees would be able to return to work on Monday.

Politicians have been arguing for weeks on a formula for financing an emergency loan.

The crisis led international credit rating agency Moody's to downgrade Puerto Rico's bonds.

Moody's gave some of the bonds junk status while some were downgraded to just one notch above.


Last week, the administration was forced to close 43 government agencies putting 95,000 people out of work. All schools were closed, meaning half a million students were sent home.

Mass demonstrations have been taking place on the streets of the capital, San Juan, but it is in the island's smaller towns that the effects are being felt.

Many people rely heavily on municipal services and are now having to do without basic amenities like water and health care services.

The government is the biggest employer in Puerto Rico, accounting for up to 200,000 jobs. It pays about $500m in salaries.

Unions halt Puerto Rico protests
10 May 06 |  Americas
Puerto Rico government shuts down
01 May 06 |  Americas
Puerto Rico questions US ties
28 Mar 06 |  Americas
Call for Puerto Rico referendum
23 Dec 05 |  Americas
Ruling party wins in Puerto Rico
24 Dec 04 |  Americas
Regions and territories: Puerto Rico
06 Oct 05 |  Country profiles
Timeline: Puerto Rico
06 Oct 05 |  Country profiles

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