Puerto Rico had plenty of fiscal problems on its plate already before the municipal market took a turn in late 2007 with monoline bond insurer credit rating downgrades, followed by auction-rate failures earlier this year, and an illiquid market after Lehman Brothers Holdings Inc. declared bankruptcy in mid-September.

The commonwealth was just getting back on its feet last year after a partial government shutdown in spring 2006 due to a history of budget imbalances and a political standoff between Gov. Anibal Acevedo Vila, a member of the Popular Democratic Party, and the Legislature, which is controlled by the New Progressive Party.

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