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SAN JUAN, Puerto Rico—Treasury Secretary Jacob Lew issued his most forceful call to date for Congress to pass legislation allowing Puerto Rico to restructure its debts and avoid looming defaults during his first visit to the island territory Wednesday.

His trip had twin audiences. It was in part a listening tour with islanders frustrated by Washington's apparent apathy. To make recent bond payments, the territory has withheld hundreds of millions of dollars in tax refunds and payments to suppliers. Assets in its depleted pension system have been sold to pay bills.

But Mr. Lew also visited the island as part of a bid to focus attention for Congress, which had been slow to confront the island's debt crisis until December, when new Speaker Paul Ryan (R., Wis.) committed to producing a plan in the House by the end of March.

Puerto Ricans are U.S. citizens, meaning they are free to move to the U.S. mainland. Many have been doing so as the island's economy sputters, fueling a vicious circle in which the territory's government collects less in taxes from the residents who remain.

"The people of Puerto Rico are sacrificing, but unless that sacrifice is shared by creditors in an orderly restructuring, there is no path out of insolvency and back to growth," Mr. Lew told reporters here after meeting with Puerto Rico's governor, Alejandro Garcí a Padilla. He also met with local lawmakers, business executives and labor leaders.

Puerto Rico missed around $37 million in payments on debts this month after diverting money to pay some investors at the expense of others.

The next three months are critical for the legislative effort because of the March 31 deadline set by Mr. Ryan and because passing legislation during that window would give Puerto Rico a chance to begin restructuring before the next payments come due, in May and July. Mr. Lew also defended the administration's support for an independent fiscal oversight board that remains unpopular on the island by saying that any such oversight should respect Puerto Rico's self-governance.

Wednesday's visit "makes Secretary Lew a better advocate for Puerto Rico" in Washington, said Pedro Pierluisi, the island's nonvoting representative in Congress. "It is very important for him to come to the ground level and validate what he's telling Congress to do."

The Obama administration has also called on Congress to fix funding discrepancies in the island's Medicaid program and provide Puerto Rico with access to the earned-income tax credit, a tax break designed to boost workforce participation among the poor.

Republicans have withheld their support of any debt-restructuring mechanism and instead say a powerful fiscal oversight board is needed.

Puerto Rico's economic advisers last week said they now expect tax revenue to come in below previous estimates as the island's economy continues to struggle with high unemployment and a declining population. The Census Bureau said last month that Puerto Rico's population loss accelerated in the year ended June. The population fell by 1.7%, primarily as residents migrated to the U.S. mainland.

If residents of Puerto Rico don't have access to the same public benefits, health coverage or economic opportunities as other Americans, "do not then complain if they hop onto a plane and move to Florida or New York," Mr. Pierluisi said.

Mr. Lew said an action by Congress would provide the most immediate and comprehensive solution to fix Puerto Rico's fiscal problems. He repeated the Treasury's long-standing position that it won't provide loans or other bailouts.

"There is no federal bailout here. Restructuring is an alternative to a bailout," he said. "This is not a case of 'waiting will help.' All waiting does is makes a process more complicated, messier and more costly."

The trip offered Mr. Lew an up-close look at the fallout from the debt crisis. Small-business owners who are vendors for the government haven't been paid, and residents are concerned about health-care cutbacks that have prompted hospitals to close floors.

The island has in recent years sought to boost its struggling economy with a tourist sector catering to wealthy Americans, such as the Condado waterfront district featuring gleaming hotels beside Gucci and Salvatore Ferragamo shops. Mr. Lew spoke to the media from a hotel complex that had been a troubled development until it was rescued by a New York hedge-fund manager two years ago.

Write to Nick Timiraos at nick.timiraos@wsj.com

(END) Dow Jones Newswires

January 20, 2016 18:05 ET (23:05 GMT)

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