Greece in the Caribbean

Puerto Rico facing historic default on its $72 billion debt

Puerto Rico is just days away from a historic economic collapse after the commonwealth's governor said the island cannot pay its $72 billion in debts. Gov. Alejandro García Padilla, who took office two years ago, said in a statement Monday that the government's attempts to slash expenditures and restructure its debt have failed. He said an analysis by former World Bank and International Monetary Fund officials "for the first time acknowledges the true extent of the problem." With several massive payments looming in the coming weeks, Padilla scheduled a media conference for 5 p.m. Monday to address the situation. Over the weekend, Padilla told The New York Times that the government's finances were "in a death spiral" and that "the debt is not payable." The inability of the U.S. territory to repay its debt, combined with the financial crisis in Greece, would have far-reaching implications for financial markets and unsuspecting American investors. Morningstar, an investment research firm based in Chicago, estimated in 2013 that as much as 80% of Puerto Rico's debt has found its way into muni-bond funds, and 180 mutual funds in the United States and elsewhere have at least 5% of their portfolios in Puerto Rican bonds. Puerto Rico, which became a territory of the United States in 1898 after a war with Spain, cannot legally file for bankruptcy, as American cities like Detroit have done when faced with similar fiscal crises. The island's constitution, however, states that Puerto Rico must make its debt payments before it pays for any other government services, leaving the island in a fiscal limbo if it cannot make its payments.
Comment: Image snap from the Economist


  1. Looks like a test case for Illinois and California.....and it strikes me that they're paying a brutal butcher's bill for the phase out of tax exemptions, NAFTA, GATT, etc..

  2. Puerto Rico Has No Easy Path Out of Debt Crisis:

    Analysts believe the central government will run out of cash as soon as July, which could lead to a government shutdown, employee furloughs and other emergency measures.

    “This is going to be painful for the next two to three years,” said Rep. Pedro Pierluisi, the island’s Democratic representative in the U.S. House, in an interview. “The government is facing serious cash-flow issues.”


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