Greece in the Caribbean

Puerto Rico facing historic default on its $72 billion debt
Excerpt:

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