Puerto Rico defaults on principal of $422 million debt payment
SAN JUAN, Puerto Rico — Puerto Rico on Monday defaulted on most of its debt payment of $422 million, paying only $23 million, which represents interest due. The development puts pressure on Washington to come up with a solution to help the beleaguered U.S. territory.
On Sunday, Gov. Alejandro García Padilla gave a televised address in which he announced the payment default — the biggest to date in Puerto Rico’s worsening debt crisis — and said he had to order it because Washington had failed to help in time.
“We have repeatedly traveled to Washington to convey the urgency of the situation,” the governor said. “So far, no action has been taken. The crisis escalates each passing day.”
A debt package being crafted in Washington includes language that, in some form, ties the territory to Puerto Rico’s woes. Specifically, the bill includes language that gives U.S. territories the option to opt into a federal bailout package if they were to fall into financial trouble. The catch of opting in is that the federal government would then have oversight of the territory’s public funds. Delegate to Congress Stacey Plaskett and Governor Kenneth Mapp have both come out in fierce opposition of the language, with Ms. Plaskett rebuking that portion of the measure as intrusive and Mr. Mapp expressing concern that the territory’s bond ratings could be negatively impacted.
“I was asked to support this bill in its current form, and I made it clear that I could not,” Ms. Plaskett said last month at an urgent press conference held at her Frederiksted office. “Over this past weekend, I have been in deep discussion, debate, even arguments with my fellow colleagues, House leadership, other federal agencies, and I’ve made it clear that any language that implies federal oversight of how we in the Virgin Islands govern ourselves, even if it implies that local support is required, is not acceptable.”
“I believe it is unfair and wrong to demand that the other territories agree to the authorization for an oversight board with extraordinary powers — even one that would not be triggered unless requested by local resolution — without consultation with the territories affected and without considering or understanding the impact of enacting such a provision on our ability to access the capital markets and the cost to our treasuries of accessing such critical capital,” the governor stated in his message to Congress,” Mr. Mapp said the same month.
According to the New York Times, Congressional aides said on Monday they agreed that the latest default showed an urgent need to establish federal oversight and restructuring powers for Puerto Rico, but they could not see a way to speed up the process.
In 1984 Congress explicitly barred Puerto Rico from restructuring debt in bankruptcy, without leaving any rationale for doing so.
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2 Responses to “Puerto Rico defaults on principal of $422 million debt payment”
Congress allowed PR and the USVI to have a number of business tax credits/incentives that encourage businesses like drugs (legal) and chemical manufacturers to move there, when they expired and congress refuse to extend the credits the businesses shuttered, business tax revenues declined, personal income tax revenues declined as citizens were laid off, people voted with their feet and took their skills and whatever savings they had and left for the mainland to seeking employment (more tax revenue lost from spending on small local business which suffered). So BVI leaders you see how easy it is to end up on this slippery slope?
I pray that the Financial Services and Tourism industries in BVI remains strong because the minute it slips then BVI suffers a similar faith. I am going to guess that a cumulative total of 40% or more of BVI residents are either U.S. born, greencard holders or holds residency credentials from some other country. Think what will happen if anyone of the 2 BVI revenue cohorts decline; look at how many of the residents that are carry the country can vote with their feet and migrate to the U.S. or elsewhere for job security. What will happen with the tax generated from Financial Services, grocery stores, apartment buildings, commercial properties? It is time for the BVI government to put a temporary brake on spending until they can boost Reserves. If the individual man needs to save for a rainy day so should BVI Government. There has to be a balance between spending to spur employment and economic growth and securing the country financial (Reserves).
On another related note, I also wonder how much of the BVI pensions both government and Private employers have PR bonds in them? I was shock to discover that one of my major mutual fund investment holdings have 7% PR bonds in it.. who knew it wasn't listed as one of the major holdings, only after this debt default issue came up and the funds starting disclosing this information to shareholders that it came to light. PR debt issues impacts mainland U.S. and other international countries far and wide..so it would be great if the BVI gov can inform the public if they have any PR bond holdings, source of funds (pensions or reserves) and how much.