It was reported last Friday, that local credit union holders of $33 million of GDB debt, have chose to push forward the maturity of the debt for a year. Garcia said that the chances of being able to make the next payment looked weak. Now we know the financial outlook could get a lot worse for the territory before it gets better. Some of these bonds, due July 1, are considered what’s known as general obligation bonds issued directly by Puerto Rico’s government and are constitutionally protected. The governor has called the debt as it now stands “unpayable”.
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“Absent enactment of a workable framework for restructuring Puerto Rico’s debts, bondholders will experience lengthy, disorderly, and chaotic unwinding, with non-payment for many a real possibility”, Lew wrote in the letter. “Most people view the default as quite negative, and they are concerned, but I have a feeling that most people don’t know what the consequences will be”. The courts could also rule that Puerto Rico is legally obligated to pay all its bonds, despite being unable to make ends meet, forcing the government to cut basic services. Obama’s Treasury Secretary has informed Congress that the administration supports bankruptcy, and has urged Congress to grant it in the process of enacting legislation to address the debt crisis.
The Government Development Bank is an unaccountable, opaque government bank that allows insiders access and information while keeping outsiders in the dark regarding Puerto Rico’s finances.
The governor said that San Juan can’t pay creditors when it needs to fund public sector salaries, health and education budgets, which, if neglected, could unleash a “humanitarian crisis”. “We do not want a bailout, nor has one been offered”. We haven’t asked for a bailout. There’s no taxpayer-funded rescue here, just the overdue creation of a process to stop the fiscal bleeding and restructure debt.
According to congressional sources, some Republican legislators fell victim to the campaign, evidently without reading the bill itself. “Congress and the Puerto Rican legislature have a responsibility to expand economic freedom so that their citizens can thrive”, Furth said. Should the United States government choose to do nothing, the island would be on its own to pay back its almost $71 billion debt.
As conditions worsened, residents also began to flee for the U.S. mainland in ever growing numbers – Puerto Ricans have full USA nationality – an exodus which only served to worsen the economic crisis by eroding the government’s tax revenues further.
“In 2014, it is estimated that some 84,000 people emigrated from Puerto Rico to the United States, and in the opposite direction, about 20 thousand people immigrated from the United States to Puerto Rico – resulting in a net migration of 64,000 people between Puerto Rico and the United States”, the findings say when translated into English. “The people of Puerto Rico will be forced to endure additional suffering”. The institute’s director said on Sunday that net out-migration was likely even higher in 2015.
The island’s lawmakers recently enacted a debt moratorium bill created to ease the legal implications of defaults, but bondholders are furious and could mount a legal challenge. Republicans on the House Natural Resources Committee are being corralled by party leadership, which has repeatedly promised to help Puerto Rico.
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The development bank said it reached indicative terms of a deal with the Ad Hoc credit group holding about a quarter of the bank’s almost $4 billion in bonds.
