Puerto Rico will begin clawing back revenue from some bonds starting Tuesday “in order to maintain essential public services”, Gov. Alejandro Garcia Padilla told senators at the hearing.
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Speaking to members of the United States senate Puerto Rico’s Governor, Alejandro Garcia Padilla, said the island’s government, “had not cash left”.
Failure to make the bond payment could complicate the island’s efforts to reach restructuring deals on its $72 billion of public debt. The agencies targeted include the heavily indebted Highway and Transportation Authority, the Infrastructure Financing Authority and the Metropolitan Bus Authority. A Puerto Rico agency has skipped debt payments since August on bonds repaid through legislative appropriation.
Unlike some of the biggest investment banks, which brought the world economy to the edge of collapse in 2008, the American Commonwealth of Puerto Rico is not asking taxpayers for a bailout as it tries to avoid collapse. That’s why hundreds of Puerto Rican community leaders from around the USA are planning to gather in Washington on Wednesday in a massive lobbying effort targeting those lawmakers who still have their heads stuck in the sand.
The Wall Street Journal reported the Tuesday payment – which would keep negotiations with creditors from collapsing – was weighed against millions of dollars of holiday bonuses owed to Puerto Rico’s government workers.
The Obama administration has proposed a plan to help the island, but Republicans in Congress have said they want to first address the root causes of the crisis and see more data on Puerto Rico’s financial condition.
If Congress does not pass legislation to allow Puerto Rico to reorganize its debts in bankruptcy, Tuesday’s financial move will just be “the beginning of a very long and chaotic process” that will harm the island’s creditors and allow a budding humanitarian crisis on the island to grow out of control, the governor said. He hopes to secure bankruptcy for Puerto Rico, a legal and financial instrument not now available to USA territories.
With 45 percent of its 3.5 million population in poverty, Puerto Rico is a meteorological paradise mired in economic purgatory. Richard Blumenthal of CT said today during a Senate Judiciary Committee hearing.
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Puerto Rico’s next payment deadline is January 1, when $1 billion is due to various creditors.
