Puerto Rico said it made a December 1 debt payment but warned that the threat of default loomed.
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Despite the move the territory is struggling to find money for government services and future debt payments.
The Senate hearing that Garcia Padilla testified at discussed proposed bankruptcy, health care, tax reforms and a federal control board to monitor Puerto Rico’s finances. Electricity costs more than twice the national average per kilowatt-hour in Puerto Rico.
“Today’s debt service payments reflect our commitment to honor our obligations notwithstanding the extreme fiscal challenges we face in an effort to facilitate a voluntary restructuring process with our creditors”.
Puerto Rico has begun to default on its debt in order to pay top-priority borrowings backed by its constitution and protect the commonwealth’s people, Governor Alejandro Garcia Padilla said on Tuesday, but the status of a December 1 payment remained unclear.
And amid the ongoing financial crisis on the island, a record number of Puerto Ricans, who are American citizens, have left for the U.S. In 2014, the net population loss was double that of 2010 according to Pew. Governor Alejandro Garcia Padilla wasn’t so clear.
Of the $354 million in payments due, $267 million of the bonds are guaranteed by Puerto Rico. Garcia signed an executive order that allows the island’s Treasury Department to retain certain revenues slated for specific public agencies to help pay Puerto Rico’s debt. “These emergency measures are unsustainable”. General obligation bonds, along with GDB bonds that have constitutional guarantees, should be safe, he said, but bonds from entities such as highway authority PRHTA and infrastructure financing authority PRIFA are at risk. Moreover, they argue, many investors would have eschewed investing in Puerto Rico if they knew the territory would retroactively be granted bankruptcy protection.
Next month, Puerto Rico is due to make $957 million in payments to service its staggering $72 billion in debt accrued after years of local mismanagement.
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“We have taken this hard step in the hope that congress will act soon”, Gov. Padilla said. As Puerto Rican officials and Democrats push for assistance, primarily through granting Puerto Rico access to the bankruptcy code in a similar fashion to states, Republicans are showing little interest in that course.
