Puerto Rico governor says island can't pay its public debt

[webfact]

Puerto Rico governor says island can't pay its public debt
DANICA COTO, Associated Press

SAN JUAN, Puerto Rico (AP) — The governor is warning that Puerto Rico can't pay its $72 billion public debt, delivering another jolt to the recession-gripped U.S. island as well as a world financial system already worrying over Greece's collapsing finances.

Gov. Alejandro Garcia Padilla is hoping to defer debt payments while negotiating with creditors, spokesman Jesus Manuel Ortiz said Sunday night.

The comments came as legislators debate a $9.8 billion budget that calls for $674 million in cuts and sets aside $1.5 billion to help pay off the debt. The budget has to be approved by Tuesday.

Ortiz confirmed comments by Padilla that appeared in a report in The New York Times published late Sunday, less than a day before Garcia planned to meet with legislators and then go on television to deliver a public address.

"There is no other option. I would love to have an easier option. This is not politics, this is math," Garcia is quoted as saying in the Times.

Puerto Rico's bonds were popular with U.S. mutual funds because they were tax-free, but hedge funds and distressed-debt buyers began stepping in to buy up debt as the island's economy worsened and its credit rating dropped.

Some legislators were taken aback by Garcia's comments, including Rep. Jenniffer Gonzalez, spokeswoman for the main opposition party.

"I think it's irresponsible," Gonzalez said. "He met privately with The New York Times last week, but he hasn't met with the leaders of this island."

Puerto Rico's constitution dictates that the debt has to be paid before any other financial obligation is met. If Garcia seeks to not pay the debt at all, it will require a referendum and a vote on a constitutional amendment, she said in a phone interview.

Puerto Rico's situation has drawn comparisons to Greece, where the government decreed this weekend that banks would be shuttered for six business days and restrictions imposed on cash withdrawals. The country's five-year financial crisis has sparked questions about its continued membership in the 19-nation shared euro currency and the European Union.

Puerto Rico's governor recently confirmed that he had considered having his government seek permission from the U.S. Congress to declare bankruptcy amid a nearly decade-long economic slump. His administration is currently pushing for the right for Puerto Rico's public agencies to file for bankruptcy under Chapter 9. Neither the agencies nor the island's government can file for bankruptcy under current U.S. rules.

Puerto Rico's public agencies owe a large portion of the debt, with the power company alone owing some $9 billion. The company is facing a restructuring as the government continues to negotiate with creditors as the deadline for a roughly $400 million payment nears.

Garcia has taken several measures to help generate more government revenue, including signing legislation raising the sales tax to 11.5 percent and creating a 4 percent tax on professional services. The sales tax increase goes into effect Wednesday and the new services tax on Oct. 1, to be followed by a transition to a value-added tax by April 1.


-- (c) Associated Press 2015-06-29

[trogers]

The result of thinking that debt would spur economic growth and tax collection would be able to pay off such a debt.

Same as an individual taking on debts in the belief that his future income can pay it off...

[NeverSure]

Their debt to GDP ratio is less than the UK's but they've had a steeply declining GDP. They have tourism as a backbone which has fallen. I hope they pull it out. 72 Bil isn't that much money as countries go. That's about what Bill Gates is worth.

[MaxYakov]

"Puerto Rico's constitution dictates that the debt has to be paid before any other financial obligation is met. If Garcia seeks to not pay the debt at all, it will require a referendum and a vote on a constitutional amendment, she said in a phone interview."

Simple solution: Send them a pen and a phone.

[NeverSure]

Puerto Rico's debt is about 70% of GDP and Greece's is about 180%. Greece's is about 5X bigger in absolute terms. How did people let Greece get in so deep, and will Greece cause the end of support for Puerto Rico as bond investors reel at losses? Time will tell.

[MaxYakov]

Their debt to GDP ratio is less than the UK's but they've had a steeply declining GDP. They have tourism as a backbone which has fallen. I hope they pull it out. 72 Bil isn't that much money as countries go. That's about what Bill Gates is worth.

According to this his worth is about what the U.S. govmint reportedly blew in one year (just on improper payments?):

"The federal government made at least $72 billion in improper payments in 2008"

50 Examples of Government Waste - heritage.org (Warning: U.S. Taxpayers read at their own risks)

Edited June 29, 2015 by MaxYakov

[DeaconJohn]

The island was once known as the "Poorhouse of the Caribbean."

Has anything changed?

[little mary sunshine]

Oh Please USA we want to become a State,

Now that we're broke......Screw off. PR!,

[SOUTHERNSTAR]

Puerto Rico's debt is about 70% of GDP and Greece's is about 180%. Greece's is about 5X bigger in absolute terms. How did people let Greece get in so deep, and will Greece cause the end of support for Puerto Rico as bond investors reel at losses? Time will tell.

It easy, first Greece lied about their debt to GDP ratio before joining the EU, they were assisted by JPM to commit fraud. Secondly Germany and the northern European countries allow the poorer southern countries to come in to expand their market. So when the going was good Germany sold products and services to Greece and allowed them to run up massive budget deficits and trading deficits (within the EU). After the 2008 crash which led to the Greece bubble bursting Germany turned around and imposed austerity on Greece (the same people that caused the problem). Since these measures have been implemented the GDP dropped with 25%, unemployment is at 25% (with youth unemployment at +- 60%) debt to GDP increased to 180% (largely due to the decrease in the GDP and 45% of pensioners live below the EU poverty line (due to the austerity measures which targeted the pensions). Greeces suicide rate is 35% up and their health care system is starting to fail.

As the Porto Rico governor said its mathematically impossible to repay their debt the same is true about Greece and the sooner Herr Merkel allow Greece's bond holders to take a 50% haircut the faster we can move along to the next problem, Portugal. Spain, Italy and France.

[wwest5829]

The result of thinking that debt would spur economic growth and tax collection would be able to pay off such a debt.

Same as an individual taking on debts in the belief that his future income can pay it off...

Reaganomics, trickle down economics at work?

[Papa San]

Don't worry, everyone. Come September this year Puerto Rico will be "no more". A meteorite is prophecied to hit the Atlatic Ocean on or about September very near to Puerto Rico. This 2.5 mile wide space rock will cause an enormous earthquake and a tsunami with waves higher than 200 feet in Puerot Rico, Wiping the island off the face of the map within minutes, and taking out all life form on the island forever. Sure, they will not be able to repay any of their debts, but all their creditors on the mainland U.S.A. will also be wiped off the map. Search for the videos in Youtube to wath the details.

[quandow]

This is SO wretchedly corrupt, I don't know where to begin. I lived on that rock (technically an archipelago) from 2002-2005. It has a population of about 3.5 million. The U.S. gives aid to the tune of about $17 BILLION per year. It's made up of broken down buildings, aging hookers, and a few marinas. WHERE the HELL could that much money have gone?!?!? (don't answer, it's a rhetorical question, just like Haiti, it's now hidden in off shore accounts to which the politicians have the passbook numbers and passwords).

[elgordo38]

The result of thinking that debt would spur economic growth and tax collection would be able to pay off such a debt.

Same as an individual taking on debts in the belief that his future income can pay it off...

PR welcome to the club. You will not be alone there will be more members joining the " Financial Titanic club" club in the near future. The politicians and their friends that created this problem over the decades are long dead or gone spending their fat government pensions leaving you holding the bag. Its like financial/musical chairs and the music just stopped.

[elgordo38]

This is SO wretchedly corrupt, I don't know where to begin. I lived on that rock (technically an archipelago) from 2002-2005. It has a population of about 3.5 million. The U.S. gives aid to the tune of about $17 BILLION per year. It's made up of broken down buildings, aging hookers, and a few marinas. WHERE the HELL could that much money have gone?!?!? (don't answer, it's a rhetorical question, just like Haiti, it's now hidden in off shore accounts to which the politicians have the passbook numbers and passwords).

Maybe we should move there and get a bigger bang for our bucks. Opps sorry only aging hookers cancels that idea. No young ones?

[quandow]

This is SO wretchedly corrupt, I don't know where to begin. I lived on that rock (technically an archipelago) from 2002-2005. It has a population of about 3.5 million. The U.S. gives aid to the tune of about $17 BILLION per year. It's made up of broken down buildings, aging hookers, and a few marinas. WHERE the HELL could that much money have gone?!?!? (don't answer, it's a rhetorical question, just like Haiti, it's now hidden in off shore accounts to which the politicians have the passbook numbers and passwords).

Maybe we should move there and get a bigger bang for our bucks. Opps sorry only aging hookers cancels that idea. No young ones?

They HATE whitey! My friends and I went to a bar in San Juan one night, they refused us service. We were ghosts as far as they were concerned, wouldn't even acknowledge our presence. I had to fly to Dominican Republic to get any freak on. You think THAILAND is xenophobic, they don't hold a CANDLE to Puerto Rico!

[SOTIRIOS]

...wow.....isn't that more than what Greece owes.....???

[stoli]

Puerto Rico is just following what the US is doing, spending money that they can never pay back. Greece has done the same thing. It will be interesting to see if they are allowed to do a BK. In the USA, a city or county can do a BK, but a state cannot. Be fun to see how it plays out......In ten years, thanks to Obama, this same scenario will be playing out. There will be a Republican President then, and the Democrats will blame him or her. So typical.....

[NeverSure]

The result of thinking that debt would spur economic growth and tax collection would be able to pay off such a debt.

Same as an individual taking on debts in the belief that his future income can pay it off...

Reaganomics, trickle down economics at work?

When Reagan took office the US was in bad shape with a bad recession, sky high interest rates and sky high inflation thanks to Democrat Jimmy Carter, The Worst President The US Ever Had^R.

Reagan pulled out of it and handed Bush 1 a recovering economy which went on to be one of the best expansions the US has had.

Next.

[Usernames]

The time for PR independence is now.

[wwest5829]

The result of thinking that debt would spur economic growth and tax collection would be able to pay off such a debt.

Same as an individual taking on debts in the belief that his future income can pay it off...

Reaganomics, trickle down economics at work?

When Reagan took office the US was in bad shape with a bad recession, sky high interest rates and sky high inflation thanks to Democrat Jimmy Carter, The Worst President The US Ever Had^R.

Reagan pulled out of it and handed Bush 1 a recovering economy which went on to be one of the best expansions the US has had.

Next.

At a cost of the U.S. debt rising by how much? Jimmy was a good man but I cannot defend the economic condition. Think I was paying 14% mortgage interest. I'll be quite satisfied with history's determination of these Presidents. Certainly Reagan was popular and a welcomed PR change. As to his Presidency he will be called to task for the Google and the bad. He will not end up being a saint by any means.

[samran]

The result of thinking that debt would spur economic growth and tax collection would be able to pay off such a debt.

Same as an individual taking on debts in the belief that his future income can pay it off...

Reaganomics, trickle down economics at work?

When Reagan took office the US was in bad shape with a bad recession, sky high interest rates and sky high inflation thanks to Democrat Jimmy Carter, The Worst President The US Ever Had^R.

Reagan pulled out of it and handed Bush 1 a recovering economy which went on to be one of the best expansions the US has had.

Next.

And real median family incomes have more or less been stagnant since.

[boomerangutang]

I had a P.Rican g.f. once, for just a few days. Man, she was a sexual monster. She could have kept both super bowl teams working out in shifts and still called out for more. Sorry to be off topic.

Back on topic: It sounds like countries can be like people: borrowing as much as they can (with smiles and good cheer), then later saying, "hey, I can't pay."

then adding one or both of the following tags;

"Can't talk now. Someone's on the other line."

"You got tons of money, why are you harassing poor little me?"