Puerto Rico’s Governor Says Island’s Debts Are ‘Not Payable’

New York Times, By Michael Corkery & Mary Williams Walsh, June 28

Puerto Rico’s governor, saying he needs to pull the island out of a “death spiral,” has concluded that the commonwealth cannot pay its roughly $72 billion in debts, an admission that will probably have wide-reaching financial repercussions.

The governor, Alejandro García Padilla, and senior members of his staff said in an interview last week that they would probably seek significant concessions from as many as all of the island’s creditors, which could include deferring some debt payments for as long as five years or extending the timetable for repayment.

“The debt is not payable,” Mr. García Padilla said. “There is no other option. I would love to have an easier option. This is not politics, this is math.”

It is a startling admission from the governor of an island of 3.6 million people, which has piled on more municipal bond debt per capita than any American state.

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  • “He said creditors must now “share the sacrifices” that he has imposed on the island’s residents.

    “If they don’t come to the table, it will be bad for them,” said Mr. García Padilla, who plans to speak about the fiscal crisis in a televised address to Puerto Rico residents on Monday evening. “What will happen is that our economy will get into a worse situation and we’ll have less money to pay them. They will be shooting themselves in the foot.”

  • Economic exodus means two-thirds of Puerto Ricans may soon live in US

    The Guardian, By Alan Yuhas, July 2

    New York – Facing a crisis of monumental proportions at home, tens of thousands of people are fleeing a Caribbean island in search of a better life in the United States only to find hardship and struggle on American shores. Their stories sound like those of millions of migrants – poverty at home, where the economy lies in tatters – but they differ from millions of others: they’re already American.

    Unable to pay its $73bn debt, Puerto Rico has begun rationing water, closing schools and watching its healthcare system collapse and 45% of its people living in poverty. Emigration to the mainland has accelerated in recent years, activists say, and data shows that from 2003 to 2013 there was a population swing of more than 1.5 million people.

    “This new wave of immigration can be compared with the immigration in the 1930s and 40s,” said Edgardo González, coordinator of the Defenders of Puerto Rico, an activist group. The Great Depression and second world war spurred the so-called “Great Migration”, when tens of thousands of Puerto Ricans moved to New York every year for nearly two decades.


    Today, 60% of Puerto Ricans live in the States and 40% on the island according to a 2014 Pew report, with most moving to Florida. Cuny professors Edwin Meléndez and Carlos Vargas-Ramos predict that by 2020, it’s likely that two-thirds of Puerto Ricans will reside in US states.

    CEPR: Greece and Puerto Rico [Compare and Contrast – 10 points]

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