Puerto Rico Makes July 1 Bond Payments, Avoids Default

In recent years, as debt levels have grown as a percentage of GDP and real economic growth has slowed, the willingness of regulators and political leaders to deal with debt has been limited.

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“It is clearly the best course of action for both Puerto Rico and its creditors”.

Puerto Rican Gov. Alejandro García Padilla acknowledged his country can not pay its approximately $72 billion in debts, according to The New York Times.

The bank also said in a quarterly report supplement that the government’s deficit is in the $700 million range, almost $200 million bigger than expected in part because of lower than anticipated revenues.

Throughout the next two days, his spokesmen declined to comment on the imminent debt payment deadlines as well as request for interviews.

The sector is performing well across the board in stayover arrivals, hotel occupancy and cruise passenger arrivals, according to Ingrid Rivera Rocafort, executive director of the Puerto Rico Tourism Co. Is the governor threatening to default at this point?

While Europe wonders what would happen if Greece leaves the European Union, news from Puerto Rico implies that debt crisis is a global problem.

In a significant development Wednesday, PREPA announced an extension of a forbearance agreement with its creditors to September 15.

For both Greece and Puerto Rico, the road back to whatever normal is will be neither fast nor easy, though it’s still a long way from Armageddon. Here’s what he had to say. There haven’t been any bank runs in Puerto Rico. When Detroit was in financial trouble, the Illinois legislature allowed them to restructure their debt through bankruptcy.

“We do not have any lifeboat or financial partners that have been willing to step up”, de Jesus said. The White House has been rather silent, other than to say there will not be a federal bailout.

It is also thought that the risk of contagion to neighboring states is negligible in Puerto Rico’s case.

ALLEN: I don’t think they do. Its banks are still open and people can still take out as much money as they want. So the lenders are at the table negotiating, but something like a multi-year moratorium on debt payments that the governor’s asked for – that might be a bit of a stretch. Irreversible structural reform in return for court-supervised debt relief is the only hope for Puerto Rico, and energized leadership in Washington is the only way to make that possible.

ALLEN: Well, clearly they have some. Puerto Rico, with its population of approximately 3.6 million people, has over $73 billion in municipal bond debt.

Governor Padilla said on Monday that the island does not have the means to pay the national debt, which has increased by $50 billion since the ’90s. But there’s other things going – out there. It has the same pay floor as the rest of the United States – $7.25 per hour.

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Lazaro said that the new homes and businesses being added to the rationing plan are in Guaynabo and Bayamon, municipalities adjacent to San Juan, along with the capital neighborhoods of Montehiedra and Caimito. America’s minimum wage applies in the territory, but local workers are less productive than their counterparts on the mainland (the minimum wage is equivalent to 77% of Puerto Ricans’ average income). What does it feel like to them?

Puerto Rico like Greece has more debt than it can handle. It's trying to restructure the debt