That’s the largest withdrawal since the period through July 1, during which Puerto Rico Governor Alejandro Garcia Padilla said the U.S. commonwealth can’t afford to pay its debts.
The mutual funds, however, quoted an authorizing act for the bonds in question as saying that Puerto Rico’s treasury secretary is “authorized to advance the funds needed for the payment” of the bonds’ principal and interest.
“We hereby demand that P.F.C. take all actions necessary to collect”, said the executives, Richard A. Stein of OppenheimerFunds and Sheila Amoroso of Franklin Advisers….Officials who represent bondholders have said repeatedly that they believe Puerto Rico has the resources to pay all of its debts and does not need to suspend the payments. The island’s 12 per cent unemployment rate, which exceeds every state on the mainland, and its recent 4.5 per cent hike in sales tax contribute to the island’s 40 percent poverty rate, leading tens of thousands of Puerto Ricans to the US each year. Bankruptcy would hurt the finances of the Island’s cooperativas, or local credit unions, which hold Puerto Rican municipal bonds.
Puerto Rico made history this week, and not in a good way.
The U.S. commonwealth paid only $628,000 of a $58 million payment due on its Public Finance Corp (PFC) bonds. In fact, there are more Puerto Ricans living in the continental US than there are on the island, and that’s not because they want to but rather because Congress has contributed to an uninhabitable PR that forces them to leave. Economists say Puerto Rico must boost its tourism sector and modernize its infrastructure. “As Puerto Rico falls, Connecticut falls”, Murphy said.
Although, the US financial market is expected to remain at bay from the developing situation in Puerto Rico, due to a relatively small debt of $72 billion.
If Puerto Rico defaults on a debt to a more formidable creditor, say Wall Street hedge funds, it could mean an end to democracy on the island.
“The people of Puerto Rico are American citizens”, Blumenthal reminded everyone. Countries across Asia, Africa, Europe and Latin America have demonstrated that independence is possible. The bondholders argue that allowing Puerto Rico to declare bankruptcy is nothing short of a federal bailout, and that it not only changes the rules in the middle of the game but also rewards financial irresponsibility.