Puerto Rican Citizens Can't Be
Sacrificed To Pay the Debt,
Island Official Warns
July 21, 2015 (EIRNS)With a total of $72 billion in unpayable debt, the bankrupt Commonwealth of Puerto Rico is headed for a blowout, one of several crisesUkraine and Greece among themwith the potential to ignite a global financial conflagration. No one can predict which of these, or others, might be the detonator. In the highly volatile municipal bond market, which holds large quantities of Puerto Rican debt, panic has already set in.
Here's the reality: Over the next 12 months, the Commonwealth has $5.4 billion in bond payments coming due, out of a total budget of $9.8 billionthat is, a debt service equal to 55% of its total budget! Coming up immediately on Aug. 1, is a $94 million. payment on Public Finance Corporation (PFC) bonds, $36.3 million. of which was supposed to be transferred to a trustee on July 15 to guarantee the Aug. 1 payment. But that payment wasn't made because the island's Legislative Assembly didn't appropriate the funds for it, and then recessed until mid-August. Standard and Poors has already downgraded PFC bonds, declaring that "a default is inevitable."
In a July 19 press conference, Luis Cruz Batista, Director of Puerto Rico's Office of Management and Budget, clearly stated:
[W]e all know the difficult situation we're facing from the standpoint of cash flow, and we have to make a decision, and that's what we're doing ... and our priority is to provide services to our citizens, health services, protection and security, and education services.
Cruz didn't rule out making the Aug. 1 payment, but emphasized that that will be up to the Legislature in coordination with the Executive.
Iowa Republican Rep. Steve King, according to the July 20 U.S. News & World Report, groused last month, "It's as if Puerto Rico is the Western Hemisphere Greece. They refuse to accept austerity. They refuse to take the issue on."