‘We’re Insolvent,’ Puerto Rican Officials Declare; Debt Moratorium on the Table
Feb. 17, 2016 (EIRNS)—Following yesterday’s release by the Puerto Rican government of the Consolidated Annual Financial Report (CAFR) for fiscal year 2014, top-level government officials announced very simply that the island government is "insolvent," and is considering a moratorium on payments due on May 1 and July 1, among others. "The Commonwealth’s management believes that there is substantial doubt as to the ability of the primary government" and other governmental entities "to continue as a going concern," the report warned.
In an interview yesterday with radio WUNO, Finance Secretary Juan Zaragoza put it this way: "If, by insolvent, we mean we’re unable to make debt payments when they’re due, yes, we are insolvent." In a press conference yesterday, Primera Hora reported, Chief of Staff to Gov. Alejandro Garcia Padilla, Grace Santana, said that the emergency measures under consideration "will affect the rights of creditors and the payments due in May and July 1." The Government Development Bank (BGF) has $422 million coming due May 1, and the government and several agencies combined must pay $2 billion on July 1, $805 million of which are General Obligation (GO) bonds, which carry a constitutional mandate of payment.
The CAFR, whose release Sen. Orin Hatch (R-UT) demanded to see, to determine whether Puerto Rico was being sufficiently "transparent" about its finances, confirms "the critical nature of the crisis," said BGF president, Melba Acosta; but, she emphasized, as did Santana, under no circumstances will public employees be fired, or their wages reduced, because this would worsen the crisis. She added, however, that if Puerto Rico’s financial situation doesn’t improve in the immediate future, it may be necessary to place some public agencies in receivership. Whatever measures are required to guarantee continued essential services, will be taken, she admonished.
Gov. Garcia Padilla issued a statement yesterday accompanying the release of the CAFR, again demanding that Congress act and grant the Commonwealth bankruptcy protection and the ability to restructure its debts. At a White House seminar with Puerto Rican labor and business leaders yesterday, Treasury Secretary Jack Lew also urged Congress to act swiftly.