The Strategist

Puerto Rico is Caught in Default

08/04/2015 - 15:46

Government Development Bank of Puerto Rico was not able to pay part of the payments on the debt to the creditors. Thus, the country found itself in a state of default.

Ramón Morales
Ramón Morales
Earlier, authorities reported there is no assets to meet the obligations. General government debt is in excess of $ 70 billion

- Due to the lack of funds allocated for the current fiscal year, payments were not made in full today, - said the head of the organization Melba Acosta Febo.

According to him, the State Finance Corporation of Puerto Rico, which is responsible for paying the debts, paid approximately $ 628,000 of 58 million, payable to August 1st.

The debt situation in the commonwealth attracted attention after the governor Alejandro Garcia Padilla said that it is not possible to pay the debt of Puerto Rico in the amount of $ 72 billion.

Debt Market of Puerto Rico has been very popular among investors because of its triple system of tax benefits.

Earlier, Garcia Padilla urged the US Congress to change the law on bankruptcy and enable the Commonwealth to declare themselves bankrupt. Puerto Rico cannot declare bankruptcy, since it is not the state.

Puerto Rico is a US territory dependent and has the status of unincorporated organized territory, which means that this territory is under the control of the United States, and is not an integral part thereof. Action of the United States Constitution is limited on the territory, the supreme power belongs to Congress, but the territory has its own system of government.

According to the US Census Bureau, the median income for a Puerto Rican family is somewhere in the $ 20 thousand per year. The salary of civil servants exceeds this amount by more than 90%. However, if Athens reduced 150 thousand civil servants because of the crisis, the state budget of Puerto Rico, began July 1 fiscal year, does not include plans for dismissal of officials.

The former World Bank chief economist Anne Krueger said in the report on the finances of the island that only 40% of the population are employed or actively seeking work, whereas in the United States as a whole, this proportion reaches 63%. One of the reasons for the under-employment is that state aid to the inhabitants of the island is $ 1743 per month and the minimum wage - $ 1159. Many believe that working with such financial assistance is pointless.