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Puerto Rico’s governor on need to postpone debt payments for years: ‘It’s about math’


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cbae1bc4-1e05-11e5-84d5-eb37ee8eaa61_story.html?tid=HP_lede?tidWashington Post:

Michael A. Fletcher

June 29 2015

 

The governor of Puerto Rico said in a televised address Monday that the island cannot pay back more than $70 billion in debt, setting up an unprecedented financial crisis that could rock the municipal bond market and lead to higher borrowing costs for governments across the United States.

 

“This is not about politics,” said Puerto Rico’s governor, Alejandro Garcia Padilla. “It’s about math.”

 

Garcia Padilla said the country needed to postpone for several years its debt payments.

“The first step is to revive economic growth...We will never get out of this vicious cycle,” said Garcia Padilla. “But we need to do more—much more—to return to riches and to become more competitive and have an expansion in the private market.”

 

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Puerto Rico’s move could roil financial markets already dealing with the turmoil of the renewed debt crisis in Greece. It also raises questions about the once-staid municipal bond market, which states and cities count on to pay upfront costs for public improvements such as roads, parks and hospitals.

 

[Puerto Rico, with at least $70 billion in debt, confronts a rising economic misery]

 

For many years, those bonds were considered safe investments — but those assumptions have been shifting in recent years as a small but steady string of U.S. municipalities, including Detroit, as well as Stockton and Vallejo in California, have tumbled into bankruptcy.

 

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Hmmm. They want to return to riches... I've never associated Puerto Rico with riches. I seriously doubt professional investors ever considered PR a highly safe investment. Of course the U.S. Government involved with loans and financial guarantees to help equalize all may have changed that.

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Hmmm. They want to return to riches... I've never associated Puerto Rico with riches. I seriously doubt professional investors ever considered PR a highly safe investment. Of course the U.S. Government involved with loans and financial guarantees to help equalize all may have changed that.

 

 

but those assumptions have been shifting in recent years as a small but steady string of U.S. municipalities, including Detroit, as well as Stockton and Vallejo in California, have tumbled into bankruptcy.

 

 

As I understand it Ill., and particularly Chicago are real close also, to going under.

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Puerto Rican debt crisis sets off fresh fight in Congress

Peter Schroeder

07/05/15

 

A looming debt crisis in Puerto Rico is setting off a fresh fight in Congress, where lawmakers are debating a statutory fix that could allow the island territory to declare bankruptcy. Advocates of the change say it would resolve a technical oversight from a decades-old bankruptcy law, while skeptics warn that it could throw into question billions of dollars in debt now owned by investors across the country.

 

Earlier this week, Puerto Rico’s governor declared that the nation’s $72 billion pile of debt was too much for it to handle. To avoid a “death spiral,” Gov. Alejandro Garcia Padilla said the commonwealth would have to break its promise to pay back some money owed. But a quirk in the nation’s bankruptcy code is throwing Congress into the middle of the matter, as lawmakers will need to quickly pass a new law if Puerto Rico is going to gain access to the nation’s bankruptcy courts.

 

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Puerto Rico’s financial woes are a decade in the making, as the territory was hit hard by the financial collapse and never really recovered. A large number of Puerto Ricans have moved to the U.S. mainland seeking better opportunities, further exacerbating the territory’s woes by shrinking its tax revenue base. Meanwhile, the island’s municipal debt has long been popular with investors, in part due to the fact that investors receive interest exempt from all federal, state and local taxes, a feature unique to Puerto Rico bonds. All that has combined to make Puerto Rico by far the most indebted place in the United States, reaching the point where public officials are declaring it unsustainable.

 

(Snip)

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