Over the past year, Puerto Rico’s financial problems have received national attention. Not only is the territory mired in high unemployment, but their government is also buried under a mountain of debt. Officials have desperately tried to keep the situation under control, and have pleaded with Congress to let them restructure their debt, but to no avail.
Now Puerto Rico is going to ring in the New Year by defaulting on a portion of $1 billion in bonds that are due next Monday. Officials with the Commonwealth have admitted that cannot pay 2 of 13 different payments that are owed to bondholders by January 4th. This includes $35.9 million for the Puerto Rico Infrastructure Financing Authority and another $1.4 million for the Puerto Rico Public Finance Corporation.
However, this isn’t the first time that the Commonwealth has defaulted. In August, Puerto Rico failed to pay $58 million to its Public Finance Corporation, which was the first default in the island’s history. In a recent press conference, Governor Padilla was asked about the possibility of a shutdown of government services. “We have to do all we can to avoid that situation” he said after announcing that he would meet with creditors in January.
Unfortunately, something will have to give in the near future. Puerto Rico has over $70 billion in liabilities, which no reasonable tax could ever pay down. If Congress doesn’t let Puerto Rico restructure their debt or declare bankruptcy, then the loss of some public services is inevitable.
Joshua Krause is a reporter, writer and researcher at The Daily Sheeple. He was born and raised in the Bay Area and is a freelance writer and author. You can follow Joshua’s reports at Facebook or on his personal Twitter. Joshua’s website is Strange Danger.