Puerto Rico’s fiscal crisis has been fomenting for a while now, with a debt exceeding $70 billion and an unemployment rate of 12.4 percent.
Despite repeated reassurances that he would lead the island through the crisis, the most assertive of which was offered in June, when he appointed a commission of leaders to develop a plan for dealing with the debt burden, Governor García has made little, if any, progress, and announced recently that the island will likely default on the next round of debt payments due at the beginning of the new year.
The island owes more than $900 million worth of bond payments by January 1. If it does not make the payment–and it is expected the government will not, as Governor García says it has run out of money–it will be the biggest default in the island’s history.
García told members of U.S. Congress on Wednesday that if he has to choose between paying the bill and paying the salaries of Puerto Rican employees, he will choose the latter. “It’s that simple,” he said, adding, “They will have to go to court to force me to do the opposite.”
Given the dire financial straits in which the island finds itself, it’s likely Governor García will have to make that choice. The populist line played well on the island, where García will run for reelection in 2016.
“A distress call”
Governor García, joined by Puerto Rican mayors and other legislators, as well as mainland Puerto Ricans who hold office, also asked Congress to adjust existing regulations that prevent the island from exercising bankruptcy as a crisis management option.
Governor García wants to be able to declare bankruptcy, but under present legislation, is prohibited from doing so. “This is a distress call to Congress, from a ship of 3.5 million American citizens,” he declared. “We are not asking for a bailout,” he said. “We are asking for the tools to do the job.”