Puerto Rico - 'Greeks' of the Caribbean

[unhappycamper]

http://www.dw.com/en/puerto-rico-greeks-of-the-caribbean/a-18639519

The loss of tax perks and its status as a commonwealth are just two of many reasons for Puerto Rico's bankruptcy. The island is now hoping that the default will give it leverage to restructure its debt.

Puerto Rico - 'Greeks' of the Caribbean
Andreas Knobloch
10.08.2015

US Treasury Secretary Jack Lew was less than amused when – in the middle of the Greek debt drama - his German colleague, Finance Minister Wolfgang Schäuble quipped, "we could take Puerto Rico into the euro zone, if the US were willing to take Greece into the dollar union." Thus reminding the Americans, that while the whole world seemed fixated on Greece and its debt crisis, a similar drama was unfolding in the Caribbean.

Now, after ongoing speculation, it is official: Puerto Rico is broke. On August 1, the island state, which has a treaty of association with the USA, failed to service a payment for a $58 million (53 million euro) Public Finance Corp (PFC) bond owed to its North American partner. Instead, they transferred the paltry sum of $628,000 (566,000 euro). It was the first default by Puerto Rico since it became a US territory 117 years ago.

In a statement, Melba Acosta Febo, President of the Government Development Bank of Puerto Rico (GDB), the institute that owes the money, explained: "It was a decision that reflects serious concerns about the Commonwealth's liquidity." In all, the island exclave has some $72 billion worth of debt with the United States.

'It's about math'

The default, however, did not come as a surprise. In a "New York Times" interview in late June, Governor Alejandro García Padilla said that "the debt is not payable. There is no other option. I would love to have an easier option. This is not politics; this is math."