Weekend Economists Celebrate Harry Potter's 35th Birthday July 31st, 2015

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34. Puerto Rico Makes One Payment, to Default on Another

http://www.telesurtv.net/english/news/Puerto-Rico-Makes-One-Payment-to-Default-on-Another-20150801-0005.html

The government said it had made a payment of US$169 million on Friday to one of its creditors as activists called for resistance against austerity. Puerto Rico faces a deadline Saturday for a debt payment of US$58 million to the Public Finance Corporation (PFC) bonds. The U.S. commonwealth territory is expected to default on this payment as the government had indicated that the territory's bank did not have enough funds to make it. However, according to the PFC regulations, as the payment's deadline falls on a weekend, the territory would have until August 3. Therefore, if it does not make the payment by then, Puerto Rico would officially default on that debt.

Meanwhile, the Government Development Bank made a US$169 million payment Friday for a debt owed. "The GDB will make the US$169 million payment for the debt service on its bonds today," GDB President Melba Acosta said in a statement released Friday. A payment on that debt was due to be made Saturday Aug. 1.

The Caribbean island’s Chief of Staff Victor Suarez told journalists last month that his country did not have enough money to pay back the US$73 billion it owned to creditors, which amounts to 102 percent of the country's GDP. He said Monday that the Puerto Rican government was looking into the possibility of obtaining some US$400 million through raising gasoline prices. "We are trying to achieve a smaller transaction with reasonable terms of some US$400 to US$500 million," Suarez said, according to Reuters.

In the face of the debt crisis in the country, activists and lawmakers are calling for resistance, saying that the government has failed the people of Puerto Rico as it continues to introduce further austerity measures.

“We should demand a real negotiation of the debts, a suspension of payments, carry out an audit, and place taxes on large U.S. corporations,” Rafael Bernabe, the leader of the newly-formed Working People's Party, told teleSUR in an interview Friday. “The very policy of taxing corporations could result in an annual return into the local economy of US$7-8 billion, which could fundamentally restructure the Puerto Rican economy”

For years, economic turmoil has rocked the island as a result of historical issues, as well as recent financial upsets affecting the United States, especially the 2007-2010 recession and housing crisis.