Puerto Rico defaults on $422M debt payments

Puerto Rico defaults on $422M debt payments
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Puerto Rico will default Monday on roughly $422 million in debt payments.

Gov. Alejandro García Padilla said Sunday night that the territory’s Government Development Bank would not be making payments owed Monday. He argued that the island’s dwindling revenues could not go toward the debt payment without unacceptable cuts to public services.

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“Faced with the inability to meet the demands of our creditors and the needs of our people, I had to make a choice,” he said in a televised address. “I decided that essential services for the 3.5 million American citizens in Puerto Rico came first.”

Monday’s default could ramp up pressure on policymakers in Washington to move forward with legislation that would let the island restructure its debt, as well as establish an outside fiscal control board to monitor its finances.

At the end of 2015, Speaker Paul RyanPaul Davis RyanMcConnell names Senate GOP tax conferees House Republican: 'I worry about both sides' of the aisle on DACA Overnight Health Care: 3.6M signed up for ObamaCare in first month | Ryan pledges 'entitlement reform' next year | Dems push for more money to fight opioids MORE (R-Wis.) set a March 31 deadline for action to address Puerto Rico’s debt crisis. That deadline slipped, and lawmakers are now on a weeklong recess with no bill as Puerto Rico suffers its largest default yet.

Attention now will turn to July 1 as the next potential deadline for action. On that date, the island is supposed to make roughly $2 billion in debt payments, and experts do not believe those payments will be made.

In justifying Monday’s default, García Padilla painted a grim picture of life on Puerto Rico. He said the island’s economic crisis has made it difficult to pay for fuel for police cars and provide services to students with special education needs.

However, he also laid much of the blame squarely at the feet of Congress, saying that he had been warning Washington for roughly a year of the island’s financial difficulties.

“In our efforts to avoid a humanitarian crisis, we have repeatedly traveled to Washington to convey the urgency of the situation,” he said.

García Padilla blamed “internal partisan and ideological divisions” among House lawmakers for the lack of action so far and called on GOP leaders to seize the issue and move it forward.

“Puerto Rico needs Speaker Paul Ryan to exercise his leadership,” he said.

The House Natural Resources Committee is still working on crafting a relief bill after progress on the measure stalled back in April.

García Padilla also reserved some scorn for investors in Puerto Rican debt that have lobbied hard against any legislation that would allow the island to restructure its debts.

Many lawmakers were spooked after the Center for Individual Freedom, a dark money group that does not have to disclose its donors, began running ads blasting the bill as a “bailout,” even though no federal money goes to the island under it.

Many believe Puerto Rican investors opposed to any deal helped finance the ads, and García Padilla said “pure greed” by “vulture funds and their lobbyists” was behind efforts to defeat the bill.

García Padilla closed his remarks by noting that Puerto Ricans have fought in numerous American military conflicts, proving their commitment to the nation as American citizens.

“We have proven with blood our shared values with the United States. Now, Congress must show this commitment is mutual,” he said.