Puerto Rico’s financial crisis just got more serious

The Government Development Bank for Puerto Rico announced it paid the full $355 million in principal and interest payments that were due Tuesday. The governor reiterated that Puerto Rico had run completely out of cash, and that as of Tuesday it was going to “claw back” certain revenues dedicated to paying debts, and use the money instead to provide government services and service general obligation bonds.

“That is why starting today the commonwealth of Puerto Rico will have to claw back revenues pledged to certain bonds issued in order to maintain public services”.

Of the $354 million due December 1, Puerto Rico guaranteed $267 million of the bonds.

Unlike the USA mainland, Puerto Rico is blocked without congressional intervention from filing for the same bankruptcy protections used by cities like Detroit and San Bernardino, Calif., in recent years.

The territory’s governor also called on Congress to allow Puerto Rico to declare bankruptcy as if it were a state.

“Puerto Rico’s debt crisis didn’t happen overnight, it’s been years in the making”, said Senator Chuck Grassley, who chaired the committee at Tuesday’s hearing.

Some lawmakers said they anxious about giving Puerto Rico the Chapter 9 option. Sen.

Over the past decade, Puerto Rico’s government has laid off 30,000 employees, closed almost 200 schools, raised taxes and reformed pension funds, Gov. Alejandro García Padilla told the Senate panel. Charles Schumer, D-N.Y., takes his seat on Capitol Hill in Washington, Tuesday, Dec. 1, 2015, to hear testimony by Puerto Rico Gov. Alejandro Javier Garcia Padilla before the c…

Blumenthal said Congress had a “moral responsibility” to assist the island, since they are US citizens by birth, and should give Puerto Rico the financial tools it needs to restructure its debt.

With 45 percent of its 3.5 million population in poverty, Puerto Rico is a meteorological paradise mired in economic purgatory. The most likely alternative is a default, which would result in economic chaos in which the US government inevitably would have to intervene.

“We are reduced to the role of supplicant, pleading for equal treatment, or at least more equitable treatment”, Pierluisi said. “Come January 1, we’ve got another very significant commitment that they have to address…by no means is this to be construed as anything but just a momentary blip in what’s been a continuing litany of confusing positioning and comments from the leadership” in Puerto Rico.