Puerto Rico has defaulted after paying only $628,000 of a $58 million dollar debt to local credit unions Monday.
With it’s economy grappling with a 10-year economic crisis which catapulted into full recession, Puerto Rico’s outstanding debt now stands at $70 billion.
Much like Greece, some 8,600 kilometers away, Puerto Rico’s woes began with public overspending as the economy was dealing with a growing global financial crisis.
And in a similar fashion, leaders in Puerto Rico – which is a part of the US commonwealth – have told their creditors that they cannot repay the debt and fix the economy unless their is loan restructuring.
The Obama administration in Washington appears sympathetic, despite consensus that the Federal Reserve should not provide bailout assistance to the island.
Last week, the White House urged Congress to quickly pass legislation that would facilitate Puerto Rico’s access to bankruptcy processes – Chapter 9 – in an effort to alleviate the financial burdens.
In the meantime, the economy is already battered suffering from 12 per cent unemployment and a brain drain to the US mainland as residents opt for better job and living opportunities in cities like Miami, LA and New York.
The government says it will slash public spending and increase taxes.