SAN JUAN – Puerto Rico has opted to default on $911 million in constitutionally guaranteed debt, or roughly half of the $2 billion in principal and interest that came due on Friday.
“Even if I were to shut down the government today, I wouldn’t have enough to make all” the debt payments, Gov. Alejandro Garcia Padilla said in a press conference at La Fortaleza, his official residence.
Members of Garcia Padilla’s financial and legal team who accompanied him at the press conference did not provide specific details on which bond payments were made on Friday.
But the governor’s chief of staff, Grace Santana, confirmed that no principal or interest payments were made on so-called general obligation, or GO, bonds, which are guaranteed by the U.S. commonwealth’s constitution and supposed to be repaid even before covering the cost of essential services, such as education, police and sanitation.
Friday’s default, the first involving GO debt, was historic but unsurprising because Garcia Padilla had said long before that the island had no money to make payment on those bonds.
The default coincided with the start of a new fiscal year and a new budget that has begun to bring down Puerto Rico’s hefty debt load, which had soared to more than $70 billion.
“Today the debt is $68 billion, which means that for the first time in history we’re managing to reduce the debt,” the governor said, adding that as negotiations continue to proceed with creditors that amount will fall by “tens of billions.”
“We’ve addressed the crisis with the necessary sensibility,” Garcia Padilla said, insisting that Puerto Rico had been a “colony of Wall Street” until the island began halting debt payments and defending its own interests.
The governor, who will not run for a second four-year term in November’s election, defended his administration’s actions, saying it had managed to avoid laying off public employees even though the government is the largest employer on an island that has been in recession for more than a decade.
Puerto Rico enacted a debt moratorium on Thursday due to liquidity restraints, a move that coincided with a new U.S. law signed by President Obama that installs a financial control board to restructure the island’s debt and provides a retroactive stay on lawsuits by bondholders.