Governor: Puerto Rico can't pay debt, nearing 'death spiral'

Puerto Rico cannot pay its public debt of roughly $73 billion, according to the commonwealth island's governor.

"The debt is not payable," Gov. Alejandro Garcia Padilla told the New York Times in an interview published Sunday night. "There is no other option. I would love to have an easier option. This is not politics, this is math."

According to a report commissioned by the Government Development Bank, Puerto Rico faces hard times.

"Structural problems, economic shocks and weak public finances have yielded a decade of stagnation, outmigration and debt. Financial markets once looked past these realities but have since cut off the commonwealth from normal market access. A crisis looms," the report stated.

Puerto Rico, which has 3.6 million people, has more municipal bond debt per capita than any U.S. state. It does not have the option of bankruptcy — like Detroit did when it was in bad municipal debt — because it is a commonwealth.

"If they don't come to the table, it will be bad for them," García Padilla, who plans to speak in a televised address to Puerto Rico residents on Monday evening, said about his constituents. "What will happen is that our economy will get into a worse situation and we'll have less money to pay them. They will be shooting themselves in the foot."

The government's Public Finance Corporation owes $94 million on July 15. The commonwealth's fiscal agent, the Government Development Bank, must repay $140 million of bond principal by Aug. 1.

"My administration is doing everything not to default," Garcia Padilla added. "But we have to make the economy grow. If not, we will be in a death spiral."

Puerto Rico's legislators are in the midst of a debate over a $9.6 billion budget that cuts $674 million and sets aside $1.5 billion to pay off some of the debt. The legislation has to be approved by Tuesday.

By Kelly Cohen

Governor: Puerto Rico can't pay debt, nearing 'death spiral'