Puerto Rico's Governor Announces Partial Default; Slams Vultures and Congressional Allies

December 31, 2015

In a press conference Wednesday, Puerto Rico's Governor, Alejandro Garcia Padilla, announced that his government would partially default on debt coming due on Jan. 4, the total amount of which, he said, was $757 million. Interest on General Obligation bonds, amounting to $328.7 mn., will be paid, as they carry a constitutional guarantee of payment, he said. But, he added, in order to guarantee payments of wages and pensions, the government will default on $37 mn. in interest payments due on bonds from the Infrastructure Financing Authority and the Public Finance Corp.

The responsibility for Puerto Rico defaulting at all, Garcia said, lies with the U.S. Congress and its vulture-fund allies, who lied that Puerto Rico could, of course, pay its debts.

"Had the Congress acted to provide the island with Chapter 9 bankruptcy protection, and the tools necessary to restructure its debt, we wouldn't be having this press conference, and reporting this news," Garcia said. "But the lobbyists of the vulture funds boycotted the process, and blocked the measures the island needs." We know, he emphasized, that the vulture funds "have spent a fortune lobbying against Puerto Rico in the Congress."

The Governor stated that the $37 mn. default "is one the Constitution allows me to do," and avoids a general default. The money to pay the General Obligation bonds wasn't available, he explained, but the government obtained it by commandeering $163 million from other agencies, a procedure known as "clawback." Nonetheless, other payments must be made soon, and the funds aren't available. Speaker of the House Paul Ryan's promise to come up with a package for Puerto Rico by March 31, "comes too late," Governor Garcia said. "Right now, my government has the responsibility to protect Puerto Ricans, as much as possible, from the grave consequences implied by a forced suspension of public services and a shutdown of the government."