Puerto Rico governor: Creditors should help solve crisis
Jul 2, 2015, 4:12 PM
A man plays an electronic slot machine at a virtual casino in the Rio Piedras neighborhood of San Juan, Puerto Rico, Wednesday, July 1, 2015, the day a 11.5% sales tax goes into effect, the highest of any U.S. state. The island's administration has been pushing for Congress to let the government and public agencies seek bankruptcy protection, while the White House has said no one is contemplating a federal bailout of Puerto Rico. (AP Photo/Ricardo Arduengo)
(AP Photo/Ricardo Arduengo)
SAN JUAN, Puerto Rico (AP) — Puerto Rico’s governor said Thursday that creditors are responsible for helping the U.S. island out of its economic crisis because they lent money knowing the government was running a deficit.
Gov. Alejandro Garcia Padilla also sought to clarify comments recently published in The New York Times saying he believes Puerto Rico’s $72 billion public debt is unpayable.
“What we’re saying is, and I ask that you pay attention to the full sentence, that with the current level of economic growth, the debt is not payable,” he told reporters, alluding to the island’s nearly 9-year-old recession.
They were Garcia’s first public comments since a televised address Monday in which he announced that he would seek to postpone debt payments.
Garcia said he wants to talk with creditors about how to boost the economy with the money they are owed to help generate enough revenue to make payments under new terms.
“When they lent, they knew there was a deficit,” he said. “That’s why they’re being called to the table for sacrifices.”
Garcia has been meeting this week with government officials, business leaders, legislators and unions in a bid to create a long-term economic and fiscal reform plan to help get the U.S. territory out its slump.
“This is a very serious problem that we have to address together,” he said. “We cannot hide the reality from people.”
Garcia has hinted he would announce additional measures in upcoming days to reduce costs and help revive the economy.
The government may seek to impose unpaid furloughs on its employees as one measure, said Sergio Marxuach, policy director at the Center for the New Economy, a Puerto Rico-based think tank.
But such efforts to jumpstart the economy could also impair it, Marxuach said.
“That may mean (government workers) will not have enough cash in that month to pay their mortgages, or their credit cards or their car loans, so that will have an adverse effect on financial institutions, and finally, on their own consumption,” he said. “The effects could be multiple and significant.”
Garcia’s administration is pushing the U.S. Congress to allow Puerto Rico’s government and its public agencies access to Chapter 9 bankruptcy if needed. Investors have grown increasingly worried about the finances of several public agencies.
The troubled public power company made a $415 million debt payment Wednesday, but it was forced to sell $128 million in new bonds to do so.
Other agencies have multimillion-dollar payments coming up as well, and it is unclear whether those will be met.
“We’re certainly entering unchartered waters,” said Vicente Feliciano, a Puerto Rico-based economist.
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