Puerto Rico Could Be On Cusp Of Default

According to Puerto Rico Governor Alejandro Garcia Padilla, the country can no longer make payments on its $73 billion in debt, warning the island is perilously close to entering a "death spiral."

In an interview published Sunday in the New York Times, Gov. Garcia Padilla stated, "The debt is not payable...there is no other option. This is not politics, this is math."

He went on to say, "But we have to make the economy grow. If not, we will be in a death spiral."

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The warning comes just one day before a joint IMF and World bank report that is expected to portray a desperate view of the country's economic health. Gov. Garcia Padilla will deliver a major speech Monday following the report's release.

The Puerto Rican government is now seeking concessions from its creditors, including deferring or extending debt payments. A $400 million debt payment due July 1 by the government run utility PREPA may likely not be payed in total. PREPA itself has about $9 billion in total debt and is rated the lowest level possible by Moody's.

The New York Times article also touched on the immediate implication for debt relief on such a vast scale, with a likelihood that borrowing costs for other local governments will be increased as investors become more wary of lending.

Image credit: Ekke, Flickr