On Eve of Default, Puerto Ricans Are Broke and Feel Out of Luck

by Jonathan Levin and Alexander Lopez  |  published on April 30, 2016

Opposite the headquarters of Puerto Rico’s power company, Nelson Jimenez is selling lottery tickets. He’s not fooled by the shiny facade across the street, with its glass-and-metal curves.

The island is “broke” and business is bad, Jimenez says, gesturing at his thick wad of unsold tickets — testimony to a public feeling down on its luck. Then he looks over to the utility building: “They made a lot of money, and there were lots of bonds. But not anymore.”

Of course, Puerto Rico still has bonds — about $70 billion outstanding. What it’s short of is cash to repay them with. The indebted Caribbean island, home to 3.5 million U.S. citizens, has juggled dwindling resources from one hand to another for months now, to keep creditors at bay. The crisis is set to tip into a new phase this weekend when $422 million of payments are due and, as things stand, unlikely to be made in full — threatening the biggest default yet.

Cue a flurry of activity in New York, where hedge funds are consulting their lawyers, and in Washington, where lawmakers are wrangling over a rescue package. Congress failed to come up with one by this weekend’s deadline, when the island’s Government Development Bank, which lends money to the local authorities that run schools and other services, is the potential defaulter. Some of its bonds trade at just 20 cents on the dollar, amid last-ditch talks to defer payments.



  • Edgardo L. Perez-De Leon

    To be a colony does not have anything to do with paying income taxes. Tributes have been paid the empire in different forms. But the point was that Puerto Rico is not indebted. It is up to US to pay for the colonial debt to creditors.

  • Edgardo L. Perez-De Leon

    Puerto Rico is not indebted. As a colony the debt belongs to its master, the US Congress.

    • kbfallon

      Puerto Rico pays NO MONEY to the US in income tax money–so, no-we will NOT be paying off their debts nor should we.

      • Edgardo L. Perez-De Leon

        Look at my comment above: To be a colony does not have anything to do with paying income taxes. Tributes have been paid the empire in different forms. But the point was that Puerto Rico is not indebted. It is up to US to pay for the colonial debt to creditors.

        • kbfallon

          my point is – they got themselves into this mess – with some hard work and belt tightening- they will get this paid down, but will learn nothing if they do not have to work their way out.

          • Edgardo L. Perez-De Leon

            You have no idea on how this debt came upon us: CUBA and the show case of democracy doctrine. We had to be better than Cuba. We had to have better health and educational systems than Cuba. We already had the best army of the world occupying 10% of our territory.but we had to have better roads to move military equipment on short notice to any part of the island.We even have atomic bombs in silos for ICB missiles. Again, we have no debt.

          • kbfallon

            Actually-there is a lot of information on this subject that is readily available to anyone who takes the time to look into it. Your governor thinks that you have a 72 billion dollar debt and is trying to get it restructured or bankruptcy which is not going to happen. They have failed to open the books so the root cause of the massive debt can be corrected/mis-management over the years, loss of tax breaks, free utilities to any and all govt. entities and businesses, etc….The due dates are going to hurt as you already know if you reside there…..thousands are leaving the island weekly. I watch with interest as there are states here who would like to bail on their debts also. There is a lot of blame to spread around on this mess as you know. Via con dios……did I say that right?

          • Edgardo L. Perez-De Leon

            No, you said it wrong but your intention is appreciated. Is vaya con Dios. Your information is also basically correct. However,you have a problem understanding my key issue: that the colonial debt accumulated by the colonial government of colony, sorry non incorporated territory, of Puerto Rico is owed by US, the imperial master. All what the colonial government is asking (by implication) is to expand the federal bankruptcy laws to be applied to territorial entities such as PR, Guam, the Marians, and American VI and Samoa, not to states (discrimination??). If this is not done, or in the alternative a bail out is not given (likely not to be given) the creditors of the $72 NB USD will seize the bank accounts of the Puertorrican colonial government and there will be no money to pay for police, municipalities, and other public services as public health and education, not even the wages of judges, legislator and members of the executive, taking PR into anarchy unless US appoint a colonial governor, which can be called emergency manager (last one was re-appointed in 1944) and the US army replaces the police and the fire fighters, once already air controllers are US government employees. Then the US Corps of Engineers will be in charge of repairing the roads and bridges and the veil of democracy will fall for the world to laugh at the US democracy and the UN left with no other solution than name PR a US protectorate to be prepared for independence in the future. Viva Puerto Rico Libre! (thanks to the debt)

  • David Stewart

    Yes, spent a wonderful sixteen months in PR as a young sailor, all the bases I knew have been long closed, bet that helped balance the island economy, all our civilian help were PRs.

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