Puerto Rico’s debt crisis has reached a new level, with the island’s governor saying Puerto Rico will not pay most of its $470 million US in debt payments due by Monday.
Island officials spent the weekend trying to negotiate a settlement that would have avoided the default. The development comes as Congress has so far been unable to pass a debt restructuring bill for Puerto Rico.
“Let me be very clear, this was a painful decision,” Gov. Alejandro Garcia Padilla said in a speech Sunday. He added that the government could not make the payment without sacrificing basic necessities for the island’s 3.5 million residents, including keeping schools and public hospitals open.
This default is by far the largest by Puerto Rico, who has been struggling under the weight of $72 billion US in debt that its officials say it cannot pay. Puerto Rico expects multiple lawsuits to be filed shortly after Monday’s default.
Here’s a breakdown of what has already happened to Puerto Rico and why it matters to individual investors.