Puerto Rico Expected to Miss May 1 Default Deadline
(Washington, D.C.) – The government of Puerto Rico is expected to default on $422 million in debt payments on May 1 – the largest missed payment since the June 2015 announcement that Puerto Rico would not be able to pay its debts. Puerto Rico’s inability to make good on its obligations has become commonplace and likely to cause more harm to the island’s economy and people, prompting more island residents to leave for freer economic climates. Additionally, it will negatively affect workers elsewhere in the United States, particularly Florida, as the demand and spending on tradeable goods would likely decrease. While the U.S. Congress continues to work toward legislation to assist the island in addressing its fiscal mismanagement, no legislation is expected to be adopted before May 1. As the House considers different options to address the issue, Speaker Ryan has made clear that the House will not approve a taxpayer-funded bailout of Puerto Rico’s debt. Meanwhile, the island’s government recently passed a law which grants Puerto Rico’s governor power to declare a state of emergency and seize assets from private companies, force them to provide services to the government, and ignore interest payments to bondholders among other things.
Daniel Garza, Executive Director of The LIBRE Initiative, released the following statement:
“While counterproductive federal rules and mandates have contributed to Puerto Rico’s problems, the local government cannot just sit and do nothing while they wait for a federal solution. Steps can be taken at the local level to help ease the situation, but all we’re seeing is an attempt to evade responsibility. The fact that San Juan’s response to the debt crisis is to give the Governor powers to seize property and force private companies to work for the government is simply disturbing. That behavior does not belong in a free society.
One of the reasons Puerto Rico is in economic crisis is because of the amount of interference by the government in the economy. This new law will frighten entrepreneurs and investors. Puerto Rico would be wise to invest in its greatest assets – its people and its private sector – and stop relying solely on a government fix. The U.S. Congress needs to work on a solution to help the island, but the government in San Juan must be willing to work and make tough choices.”