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Puerto Rico on brink of debt default

http://www.ft.com/intl/cms/s/0/131f3946-391f-11e5-8613-07d16aad2152.html#axzz3hlsLogfT

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Puerto Rico defaulted on some of its debts this weekend after years of battling to stay current on its obligations, signalling the start of a long and contentious restructuring process for the US commonwealth?s $72bn debt pile.

The territory, which successfully scrambled to make a $169m payment on debts owed by the Government Development Bank on Friday, did not make a $58m payment on Public Finance Corporation bonds, according to Victor Suarez, chief of staff for Puerto Rico?s governor.

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?We don?t have the money,? he said on Friday, according to newswire reports. ?The PFC payment will not be made this weekend.?

The missed payment will push Puerto Rico formally into default after the close of business on Monday said credit rating agency analysts. The PFC bonds are the first to fall into arrears, and a government ?working group? is racing to come up with a plan to restructure the territory?s debts and overhaul its economy.

Puerto Rico governor Alejandro Garcia Padilla startled investors earlier this year when he said the commonwealth would not be able to pay off all of its debts and required a restructuring, a move many bondholders ? especially creditors to the government itself ? are loath to accept.

 
Perhaps the 3,000,000 people of Puerto Rico should go back to fishing and forget about owning fancy TVs or smart phones.
 
We reap what we sow...

Puerto Rico Imposed Rich-Country Policies--And Now It Is Paying The Price

http://www.forbes.com/sites/realspin/2015/08/03/puerto-rico-imposed-rich-country-policies-and-now-it-is-paying-the-price/

If Puerto Rico?s ills were to be summarized concisely, the island is paying the price of applying rich-country policies on what is (to this day) an essentially poor society. Whereas the minimum wage introduced in 1938 was equivalent to 40% of the mean hourly wage in U.S. manufacturing, it was twice and five times the rates prevalent in the local sugar and coffee sectors, respectively. After the havoc its extension created, a lower legal minimum was allowed but set to increase over time so that it would not provide an unfair competitive advantage, or so went the argument of the U.S. Department of Labor. Its final push to parity in the early 1980s coincided with a recession and an unemployment rate that skyrocketed to 25%.
 
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