July 20 will be an important day for Puerto Rico, as on that day the country’s officials will meet with their creditors for the first time after having confirmed that the country is unable to pay for its debts, which stand at roughly $72 billion. However, a Puerto Rican official said on Tuesday that the island does not intend to cut principal payments.
Governor Alejandro Garcia Padilla announced last week that he wants to restructure the country’s debt and postpone bond payments.
"We are not saying that the government will not pay," the head of the island's Government Development Bank Melba Acosta told reporters on Tuesday. "We are not talking about cutting principal or anything like it."
Financial problems affecting Puerto Rico, a US commonwealth in the Caribbean, first emerged in the 1990s when Washington began closing military bases on the island. In 2006 the expiry of corporate taxes in the US pushed manufacturing and pharmaceutical business out of the island, driving recession. To make matters worse, the island’s tax base slumped when worried residents migrated to the US as the economy worsened.
Acosta said that the territory’s government has intentions to meet debt obligations but wants to renegotiate terms and maturities in order to make fiscal adjustments, boost its economy and meet debt commitments.
The government owned development bank of the territory also said that a report released one week ago by former IMF economist Anne Krueger will be discussed and revealed to creditors. The restructuring process and negotiation methods will also be discussed.
Monday’s creditor meeting is set to be held at Citibank's offices and will be live streamed on the internet, says Victor Suarez, chief of staff of the governor's office.
Meanwhile, US Presidential candidate Hillary Clinton on Tuesday called for changes in US bankruptcy laws which will allow the island’s public entities to restructure their debt.
Puerto Rico’s governor previously requested for the commonwealth to be allowed to restructure its debts under the US’ bankruptcy code. However, not being a municipality makes the island non-eligible for this.