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Puerto Rico will default on $37 million in interest

SAN JUAN, Puerto Rico – Puerto Rico’s governor announced Wednesday that the U.S. territory will meet $594 million in bond payments due next week but will still default on $37 million in interest.

Gov. Alejandro Garcia Padilla said the payment includes $329 million in general obligation bonds. However, he warned there is no money available for future payments including $400 million due in May in bonds issued by the Government Development Bank.

Garcia said that Puerto Rico needs Congress to act and give the territory access to federal bankruptcy laws.

“I’m not asking for a bailout,” he said. “I’m asking for the tools to address the problem.”

Puerto Rico has been in an economic decline for nearly a decade and struggling with $72 billion in public debt that Garcia has said is unpayable and needs restructuring.

As a result, he said the government will be forced to default next week on $35.9 million in Puerto Rico Infrastructure Financing Authority and $1.4 million of Public Finance Corp. bonds. He said the bonds are not protected by the U.S. territory.

This is the second time that Puerto Rico has defaulted on Public Finance Corp. bonds. The government last missed a $58 billion bond payment in August.

Garcia has stressed that the government’s priority is to maintain operation of basic services, including schools, hospitals and police stations.

“Puerto Rico is going to pull through,” he said. “These decisions are made to protect Puerto Ricans.”

While Puerto Rico is still pursuing access to a bankruptcy mechanism, U.S. House Speaker Paul Ryan, a Republican from Wisconsin, has pledged that the House will come up with “a responsible solution” for Puerto Rico’s debt problems next year. In addition, The U.S. Supreme Court announced recently that it would hear an appeal on a ruling that barred Puerto Rico from giving municipalities the power to declare bankruptcy.

But immediate relief is needed, said Eric LeCompte, executive director of the debt relief organization Jubilee USA.

“No matter what the outcome is from the U.S. Supreme Court or even from Congress, it won’t come in time to prevent a default and further austerity from taking place in Puerto Rico,” he said in a telephone interview.