Puerto Rico misses debt payment

SAN JUAN, Puerto Rico – The government of Puerto Rico confirmed Monday that it failed to make a $58 million debt payment in a significant escalation of the debt crisis facing the U.S. island territory.

Puerto Rico made a partial payment of $628,000 in interest but could not afford to make the remainder, which was due Saturday, because the legislature did not appropriate the funds, said Melba Acosta Febo, president of the Government Development Bank.

The government had warned on Friday that it would not make the payment and argued that it should not be considered a default under a technical definition of the term, an argument rejected by Moody’s Investor Service and others.

“This event is consistent with our belief that Puerto Rico does not have the resources to make all of its forthcoming debt payments,” said Emily Raimes, a vice president at Moody’s. “This is a first in what we believe will be broad defaults on commonwealth debt.”

The White House has said no federal bailout is planned.

Nearly 10 years into a deep economic slump, Puerto Rico is no closer to pulling out, and, in fact, is poised to plummet further. The unemployment rate is above 12 percent. Some 144,000 people left the U.S. territory from 2010 to 2013, and about a third of all people born in Puerto Rico now live in the U.S. mainland. Schools and businesses have closed amid the exodus. The population of 3.5 million is expected to drop to 3 million by 2050.

The government has tried to boost revenue by hiking the sales tax to 11.5 percent, higher than any U.S. state, and closing government offices. Its debt-burdened power utility already charges rates that on average are twice those of the mainland, and is under pressure from bondholders to raise them higher.