U.S. commonwealth Puerto Rico defaulted on its debt for the first time Monday, paying just $628,000 of its $58 million scheduled payment. Moody's "views this event as a default."
Puerto Rico has an outstanding debt of $72 billion.
Puerto Rico's Government Development Bank paid only $628,000 of the $58 million due creditors, the agency said. It said the decision "reflects the serious concerns about the Commonwealth's liquidity" and the need to ensure "essential services (residents) deserve are maintained."
Given the tiny payout, "Moody's views this event as a default," said Emily Raimes, vice president at the U.S. credit giant.
Puerto Rico's outstanding debt of $72 billion is far bigger than Detroit's $20 billion bankruptcy two years ago but a fraction of Greece's $350 billion in obligations. But unlike Detroit, there's no law allowing Puerto Rico to declare bankruptcy. And Treasury Secretary Jack Lew has said the federal government won't bail out the island, as institutions such as the International Monetary Fund rescued Greece.
Puerto Rico has seen its population plummet since the recession began, and despite attempts to raise sales taxes to raise revenue, the economy has not recovered. People born in Puerto Rico are U.S. citizens, although they do not pay federal income tax nor vote in presidential elections.