SAN JUAN, Puerto Rico, July 2 (UPI) -- Puerto Rico has avoided a default by making about $1.9 billion in payments but still has more than $70 billion in cumulative debts.
Government payments include $645 million in general obligation bonds, $415 million in bonds for its PREPA electric utility and a short-term bank loan of about $245 million. The payments were made before they were due Wednesday evening.
But Puerto Rico Gov. Alejandro García Padilla said the commonwealth island will not be able to pay the more than $70 billion it owes, setting the stage for a financial crisis.
"We cannot allow them to force us to choose between paying for our police, our teachers, our nurses, and paying our debt," Padilla recently said in a televised speech to the island's 3.6 million residents. "We have to act now."
Puerto Rico has more debt per capita than any U.S. state. The economic situation is in a "death spiral," Padilla said
The payments have renewed investors' confidence in Puerto Rico, as the governor will probably seek significant concessions from creditors, including debt payment deferment and a repayment timeline extension.
"If they don't come to the table, it will be bad for them," Padilla previously said of the creditors. "What will happen is that our economy will get into a worse situation, and we'll have less money to pay them. They will be shooting themselves in the foot."
Puerto Rico's debt obligation is four times more than that of Detroit, Mich., which in 2012 became the largest city in the United States to file for bankruptcy. The island has been attempting to get bankruptcy protection for its public corporations in Congress, but has not succeeded, and as a commonwealth, Puerto Rico does not have to option to declare bankruptcy itself.
A default on Puerto Rico's debts would create a financial and legal crisis for creditors and residents that could take years to resolve.