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Puerto Rico defaults on debt payment

Staff writer |
Puerto Rico has defaulted on debt by paying only a fraction of what was due August 1, potentially opening the door to broader defaults and litigation from bondholders.

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Governor Alejandro Garcia Padilla warned in July that the government and state agencies cannot repay the $72bn in public debt that hangs over the island of 3.5 million people.

Puerto Rico paid only $628,000 of a $58m payment due on its Public Finance Corp (PFC) bonds, the head of its Government Development Bank said in a statement on Monday.

The economy of Puerto Rico has failed to grow for years. Unemployment, standing at over 12 percent, is more than twice that of the United States mainland and thousands leave the island every month.

The non-payment marks the first default by Puerto Rico and is the most notable since Detroit defaulted on $1.45bn of insured pension bonds before filing for bankruptcy in 2013.

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.

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