For Puerto Rico, today was a day of reckoning, one that we'd heard about for months. The island has defaulted on hundreds of millions of dollars of debt for the third time in less than a year. To explain what this means for the island, we're joined by NPR national editor Luis Clemens. Hi, Luis.
LUIS CLEMENS, BYLINE: Good to be here.
SIEGEL: And first explain what did not happen today.
CLEMENS: Bottom line — bond holders of Puerto Rican debt didn't get paid. And we're talking about owners of debt to the tune of over $400 million. That didn't happen because Governor Alejandro Garcia Padilla last night announced moratorium. He said Puerto Rico cannot afford to make these kinds of payments.Fact is Puerto Rico's, in effect, plain, flat broke. The government owes $72 billion in debt. By comparison, when Detroit filed for Chapter 9 bankruptcy, it owed approximately between $18 and $20 billion in debt.
SIEGEL: Well, what happens next?
CLEMENS: Crystal ball time, I think. Look; first off, I think the key to understanding why this is so tricky is that Puerto Rico, unlike Detroit, unlike other cities, other counties on the mainland, does not, by law, have the option of filing for bankruptcy. It is explicitly prohibited from doing so. And because Puerto Rico cannot file for bankruptcy, Puerto Rico's governor has been lobbying Congress, the U.S. Treasury Department to come up with a plan that would allow for the orderly settlement of debts while still enable the routine operations of government on an island where 45 percent of the population lives in poverty.
SIEGEL: Well, let's talk about today's default. It's not the first. Is it likely to be the last?
CLEMENS: It's not likely to be the last. And when we talk about the significance of today's default — look; it's not good, but there may be a silver lining here to what is obviously bad news for creditors.Last night's announcement by the governor was followed by an announcement by the president of the island's Development Bank, Melba Acosta. She said, we have the outlines of a potential framework deal here with investors, and those investors today announced that they would hold off on the legal action. What is big on the horizon, looms large, is come July 1, $1.9 billion more is due.
SIEGEL: What's happening in Congress? Do lawmakers show much willingness to help Puerto Rico?
CLEMENS: You know, I think the first thing you have to consider in answering that question and for members of Congress to decide how much they put into this issue is — Puerto Rico has no representation, no voting representation in Congress. There are no senators. There's a nonvoting representative in Congress.So members of Congress have to decide how much political capital they are willing to expend on the island. And to date, there have been lots of discussions between the Natural Resources Committee, the Speaker's Office, Treasury Department. We don't have a resolution yet.
SIEGEL: And if Puerto Rico doesn't get help from Congress and it defaults on July 1, what happens then?
CLEMENS: Barring a deal with creditors, it's going to be a mess because this government Development Bank that I was referring to funds everything from credit unions on the island to highways to a range of activities. Without it, the island will be hard-pressed to continue functioning normally.
SIEGEL: That's NPR's Luis Clemens. Luis, thanks.
CLEMENS: Thank you.