Puerto Rico: the other Greece?

"This is not politics, this is math," Governor Alejandro Garcia Padilla said in an interview with The New York Times that was published late Sunday. "The debt is not payable."

His statement swiftly drew comparisons to Greece, where banks will stay closed for six days to stem capital flight before a referendum on a cash-for-reforms bailout deal for the indebted eurozone member.

Puerto Rico, a US commonwealth, has accrued massive amounts of debt in the past decade as investors' fears became more acute that the government was running out of money. Its bonds were once popular with American mutual funds because they were tax-free. But once the economy worsened, hedge funds began scooping them up as the country's credit rating dropped.

Unlike other municipalities, such as Detroit, Puerto Rico cannot declare bankruptcy due to its commonwealth status. This would make managing a default much more difficult.

According to the paper, the island has more per-capita municipal bond debt than any US state. The island's recession-plagued economy has weighed on the larger market for US municipal bonds for the last ten years.

But Padilla added that Puerto Rico's creditors were mostly willing to give it more time to pay back the money it owes. Some lenders may be willing to accept a deferral while others could negotiate a lengthened timetable for repayment.

Puerto Rico's constitution states that debt must be repaid before any other financial obligations can be met.

cjc/rc (AFP, AP)