“This law's purpose is to protect the people's basic services, while Puerto Rico keeps fighting the worst financial and humanitary crisis it has faced in history,” Governor Alejandro Garcia Padilla said in a televised speech on Sunday.
"Even the police and firemen are struggling to pay the fuel for their vehicles," Padilla noted.
Padilla signed the moratorium on Saturday in what he characterized as a "painful decision" based on inaction from the U.S. Congress, which continues to debate a legislative fix for Puerto Rico's US$70 billion debt load.
He said the island's American citizens had sacrificed much for the nation throughout history and asked Congress on many occasions for tools to restructure its financial liabilities.
"We do not want a bailout. We haven’t asked for a bailout. We haven’t been offered a bailout," he said as the U.S. territory's economic crisis enters its most dire stretch yet.
Puerto Rico, a tropical paradise in economic purgatory, faces a US$70 billion debt bill it knows it cannot pay, a staggering 45 percent poverty rate and a shrinking population as residents, who are U.S. citizens, flee to the mainland.
The legality of the moratorium, which effectively means defaulting on the debt, is almost certain to be challenged by the territory's creditors, and could spawn costly lawsuits and perpetuate more economic uncertainty for the island.
"One of our operating assumptions is that protracted or chaotic litigation will reduce aggregate recoveries," Moody's Investors Service senior credit officer Ted Hampton said.
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