Puerto Rico's Government Development Bank paid only $628,000 of the $58 million due creditors, the agency said. It said the decision "reflects the serious concerns about the Commonwealth's liquidity" and the need to ensure "essential services (residents) deserve are maintained."While the USAToday article seems to infer that the problem is because of a phase out of corporate tax breaks for the commonwealth, the more obvious reason seems to be that the government spent far too much money on things that didn't result in an economic return (BondBuyer, 2013) - ie they ran out of other people's money.
Given the tiny payout, "Moody's views this event as a default," said Emily Raimes, vice president at the U.S. credit giant.
Puerto Rico's outstanding debt of $72 billion is far bigger than Detroit's $20 billion bankruptcy two years ago but a fraction of Greece's $350 billion in obligations. But unlike Detroit, there's no law allowing Puerto Rico to declare bankruptcy. And Treasury Secretary Jack Lew has said the federal government won't bail out the island, as institutions such as the International Monetary Fund rescued Greece.