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Puerto Rico defaults on its $72 Billion Debt

Puerto Rico Governor Alejandro Padilla released a statement on Monday saying the governor said the island couldn’t pay its $72 billion in debts. The government of Puerto Rico failed its attempts at slashing expenditures and restructuring its debt. Former World Bank and International Monetary Fund released a report that acknowledged the true extent of the problem. Several massive payments are expected in the coming weeks. Padilla held a media conference for 5 p.m. addressing the situation.

Puerto Rico legislators are debating a $9.8 billion budget that calls for $674 million in cuts and sets aside $1.5 billion to help pay off the debt. The budget has to be approved by Tuesday. Puerto Rico’s bonds were popular with U.S. mutual funds because they were tax-free, but hedge funds and distressed-debt buyers began stepping in to buy up debt as the island’s economy worsened and its credit rating dropped. Economy experts including Jose Villamil, a former UN consultant and CEO of an economic and planning consulting firm believes that Padilla’s comments will not effect Wall Street.

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