Puerto Rico is drowning in debt.
The cash-strapped U.S. island territory in the Caribbean hasn’t been financially sound for at least a decade, and for years has borrowed huge sums of money to make ends meet.
Now it’s buried under $72 billion of debt - equivalent to about $20,000 per resident. Puerto Rico’s governor called the situation a “death spiral” and last summer conceded that the amount was simply "not payable."
So for the past year, Puerto Rico has repeatedly defaulted (skipped out) on large debt payments. And last Friday, the island did something that hasn’t happened on any U.S. territory since the height of the Great Depression in the 1930s: it skipped out on a $3 billion payment to creditors who held general obligation bonds, a debt it was legally required to pay back before funding anything else, even emergency services.