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Puerto Rico Governor Warns Creditors: Islanders Come First

Puerto Rico Gov. Alejandro García Padilla warned creditors unwilling to renegotiate its multibillion dollar debt that his government would proceed for
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Puerto Rico Gov. Alejandro García Padilla warned creditors unwilling to renegotiate its multibillion dollar debt that his government would proceed forward without them, potentially tying them up in litigation and defaults to put the commonwealth's best interests first.

In a televised speech Wednesday afternoon, García Padilla said his government will publicly attack those that force Puerto Rico to pay its debt without considering the consequences to the well being of the U.S. territory.

“If creditors are not willing to partake in this process, Puerto Rico will have no alternative but to proceed without them. That path doesn’t suit us, nor them, and will result in years of litigation and defaults and a major humanitarian crisis," García Padilla said. "It will force us to choose between paying a creditor, a teacher, a policeman or a nurse. These are decisions I’d prefer not to make, but I will make them if I have to – always looking out for the best interests of our Commonwealth."

His comments coincided with the public release of a report from a working group he formed to come up with ways to pull Puerto Rico out from its approximately $72 billion debt.

The report had sobering news. It found there will be a $28 billion gap between Puerto Rico's revenues and expenses for the next five years if the commonwealth fails to take action. CNBC reported that its recommendations include installing new accounting and financial systems, consolidating schools and decreasing tax evasion while increasing the revenue capture rate.

If all recommendations are put in place, there still will be about a $12 billion to $13 billion shortfall, CNBC reports. The plan doesn't address two major Puerto Rico-issued bonds: the Puerto Rico Electric Power Authority and the Puerto Rico Aqueduct and Sewer Authority, with $8.6 billion and $3.7 billion in outstanding debt, respectively, CNBC reported.

Federico de Jesus, a political media strategist based in Washington, D.C., said García Padilla appeared emboldened in his speech, perhaps because Puerto Rico was able to negotiate a deal on a portion of the debt owed by the electric power authority to its bondholders.

García Padilla said he agreed with union leaders who have publicly said that "current workers have already been asked to do enough and so "we cannot add any burden on current workers."

Some unions have been calling for a general strike and that may have been on García Padilla's mind as he made that statement, de Jesus said.

García Padilla also seemed to take note of the role Puerto Rico is playing in the 2016 presidential election. Puerto Ricans on the island cannot vote in federal elections but a string of candidates have made campaign stops there.

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Their campaigns are well aware that many Puerto Ricans live in the key battleground state of Florida, including many Puerto Ricans who have recently relocated from the island but whose families back home are keeping watch on how the U.S. responds to Puerto Rico's crises.

Just last Friday, Democrat presidential candidate Hillary Clinton and Republican hopeful Sen. Marco Rubio, R-Fla., were in Puerto Rico with competing views. Clinton called for granting Puerto Rico authority to file Chapter 9 bankruptcy as do municipalities in the U.S., while Rubio said granting that authority would not solve the island's fiscal problems.

García Padilla, who has called on Washington to provide the Chapter 9 filing powers warned that the island's crisis "should not become another battlefront in the coming election.

"The crossroads requires seriousness, compromise and detachment," he said. "I'm confident if we all sit at the table with Puerto Rico in mind, with our sons and daughters in front, disposed to leave them a better future, we can return to a road of sustainable growth."