Puerto Rico's governor geared Monday to share some very bad news with the rest of the US commonwealth: it owes around $72 billion in debt and cannot pay.
Alejandro Garcia Padilla's admission in an interview with the New York Times rattled stock markets and knocked 10 percent off prices of Puerto Rican bonds.
"The debt is not payable," Garcia Padilla told the paper in comments reported on Sunday. "There is no other option. I would love to have an easier option. This is not politics, this is math."
Garcia Padilla and senior staff members told the publication last week during an interview that the island would likely seek concessions from its creditors, maybe all of them.
This, the Times reported, could include deferral of some debt payment for up to five years or a lengthened timetable for repayment.
Over the past decade, Puerto Rico's debt has doubled as investors grew increasingly worried that the government was running out of cash.
"We have to make the economy grow," Garcia Padilla told the Times. "If not, we will be in a death spiral."
As a commonwealth, the island cannot file for bankruptcy, meaning a default could take years to resolve, the Times said.
The paper added that Puerto Rico has more municipal bond debt per capita than any US state.
The economy has posted negative growth for eight years. Ratings agencies like Moody's classify Puerto Rican debt as junk bonds.
The financial problems of the Caribbean island, which has a population of only 3.6 million, have shaken the large market for US municipal bonds, especially in the wake of the US city of Detroit's declaration of bankruptcy in 2013.
Meanwhile, Greece is facing its own debt crisis and growing risk of a euro exit. The country announced early Monday that it will shut banks for a week and impose capital controls, pleading for calm after anxious citizens emptied cash machines.
The governor's grim assessment coincides with the release of a report by ex-officials of the International Monetary Fund and the World Bank that says Puerto Rico's debt load is unsustainable.
The economy is caught in a vicious cycle: weak public finances fuel investor wariness and low growth, and that in turn increases the budget deficit and debt, said the report, commissioned by the governor.
The report said Puerto Rico needs structural reforms like cutting civil servants' salaries and the costs of providing public services like electricity and transport. The local electric company alone is saddled with debt to the tune of nine billion dollars.
The report also recommended a restructuring of Puerto Rico's debt through a voluntary exchange of existing bonds for others that are longer term.