When it comes to paying off its debts, the U.S. Virgin Islands is not in the same financial boat as Puerto Rico, and Gov. Kenneth Mapp said Tuesday that he and some of his key cabinet members are working with the national media to make sure “people in the markets” understand the difference.
The press conference on St. Thomas gave Mapp a chance to talk about what happened during the past few weeks of meetings in Washington, D.C., and New York, but speaking afterward, Mapp said recent financial developments in Puerto Rico were being monitored within the cabinet before he left the territory.
On Friday, Puerto Rico Gov. Alejandro Garcia Padilla and his top staff members announced that the nearby island needed to be pulled out of its “death spiral” and would not be able to continue making payments on its approximately $72 billion debt.
According to an article in the New York Times, Padilla said Puerto Rico would “probably seek significant concessions from as many as all of the island’s creditors, which could include deferring some debt payments for as long as five years or extending the timetable for repayment.”
Delegate Stacy Plaskett said Monday the news of Puerto Rico’s decline should come as no surprise to anyone, and Mapp added Tuesday that after meeting with Padilla several weeks ago he understood their government is “really facing a tremendous problem” as a result of slow investment, flight from the business community and increased taxes on residents, among other things.
“We are going to work to be sure that we insulate ourselves so that people in the financial market do not see the Virgin Islands as they see Puerto Rico,” Mapp said Tuesday. “We have a unique model when it comes to financing our debt and our ability to service our debt is fully up to date, while our ability to continue meeting our debt obligations is not threatened by what is happening in Puerto Rico.”
That does not mean Padilla’s announcement won’t have an impact. Mapp said that if the island does default on its debts, the “entire public sector will feel the impact.”
“We’re going to pay more money for money,” he said. “So the wonderful 4 percent rates we’re seeing for municipal bonds and securities, that number is going to go up. How much, I don’t know, but this is one of the biggest hits to the municipal bond markets in the nation. It won’t happen without seeding some cost to the rest of the market.”
As the situation continues to unfold, Mapp said members of the cabinet, led by the Tourism commissioner, will be making it clear to members of the national financial media how the two territories are different, and how the Virgin Islands can and will continue to pay off its debt.
Mapp said he does not believe the Virgin Islands should get ready for an influx of residents coming over from Puerto Rico. Much like when Hovensa closed down on St. Croix, Mapp said he expects anyone looking to relocate from the island will head to the northern part of the mainland, where the cost of living is lower and there is more financial stability.