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Puerto Rico narrowly avoids default

Puerto Rico's Governor Alejandro Garcia Padilla Image copyright Getty Images
Image caption Puerto Rico's Governor Alejandro Garcia Padilla said the island is running out of cash

Puerto Rico has narrowly avoided a default by making a last minute payment on its outstanding debt.

The Government Development Bank made a $355m (£235m) payment that was due to creditors on Tuesday.

Despite the move the territory is struggling to find money for government services and future debt payments.

Speaking to members of the US senate Puerto Rico's Governor, Alejandro Garcia Padilla, said the island's government, "had not cash left".

Puerto Rico has $72bn (£48bn) in outstanding debts.

If the government had missed Tuesday's payment it could have sparked law suits from creditors.

The prospect for future payments is still unclear.

The Governor said the territory is facing a situation where it must decide between defaulting- failing to make the payments on its debt- or cutting public services.

In his comments to a senate judiciary hearing Governor Garcia Padilla said, "Starting today the commonwealth of Puerto Rico will have to claw back revenues pledged to certain bonds issued in order to maintain public services."

Though Puerto Rico is a territory of the US it is not entitled to restructure its debt in the same way that state and city governments are.

Representatives from Puerto Rico - including the Governor - have been making the case that the island should be allowed to undertake the same process Detroit used when it faced bankruptcy.

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