Puerto Rico downgraded: Bonds reduced to 'junk' levels

Puerto Rico credit rating was dpwngraded to 'junk' status, prompting Governor Padilla to order budget cuts for government agencies. News of Puerto Rico's credit being downgraded caused its yields on the S&P 500 to rise Wednesday.

Alvin Baez/Reuters/File
Advertising covers the abandoned shell of an unfinished condominium building in the Condado tourist district of San Juan. Standard & Poor's on Tuesday downgraded Puerto Rico's credit rating to junk status, making it harder for the cash-strapped Caribbean island to borrow in America's $3.7 trillion municipal bond market.

Puerto Rico's governor says he is renegotiating the payment of short-term debt and has ordered all government agencies to reduce their current budgets by 2 percent after the island's credit rating was downgraded to junk status.

Alejandro Garcia Padilla made the announcement Wednesday on radio station WKAQ.

Spokeswoman Paola Figueroa tells The Associated Press that the governor will make additional announcements later Wednesday in response to the downgrade.

Garcia said Tuesday that he also would be submitting legislation to further reduce the deficit and would present a deficit-free budget for the upcoming fiscal year.

Puerto Rico is in its eighth year of recession while struggling with $70 billion in public debt and a 15.4 percent unemployment rate, higher than any U.S. state.

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