The purpose of his blog is to utilize publicly available information to comment on the current economic crisis in Puerto Rico.
The Caribbean island of Puerto Rico is in a deep economic crisis due to excessive debts – more than $70,000,000,00 in municipal bonds, utilities and other public agency debts, and another ~$40,000,000,000 in Government Pension responsibilities. Contributing to the debt were so-called Municipal bonds, which were especially attractive for investors due to a U.S. law that provided triple tax exemption for Puerto Rico bonds (no federal, state or local tax). Access of the local government to easy money, stimulated by banks that profited from transaction and underwriting fees, provided a perverse incentive to take out even more loans to finance the increasing annual government budget deficits. These loans were supported by favorable ratings of the major credit rating agencies (S&P, Moody’s and Fitch) until July 2014 (http://sincomillas.com/moodys-degrada-la-deuda-de-puerto-rico-2/), when the ratings were drastically lowered, and finally ended up in “junk” territory. During the preceding years, similar to a Ponzi scheme (https://en.wikipedia.org/wiki/Ponzi_scheme), new loans at increasingly higher discount and interest rates were taken on by the Puerto Rico government to refinance payments of existing loans, finance daily operations, and support government contracts for projects with dubious benefits to society, but sure to provide a windfall for contractors.
Continuously taking out new loans to pay existing ones could be compared with taking on a credit card loan at a 20% interest to pay for a mortgage loan at 5% interest, and, as a consequence of higher monthly payments not be able to save money to fix your leaking roof. As eventually all Ponzi schemes are bound to come to an end, last year the then governor of Puerto Rico (Alejandro Garcia Padilla) announced that the outstanding debts could not be paid, and the first debt payments missed were on May 3, 2016.(http://www.elnuevodia.com/noticias/locales/nota/comienzodeunacascadadeimpagos-2194392/).
An un-elected Governing Board has now been appointed by the U.S. government to extract as much as possible from the Puerto Rico population to pay for the debts of the bondholders via a federal law cynically called PROMESA (promise). In collaboration with the newly elected government led by Ricky Rossello, extreme austerity measurements are now being implemented which will affect pensioners, the public University, and the public health system, among others. New legislation already has taken away rights of workers in the private sector, and a recent law proposal will allow for further exploitation of those in the greatest financial needs via the extraordinary abusive payday loans (http://grupocne.org/2017/03/24/endeudando-al-de-aqui-los-prestamos-por-deposito-diferido-en-puerto-rico/). Wholesale of government owned island properties and institutions via so-called Public Private Alliances is proposed by the Rossello government. Previously, similar transactions in the Fortuno government (2008-2012) have been extremely opaque, provided unknown benefits to the public, but a windfall to the dealmakers (politicians and their “investors”) involved.
Meanwhile, the population of Puerto Rico is in steady decline, with a 6.8% loss of population from 2010-2015 alone (http://www.pewresearch.org/fact-tank/2016/03/24/historic-population-losses-continue-across-puerto-rico/). The United States Census Bureau estimates declines from 3.72 millions in 2010 to 3.41 million in 2016 (https://factfinder.census.gov/faces/nav/jsf/pages/community_facts.xhtml) with many educated and productive youngsters feeling forced to leave to the “mainland” for lack of fulfilling employment opportunities in the island.
The Fiscal Control Board that currently administers the colony of Puerto Rico has effectively recruited the main newspapers on the island (El Nuevo Dia, combined with their sister papers Primera Hora and Indice) to manipulate public opinion. Other news sources are also owned by specific interest groups.
This blog will attempt to analyze news information related to the fiscal situation from multiple sources via active links (no warranty is provided that the sources will remain active) and non-objective comments on these articles.