To find out more about the island’s debt burden and what it means for residents there, we called Luis Vega Ramos. For each person in the Puerto Rican workforce, there is $168,471 of debt.
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The new deal comes just days after Gov. Alejandro Garcia Padilla said the island’s $72 billion public debt is unpayable and that he would seek to postpone payment of it. The good thing is that it appears the strategies used in the past are being left behind. But almost all countries carry debt – the worldwide economy runs on debt. Individuals and small businesses had less wealth to be pumped into the economy.
The larger problem may be employment and labor costs, which thankfully seem to have possible solutions. About 40 percent of that total was from high-yield funds.
Indeed, the temporary PREPA resolution was a high point for those preoccupied with Puerto Rico’s ballooning debts.
And more workers there rely on the minimum wage to get by.
The Government Development Bank (GDB), Puerto Rico’s financing arm, said the payment due amounted to US$265.5 million but did not immediately confirm whether it had been made.
Edwin Pereira with the Puerto Rican and Hispanic Chamber of Commerce in West Palm Beach says the crisis will hit American markets soon. The ties of history, citizenship and values that bind the United States and the commonwealth it took over from Spain in 1898, though hardly untroubled, are closer than the ties between Greece and Germany. Outmigration since 2000 has reduced Puerto Rico’s population by 200,000 – a trend expected to continue for decades. And the third is having the federal government guarantee bank deposits, so people know their money is safe no matter how much trouble their state gets into.
Prepa said it was funding the $415m payment with about $153m of cash out of its general fund and the remainder from its debt service reserve accounts. Legislators tried to assist these corporations with a law intended to skirt rules governing debt reconstruction.
The Chapter 9 proposal has faced opposition, largely from conservatives, who have been labeling it a bailout, which occurs when a company or country is given financial assistance, and some who prefer that Puerto Rico be placed in receivership. Republicans argue that such an exception would infringe on investors’ rights. Thanks to U.S. law, Puerto Rican bonds have been given municipal bond status and therefore have a unique tax advantage – they are exempt from federal, state and local income taxes.
Ms Krueger’s report reinforces the consensus that debt relief is needed.
LUIS VEGA RAMOS: We have cut spending in great terms during during the last two and a half years. By proposing a referendum on statehood, and assisting with an orderly debt write-down, America can atone for past sins and put Puerto Rico back on an upward trajectory. As all eyes are set on Greece and its underlying debt problems that are crippling financial markets across the world.
So a poorly designed currency union is really a doomsday device for turning fiscal crises into financial ones. If they so wish, they ought to be given either full statehood or independence.
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The crisis is not yet to the level of Greece, which has commanded far more attention in news headlines, but that nation has been getting assistance from the European Central Bank and other entities, unlike Puerto Rico.
