Maybe the current GOP public relations lovefest for the Vice Presidential campaign of Puerto Rican Goveror Luis Fortuño should start subscribing to elnuevodia.com, the island’s largest newspaper, and hire Spanish-speaking readers. Their one-sided glowing reviews of the Fortuño administration might actually be more balanced.
Case in point, today’s news out of Puerto Rico includes a report that suggests that Puerto Rico is quickly spiraling into another Greece. Here is the link in Spanish, but for our English readers, we have provided our translation of the article:
Puerto Rico’s indebtedness of and the insolvency of its pension plans have become so large that there is no alternative but to restructure the debt with its bondholders.
That’s the conclusion of a detailed report prepared by the firm Wasmer, Schroeder & Company (WSC), in which the firm specializing in fixed income assets contends that the status of Puerto Rico is so bleak that the island is closer to the crisis in Greece, Spain, and Portugal than to the 50 states of the Union.
In financial terms, restructuring means that Puerto Rico would not pay the entire principal that it has borrowed, the interest it agreed to pay or a combination of both.
The firm, which manages about $ 4 billion in assets, circulated the report to several of its customers and financial advisers last month.
The President of the Government Development Bank (GDB), Juan Carlos Batlle, sharply disagreed sharply with the report.
Two Drops of Water
According to the firm, there are many similarities between Puerto Rico and Greece, Italy, and Spain, which the report describes as “weak European economies, among them: insolvent pension plans, high unemployment, and poor management in the collection of revenues into the treasury.
Of all the similarities, however, the debt level would be the most alarming indicator, according to the report.
WSC estimated that is one were to divided the central government debt by the population of the island, every Puerto Rican owes about $ 7,837. Meanwhile, the island’s per capita income would be at about $ 13.675. Percentage-wise speaking, this means a debt ratio of 57.3% to income.
If the calculation considers other $ 28 billion of debt issued by public corporations and municipalities, each Puerto Rico would owe about $ 17, 265 in debt.
As Indebted as Portugal
“(The figure) aligns more with Portugal, near to that of Spain, and well above the lowest per capita income in Puerto Rico,” said WSC.
The per capita debt of Portugal, as WSC states, is about $ 16,402. In Spain it is estimated to be $ 17,539.
However, this indicator in states like New Jersey would be about $ 3,669, in Hawaii it would be around $ 3,996 and in Connecticut, the debt per capita would be in the vicinity of $ 4,859. Percentage-wise speaking, the debt of these states in proportion to income per capita would be 7.2%, 9.6% and 8.8%, respectively.
The firm estimates would be higher if one considers that WSC did their numbers based on a total debt of around $ 64 billion
On November 20, El Nuevo Dia outlined that public debt was about $ 65.5 billion.
That figure, as a proportion of Gross National Product (GNP) could be equal or exceed the size of the local economy. This means that the debt of the Island in relation to GNP, could range between 92% and 100% or more, something that the research identifies as a serious economic burden for the development of any society.
Poor Reputation
“Despite having a conservative governor in fiscal terms, the history of Puerto Rico is tainted by cronyism and irresponsible fiscal decisions,” the firm said.
He added that unless the debt is reduced or the island’s economy grows faster than debt, Puerto Rico is aimed at a “critical moment” for its finances before the end of this decade. At this juncture, in light of fiscal conservatism “rampant” in the federal capital, it would be “unlikely” that the US Congress would help the island. So, if the situation does not improve “materially and fast,” the island would be in serious trouble and the U.S. municipal debt market may face “a significant credit hurdle,” said WSC. Puerto Rico’s debt has grown at a rate of 9% annually in recent times. Meanwhile, the Puerto Rican economy has shrunk almost 12% since the start of the recession.
The BGF Refutes Findings
“It is clear that we have to keep working,” Batlle said when asked about the report.
“In 2009, we indeed were on the path to being Greece,” admitted the banker. “But we have succeeded in keeping Puerto Rico from falling off the cliff,” Batlle said, referring to the period when the island lost access to capital markets by the growing fear of degradation.
Batlle preferred to emphasize that the report acknowledges the progress of the fiscal reforms that the Fortuño administration has implemented. In response to questions about the possibility of restructuring the island’s debt, Batlle said it will not be necessary if they continue to apply that fiscal discipline measures have already been implemented.
Franky Benítez 
Thanks Benny. Scary times for the island.
very
The republican wonderboy is no longer. No doubt, cronyism and irresponsable fiscal decisions are key to P.R. downward slide to insolvency. Thank God the governor contrary to other republican governors accepted the Obama stimulus dunding. If not the situation would be much worse.
A change in administration is due in 2012. It will help to a certain degree since our main problem is our colonial situation which impedes P.R. from implementing policies which could produce jobs.
Looks like it, and when the Wonderboy gets asked about progress in PRico, he touts the fact that Victoria’s Secret is opening up on the island.
Consider this; the per capita federal debt for US citizens is approximately $40,000. The monies PR receives as stimulus funds comes from a bankrupt government that has to borrow or make money just to keep everyone afloat. It may seem helpful now, but it will only make the downward fall even worse when it does happen. And you think the 2008 financial crash was bad, well you ain’t seen nothing yet. That was the housing market bubble crashing, and it is not finished. People are still losing their homes. The next crash will be due to the government debt, high inflation and high interest rates which will cost the government more money just to borrow more money to stay afloat. Eventually the good times will come to an end. Were just talking Economics 101 folks.
And because of the island’s airtright dependency on the US economy, PR will only get worse before it gets better and that breaks my heart since I love my homeland so much.
What we are seeing is a global financial issue Julito. Just look at Europe. And now China is starting to slow down since many of their products are bought by us, and we are not buying as much these days. I’m really not sure where PR would turn to to help the economy. I don’t want to sound pessimistic but the statistics do not look good. I just hope the news folks are not holding back on the facts so we get caught by surprise…again. I mean, no one admits to seeing the .com bubble ready to burst in the late 90’s, nor they see the housing bubble meltdown coming in starting the end of 2007. Where are the experts? Personally, I think things are worse then anyone wants to admit. It now goes beyond politics. SOS!
Add the fact that PR has no real leaders and the island is screwed
Reads like an obituary. ;( .. Hope “they” don’t chase the middle class of the island, by trying to milk them more..
Agreed
* off ..
Sorry Myrna. I know you want to here something hopeful. But hope can only come from people doing their part, and I don’t see that happening. Like all ailments and such people just want to take a pill and make everything all better. Not gonna happen. We are all just going to have to cut back and start living within our means. And this means the governments as well. We can all start by cutting up the credit cards.
LATINO AMERICA UNIDA ES LA UNICA SOLUCION, MIENTRAS SIGAN MIRANDO AL NORTE, NADA CAMBIARA,ABANDONAMOS LA AGRICULTURA POR LA INDUSTRIA CUANDO DEBIO HABER UN BALANCE Y PARA COLMO LA INDUSTRIA ES EXTRANGERA Y NOS FUIMOS AL PISO CON ELLA, LO MATERIAL FUE MAS IMPORTANTE…LA MORAL,EL AMOR EL RESPETO A LA PATRIA Y LA CONFIANZA EN NUESTRO PUEBLO ME TEMO SE HAN PERDIDO.SOMOS UNA RAZA EN EXTINCION.YA NO EXISTEN LOS ALBIZUS, LAS LOLITAS… DE ANTES.
Teodoro; incluso los países latinoamericanos están luchando actualmente. Tan yo don’ t considera cómo ésa es la respuesta. En cuanto a perder el negocio de la agricultura aquí, incluso el US’ agricultura según lo encogido. Alrededor qué granjas todavía esté están siendo subvencionados por el gobierno. It’ s apenas un sueño de pipa para pensar cualquier un país puede actuar independientemente. Ahora somos una economía global. Necesitamos aprender trabajar y jugar con cada uno que viven en este mundo. El aislamiento nunca es la respuesta.
P.S. Usted conoce tan Teodoro, usando todas las letras mayúsculas está igual que gritando. Utilice por favor la minúscula en su caso. Gracias
Bruce R Harris ….Si grite,el coraje es grande y nunca hable de aislamiento eso lo hace solo los Estados Unidos se separan de quien no esta con ellos a su conveniencia y los acusan de socialistas, y tu forma de pensar (la cual respeto)es precisamente lo que nos lleva cuesta abajo. CON MI MAYOR RESPETO HAY TE DEJO MI HUMILDE OPINION…..