Puerto Rico is America’s Greece

March 8, 2012

On Tuesday, Puerto Rico increased the size of its general-obligation municipal bond sale to $1.7 billion from $1.4 billion, demonstrating the voracious appetite that tax-exempt investors have for higher-yielding bonds. Unlike the debt of the 50 states, Puerto Rico’s municipal bonds are tax exempt for investors all over the U.S. This makes the debt especially attractive to wealthy investors in states with high personal income tax rates (think New York). But you have to wonder how many of these investors took the time to read the offering statement of the deal and run some numbers.

If they had done the math, they likely would not be buying maturities that come due too far into the future, because it’s unlikely that Puerto Rico will be solvent enough to repay them.

Puerto Rico is a Caribbean island with a simple, local economy that was supercharged by tax breaks the U.S. Congress granted it to promote manufacturing. The Center for the New Economy described Puerto Rico’s economy with a few quotes from Richard Weisskoff’s book Factories and Food Stamps: The Puerto Rico Model of Development:

Puerto Rico was “the prototypical industrial colony, the archetypal case of the highest stage of development toward which many other Third World economies are moving. Its economy is open and dependent: open to both imports and exports; dependent on flows of foreign capital, government aid, and on the intangible methods, such as technology, consumption styles, and even wage levels for certain occupations.”


In that kind of an economy, both production and consumption are dominated by the foreign sector. The production of goods for export is dependent on “imported capital, imported investment, imported raw materials, imported technology, and imported spare parts.” Thus, most of the income derived from the manufacturing and sale of exports accrues to and is repatriated by absentee owners, with little impact on the local economy.

Puerto Rico could be described as America’s own Third World country. It has a per capita income of $15,203 — that’s less than half the level of the poorest state, Mississippi, where it’s $31,046 — and the official unemployment rate is 15.5 percent. Forty-five percent of Puerto Ricans live below the poverty line, and 20 percent of personal income in the commonwealth comes from federal or Puerto Rican public funds. In short, it’s an economy going nowhere.

But it’s Puerto Rico’s massive debt load that makes it resemble another crisis-stricken country that’s been in the news lately: Greece. Although the commonwealth’s debt load is only 89 percent of its GDP, Puerto Rico’s underlying finances are weakening, and a big reason why it has balanced its budget so far is because it sold tax anticipation bonds and transferred the funds into the general fund. In 2011 public revenues were $8.17 billion while expenditures were $9.07 billion. This shortfall was plugged with official funds from the COFINA Stabilization Fund, a government subsidiary that sold bonds to be paid off with future sales tax revenues.

The other way that Puerto Rico has been seeking to close its deficit is by selling public assets to private investors. In September 2011, Goldman Sachs and Albertis paid the government $1.14 billion to lease two toll roads for a 40-year concession. In August 2011, Puerto Rico got bids from 12 international consortiums for the island’s main transport hub, the Luiz Munoz Marin International Airport. There are plans afoot to privatize other public assets, including energy, public-school infrastructure, transportation and water assets. But these hard asset sales will only provide a one-shot infusion of cash to fill a budget hole. There is only so much family silver to sell.

Rating agencies placed Puerto Rico in the lowest tier of investment grade ratings: Moody’s rated it Baa1 with a negative outlook, S&P rated it BBB and Fitch rated it at BBB+. It’s not a giant concern to sophisticated investors if the rating slips into the junk category, but Puerto Rico’s borrowing costs will shoot up if that happens. Then the more dire question arises of what the government will do once it runs out of funds to cover pensions, social welfare funds, government payroll and debt service. As happened with Greece, bond investors continue to buy the debt assuming at some point the government will be bailed out by somebody, somewhere. Good bond investors know how to do financial calculations better than anyone. The Wall Street Journal quoted one skeptical investor:

Some investors remained undecided early Tuesday afternoon.

“There are those people who won’t touch [Puerto Rican debt] with a 10-foot pole, and those people who embrace it thinking, ‘Hey, it’s a commonwealth, the U.S. government won’t let it go under,'” said Steven Schrager, director of research at SMC Fixed Income Management, which oversees $150 million worth of munis in separately managed accounts. “Well, I don’t know about that, and I don’t ever want to find out.”

Caution, bond investors: There is no European Union standing ready to bail out Puerto Rico. If the U.S. Congress or Federal Reserve bailed out Puerto Rico, then they would have to bail out Illinois and California. And that is not going to happen.


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

All this could be true wat is not; we haqve to remember that nither Illinois nor California were invade by USA. During the Spanish-american war the USA anexe Puerto Rico without considering the “natives” and in 1917 the Congress give puertorricans the USA citizenship without been request by Puertorricans. So as a colony of the imperial nation(USA) they will have not only to bailout PR but keep them as it is. The only salvation is to create a real Associate Republic that can sustane itself and keep for Puertorricans the American citizenship. Puertorrican were honest, labor people but the USA change that with the MANTENGO.

Posted by juliorafael | Report as abusive

The government bailed out banks and companies but can’t do that to states representing people?

Indeed, it is Puerto Rico’s own fault for having stuff like this happen. But if we paid off our national debt, protected our local economy, and all that jive, we probably would have CIA-backed coups faster than you can say bacon in the morning.

Posted by serialteg | Report as abusive

The circumstances are not the same for Illinois and California because none of them have the history that Puerto Rico has. Since it’s discovery in (1492) Puerto Rico was, for all intents and purposes, Spaniard territory. The Spanish-American war changed that, and that war ended in the 20th century (1892). THERE WAS NO CONCENSUS, AND PUERTO RICO WAS INVADED BY THE USA. No democratic process (letting the people decide) was held to commit the future changes that continue to this day (Commonwealth, USA citizenship, etc.). The USA has had an agenda for Purto Rico and that agenda doesn’t need the consent of the people. We let foreigners decide what’s good for us, while they don’t even have the decency to know more about us, our history, the mess of governments throughout the years, or the struggles of the university students (UPR) for the right of receiving cheap (high-calibre) education. 2012 marks the 120th anniversary of Puerto Rico’s US-territory-status and not much has happened since then.

Posted by J2lopz | Report as abusive

Permit me to add my two cents Ms. Cate Long.It is obvious you should get TSA to do a background check on this “Expert” Steven Shrager. FYI, the US “WILL” bail out Puerto Rico before Illinois or California. Neither of those two states are strategically positioned for the defense of the contigous US. They will let any state besides Alaska, Hawaii and the territory of DC to go under before they permit the wreckage of PR. Mr. Shrager’s ignorance intertwined with his arrogance, (ex. HOW COULD THE US DO SOMETHING FOR THAT 3RD WORLD TERRITORY BEFORE “A STATE”?)does not permit him to anlyze correctly based on the US priorities. Also, why don’t you ask the local banks if tey are complaining? It so happens that the underground market is bigger than the “market” you analyst’s quantify. This is permitted precisely because it is a territory and not a state. So, I would recommend to both you Ms. Long and Mr. Shrager to reevalute on how you look at your numbers.

Posted by zunic2 | Report as abusive

Puertoricans and other inmigrants from all over the world, work in the Commonwealth of Puerto Rico islands(because we are an “archipiélago”, more than only “an island”) and pay taxes to the USA in terms of millions. Mega stores are coming here for th “good business” and displacing the small commerce. Some of these chain stores are the most selling ones all over the country, and thus a great support for their business. The best land, coastal and forestry ones, have being used by “The Nation” for military purposes, with a high cost on OUR health, both fisical and emotional, paying no rent nor utilities. DOES ANYONE BELIEVE PUERTO RICO IS “BAD BUSINESS” FOR THE DOLLAR INVESTORS??? We are educated and rational people, even though we are not the best ones expressing it IN ENGLISH; so don’t take us as fools with this Geece-like devastating premonition. We are suffering the struggles provoked by the high cost of living, as a result of the military-oily campaign from the Bush family, provoked by GW A.K.A. President Bush. We have being robbed and taxed for more than 110 years…so any “bail out” has to be re-baptized as a “Little Payback”, because your nation has no enough money to pay for what they have done. God bless the poor, those rich-in-soul humans who live a lifetime for a minute of happiness and laughter.


Posted by CriolloGourmet | Report as abusive

It is amazing that some still justify what has and is happening in Puerto Rico. For over 40 years, Puerto Rico has been living beyond their means. Corrupt governments and politicians have had a feast with all related economic activities. Political tribalism, has impeded islanders from making intelligent decisions in the ballot box. Thus,the saying, a country has the government it deserves. The present government, continue to hide the economic data needed to make judgement on it actions. The stratigic value of the island has been long gone. In fact puertoricans, asked the Navy to close the last Armed Forces Base on the island. The U.S. will eventually give the last gift to Puerto Rico…it’s independence. They cannot afford us anymore. Manuel

Posted by maderaprado | Report as abusive

@Maderaprado, nobody is justifying anything, much less the rampant corruption in the government. You should go back and read the article that the comments posted are talking about. It is obvious you are an Independentista. If you think the US has left the Bases in PR you need to go and find out where they went because they are still in PR. Fort Buchanan, this year alone has invested over $350M in infrastructure. Roosevelt Roads is once again up and running, they have just stopped the bombing. I reiterate, the US will first let go of Illinois and California before they let go PR.

Posted by zunic2 | Report as abusive

¡Muy interesante!

Just two observations: Neither the Fed nor Congress will be able to cut off PR’s financial or political ties to the US — much less handout a bailout — and allow islanders to establish their own monetary unit other than the US dollar. No matter how pro-independence many islanders consider themselves, Puerto Ricans want to keep the American dollar as their currency of choice, regardless of their status formula preference. (They quickly point to Ecuador and Panama as reference cases.) It would be impossible for Puerto Rico to devalue a currency as Greece could — to help its exports and generate more jobs, even at lower wages — if it were to leave the euro zone and return to the dracma.

Secondly, public corruption is INDEED a big problem in the island — just look at the number of news releases on the US Justice Department’s website of the convictions of elected local officials. Adding to this problem (or encouraging it) are the hundreds of thousands of dollars US presidential and congressional candidates from both major parties raise in the island. (Again, check the Federal Elections Commission records on the fec.gov website.) For a tiny Caribbean commonwealth that has no mainland voting rights or influence, many of its residents regularly like “to contribute” to national and stateside campaigns. The $64,000 question… Why?

Posted by MartiD | Report as abusive

This article is full of crap. Puerto Rico is able to sell more debt than any state besides California and it has ten times less population. Greece is not able to do that, Spain is not able to do that, and Portugal is not able to do that. So, Puerto Rico is not comparable to Greece or for that matter any of the other countries I mentioned.

By the way, read this statement from the WSJ.

…For the third time this year, Puerto Rico on Tuesday increased the size of a municipal-bond deal to meet investor demand, boosting the amount of bonds it sold to $2.3 billion from $1.5 billion. The deal still drew more orders than underwriters could fill; investors would have bought an additional $1.3 billion in bonds, a Puerto Rico official said. This year, Puerto Rican government agencies are the second-busiest borrowers in the municipal-bond market, raising about $5.8 billion, according to data provider Ipreo. Only issuers in California, where there are 10 times more people than in Puerto Rico, have borrowed more money.

That there are problems, sure there are, but all cannot be resolved overnight. A deficit that was over 33% now down to 6%, unemployment through the roof now starting to come down, 30,000 public employees that left because of attrition and reduction measures. Tax revenues are starting to increase.

Ms. Long, stop working for the PPD, they took us down this treacherous road and our current governor is taking us out of it.

Posted by MEP | Report as abusive


In terms of demand it might help if you looked at the massive demand in high yield bonds.

“February was the third-highest monthly tally on record”

http://www.forbes.com/sites/spleverage/2 012/03/06/issuers-flood-high-yield-bond- market-as-super-low-coupons-abound/

There is so much liquidity in the market everyone has huge demand for their paper especially if it is lower rated and paying higher yields like PR.

Who are the PPD?

Posted by Cate_Long | Report as abusive

MEP, you make me crack up, all you PENEpes got that none sence memorize!!!

Cate the P.P.D. is the opposition party. There are 3 major parties in P.R PPD(commonwealth) PNP(statehood) PIP(independence)

Posted by G.O.D. | Report as abusive

PPD = the bad guys.
PNP = the good guys.

PPD created the fiscal and budget mess when they were in power.

PNP current government that is straightening out the mess and getting the island back on growth track.

Posted by Howtrue | Report as abusive

As you can tell from the comments they don’t call this the island of enchantment for nothing. You have to live under a spell to believe the crap that passes for knowledge and principle. Yes, we are broke. But guess what so is everybody else except for a few and far apart exceptions. We are just part of the worldwide pretent and extent. People that live in glass houses cann’t throw stones, so we feel fairly safe.
Want to know where puertoricans are moving to?
Orlando, near the magic kingdom. From enchantment to magic. You just cann’t make this stuff up.

Posted by qqruqq | Report as abusive

Wow. I can’t believe Reuters allows for someone to write the garbage that this reporter has written here. This story is full of factual errors….I wonder if this story is politically motivated….I’ll give Ms. Long the benefit of the doubt by assuming she is highly uneducated when it comes to Puerto Rico. Any responsible reporter (and intelligent for that matter) would at least do some research to understand that PR was very much like Greece in 2008, but thanks to a surprisingly responsible Governor who, against all odds, has begun to straighten the Island’s finances, Puerto Rico is today a world apart from Greece and many other European nations and….maybe, including the US.
To se the record and facts straight: PR’s Debt to GDB is 67%, not 89%; the Center for the New Economy is a highly politicized organization that claims to be unbiased, but is largely funded by the opposition party supporters (Banco Popular); PR’s debt per capita is $18,000 vs the US that is $44,000; the proceeds of the concession of the highway were used to pay down debt and to invest over $400 million in the highway. Please, read, inform yourself and be responsible. This article is shameful.

Posted by marleon | Report as abusive

Lets continue educating Mrs. Long with facts, since aparently she didnt read the offering statement either. The previous commenter is correct as far as debt to gdp ratios are concerned. Total debt is around 65B vs GDP of 96B. Thats 67% not 89% (USA is at 100%, but that should not be a concern since they print the money). Revenues have been increasing while expenditures have decreased. The budget deficit has been lowered from 3.2 billion to 610 million. While all of this has happened, rating agencies have increased the commonwealth’s credit rating from BBB- to BBB+. Now those dont seem like “weakening finances” like Mrs. Long would say. I find it irresponsible of Reuter to publish such an article from a journalist with no knowledge of the situation.

Now lets give some context to the PR v Greece debate. In 2008, PRs budget deficit was 3.2 Billion (3.12% of GDP). Greece was at 13.6% of GDP, thats 4 times higher. Since then PR has lowered that deficit to 0.6% of GDP while Greece is still at 9%. Also 31% of Greece’s expenses are welfare. In PR that number is closer to 0. Uncle Sam takes care of that. Those are some big differences.

What Mrs. Long should have published is that PR does have the weakest economy out of all the 50 states, no doubt about that. And for that same reason their bonds trade at about 2.5% over the AAA index. But as far as comparing it to Greece, or having concerns over their ability to meet their debt obligations, one would have to be completely ignorant to say such statements when looking at the facts.

Posted by Pepfre | Report as abusive

I’m throwing into the mix why PR is a much more important asset to the US– than we are lead to believe.
What’s the price tag on this: thishttp://en.wikipedia.org/wiki/High_Fr equency_Active_Auroral_Research_Program
I think the relationship between the Island and the US far outweights the negatives. Let’s do a 360 degree analysis before we form opinion and start a conversation.

Posted by onemoreopinion | Report as abusive

Mrs. Long: With all due respect, after reading through all the feedback your article has had, it would only be fitting and responsible for you to retract and restate your article and opinion about Puerto Rico. Please, be responsible to your readers.

Posted by marleon | Report as abusive

GDP is a poor measure of Puerto Rico’s productive capacity because it incorporates distortions due to international tax strategy (transfer pricing) implemented by the multinationals that account for 46% of that GDP. Most of the difference between the $63B GNP and the $96B GDP published by Puerto Rico’s Government Development Bank is precisely those profits repatriated to absentee owners; thus, it is not an effective source of taxable income to sustain bond payments. The debt:GNP ratio, if that were the relevant figure, is much less favorable.

Pepfre, please also note that the “upgrading” of Puerto Rico’s debt was solely due to the Moody’s technical recalibration, which uplifted 34 states as well (http://bit.ly/cMlQoo), rather than due to a substantive re-evaluation of Puerto Rico’s finances.

Posted by MarcosPolanco | Report as abusive

Thanks for all the comments. I’m studying the bond issuance of the Government Development Bank and looking at the economic environment for PR which seems to be very challenging. I’ll write a followup post discussing these issues.

Also addressing the multinationals influence on the economy and tax revenues.

Here are the latest offering docs:

Dated Date: 04/03/2012

http://emma.msrb.org/IssueView/IssueDeta ils.aspx?id=EP350066

Dated Date: 03/29/2012

http://emma.msrb.org/IssueView/IssueDeta ils.aspx?id=EP349924

Dated Date: 02/29/2012

http://emma.msrb.org/IssueView/IssueDeta ils.aspx?id=ER348771

There are many additional PR bonds issued that can be reviewed here:


Posted by Cate_Long | Report as abusive

Addressing MarcosPolanco’s comment regarding the use of GDP vs GNP as a measure of real economic activity supporting debt payments, note that those multinationals:
1) Employ a good number of professionals that live, earn, pay taxes, consume in Puerto Rico.
2) There is a new tax on these multinationals that’s generating revenues to the general fund and, obviously, supports debt service payments.

In summary, I believe Ms. Long and some others are being too tough on PR. Yes, PR is going through very tough times. But, as any capable economist or analyst must understand, changing the direction of an economy or a country, takes time and effort. Status quo is always the easiest way out. In PR, the current Governor is changing that status quo.

I think we can all agree, at least, that change has happened, and PR is slowly showing improving signs.

Posted by marleon | Report as abusive

I am Sergio Marxuach, Policy Director at the Center for the New Economy, Puerto Rico’s only independent, non-partisan think tank. Unlike some gutless worms, I write my posts under my own name.

In general Ms. Long post is on point. There are, of course, some differences between Puerto Rico and Greece, but the similarities are simply overwhelming. Both have been running primary deficits for years; both have high debt ratios, Puerto Rico’s debt to GNP ratio is close to 100%, and that is excluding unfunded pension liabilities, (in PR GNP is a better yardstick of economic activity); and both suffer high unemployment, widespread corruption, and massive tax evasion.

At a more fundamental level, neither country has control of monetary policy, so they cannot devalue to jumpstart the economy; neither has a strong productive base it can bootstrap to ignite growth; and perhaps more important of all, both economies are economic mirages that have been sustained by a monetary illusion, that is by having a stronger currency than their fundamentals warrant.

So, in my view, the fundamental similarities outweigh any superficial differences between both countries. Ms. Long is also correct in that the U.S. will not bail us out. It didn’t do it for New York City in the 1970 or for California in 2008/09.

Posted by sergiomarxuach | Report as abusive

An important reason why Puerto Rico can absorb more debt per capita than any state of the union is that the commonwealth collects the full combined federal-state marginal tax rate from its citizens and retains it on the island. It does not share it with the federal government, although Puerto Rican taxpayers do pay for Social Security and Medicare. Once adjusted for this revenue factor, the comparison with stateside jurisdictions becomes murky. As for comparing it to Greece, we have to also adjust for that country’s illiquid banking system, as well as the rest of Europe’s exposure to that country as well as the previously infinite leverage provided European banks by the ECB by holdings of Greek bonds. Greece has a much greater contagion factor than does Puerto Rico due to the cross-holdings of Greek bonds whereas Puerto Rico bonds are distributed well beyond the banking sector to individual investors. Puerto Rico does have its problems, including large structural ones, and could ostensibly need to restructure its obligations someday (particularly likely if it needs to share revenues with the federal government if it ever becomes a state), but I would not readily call it the U.S.’s Greece. That is a nice headline, but it’s a bit of a stretch.

Posted by jotaerrese | Report as abusive

Nice post by jotaerrese but not quite right. It is true that Puerto Rico’s statutory tax rates are similar to the combined-federal state marginal rate. However, due to lax enforcement of the tax laws and a multitude of legal loopholes the actual take by the government is relatively low. General Fund revenues for 2012 are estimated to be around 13% of GNP.

Furthermore, an analysis by Moody’s done in January 2011 calculated Puerto Rico’s combined net tax-supported debt and unfunded pension liability to be around $64 billion, which is about 7 times general fund revenues. In fact, Puerto Rico’s combined tax-supported debt and unfunded pension liability is the third in the U.S., just behind California and Illinois, two jurisdictions with a much larger economy and tax base. Furthermore, the general fund provides a backstop for Puerto Rico’s state-owned enterprises, such as the PR Aqueduct and Sewer Authority, which disclosed in its last bond offering that it simply does not generate enough cash flow to service its subordinated debt. So it is quite clear to me that Puerto Rico is highly leveraged and the burden on the general fund is enormous.

I agree that eventually Puerto Rico will have to restructure its obligations. Puerto Rico simply cannot honor all the obligations it has incurred with bondholders, pensioners, university students, the medically-indigent, etc. My guess is that bondholders will probably be OK, given the prevailing statutory and constitutional protections. As usual, it will be the students, the old, and poor who end with the short end of the stick.

Posted by sergiomarxuach | Report as abusive


The Second Economic Adjustment Programme for Greece March 2012

http://pdf.reuters.com/pdfnews/pdfnews.a sp?i=43059c3bf0e37541&u=2012_03_13_11_39 _7dd1a68480b04fce9eca6090eb5a433c_PRIMAR Y.pdf

Posted by Cate_Long | Report as abusive

God Bless America, and everything around it, Mrs. Long!

This problem goes way back!

When the Spanish government lost control over the island and the U.S. came; what was somehow greater than our fate with Spain, we did not have the situations we have today.

As a previous user commented on this page, it is all because of the MANTENGO problem. The Americans started creating options for the low class society, who were either labor workers or slaves, but some people these days often abuse from the services and do not work in order to contribute to the main debt, plus the fact that there is no work anymore ever since the crisis started.

This is how the middle class society was born in many places, including my island.

Puerto Rico thankfully didn’t become a Third World country because of Luis Muñoz Marín and his party (PPD stands for Partido Popular Democrático, which is in fact, the one that collaborated in order to create a system for the island in order to use the industrial incentives for the island’s progress, about by 1940). There was already a problem with cultural disadvantage and extreme poverty by that time, so the PPD used that strategy in order for the island to advance, but that was a long time ago.

After Pedro Rossello’s party, the PNP, the only thing politicians have done is stealing, and stealing and stealing, because of our first impact with U.S. companies. The only one who appeared that somehow managed to recognize the situation was PPD governor Anibal Acevedo Vilá, but he didn’t get elected because of some situations that happened and voters lost confidence in him. No one can be trusted, or so the puertorricans think; neither the PPD, or the PNP, or the PIP (PIP stands for independence, or Partido Independentista Puertorriqueño).

People here in Puerto Rico forgot about the necessities our grandparents passed and everything is becoming more industrialized, which is somehow great because of the social progress, but we cannot pay the debt for these “great luxuries”. We pay the U.S. with our troops, our artists, and with our “bad tourism” programs, or so we think. That is why most puertorricans leave the island. There is simply no opportunity here anymore and if there is, workers will think twice in hiring anyone. Plus, we cannot produce or collaborate in raising the national money reserves like other states can. The modern puertorrican citizen is educated to be lazy and most have this fake ideal of becoming a state, and that makes things worse. You can see that on our constant revolts in Black Fridays. Our economy is bad, but we go and buy 3 plasma T.V.s.???? How???

We do not want to be the next Greece; we just want to pay our loans and live a good life. We even lost communication with Cuba and that is sad. Our history with Cuba is supposed to be even more united than our history with La Española, which is closer to us.

The government aids people use here for food and other needs, take to much from our monetary production. Plus, the population here uses coupons like going to the candy store. U.S. takes way too much from us in taxes as well; that would not happen with our seas and ports operating again. We could gain materials for ourselves and for the U.S.

When the ships stopped appearing on the south of the island, half of the economy was halted. That needs to awake again. They were supposed to bring specialized teams to teach puertorricans how to deal with the situation regarding our debts and industry management, but the problem is, it is the issue with the changing governments. We only need one government, and the constant change in politics doesn’t work for us; we were brainwashed in thinking we could become a state and it won’t happen and that is why we have such a debt. We can pay it by operating the ports to bring merchandise back, by focusing on better laboral conditions and by controlling the tax refunds, plus taking away government aids and giving them only to handicapped or people with serious conditions.

Search for Puerto Rico Reconstruction Administration and the Puerto Rico Emergency Relief Administration, both made for the island’s development when Franklin D. Roosevelt was still president. Study all the economic movements (both legal and illegal). After that, you will be able to complete the other half of your investigation.

Posted by turismoP.R. | Report as abusive

Oh, by the way, Mrs. Long; PIP really stands for Partido Independentista Puertorriqueño. They stand for the island’s independence.

What puertorricans want is not clear in the new Era, but it is not absolute independence. We do want to get rid of the debt, and at the same time, retain some income for our island’s development. The U.S. still resists in letting us commerce freely, but at the same time, the U.S. takes our products and resells them to us with more expensive prices. How to blame?

There has to be a way to make the economy better, and there is.

“The Emperor indeed has no clothes, but we figured out the emperor is in fact, a shark; and to defeat or join this shark, we somehow have to act like it.”

Posted by turismoP.R. | Report as abusive

http://wwwc-300enrd.blogspot.com/ Historic Memory of U.S. Colonization of Puerto Rico-Chronology of historical events leading to the Spanish-American War and the U.S. intervention in the Cuban War of Independence and the Invasion of Puerto Rico. :-)

Posted by ArielFornari | Report as abusive

Mental colonialism is a psycho-social ailment, the diagnosis thereof which is virtually impossible by those who suffer from it, and this pathology is directly connected to another even more chronic psycho-social disorder known as the functional illiteracy of the historic memory of nations. :-)

Posted by ArielFornari | Report as abusive

Increible, como hasta aquí los Penepeste critican la verdad que publica esta periodista. No hay peor fanático que un PNP acorralado por sus actos.

Posted by speakerdel | Report as abusive

I really do hope Mr. Marxuach says who he really is, one of the persons responsible for this debacle that our current governor is trying to fix while he worked for Melba Acosta in the Office of Management and Budget under our former fiasco governor Anibal Acevedo Vila. The people who doubled our debt in less than four years to help their own separatist agenda. Center for New Economy, yeah right…Center for Neocommunist Economy. Or did he forget? Once a socilaist, always a socialist.

Posted by MEP | Report as abusive

Sergio, you and you bosses doubled our debt….how is that for a figure?

Posted by MEP | Report as abusive

If you read this article and it’s comments you will realize what’s really wrong with PR. The people of PR truly have no clue about the state of the country due to the lies the media and political parties (all of them PIP, PPD, PNP) have been feeding them in order to stay in power. When someone finally tells them the truth they unite and shotdown the truth in order to continue their scam.

Posted by Anonymous | Report as abusive

speakerdel: exprésese como le venga en gana, pero es interesante cómo vienes aquí a hablar con insultos y cafrerías típicas al tono de los fútiles debates de los foros de El Nuevo Día. Sigue el ejemplo de los que hasta que tú llegaras han argumentado con fundamentos y razonamientos lógicos. Y for the récord, estoy de acuerdo en general con los planteamientos del periodista. Pero añado que este hoyo era peor hace cuatro años. Requeriría una ceguera viciosa ignorar los años 00 al 08, comandados por administraciones populares.

Posted by estoestapasando | Report as abusive

How come these articles are posted within the United States when there is a pro-statehood party gorverning Puerto Rico?

We have had two continuos administration by those who have created the unheard of “Estado Libre Asociado” with the help of the US Congress. We have never been a “Estado” (State), never have been “Libre” (Free) and have never been “Asociado” (Associated) with the United States.

The creator of such a creature was the “PPD” or the Partido Popular Democratico to fool those that were pro Statehood, those that were pro Independence and those that were favoring an Association with the United States.

Puerto Rico was a heaven when the 936 Section was alive. Once this section was eliminated, it became impossible for those PPD government to govern the Island without adding new debt to maintain the economy.

There have been two administration under the PDP and both have failed to afloat the economy and or make permantent structures in Puerto Rico. Even with the 936 funds The Hernandez Colon administration never provided a single permanent structure in Puerto Rico. He served three time for a total of 12 years.

None-the-less the PNP (Partido Nuevo Progresista) have governed several terms and in each term have left permanent structures. The PNP have provided salary raise to the teachers, police and government employees.

There has not been a PPD administration that have made such raise to any govenmente employee.

Get your facts together because the governor Fortuño acquired the administration with a $3billion dollar debt.

You question the GO issue and like any other government and or state, that is the ONLY way they have to sustain an economy that, even for Greece, which is being bailed out due to ignorance of people like you.

Reuters is very well known for information provider of World Economy, but also for alliance that not necessarily represent the well being of a nation.

For the same token, there has been

Posted by luisenda | Report as abusive

I can’t say I am amazed of how ridiculous Puerto Ricans act. Ms. Long made an article, and instead of people just recognizing it’s value for what is real, and what needs to be worked on, you just go and pick on her with your “facts”. Well, just so you know, I left Puerto Rico this last fall, and I am very glad. There are no jobs for professionals, the cost of living is very high and please, please don’t get me started in the potholes that have taken over like gangrene on a badly infected wound. Puerto Rico once was attractive for business and growth, and now it is an island full of corruption, deceit, and drugs. As long as everyone in PR keeps playing the game of being the political fanatic, if it’s Red, Green, Orange, or Blue, no one will get their act together and work. Also the amount of lazy people is incredible, and yes that is due to benefits acquired by the US Government, but any individual can choose to work hard and earn their living instead of living of the government and the “mantengo”.

For now, I moved to the states, I am very happy, and would not move back to Puerto Rico. I suggest the same for anyone that wants to improve their quality of life, and grow. All others, enjoy the island!!!

Posted by ByeByePR4ever | Report as abusive

Dear Mrs. Long:
Thank you very much for your report. I will try to make my opinion in an objective way. It may be true all the facts that you present on your article. The thing here is how you present them. If you name your article “Puerto Rico is America’s Greece”, you cannot pretend to receive flowers back from the people that are struggling some way to get things better. If you really want to help the people of Puerto Rico and you consider yourself as an expert in these things, then you should present some solutions that can help the government of PR following your complaints. Is kind of easy to make some research and just criticize what’s wrong. So I will really appreciate that you bring us some solutions or what you had been done instead if you were the governor of PR. Mrs. Long, these are the things that will really help. So I will be waiting for an article named something like “If I were the governor of PR”.
Thank you very much!

Posted by Orvan | Report as abusive

Let’s keep things in proper perspective.

The author of this article is a journalist and blogger, not a financial analyst.

It’s only natural that as part of the liberal media, she critize the progress being made by the island, particularly by Gov. Fortuño, who is straightening out the fiscal and budgetary mess inherited from the previous (left-leaning PDP) administration after their eight years of mismanagement.

The lady’s sensationalist, attention-grabbing “Greece” headline would appear to be right in line with her biased journalism and shouldn’t surprise us at all.

Posted by Howtrue | Report as abusive

Thanks for the comment Howtrue.

When I write about Puerto Rico next I’ll include the analysis the investment bank UBS and other analysts. After I wrote these pieces I was contacted by numerous analysts who agreed with my view of the debt levels and cash flow problems of PR.

I have yet to see a rebuttal of my work on a financial basis only political statements. Only criticism like your’s that I’m not qualified to form opinions.

Posted by Cate Long | Report as abusive

Ms. Long, I hope you’ll see my comment in the spirit in which it is given, but honestly, your opinions might be convincing if they did not come across as very one-sided. And you must agree that your “Greece” headline was pure sensationalism and totally out of line.

A “fair and balanced” journalistic piece would include some historical financial perspective, like “where they’ve come from”, what they’re doing to deal with the inherited fiscal and budget problems, and where they’re going. I hope any future piece on PR might use that approach.

Posted by Howtrue | Report as abusive

Thanks again Howtrue.

Let’s revisit the topic when interest rates have risen and rolling PR debt becomes a lot more expensive. The very low rate environment has been a blessing to municipal issuers. It’s unlikely that this condition will last given the quantity injected into the monetary system.

Posted by Cate_Long | Report as abusive

Amazed me to see the fanatics writing in this post. The blames continues pnp, ppd whatever. The issues of Puerto Rico has been created from both main parties. The ay bendito and the corruption that is rampant in their local government is a complete disgrace.

If you believe PR has a strong economy you must be kidding. When everything cost almost double than in the states and the salaries of people are stagnant how that can be progress. If you tell me that the underground economy is making money I will believe you “drugs” everyone. Indeed they are making a killing at there.

Now Mrs. Long has not posted anything that is not true about PR economy that is a completed fiasco and if you really believe that the USA will bail you out you better think twice that rhetoric. In your dreams!!!!

Posted by Piry25 | Report as abusive

Many problems with this article rhetoric aside,

1.Puerto Rico has an Emigration issue, skilled workers leave and workers in puerto rico are often immigrants,

2. Puerto rico does not get state aid like other states but also is left on its own due to non-state hood, calling it america’s greece is silly, as it isn’t a state, the demographics, economy, language, infrastructure, history of the USA has little or nothing to do with puerto rico,

3. Greece’s problems are due to the Euro a one size all fits currency, tax evasion, and spending unwisely, greece is soverign , puerto rico is basically a colony with a few rights due to its status not being final,

4. Food Stamps have long been gone in puerto rico, almost 30 years, before the book was published, a switch to a less costly block grant program was given.

5. The “Greece scare” is common amongst folks, ignoring the facts, greeks work very hard and tax evasion is a problem, take a look at ireland one of the “pigs”, austerity and low corporate taxation would make conservatives smile, but alas to no avail, of course I am not saying conservatives are wrong, but to use rhetoric and not get the facts straight, credibility of your point and argument, in fact high spending states such as sweden and finland are doing fine.

In summary, Puerto rico cannot be America’s greece because the former is more like a wanted/unwanted stepchild and stepparent.

Posted by Kberg | Report as abusive

The Governor on where they’ve come from and where they’re going:

http://www.youtube.com/watch?v=8FnFmngIS QA&feature=youtu.be

Posted by Howtrue | Report as abusive

I hope my puerto rican people survive anything

Because years years ago puerto ricans were hard as workers mayby a lil more then anybody! But once u see what america does to you its lazy because america is the disque (so call) free life when it actually no its not it just has more money then other countries and a lil less laws and gangs tht is corrupted in other nations such as central america

Puerto rico would of got independence years ago by spain but remember even some of you said it u.s just walked in on puerto rico all didily dadly how the white rednecks say it and did things without our permission! So its not puerto rico fault blame yah white gringos for this situatuion u started it now finish it an old saying!

Puerto rico won’t ever become a state been trying for years and still won’t happen
I have faith in my people as well as you guys do for your country

Remember before u.s came in puerto ricans were hard ass workers then u show them your life and made them lazy even though I see puerto ricn busninessed and they trying to work as ahrd as they can!

Debtts is out of hands everyone owes everyone money

Posted by PR2012 | Report as abusive

Gee…I thought the gist of the article was to beware about buying PR bonds because they may not be repaid in full?? Then I read the comments that discussed everything except the finances of PR Bonds

Posted by Omaha29 | Report as abusive

Puerto Ricans not only pay State Tax but also Federal Taxes. Yet we do not have a representative in the Congress or Senate of the US. The US was founded under the belief that Taxation Without Representation was wrong. Just like the 13 colonies believed this to be wrong in the 1700’s, it is still considered wrong today. Yet Puerto Rico is the only US Territory without representation. And please don’t say that we are represented by our Resident Commissioner. That position has no say in Congress with regards to issues of the US that affect Puerto Rico and can not vote on the issues.

In short Puerto Ricans pay federal taxes but are not represented with a vocal and Voting representative. This friends is the definition of Taxation Without Representation.

Posted by rodridon67 | Report as abusive

As a Puerto Rican born and bred, the level of discourse here is embarrassing. In too many cases, the writing level is atrocious and the “facts” are, to say the least, warped through a political prism. What frosts my perineum is that most of the comments were most likely written by supporters of statehood for Puerto Rico (in witless defense of the current government administration) and by virtue of their hideous spelling (spell-check function, people?) and pathetic grammar of the language they WANT to live in every day in every way, all they do is reinforce the long-held impression of obviously being “not American”.

Not that the average American writes much better, but you know what I mean.

To compound the impression and shove it into the realm of ignorance, the post is about the precarious situation of Puerto Rico’s municipal bonds, not about status or invasions or whatever the flippin’ hell roils in a statehood supporter’s febrile noggin. Stick to the topic, look at the facts and have someone teach you where spell-check is. Better yet, learn English in the 16 years of schooling most of you (may have) completed.

Stop embarrassing yourselves, which might be asking too much of the plainly self-deluded. And one last point: Recent events have proven the post’s point. The massive debt increase in a weak economy/contracting economy means greater investor risk and the possibility of needing a bailout. Like Greece needed a bailout. We might be years or months away from that, but we are getting closer to that, rather than farther away.

Moody’s Downgrades $16 billion in Puerto Rico bonds: http://puertorico.municipalbonds.com/bon ds/moodys_report/19457/

Posted by GCSchmidt | Report as abusive

This article is spot on. Puerto Ricans pay no federal taxes but instead leech off the US government. Most Puerto Ricans receive some kind of assistance whether it is food stamps, disability, or public housing. The true unemployment rate is MUCH higher than 15%, I’m guessing more like 50% if you count people not looking for work. This economy is non-existant if not for the US government money. Nothing worthwhile is produced in PR. The US receives NO benefit from keeping it a US territory. Let’s give it back to the people and watch it become Afghanistan in a few months.

Posted by PRleechers | Report as abusive

I think a big difference between states and Puerto Rico that’s going to have an impact on the outcome of this story is that Puerto Rico is in part a cap gains tax haven–you don’t have to pay on stocks if you’re based in Puerto Rico. This wasn’t the case with Greece. You can read more about it here: http://www.puertoricoreport.org/go-to-pu erto-rico-to-avoid-tax-on-stock-profits/

Posted by KimHaden | Report as abusive

I excuse myself for my lack of economic argot. I’m a soon to be graduate, 25yo jobless male born and raised in Puerto Rico. I do not disagree with what this article states but I feel it’s important to give a little context, right after expressing some deeply founded opinions about “America”.

I respect Reuters. It has always served as a quick outlet for relevant news. I value the quality of the information and, above all, the fact that it’s not as sensationalist as other media outlets.
Having said that, which might have been a poor observation, I find that the title for this article is either wrong on the basis of fact, or wrong because of non-objectivity.
“PR is America’s Greece”.
“PR could be described as America’s own Third World country”
America is a whole continent, half of which has already been very naively denominated as “third world” for whatever political purpose, rendering them intuitively “behind” on the global economic scale, which is something to debate, but not at this point. Anyone using “America” to refer to the “United States of America” (as well as the consequence of labeling all citizens of the USA “Americans” and the rest of the continent’s inhabitants can find their own name), is either ignorant, or arrogant because it portrays that USA is the only (relevant) part of America.
Assigning “latinamericans” and “southamericans” to other Americans simply because (?) is another longstanding linguistic attempt at associating these people as intuitively “behind” of the economic prestige, the cultural advancement and the political foresight many southern American countries have demonstrated in the past decades, all while being constantly and consistently pillaged by local and foreign enterprise.
You know what it is? There is no equivalent to “of the United States of America”. It’s almost as if a citizen of the United States of America has no nationality. If you believe me to be wrong, please correct me, but if there is NO word for a concept, if the most historically significant nation cannot “come up with” a word that can replace “of the United States of America”, then I believe it was intentionally never defined so that the linguistic inception mentioned earlier would eventually happen.
OR referring to both The United States of America and citizens of the United States of America as America and Americans respectively, is just people avoiding those previous mouthfuls, in other words, being LAZY.

“..per capita income of $15,203..”
“..official unemployment rate is 15.5 percent..”
“..45% of PRs live below the poverty line..”
“20% of personal income [] comes from federal or Puerto Rican public funds”
reported facts, I see them as undeniable.
“it’s an economy going nowhere”
of COURSE it’s going no where. Some of us here have been aware of that fact for a LONG while. But we (the people that understand the problem and live the problem, always minority) have no means of asking USA leaders for some kind of intervention, because if we ask our political leaders, we get ignored and even attacked because the general populace has learned to vote themselves more privileges and easier access to that federal stipend, as well as the local public treasury.

Oh, that sweet federal river made of money. It’s a goo of solid poison that will eventually make anyone corrupt their own reality. How is it poison? How is it that my welfare state has gotten to the point where it is right now? Imagine the following scenario:

During the decade of 2000-2010, the Government was pushing for a rebirth of the dying coffee industry, which by then could only account for the 2-5% of the locally consumed coffee. They allocated resources, they gave the farmers tax exemptions and they facilitated loans intended for the needed infrastructure, as well as took other actions over and under the table; but this is to be expected, since coffee is seen with pride by the local populace (because they don’t know the actual state of the industry) this government initiative was widely supported in opinion, but not in reality. The initiative failed by massive margins, having only revitalized enough to provide for 10-15% of the locally consumed total coffee at present date.
The reason? That sweet fed goop.
A general populace interview was conducted about the whole coffee business. The conversation usually went a little like this:
“Are you employed?”
“How many children do you have”
“So have you heard about what the government is doing with the coffee industry?”
“Yes and I think it’s great”
“Oh so do you plan on becoming part of the work force and moving to the mountain to go pick coffee beans?”
“Why would I do that?”
“Well… because you would be patriotic while gaining a job, right?”
“I already get the unemployment check. If I get a job I will lose that and spend time I don’t have doing something that sounds really boring, instead of with my children and my family. I already live in a ‘government subsidized building’, and losing that is a risk I don’t want or need to take.”

This situation has repeated itself over and over, with different scenarios, circumstances and players, over a period of (I would say) 50 years at least, because the general populace hadn’t become accustomed to the status quo of voting and welfare manipulation. And when you have government policies that include getting more welfare money for having more children (this goes against everything that is proper) combined with a poorly administered education system, you end up with as much as 3 to 4 generations (its quite common) of people that have not only been raised to believe that this welfare state is “natural”, but people who will actively engage in social campaigns like the notorious “Con la fianza no se juega”. The Government was trying to pass a bill to deny bail possibility if the case in question was of an “extremely violent and inhumane nature”. Suddenly everyone was talking about it, and the slogan “You don’t play with the bail” started popping up everywhere. If I’m not incorrect that bill was not passed. The criminals did their job well. As if anyone who is decent and hardworking was interested in not passing this bill.

Friends of mine are more literate than I, and we refer to this little paradise as Macondo Island. For anyone who didn’t get the reference, it’s the spanish version of Neverland (where anything and everything is probable). There are so many examples of illogical decisions/policies/practices, due to that great big federal “help” that I simply wouldn’t end writing this response.

And this river of money has a source. It has a faucet. Politicians here act as though that faucet will never close. Or they know it will but they are just putting as much into their own pockets as they can before it closes. And then they happily live in Washington or Florida or Miami. Because they don’t emigrate, they take vacations. Some of us on the other hand won’t even have time or enough resources to actually abandon the island if things turn really sour. Some of us simply chose to get shot in the face by a hoodlum before allowing the power of a bullet or a dollar to continue inducing fear into our hearts. But most of the people here are a little more “logical” and less “passionate” in that sense. Most don’t actually love their land. They haven’t really fought for it. And they can “jump” to the states whenever they please. So, what’s the point of fighting for lost causes?

But this isn’t new. In fact why is everyone suddenly noticing that all of these are facts. Oh, I see, because “the voracious appetite that tax-exempt investors have for higher-yielding bonds”, in other words, because of the blind greed portrayed by entities of a system that is fundamentally flawed, a system that should have changed as technological breakthroughs became more pervasive, a system that uses tools and solutions from it’s “failed” competitor to sustain its current evolutionary pathway, a system that has failed to actually bring anything, except the birth internet and the production of the situation that gives most power to the least amount of people.

I kind of hope PR ends up becoming the poison that kills the beast. It would be very poetic. Instead I actually do think we will get a bailout. The fact that Puerto Rico is USA’s foothold in the Caribbean has been “less true” as time goes on, not that they need the military presence but lets see some numbers. During the 2008 recession, I know of at least one Military base that shut down: I heard that $40 million/year was lost merely by having removed those soldiers from the local economy. I admit this figure I heard could be exaggerated but I’m confident that it wasn’t only one base that got shut down, and that it was a lot of people that left the island.
Having already made clear the high reproduction rate of people who have learned to feel entitled to that great fed goo, and the recent statistics of people who have been abandoning the island I’m pretty sure that if the situation doesn’t change, this island will become inhospitable by 2040, which is when I will be 50, which is the same amount of time that i have had to see the changes that have occurred in the past slowly manifest themselves into the future, many times over.

Thank you for having read this, if you have any thought that merits voicing out, by all means, share it with me at jose.taveras@upr.edu. I have stated all facts that I have previously read but maybe I need to provide sources as this is a combination of context and interpretation.

Posted by USAisnotAmerica | Report as abusive