An open letter to Puerto Rico Governor Fortuño

By Cate Long
March 13, 2012

Dear Governor Fortuño:

I wanted to write you to discuss the condition of Puerto Rico’s economy and its municipal debt load. After I wrote a column last week entitled “Puerto Rico is America’s Greece,” I was surprised to see the piece get a lot of attention. What I said has been common knowledge in the U.S. bond market for some time, and the facts that I brought up have been previously pointed out by the major credit rating agencies. For those in municipal bond markets, I wasn’t really adding much that was new to the conversation.

But it turned out the attention my piece was getting was from people outside the bond market. Those who were responding to it were those who love Puerto Rico and are concerned about its future, namely its citizens. They seized on what I wrote and passed it around on Facebook. Newspapers like and blogs picked it up and debated the fine points of the island’s unemployment rate and deficit spending. I’ve never seen anything like it in the United States.

Now, before going any further I need to mention that I made one mistake in that piece, which I did not discover until I read the rating agencies’ reports about the commonwealth. Your constitution requires that bond principal and interest be repaid before your government can make any other expenditures. That means bond repayments take precedence over payments for education, healthcare, government-worker wages and pensions. Bond markets cheer for this, of course, but I’m not sure that your citizens are entirely aware of it. Michael Corkery of the Wall Street Journal also wrote about your bond offering last week and didn’t mention the seniority of payments that makes your debt so appealing to investors.

Aside from that error, I stand by everything I wrote in my earlier post. If you don’t want to take my word for it, take a look at what the rating agencies have to say. They are typically pretty blunt in their assessment of the fiscal condition of states and municipalities. Here is what Moody’s said about your recent debt offering in a report on Mar. 6 (emphasis mine):

The commonwealth’s general obligation bond rating (Baa1) has been pressured by continued financial deterioration of the severely underfunded retirement systems and weak finances, with a historical trend of funding budget gaps with borrowing. Furthermore,while the administration has taken steps to control spending and move toward structural budgetary balance, needed retirement system reforms and the increasingly heavy debt load could exacerbate strains on the commonwealth’s economy and budgetary finances in the coming years.


The debt service payments were initially made with advances from the Government Development Bank and bond proceeds will be used to repay those advances. This is essentially deficit financing and follows the $600 million deficit financing in fiscal 2011.

Here is Fitch’s take on the latest financing, from a note dated Mar. 5 :

HIGH DEBT LEVELS: Debt levels are very high, partially reflecting the consolidated nature of the central government’s role, and have increased as the commonwealth has used deficit financing as part of its fiscal stabilization plan.

And on Mar. 8, Standard & Poor’s said this:

In our opinion, the practical and political ability of the administration to rely exclusively on expenditure cuts to balance the budget in fiscal 2013 is relatively limited, given the depth of the cuts already adopted, and the potential for additional expenditure reductions to hamper what remains a relatively anemic economic growth.

Many governments use deficit financing, although this is rare among U.S. state and local governments due to constitutional limitations. Deficit financing works when an economy is growing and can service higher debt loads in the future. But Puerto Rico is barely growing as islanders move to the mainland and unemployment is stuck at very high levels. Critically, the government has only saved enough funds to pay approximately 9 percent of pensions (page 184) that will be due in the future, unless substantial contributions from your overstretched budget are diverted there.

The unemployment situation is the pivot point on which all your economic activity turns. Here is a 10-year chart on Puerto Rico’s employment figures from the Bureau of Labor Statistics; it looks bleak for people needing jobs in your commonwealth:

You have raised taxes to bring in more revenue, and you have reduced the size of the government. I’ve studied what Juan Carlos Pavía, the director of Puerto Rico’s Office of Management and Budget, has done to rationalize and get better control of government cash flows. These are all useful and positive actions. But it still comes down to the need for your economy to grow to support your increasing debt load. Instead, the numbers show the economy is barely growing. I’ve read in many places about a large shadow economy, but it’s hard to collect tax revenues to support bond payments from economic activity that happens outside the official sector.

Governor Fortuño, I could go on all day citing rating agencies and U.S. fund managers who do not own the debt of Puerto Rico and will not because of the instability of the fiscal trajectory. But you have already lost this war when your cronies attack me and call me names rather than engaging in dialogue on these complex issues. I’m not the enemy, Governor Fortuño. I’m like the child watching the parade who says: “Look! The emperor has no clothes.” And it’s clear to many that the emperor indeed has no clothes.




Cate Long


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Dear Ms. Long:

Thank you very much for your accurate and thought provoking article. Unfortunately, many fellow Puerto Ricans either do not know these facts or simply ignore them. I am not surprised that you were attacked by the Governor and his friends when you wrote the first article. See, that is their “modus operandi”; they attack and destroy every person or every institution that raise their voice to criticize Fortuño’s government. Fortuño’s priority is to get his friends’ pockets with millions and leave Puerto Rico in shambles. Thank you for making the US and the world aware of this situation.

The only piece of information I do not completely agree on is when you said: “But Puerto Rico is barely growing as islanders move to the mainland…” See, I moved to the US ten years ago for the same reason: I couldn’t find a job in the island, even though I graduated from the best university in the island: “Recinto Universitario de Mayagüez.” I think Puerto Rico is barely growing because their is a lack of reforms to create jobs and keep educated people, like myself, in the island. I know live in Europe, but I hope that my fellow Puerto Ricans start reading articles like this and digging deep to get out such a suppressing government and start anew.

Posted by gatubela | Report as abusive

Thanks for this information. Many of the people who live in Puerto Rico do not know or understand about this.

Posted by Teseo | Report as abusive

Hi all, thanks for this article. I think Puertoricans are awesome every four years no matter what color finding defects on the government wich is in fact since marin and before on a bad track. Now I would like to suggest because this has been the same for over 32 years ive been living can we get to the point were this intelectuals get to the solution writing and not just say the idea but actually roots for it and makes the changes necesarry to create the economy. I guess with all the selling signs, bankrupcies and high level of criminality it is obvious we have a crisis. The ones that state that this is this administrations or past administrations fault are blind. The root cause of this problem is simple: WERE STUCK IN AN ISLAND THAT DOES NOT MANUFACTURE OR CREATE MORE THAN WHAT IT CONSUMES FROM THE EXTERIOR. Its not the government fault we are consumerist of everithing out of our island and the private sector people (US THE PEOPLE) do not take action to help create a solid economy. We must stop pointing fingers and instead point to what we can do and again not just ideas but actual work behind those. That way when you start doing something about it Cate and you have a bunch of people to criticize you instead of supporting progress wellp you will really understand what PR is about.

Posted by RoboCoqui | Report as abusive

Cate, your presentation of Puerto Rico’s financial predicament is well presented. But, sadly, biased. There’s another presentation of PR’s financial position by Newsmax. Maybe they’re biased, too, but it’s nice and smart, to hear from the other side. uno-puerto-rico-deficit/2011/02/16/id/38 6344

If the numbers and, well, facts, presented on this “biased” site conflict with yours, please, shop around on PR’s financial standing on other sites. You won’t be surprised, Cate.

Posted by aschark | Report as abusive

One fix…
Hire Mitt Romney – fast.

Mitt Romney / Marco Rubio 2012!

Posted by AmericanBirther | Report as abusive

Thanks for the link but I’d prefer to use credit rating agency reports issued this month that assess the fiscal condition of the commonwealth rather than a year old news account.

Thanks Cate for the eye-opening.

Posted by wcaguas | Report as abusive

Excellent post, Ms. Long. In addition to the rating agency reports, the research team of the UBS Wealth Management division in New York City published a thorough report on the Commonwealth’s finances on January 11, 2012. I suggest you take a look at it. One of their findings is that “current spreads for many Commonwealth borrowers do not fully reflect the unresolved credit issues and we expect more downside than upside momentum to the credit for now.” This is a diplomatic way of saying there are some deep structural problems with Puerto Rico that have not been yet addressed and which are not fully reflected in the market prices for Puerto Rican bonds.

Posted by sergiomarxuach | Report as abusive

A detail not mentioned is that the labor participation rate in Puerto Rico is about 40%.

Posted by erpepe | Report as abusive

Ms. Long, I was one who posted on your first writing and I want to make clear that I am not in disagreement with you. Who I took issue with was Mr. Shraeger’s comments. Now as far as the rating agencies go, it is obvious that even the Federal Government is no longer paying attention to them. What has to be understood by all of this is that this economy is actually The Federal’s Government’s doing. What’s on the PR Constitution it was the Federal Government who installed it into it’s wording. What Governor Fortuño is guilty of is going along with what the Federal Government wanted , which was for PR to continue to borrow. If you study the history of his path to the Governorship you will see that it was with the Federal Government’s backing as his competitor, the ex Governor Acevedo Vila, was not in agreement of this practice and he was charged with trumped up charges to get him out of the way. This is why I say that the ratings agencies pick on the wrong people for it’s way on how to get to their ratings. Based on this I continue to reiterate, the US will let go of Illinois and California before it let’s go of Puerto Rico.

Posted by zunic2 | Report as abusive

Excellent Ms.Long. There is only one thing missing and it is that you should have posted this letter in spanish in any media in PR. As it is it does not reach a great majority of our fellow puertorricans either because of the language or because many do not have access or know about your blog. Your letter should have had an enormous impact if our people in this blessed island would had the oportunity to know about it. Most of the incidents abroad concerning us our local media screen them and we rarely are aware of who says what.

Posted by Guacho | Report as abusive

This Fortuño guy is the same who when in meetings with the Koch Bros says he despises Obamacare and when in Puerto Rico he praises it. And one thing perhaps you did not know, this poor republican thing pays a Washington guy with Puerto Rico’s taxpayers money to promote him among republicans in the mainland… He can’t govern Puerto Rico and still has presidential dreams (sorry, delusions).

Thank You Cate, we need outside people like you to watch over these Randian/Kochian crooks.

Posted by forester | Report as abusive

Dear Miss Long:

Thank you so much for your letter to the “Nuded Emperor”.

Now, seriously speaking, it is very refreshing to have someone tell the truth with no hidden agenda. The government here portrays somewhat different although many of us know how deceptive they are and can be.

I think you are very courageous and allow me to congratulate you for your integrity and verticality. Keep on the good work!

Posted by aixab | Report as abusive

I would like to congratulate Mrs. Long for her telling the people of Puerto Rico that their “King” is naked. Gov Fortuno gained power by promising NO LAYOFFS, to reduce the crime rates, lower cost of living, lower price of gasoline and that we would not privatize.

Yet,as soon as he won he planned the layoff of more than 30,000 Heads of households, he implemented 19 NEW TAXES, He raised “turn-pike” tolls, and then privatized them, He has worsened the debt of PR for future generations and yet almost a million ignorant fools DARE NOT SAY THAT THE KING IS NAKED!!

The issue was not what steps he took to implement his FAILED Reaganomics, the problem we have in PR is that he LIED when asked if he would do what many knew he would do (since he is a “wannabe” REPUBLICAN/TEA PARTY MEMBER)…

My salute to a valiant woman, reminds me of my mother who wouldn’t keep quite in times of tiranny..

Yosef Ortiz
Bayamon, PR

Posted by YosefOrtiz | Report as abusive

Sometimes we pay more attention to what others have to say. Great article and thanks for bringing some reality to the discussion of PR’s economy.

Posted by Boricuaenlaluna | Report as abusive

Interesting that after we saw governor Fortuño trying to kill the messenger, no pro-statehood sympathyzers have left any messages in this forum or supported their suck-up governor. Betcha they haven’t because they don’t understand English. And they want to be a federarated state. Really?

Posted by Paul_Barbadori | Report as abusive


Your article is intelligently written and you describe the situation as it is now, although some economist and other financial analyst might disagree with you in some areas. Assuming that you have no hidden agenda to make the current admisnistration look bad, you paint a clear picture of the economic problems that Puerto Rico has today. But we all know that all the World has economic problems. What you fail to do, and many inquire as to why, is to attest to the fact that Puerto Rico is in much better shape that it was since this administration took office with its fiscal responsability attitude. Your article would have been better in my opinion if you would have commented on the past 3 year trends.

Welcome to Puerto Rico Politics!

Posted by ReneAcosta11 | Report as abusive

Thanks Ms Long for the information.But i wondering after 100+ years puertorican being a colony of US and treat our country like a hungry indians with no knowledge and no future. Let Puerto Rico go. They don’t need you, they don’t asking for your help. Is time to let them know, Politicians in the United States Congress, Puerto Rico doesn’t need United States to survive. It’s time to let them go and focus effort to help the people living in the states. They don’t want United States in Puerto Rico. The Puerto Rico Commonwealth need to finish,this status doesn’t help, more than 30% of people live from wealfare and goverment help, you don’t built a country like that…….it’s time Puertorican people take a new horizon like a Nation. They just only need want sesion in the US Congress to change the Law about Puerto Rico because,this Puerto Rico in the US Congress a Law can derogate in one session of the US Congress. IF you really worry about Puertorican people, HELP THEM FINISH THE COLONIAL STATUS………………THANK’S

Posted by cuco | Report as abusive

Great article and welcome to the world of Puertorican politics. The other secret that the Governor has kept from you and the bond markets is that he has substituted does layoffs with private contracts . The savings are Enron type accounting gimmicks. Also, technically the government is broke and broken. They have had several asset sales in the past. Most recently several toll roads and in the past the PR Telephone Co. Both of these assets were revenue producing businesses. The funds from the telephone sales are long gone and am sure the Toll Road deal is soon to be swallowed by the deficits or are collateral for bonds. I anticipate thatbthe next asset sale will be the Electric Co. If that happens then the island will be in a world of hurt. There are a lot of government agencies and municipal governments that have unpaid electric bills and that wouldn’t happen under a private electric company.

I truly think the commentators in Reuters and the other sources that you mentioned do not comprehend what you mean about the banks being in the front of the line. The owners of the bonds are lien holders of the island’s future revenue. If revenues do not increase, they will take it out of the operational budget and require sharper cuts in government expenditures. The real pain for Greece has been the large cutbacks in government spending (retirement benefits and jobs) and that is due to the debt repayment requirements from the ECB. Now that is in PR’s near future.

Posted by bfranco | Report as abusive

Puerto Ricos problems won’t be solved by tweeking the economy and calling for more unsustainable growth. This applies particularly to an overpopulated island with diminishing natural resources and a public increasingly dependent on handouts. Until the roots of the problems that affect so many countries, overpopulation and extreme wealth and power concentration, governmental fixes will amount to sticking bandaids on hemorrhaging wounds.

Posted by ezeflyer | Report as abusive

It is a shame .. in what has become my country. It remains to echo the words of Ms. Long if you are Puerto Rican knows that the crisis is growing .. Where the government instead of helping their citizens to put greater burdens on their shoulders than they can carry .. more taxes, fewer benefits, fewer jobs ..
Has increased costs of basic services, food, electricity, water, gasoline but unfortunately the salaries are equal and not see another boost for a long time as well .. we say in my Puerto Rico: undressing a saint to dress another ..
and the government taking its toll on its citizens for their mismanagement ..

Posted by asiris | Report as abusive

I honestly think you should quit taking money from lobbyists from the Popular Democratic Party in Puerto Rico. Your column is so bias that even when you recognize the actions taken by Luis Fortuño’s administration to righten the mess left by previous administrations you do so “con las muelas de atras”, or against your will. I encourage you to use your new found fame to advocate for the rights of all the american citizens living in Puerto Rico to finally determine that we no longer want to be the oldest colony in the world because in our case it’s not “the economy stupid” it’s our political status that no longer provide for growth. Next time, please get your facts straight.

Posted by theuglytruth | Report as abusive

Traducelo al español si quieres que tus comentarios lleguen donde tu deseas no pensamos abandonar nuestro idioma el español

Posted by jd2s | Report as abusive

Hello Cate,

Thanks for following up on the issues here in PR.

I’m personally not aligned with Fortuño’s Republican economic ideals, but I’m trying to be fair here. You mentioned that Fortuño and his cronies were attacking you and provide a link to an article. You may have more evidence for saying this, than what we know, but I fail to see where in that article you are being called names. Sure, they say you supposedly have an agenda to criticize Fortuño’s decisions and government, but I see nothing that would be that offensive. It’s in Spanish so I don’t know if you read or had someone translate accurately.

Additionally, you must know that anyone can write and post on a website and that doesn’t necessarily mean it’s been done in coordination with Fortuño or his campaign. Do you have some evidence of Fortuño or someone close to his political campaign referring to you inappropriately? I’d be good to know what prompted you to write an open letter to the Governor.

You should know that politics here in PR usually leads to heated discussion, and most of the time it’s driven by fanaticism rather than by careful consideration of facts. Some of the posts you see here are, as you may have seen, an example of that and should be taken with a grain of salt.

Well, keep up the good work.

Posted by itorres008 | Report as abusive

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

Posted by Howtrue | Report as abusive

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

Posted by Howtrue | Report as abusive

Hon.Luis fortuno, gobernador de Puerto Rico. Saludos. estoy escribiendole hoy 9 de octubre/12. Mi pregunta esl, como es que los hogares AMSCA en puerto Rico para personas con problemas mentales no locos, aparentemente no hay vigilancia. Mi sobrino esta en el hogar santita en zona industrial de san Lorenzo,pr. y se ha fugado 4 veces. segun mi hermana ella paga como madre del muchacho,el ssocial q el recibe, mas 222.00 q servicios sociales cupanes,le paga ,mas 200,oo mi sobrina y la suma total a pagar es 800.00, y mi hermana la madre completa el restante. me gustaria verificara este hogar en san lorenzo. No se mi hermana dice q es privado pero por que hay em este hogar 32 pacientes POR AMSCA. Mi sobrino indica q los servicios noson los mejores, cierran la llave de paso despues que se banan en la manana,. le restringen la comida y el jugo y la higiene no es la mejor,durante el dia los banos no los pueden bajar y todos esos desperdicios y ese mal olor ahi. No entiendo Hon.Gobernador como hay tanto desperdicio de diniero y presupuesto en otras cosas innecesarias y tomamos por fin el control de AMSCA , y todos los demas servicios de salud. Yo veo las campanas politicas, usted quiere renombrar como gob., y todos los politicos buscando puestos, pero q pasa con la gente humilde y pobre de este pais. Yo misma tengo medicare advantage y ya desde octubre no m cubrieron los medicamentos. Que Pasa. si tento medicaid mas medicare y no m pagaan la farmacia. Mire con todo respeto la salud y la educacion y el Programa APS, AMMSCA en puerto rico no son una solucion para nada. Por ahora opino q si es l q tenemos vamos a dar buenos servicios. Y ademas pernsar y llevarlo a cabo como vamos a rehabilitar los jovevenes con problemas mentales y adictos desde la raiz del problema, el hogar q las madres no tengan q estar a;os rogando y casi arrodillandose, suplicando por un sservicio. Por favor eso dice mucho de Usted como Gob. y los Gobernadores anteriores. Vamos de una vez a luchar por puerto Rico, verdaderamente con brios, y con verguenza y honestidad. Mire una va a emergencia en Cidra y le ponen 2 inyecciones a todo el mundo. la misma, q pasa con la reforma de salud, q pasa con medicare advantage. Da verguenza q un pais q quiere y q ser estado y si ni siguiera ha resuelto los pormenores mas leves en la isla, quiera llegar mas alla. Un estado es algo grande un cambio, y adaptacion de loscciudadanos increible. No tenemos servicios ahora, y en lo q integran todo lo q conlleva ser estado entonces nos moriremos. Reaciionen los politicos en este pais, Puerto Rico merecemos mucho mas que lo que sobra. gracias. 9 de octubre de 2012

Posted by marimar7 | Report as abusive