Justin Vélez-Hagan is the executive director of the National Puerto Rican Chamber of Commerce, a small non-profit not to be mistaken with the much larger Puerto Rico Chamber of Commerce. Vélez-Hagan argues in a recent Forbes opinion piece that Puerto Rico must default on its debt:
Washington politicos aren’t the only ones instigating a perpetual debt crisis. Puerto Rico too is experiencing a political stalemate-induced fight for their financial lives that affects not only its 3.7 million residents, but millions of others who have purchased bonds to help finance its government, causing us to wonder if the next logical step is a debt default.
Here is his rationale:
Many experts say Puerto Rico is entering the eighth year of a recession, with at least one who considers it to be in the midst of an all-out depression. Gustavo Vélez, former economic adviser to the governor, is one such analyst, acknowledging that the economy has been kept afloat by increasing taxes, with little or no effort to fix underlying structural problems.
Though the Puerto Rico Government Development Bank has not published the September Economic Activity Index they have released the component figures of the index for September and October. The numbers are terrible, and indicate that the economy continues to rapidly contract. For example employment has declined 4.7 percent year over year for the July through October period:
Electric energy consumption (MM kWh) is down 6.7 percent year over year for the July through October period and gasoline consumption declined 3.5 percent. Commercial bank capital, the assets necessary to expand lending to boost the economy, declined 4.2 percent and commercial loan activity declined 17 percent.