While the world’s attention has been focused on Greece’s financial crisis, Puerto Rico’s is entering what its Governor has called a financial “death spiral”. The news comes almost exactly around the time we predicted back in April.
Over the weekend, Governor Alejandro Garcia Padilla said his state can no longer make loan payments on the $73 billion it owes.
“The debt is not payable … there is no other option. This is not politics, this is math,” he said. “But we have to make the economy grow. If not, we will be in a death spiral.”
Padilla is expected to today release a report prepared by World Bank International Monetary Fund former officials outlining Puerto Rico’s grim financial picture brought about by years of debt dependence, high energy costs and overspending by the Government.
Like Greece the Government is asking for creditor concessions which include extending repayment periods and deferring payment of debts.
One of the largest debts, $400 million, which has a July 1 payback deadline is owed by PREPA, the government owned and run electricity provider. Experts say it is highly unlikely PREPA which has been given the lowest possible ranking by Moody’s can pay the loan which is only part of the $9 billion debt it carries.
Puerto Rico’s dismal financial situation has seen a mass exodus of people. Immigration figures show that from 1980 to 2000, on average 12,00 Puerto Ricans left for mainland USA annually. That figure between 2010 and 2013, when the economy began to tank, has risen to 48,000 annually.
Every time a Puerto Rican jumps ship by immigrating, it adds to the problem because the island’s tax base shrinks, meaning less money for the Government to repays its debt.
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