[View the story "Puerto Rico: The next debt crisis?" on Storify ]Puerto Rico: The next debt crisis? $87 billion in the red, how can the island get out from under its massive debt? Storified by AJAMStream · Fri, Jan 24 2014 11:21:44
Some analysts say the island has actually been in recession since
2006 , when a corporate tax break expired, causing many manufacturers to leave the territory. In that time about 138,000 people
fled the island, bringing its total population to 3.7 million. This amounts to $23,000 worth of debt for every man, woman and child left on the island. It is important to note that unlike Detroit, Puerto Rico's status disqualifies it from filing for bankruptcy.
Translation: The new poor in Puerto Rico are those who are middle class. The workers of the country.
El nuevo pobre en Puerto Rico son aquellos que son clase media. Los trabajadores del país.Misael
Many
attribute the burden of debt to over-borrowing by the Puerto Rican government. Government officials find themselves borrowing money from various investors to pay back debts. Now, Puerto Rico "has more debt than it can easily pay."
Translation: There will always be buyers, but the question is at what price. (Puerto Rico) can't enter obligations with interest at 12%
@AndrocoSal @juancpedreira Siempre hay compradores, la pregunta es a qué precio. PR no puede contraer obligaciones con tipos de sobre 12%. Joanisabel Gonzalez
Translation: This is the tragedy that we always have with "distressed buyers" responsible for buying the (bonds) of Puerto Rico.
@jgonzalezpr @androcosal Esa es la tragedia siempre hay "distressed buyers" disponible para comprarle la "droga"(bonos) a Puerto Rico…Juan Carlos Pedreira
In an effort to reign in finances, Puerto Rico Governor Alejandro Padilla has tried to restructure the pensions of federal employees, including judges and teachers. The judges have
filed suit , ruling that any change to their pensions is unconstitutional. As well as filing a suit on their own behalf, the teachers have taken to the streets in protest. Below, a video from the January 15th rally.
Paro Magisterial en el Departamento del Trabajo en Hato Rey P.R.NlgKZILwgjjJ8vzKGxXBbQ
To show their disapproval with the measures suggested by the Padilla administration, teachers staged school
walkouts that lasted for two days, closing down many schools in affected areas. They say that any reforms to their pensions would "force them into poverty." The Stream covered the teachers' protests in a previous post.
Puerto Rico's pension reform law delayed as teachers strikeA protester shouts slogans during a demonstration by teachers outside the Department of Labor in Puerto Rico, Wednesday, Jan. 15, 2014. R...
In an op-ed published on the Huffington Post, Padilla gives his own account of his governorship, using the restructuring of pensions as a highlight:
We also recently reformed the judiciary and teacher retirement systems, ensuring decades of solvency and protecting our educators so that they are guaranteed retirement. My administration also enacted new fiscal measures that produced $1.35 billion in revenues.huffingtonpost.com
The Senate President Eduardo Bhatia tweeted in support, highlighting a spending decrease by the current administration in comparison to similar periods in the year prior.
Translation (tweet): Really good news for Puerto RIco. Raising taxes; minimizing expenses of government. Look at the graphic.
Muy buenas noticias para Puerto Rico. Aumentan los recaudos; disminuyen los gastos del Gobierno. Ver gráfica: http://t.co/e1TRog9lCREduardo Bhatia
Although expenses are down, Puerto Rico still has to
borrow more money. In the next six months, the territory needs to
pay back over $1.2 billion. As recently as January 22, reports surfaced that investors were showing interest in providing Puerto Rico a $2 billion
loan . The potential rewards of a default were highlighted in a recent Slate article.
But the really striking thing is that the default option also makes Puerto Rico look more attractive as a forward-looking investment. It gives the Puerto Rican economy the best chance to grow and succeed.slate.com
The Stream asked its online community about the federal government's role in the financial crisis:
@AJAMStream federal government should serve as a mediator for the govt and their creditors perhaps feds can learn some lessons. #AJAMStreamTony V
@AJAMStream They don't pay taxes, their not a state and I'm sure Obama will bail them out soon.WmSan
Others had ideas for how the Puerto Rican government should proceed.
.@AJAMStream if it were an option, bankruptcy. But since it isn't: more public sector layoffs, privatization... @julito77 #PuertoRico #debtSam Rosado
.@AJAMStream ...and increased tax incentives to attract both business capital and repatriation of the diaspora @julito77 #PuertoRico #debtSam Rosado
.@AJAMStream Lower taxes on industry & business & elim bureaucracy. Difficult to start/keep business there bc of pprwork. #PuertoRico #debtRosie in Houston
UPDATE 1/23/2014: The Puerto Rican government approved measures allowing the territory to
take on new loans.
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