$70 Billion in Debt: Puerto Rico's Detroit-Like Economic Turmoil
Puerto Rico's economic crisis features a shrinking economy and a declining population, with 15 percent unemployment rate to boot. In laymen's terms, things aren't looking too good for the high income economy territory with the poverty rate of 41 percent. Numbers show that they're poorer than the poorest state in the United States. The ever-mounting debt in Puerto Rico has been outgrowing its economy for years, and at the macroeconomic level, Puerto Rico has been experiencing a yearly recession for 8 consecutive years, starting in 2006.
The island's financial turmoil is rooted in: expired federal government regulations; being historically dependent on other nations; highly politicized public policy that shifts with political party power; and its incompetent local government that's responsible for accruing public debt equal to 66 percent of the nation's gross domestic product throughout time. Puerto Rico's external debt was at $56.82 billion during 2010 and has only deepened since that time, reaching $70 billion. Puerto Rico also recently increased corporate taxes and broadened the sales tax, raising taxes by $1.3 billion in 2013, as means to quell the debt.
For the last few years, Puerto Rico has taken a 1 percent dip in population, equating an annual loss of 36,000 citizens. Nearly everyone in the territory has a family member who has left for Virginia, Texas, New York or Florida. Not only are jobs scarce, but utilities are twice what consumers pay on the mainland. The same goes for childhood education.
The production of surgical equipment, contact lenses, and warm beaches are expected to help turn the downtrodden nation around. The Johnson & Johnson-owned plant, CooperVision, has plans to add hundreds of residents to its roster. An expansion of the medical manufacturing and pharmaceutical industry is expected to grow the economy, and boosting tourism is expected to revive the economy of the island that's looking to raise $2 billion by mid-March.
Despite the slow-climbing public debt, ABC, CBS and NBC didn't air a single story covering this crisis between Aug. 1, 2013 and Feb. 1, 2014. Yet, a number of newspaper outlets and financial institutions have spoken on Puerto Rico's dire economic situation and possible tactics for recovery, including USA Today, that deemed Puerto Rico "the latest poster child for serious debt woes," while Forbes said that the island is "in the midst of a full-on bond market assault that now threatens the government's ability to raise capital."
Puerto Rico, because it is a territory, cannot file for bankruptcy like Detroit, despite wearing a similar financially unflattering situation. It would cost taxpayer billions if the government were to offer Puerto Rico a bailout though, as of Jan. 22, the White House has stated that it was not considering a bailout. Also, Governor Alejandro Garcia-Padilla denied that the island would default or need a bailout.
"We will do everything, and I repeat, everything that is necessary for Puerto Rico to honor all its commitments," he said. "It's not only a constitutional but also a moral obligation."
Puerto Rico is the third-largest municipal borrower behind California and New York.
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