Puerto Rico’s Economy Stagnates Amid Debt Crisis
San Juan, Puerto Rico - The United States territory of Puerto Rico is struggling to recover from a deep economic recession, with its government facing a daunting task of restructuring its debt and avoiding further defaults.
Economic Decline
According to recent statistics, Puerto Rico’s economy has been in decline since 2006, experiencing a 10-year contraction. The country’s unemployment rate has risen to 12.4%, more than double the US average, while poverty rates remain high.
Debt Crisis Exacerbated by Government Inaction
The crisis was exacerbated by the government’s inability to access capital markets, leading to a series of debt defaults. In August 2015, Puerto Rico defaulted on most of its bond payment to the Public Financing Corporation, and since then, it has defaulted several times.
Accrued Budget Deficit Forecasts
The situation has become so dire that the Financial Oversight and Management Board for Puerto Rico has forecasted an accrued budget deficit of $67.5 billion over the next ten years if no help is received from the US government and new tax measures are not implemented.
PROMESA Bill and Fiscal Oversight Board
In response to the crisis, the US Congress passed the PROMESA bill in June 2016, which created a fiscal oversight board to help Puerto Rico restructure its debt and prevent it from being sued for defaulting on bond payments. However, the island’s governor, Ricardo Rosselló, has warned that even if creditors agree to less than full repayment, Puerto Rico will still need help from the federal government to end the crisis.
Challenges Faced by US Territories
The situation is a stark reminder of the challenges faced by US territories, which are not entitled to the same level of autonomy as states. Puerto Rico’s residents do not have voting representation in Congress and can only elect a non-voting Resident Commissioner.
Recovery Efforts
Despite the challenges, Puerto Rico remains determined to recover from its economic woes. The government has proposed a series of austerity measures, including reducing the size of the public workforce and increasing taxes on certain goods and services. Additionally, initiatives such as promoting tourism and investing in renewable energy are being implemented to revitalize the economy.
International Community’s Watchful Eye
As Puerto Rico navigates its way out of debt crisis, the international community is watching closely to see if the US territory can successfully restructure its debt and avoid further defaults.
Key Statistics:
- Unemployment rate: 12.4%
- Poverty rates: High
- Accrued budget deficit forecast: $67.5 billion over the next ten years
- Debt default history:
- August 2015: Default on most bond payment to Public Financing Corporation
- Multiple defaults since then