Friday, December 14, 2012

Puerto Rico: Moody's Investors Service Downgrades US Territory to Baa3

According to EFE, Moody’s Investors Service downgraded Puerto Rico's credit rating on Thursday (December 13) two levels to Baa3.

The ratings agency expressed particular concern over the ability of the island’s government to control public spending and lack of progress on pension reform.

COMMENT: In its downgrade report, Moody's emphasized that the island entered recession in 2006, two years before the rest of the US Mainland.

The agency also said that the “pension systems’ combined unfunded liability of $33 billion is almost four times the annual budget of $9 billion,” adding that it remains unclear as to how the incoming administration of Gov. Alejandro García Padilla will resolve that challenge, warning that lack of action could trigger another debt downgrade.