Tuesday, April 1, 2014

Puerto Rico: Residents of Commonwealth Confront Crisis-Level Crime, Unemployment, Resident Exodus

According to The Latin American Tribune, Puerto Rico’s economy continued to contract in the first eight months of the current fiscal year (July 2013-February 2014), shrinking 3.8% relative to the same period of the previous 12-month accounting cycle, the island’s Government Development Bank reported.

The Bank said that the US commonwealth’s economy shrank 2.4% in February compared to the same month of 2013, noting that the contraction was lower last month than the 3.4% annual gdp decline in January.

Puerto Rico is the midst of its eighth year of recession and double-digit unemployment and has more than $70 billion in debt, equivalent to roughly 70% of gdp.

COMMENT: The island’s economy has contracted nearly 13% since 2006 and is suffering from a severe population exodus, a very low labor force participation rate and high crime, all of which are hindering a potential economic recovery.

Governor Alejandro García Padilla’s administration has responded with a series of austerity measures to close Puerto Rico’s budget gap, including pension cuts, tax hikes and reduced government spending.

Adding to the island’s economic woes, all of the big three ratings agencies-- Standard and Poor’s, Moody’s and Fitch--have downgraded Puerto Rico’s debt to junk status this year.