Puerto Rico’s Economy Continues to Decline

Morayma Reyes Alejandro Garcia Padilla, governor of Puerto Rico, has referred to the island as being in an economic “death spiral.” Monday marked a historical moment in the spiral, when Puerto Rico went into default for the first time ever. Paying back a mere $628,000 to creditors of its Public Finance Corporation of the $58 million debut bill on Monday, those who will be hurt the most by going into default will be the island’s residents. Most of the debt is owned by Puerto Ricans through credit unions.

The government is strategically choosing to not pay its debt due to creditors of the PFC because the entities that own the debt have little legal power to fight back in court. While other debt, some of which is controlled by Wall Street hedge funds, were paid on Monday, due to their legal clout. “This was a decision that reflects the serious concerns about the Commonwealth’s liquidity in combination with the balance of obligations to our creditors and the equally important obligations to the people of Puerto Rico,” said Melba Acosta Febo, president of Puerto Rico’s Government Development Bank.

While Puerto Rico has the same amount of outstanding debt as New York state, it’s economy isn’t nearly what it is in the Empire State, with Puerto Rico’s value at $69 billion, and New York at $1.2 trillion. Former government employee Omar Rodriguez recently left the island first the first time to move to Austin, Texas where he works at a restaurant and as an assistant teacher. “I wouldn’t imagine having the same quality of life in Puerto Rico at the moment and that saddens me,” said Rodriguez.

Unemployment in Puerto Rico is almost double the rate in mainland United States, which is driving Puerto Ricans to flee in the island in search of firmer economic ground. With a shrinking population comes a reduced tax base, making it nearly impossible for the island to pay back its debts. To top it all off, Puerto Rico is also experiencing a severe drought with the government rationing water and some families going without running water for days.

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Puerto Rico Experiencing Increasing Migration Numbers

Morayma reyes

Source: Pew Research Center

As Puerto Rico’s economy continues to experience a steady decline , more people are finding themselves moving to the United States in search for better opportunities. This migration wave is one of the largest to date, just short of the epic 1950s era. According to a data collecting online tool, there are now more Puerto Ricans living in Florida, than in PR.

One of the biggest factors attributing to the country’s declining economy is the huge governmental debt, that is now amounting to 73 billion dollars. One important thing to keep in mind is that PR’s debt does not mirror its population’s needs. Its debt is comparable to a large state like NYC, however, its population is closer to Connecticut. This situation is due to a number of things, including out of means spending and migration. The latter reduces the tax amount the country is able to collect, which is necessary in establishing a reserve to start repaying the debts. Other clipping factors include overspending, high energy costs, and a dependency on borrowing funds from other countries.

Migration is common among people of all ages and classes, especially college students. After completing higher education, most graduates look for job opportunities in the states, or different countries. These numbers greatly diminishes the output of internal economy, and eliminate any chance on economic development in the field of law, medicine and business . According to this article “between 1980 and 2000, the average annual migration of Puerto Ricans to the mainland United States was 12,000 people. From 2010 to 2013 — when the economy started tanking — that figure jumped to 48,000 people per year.”  Many believe that the worst is yet to come, as the country’s biggest electricity provider, PREPA,  is approaching a debt payment of 400 million dollars this July. Even though most of the Caribbean is turning to more efficient and natural energy options, PREPA continues to rely on oil fields and “inefficient” spending.  

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