Puerto Rico is the worst “state” in the nation fiscally, according to Barron’s, the country’s leading weekly newspaper on financial matters.
A cover story entitled, “The Best and Worst States” identified the territory as Number 51 of 51 “states” — the worst … and by far.
Although Puerto Rico is not a State of the Union, the Federal government has authorized it to exercise the authority over local matters that States of the U.S. possess. Unlike the actual States, however, it does not have votes in the government that make its national laws, depriving it of the influence needed to develop its economy.
As a possession that has not been made a permanent part of the U.S., it is also treated differently than the actual States in many Federal programs — costing its people and its economy billions of dollars a year.
The territory has more people than two-fifths of the actual States of the U.S.
Puerto Rico scored a distant last in all four categories on a chart prepared with data supplied by Eaton Vance, one of the oldest investment management companies in the U.S.
- The territory has to pay 8.3% more than what “AAA” rated municipalities in the actual States have to borrow money for 10 years. Half a dozen actual States pay no more than “AAA” rated municipalities. Illinois, the actual State that has to pay the most, only has to pay 1.5% more.
- Puerto Rico was the only “state” with “B” level bond ratings from national debt rating agencies Moody’s and Standard and Poor’s. All of the actual States had “A” ratings.
- The territory’s pension debt and healthcare liabilities as a percentage of Gross Domestic Product was 87.8%. The percentage of the best actual State in this respect, Nebraska, was only .8%. The worst actual State percentage was that of Hawaii, with 42.3%.
- Puerto Rico’s jobless rate was 14.3%. The rate in the best actual State, North Dakota, was 2.7%. The actual State with the worst percentage was Rhode Island, with 8.9%.
Also Worse than Most Nations
The article began with the finding that, “U.S. states represent one of the most secure areas of the global bond market.” It made clear that the territory of Puerto Rico was the biggest exception.
“Puerto Rico remains in a class by itself,” the report said, “with far higher yields [the amount it has to pay for its bonds in comparison to the amount borrowed] than those of any State and a poor economic and financial situation.
It noted that the $3.5 billion in bonds that the Commonwealth government sold in March now trade “at 87 cents on the dollar for a 9.4% yield.”
“Few dollar denominated bonds from any country yield as much,” it pointed out.
The report than observed that, “The issue for investors is whether that yield compensates for the risk, especially” since the “commonwealth” party controlled government enacted a law in June that supposedly enables the territorial government to cancel its debts.
Outlook for Territory Poor
Looking to the future of the territory, it was reported that, “There’s little evidence that the depressed Puerto Rico economy is turning around and the island remains burdened by a badly underfunded pension plan.”
Additionally, “Eaton Vance analysts cite other negatives, including high electricity costs, population loss, and a looming budget cap in the current fiscal year.”
Replacing Territory Status the Answer
In studying Puerto Rico’s poor and worsening fiscal situation, President Obama’s Task Force on Puerto Rico recognized that the question of the territory’s ultimate status “and the economy are intimately linked … identifying the most effective means of assisting the Puerto Rican economy depends on resolving the ultimate question of status.”
This question is: whether Puerto Rico will eventually become an actual State of the U.S. or a separate nation and how much longer it will remain in the territory status that retards its economic growth.
The presidential task force on the territory concluded that, “the long-term success of Puerto Rico is ultimately linked to a resolution of the status question.”
In Puerto Rico’s November 2012 elections, a solid majority of voters opposed continuation of territory status and a more than three-fifths majority chose statehood among the alternatives.
Because a majority of very narrowly elected insular officials who opposed the results lobbied against Federal action to implement the self-determination decision, the Federal government in January provided for a plebiscite on an option or options that can resolve the issue under U.S. Justice Department auspices. This would make it more difficult to dispute the results of a vote.
The options could be statehood and nationhood. Continued territory status could not because it cannot resolve the issue. By definition, it is temporary and Puerto Ricans would still be able to seek statehood or nationhood.
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Because the mayority of the valots favor the Alejandro Garcia Padilla for Governor of Puerto Rico,thought some counties valots are in questins ,we on a stand still cituation.Because the political status that was deffeated on plevisites is favored by the party of the Governor elected and ontop the govrnor himself believed in separation from the USA.some called a political strike.