Puerto Rico's Sovereign Debt Crisis

In summary, around 2006 PR entered a recession when all the factories started living the island and there was mass unemployment. The government continued the same level of spending, living outside their means got them in trouble. PR can not just make trade agreements with other countries and bring foreign capital in unless the US approves it first. So their hands were tied in increasing the economy in other ways. So stupidly they borrowed, and borrowed some more, this went on for multiple administrations. Now they have to pay and there is no money because the economy has been contracting for several years. Unlike the US, PR does not have gold mines, Oil, and other resources to sell and make money from, and it is unable by its status from making deals with other countries. A lot of people do not have the vision to invest for the future.

We did this to ourselves, both the people, the government and the directors of autonomous corporations after PR was pushed into a 10 years recession. Lots of people skimmed what they could and left other generations to pay. Little was used to upgrade the infrastructure. My Salud, which is free healthcare for the poor is a big drain since PR pays mostly all of the bills for that and gets less than states get for subsidizing healthcare. It is political suicide to mess with it and other social programs, so the cost is huge and they borrow to pay.
Lack of vision, a long recession, social services, inefficient systems, lack of inversion into the future, inability to trade freely with other countries, some stealing of the moneys, and many other factors have all made the problem grow.

Sorry I can not explain it in 140 characters or less.

Saying what happened doesn't fix things. I'm asking what would be your plan for fixing things.

I would change the new moratorium which ends in January to a 5 or more year moratorium (we need some breathing room to grow and invest), I would privatize most services, like electric, water etc. I would cut services and have all health and welfare services re apply using a better standard, if you are able to work you get no service, go get a job. I would start constant auditing of all government offices and create rules to make sure most government laws, actions, and negotiations are recorded and made public, no more backroom negotiations. I would audit all elected officials and heads of public organizations, looking for how they got their property and money, and prosecute them, and their families if they were involved or had property transferred to them. I would increase police funding to go after the drug problem and confiscate the drug lords and distributors properties and money and make it available to the government. I would raise holly hell with congress about eliminating the Jones act affecting our maritime commerce and would also raise holly hell about allowing PR to do free trade with other countries.

That is just a start, once the island is on its feet, I would likely organize the people to seek independance from the US to cut the cord of dependency and have the country be responsible for its own affairs without having to ask anyone for approval and no handouts.

All of that is political suicide, I would never get re-elected and the drug lords would probably be looking to do me in.
I would run it like a business, looking to save at any turn, and build a surplus to handle opportunities and to survive lean times.

So, if someone is able to work, you would exclude them from access to services, if he/she can't get a job? And doing so would have a significant impact on the debt crisis?

Can you tell me, exactly which countries are prohibited from trading with Puerto Rico?

You insisted I tell you what I would do to solve the issue, I just did. All of that makes no sense since I am not in a position to do any of it. None of  the people running for president have been detailing their plans to that level, I do not have the resources they do but you ask me to do so.

Nope, I think people here had enough of my rants. In summary, I would run the island like a business, not that it will ever happen.

Well the issue is now affecting private schools, teachers loosing their pension, not this particular group but others are really screwed because they don't qualify for social security either  http://www.apnewsarchive.com/2016/The-d … d230bb5ec1

That's terrible. I can only imagine being on the cusp of retirement only to have your pension rescinded. And what a blow to the already retired.

The article states that the church's contract with the teachers states "its contract with employees allows it to terminate the pension plan at any moment". So that's a lot of trust people were putting into the church holding up it's end of the bargain. But I can't blame them for thinking something like this was highly unlikely.

I feel very fortunate to have had a matching 401K with my former employer instead of a traditional pension.

My wife and I are opening a school when we get to PR. It will be very small so I hope it can weather this crisis. Every time I read something like this article I keep telling myself "It will be ok. We will have different circumstances." I guess time will tell.

Where, exactly, did the pension money come from in the first place?

Don't know, I assume they contributed to the pension but not sure.
In the case of government workers they are excepted from paying SSN so they don't qualify to my knowledge for SSN payments. If the government is unable to pay them, they are really screwed, at least that is my understanding.

When I was working for Fidelity Investments (21 years), we had a pension plan and 401k, I was supposed to get over 3K a month from the pension and all of a sudden they canceled it and gave us a flat amount. In my case it was 140k, but that does not add up to 3k a month for the rest of my life. Many corporation have eliminated their pension. Very few remain. I still have a good SSN and my 401k so I'm fine, but it could have been better.

By the way, I just read that congress is releasing a new draft today, having a comment period tomorrow, and 6 hours later they expect to start voting on it which should take late Wednesday and Thursday to complete. Who knows how much it has changed.

Like a large and painful pimple in the rear end, looks like this is coming to a head.

My take, after reading the article, is that the Church paid out the pensions to the teachers. The Church isn't making enough money to pay them out, so it's cutting pensions. I'll never get a pension, so I'm not conversant on how they structured, but I can't imagine it would be any different with any other employer, unless there were some kind of guarantee which, apparently, was not a part of this plan.

Yea, not a pretty situation

I'm glad I don't relayed on a pension. I remember my uncles struggles with the tuna factories pensions. They left the island and left the employees behind. Luckily they were paying SSI and can collect now.
The churches didn't want to pay their part for SSI benefits so they set up a plan for pension like the government with public teachers. Now they are saying that they can't pay the pension plan. At the end, as always, the poor people are paying the consequences as usual. I guarantee you that the church finances are not affected. Just another excuse to hurt the poor.
I will never work or encourage a member of my family to work for a company that does not contribute to the SSI. Too easy for that company to "loose" the money and leave you hanging.

Seems unlikely that Congress will have a package for PR before the Island defaults on the May payment. Article: http://www.nbc12.com/story/31764541/con … f-deadline

It seems I am not the only one that believes that the control board may not only cause civil disobedience within the government and the people in the streets, but there is also the possibility of violent protests. This could happen due to severe cuts in employment and services which are likely to be imposed in a fairly radical way. The next 3 to 5 years are going to be difficult in my opinion and it seems others.  Spanish article where Judge Rafael Torruella  states his opinion: http://www.elnuevodia.com/noticias/poli … a-2189001/

Juan Rafael Torruella del Valle, Sr. is a Puerto Rican jurist, who currently serves as a judge on the United States Court of Appeals for the First Circuit. He is the first and to date only Hispanic to serve in that court.

I was just reading in the Caribbean Times, that about 930,000 people are employed out of the 3 million that live in PR. Also that 33,000 jobs have been lost in the last 3 months.

This does not appear to count all the people in the Drug distribution business I guess  .

If you were to take these numbers at face value, you would erroneously conclude that there are 2 million retired and disabled in PR, which is not true.

That's not quite right, Rey. You have to factor out about 20% who are under the age of 15.

True, but still too many people not working. I like to know how they calculate that 45% of the population live under the poverty level if only 930,000 are working in a 3 million population

Don't forget the pretty big grey economy. Many people do odd jobs and get paid cash. In towns it may be less but here in 'El Campo' you can get about anything done from construction/plumbing/electricity to anything car maintenance related, yard maintenance, all kinds of repairs (electronics etc.) by people who just want to be paid in cash.
Most if not all of these people are in the official statistics as "jobless".

There are pulgeros and road stands everywhere where you can buy almost anything, brand new or fresh when it's food, processed or not and you don't pay IVU.

Agreed Gary

Yes, Gary. All the work I had done on my apartment was done by "independent" contractors, and all were paid in cash. All charged very reasonable rates and did very good jobs, I might add.

lgustaf wrote:

All charged very reasonable rates and did very good jobs, I might add.

Oh yes, I built a network of good craftsmen for all kinds of jobs. It seems to important to know the guys in order to get good service and quality work. I had some bad experiences, too. 

I was very fortunate in that I hooked up with a property manager who is a local and lives in VSJ where I bought. She was a high-level exec with Victoria's Secret for over 20 years, organizing store openings in the Americas, until she retired to take care of her aging mother. She had a bank of good workers for just about any job, and oversaw whatever repairs and improvements were done to my apartment.

I have they guy that does work on my property, honest and hard worker person. Reasonable prices and dependable. Most of the work done in my house been that way, under the table cash transactions done with local people. This is part of the other economy not seen by the government. A lot of manual work is done on a cash basis. The guys that cut grass, the others with heavy equipment, even plumbing and electrical work is done that way.

You can always take them to court if they screw it up, cash is valid form of payment, but don't count on getting much from the guy if you win. His failure to declare the money is his issue, not yours.

Would you consider giving more of the same poison to somebody that is poisoned?
I am not too sure about this approach: http://nypost.com/2016/04/21/hedge-fund … more-cash/

Gas in PR is expensive enough, this will likely raise gas taxes and then the price per barrel goes up and makes it even worse. Lets find ways to get more blood off a stone.
Higher gas, higher electricity, higher water, not a problem, people have millions in their mattresses all ready to give to bond holders.

More money for the local politicians to embezzle! I'm sorry, some may not agree with me, but it is being proven that there needs to be some oversight. Until that happens the island will unfortunately continue on the same path.

PR needs some forward-thinking policies:http://cleantechnica.com/2008/07/16/danish-island-becomes-energy-self-sufficient-the-lesson-of-samso/

Igudtsf, I agreed 100% , the way the island is going, they can clear the debt right now and in a few years be in the same boat all over again.
If you look back, every political party is to blame. There is no oversight, over spending and corruption from both major parties. None of them care what is good for the island, only what is good for the party. Look at the impeachment a few months ago because some senators did not agree with the governor on the IVU. How can we say it is a democratic society when you as a candidate had to align with the party even though you disagree?
Until the people wakes up and hold the politicians accountable no much is going to change.

In my opinion, we need to cut the debt down by 40 percent. Stop paying on it for 5 years or have congress come up with the payments. Mean time the board is set to control all the money and audit and send to jail a bunch of peopke. What money they get from taxes to be use to make repairs and improvement of the infractructure, power generation, process and procedures to make everything run smoother and faster. Get new tax incentives to bring industries to create jobs, help also startups with a solid and doable business plan. Mandatory bids and contract stipulations that require the bidders to eat the difference if the project takes longer or cost more than they bid. And last but not least, new politicians and regulations to check on them and procecute them if they become corrupt.

You got my vote Rey!!!

None of the above would pass congress, but while we are dreaming also get rid of the Jones maritime act and have the same rules for medicaid and medicare set upon PR as for the states to bring fairness. Remove as many incentives not to work so people get out of the welfare cycle that for several generations have infected their life and crippled their life and way of thinking.

Negotiate with other countries for maritime transport of goods based on bids not friendship and kickbacks.

Is it not nice to dream the impossible dream?

5 years hard labor for every small packet of drugs above 2, have them work repairing roads, tending animals, cleaning garbage from the beach fronts and trash around the roads. Each unregistered weapon gets you 2 years automatic hard labor. Start penetrating the drug distribution and seize all their houses, cars, boats and lands, and businesses. Hit them with well payed and well trained Swat teams. Pay the locals for anonymous tips that result in good drug busts based on the take, the more drugs and weapons recovered, the bigger the payout to the citizens. But anonymous so less chance they will become at risk.

Ratting out neighbors, friends and relatives to regulate the drug trade would not be my strategy of choice, IMHO.

On a different note; It's wrong that food & essential utilities cost about 30% more here, than on the mainland, yet the only jobs that seem to be available are minimum wage jobs. At $7.25/hr @ 40hrs/ week, your  annual pay would only be $15,080.00 two factors make this even worse, for the struggling: few to no companies will hire full time, in effort to get around the laws that require them to provide medical insurance,  and they still have to pay medicare, unemployment ins., and fed. income tax. So their actual weekly purchasing power is even less!  I read once, that at least 2/3 of all Puerto Ricans are on some form of federal assistance... I'd add to that, many non-Puerto Rican residents, do the same... given the afore mentioned hardships, is it any wonder? That report I read, was back in 2007; I think federal depenance may be higher now.

Not a strategy, just a help to provide help to the police and point them where to look. They do it today to some degree, I would just give them an incentive to do it more often. My strategy would be in surveillance and penetration of the gangs with a well trained and well payed swat team to conduct the raids.

A lot of the homicides that occur are due to drugs, some may disagree and say we need to make it legal instead, me I think it should be stamped out and make them scare to sell the stuff.

Ever watch "Gotham" in Netflix? that is what PR police situation looks like to me, lots of corruption and a lot of nasty lords running the joint with the politicians and judges in their pocket either cooperating or too scared to act.

If people and police can make money from helping the police to take down the crime lords, then they would do it more often and instead of the police shielding the traffickers they would be going after them.

I would not care if individuals grow mushrooms, poppies, or grass in their home for family consumption as long as they don't sell it and start getting organized and killing their competitors or innocent bystanders. They live their life and the rest of us live ours, but if they start getting out of line and start affecting others adversely, then I want their ass.

Politicians are not too far from crime lords, allowing misses of funds, stealing, using insider information for their own gains and in general screwing the public, I would treat them the same as drug lords.

But all the above is just a dream of mine that will never come to be.In my book,

It's about the money to be made and not about the drugs per se. If nobody made money dealing drugs, nobody would sell them. Cracking down on the drug trade will only make it  more profitable for those left dealing and make it more attractive to anybody willing to accept the risk vs. reward.

lgustaf wrote:

It's about the money to be made and not about the drugs per se. If nobody made money dealing drugs, nobody would sell them. Cracking down on the drug trade will only make it  more profitable for those left dealing and make it more attractive to anybody willing to accept the risk vs. reward.

The key problem is consumption , if people don't use, then there is no market. People have been educated they know the good and the bad of drugs, they see all the dead bodies.

If the rewards are low and the risk is high and I take down the risk takers, then things even out a lot more. In my dream and it is only a dream, the risk would be too high for anyone in the trade to stay in the trade.

I understand your point, but I would make the risk too high for them to continue the business in the island, what they do elsewhere is their business.

Drugs of that type are not a necessity of life like vegetables and meat. If you must have it, learn how to grow it at home, I will not go after them. I'm interested in those that make it a business and kill others (competitors and bystanders) or reign by fear.Those I want to terminate one way to the other.

My key here is live the way you want to live, but don't hurt others or I would be up their behind. unlike some politicians that want to tax it, I am not interested in the income, I am interested in a population that does not hurt each other and take advantage of the weak.

No I am not Batman. my car is not that fancy.