Puerto Rico's Sovereign Debt Crisis

Rey, I'm sure giving presents to the people to buy votes is part of the problem. I'm also sure that many politicians here on the island, from both the big parties are corrupt crooks.If you only look at the salaries and perks they give themselves. We're up in the top ten of highest paid representatives and that in a territory where we can hardly decide anything. How can representatives and senators justify their income when more than 50% of the people here are living in poverty? What did they do and what do they do to help providing work for jobless people? What do they do to stimulate the economy? Try to start a (small) business here and et all the permits and licenses you need. Next deal with higher prices for everything, electricity, water, telephone, internet you name it. I know that's not only government but it doesn't help the economy at all.

At the same time our government has been borrowing like crazy and now they're out of money and want to be bailed out or be able to declare bankruptcy, just like so many people who overspend, use their credit cards to the max and then can't pay their debts.

Until now I didn't notice anything in daily life from the effects of the debt crisis but I'm sure that in 2016 we can expect even less service from the government and their agencies.

I am not optimistic about property values in PR for the forseeable future, at least for the next couple of years.   Beyond that is difficult to predict.  Since we plan to stay in PR, it may not matter that much to us.   But for anyone looking to sell, it may be a difficult market.

Many have suggested renting as opposed to buying, which may be the most prudent path for  many.

My main concern now is the probality of reduced public services in utility maintenance, services, safety issues like fire and police?  Medical services?

When PR defaults next year, what will be the impacts we will see as retirees on the island?

In my opinion, short term we are going to need both, bankrupcy and some money to float us for a year or two.
People continue to vote for croocks, we need to remove them from office and start privatizing a lot of services. But we also need a lot of those people making process decisions out, so the newer generations with fresh ideas can change things. 
Puerto Rico should live up to "we do it better", not pay lip service to it.

ReyP wrote:

Puerto Rico should live up to "we do it better" not pay lip service to it.

Ain't that the truth!

One can hope for the best tres hombres, but best have a plan for not so good.  Real estate prices will fall (U.S. too, again), gov't services will be rationed, times will be difficult.  The Millennial generation for the most part does not posses the skill set for smart governance, and us baby boomers got a lotta crooks among us.  A hard one gents.  There are some answers, but nothing quick and easy like everyone wants.  Hope to meet some of you in person one day.  Karl, aka Karlos

AP newswire this morning:

"New York City Council Speaker Melissa Mark-Viverito is criticizing Republicans for not helping debt-crippled Puerto Rico.

Mark-Viverito, a Democrat, said Tuesday "it won't be forgotten" that Republicans in Congress opposed aid to the U.S. territory when passing last week's catch-all spending bill.

The speaker, one of the nation's leading Puerto Rican politicians, singled out Florida Sen. Marco Rubio.

He previously supported a bailout before opposing it.

Mark-Viverito claimed that was "an egregious flip-flop" and said she and other Latino activists would rally Florida's 1 million Puerto Ricans on this issue in 2016.

Rubio did not immediately return a request for comment. Many Republicans believe a bailout should be a last resort."
________________________________________________________________________________________________________
Rubio would be cooked politically in FL but he is vacating his senate seat also up in 2016.  So it was an easy choice in his mind to accept huge donations from the "other side" in this PR death issue and flip to the hedge fund side. He could have maintained his support for PR because the "bail out or restructuring" of the bonds isn't going to happen. If it does the Court will eventually KO it.  PR is going to get $$$, but not that way.

Short sighted because I don't think he thought it could cost him FL in their presidential primary March 15. Should have stuck with PR. Wherever he goes in FL later, PR's won't forget his betrayal. He's becoming the poster boy for PR's angst. Won't be a "hanging chad" issue on their ballot in Florida this year. It'll be holes the size of a PR fist voting for anyone else.

If he doesn't beat Trump and or then doesn't beat Hillary, he's not going to be able to re-enter the political world--at least not with the image of a 1st generation son of a poor bartender/Latino Caribe Islander.

And that's a good thing.

Well one simple thing thing that is true.  Republicans must win Florida to win a national election.  It used to be they had to have a strong Cuban showing.  Now in the thick of it all are Puerto Ricans living in central Florida.  Latinos tropicales are not the same as the Mexican population in California.  Republicans will need a level of sophistication to address PR with more than lip service or Hillary will be the next president.  (And you can take to the bank she listens to the hedge fund guys as much as anyone.  Follow the money.)
     There's a reason politicians been going to PR.  Problems in the U.S. are huge.  Problems in PR are huge.  And the geese that lay them golden eggs been beatin' feet elsewhere.  Hillary's answer to keep the ones who are left is get a fresh grip and strangle harder.  Answers hang in the balance.  And displaced Puerto Ricans just may tip the scale one way or the other.  Who woulda thunk.

http://cb.pr/waiting-for-the-u-s-suprem … overy-act/


I was unaware of this case pending on the Supreme' Court docket.  Their ruling expected this summer could be a game changer, a dud, or moot if congress passes a new law on restructuring that resolves the issues involved in the case.

Obviously it is the government of PR Gov. Broke who is appealing. And as the article notes, the S.Court only accepts 100-150 appeals a year and reverses the appellate court 70% of those times. Makes sense, if they don't think they want to reverse the case after reviewing the initial appeal papers, they refuse to accept it, same result--appellate curt opinion is affirmed. So, interesting that they accepted the appeal--75% chance they are going to do something that really has an effect. So sayeth the odds calculated by the guys who watch the Supremes every move..

Anyway, this article is well written but not an "easy read". After the 5th reading I started to get it, hahahaha.

But well worth the time IF YOU NEED/WANT TO KNOW EVEYTHING THAT'S IN THE POT regarding waaht'suppp wit dis debt thing.

I just noticed this post  -- kinda reminds me of the o'cliffhanger -- when will we see the finale?


Paying bonuses in anticipation of a federal bailout?   What do you think?

Sitka wrote:

I just noticed this post  -- kinda reminds me of the o'cliffhanger -- when will we see the finale?


Paying bonuses in anticipation of a federal bailout?   What do you think?

It is law that government employees get the christmas bonus, it is also tradition for all employees to get some kind of bonus, but mostly it is a law. You will notice that there is always a lot of picking and choosing when it comes to law enforcement.

The governor will favor the PR population over the bond holders most of the time.

Reducing government should be a priority but this time of the year there will be very little reduction, maybe in February there will be some. In a lot of cases government can be reduced by 50% and sometimes more, but that is also a lot of people in the unemployment line and food stamp program and the free Medical. If you let them go, in a way you are still paying them.

About a third of the working class are government employees!!!!!

The system needs to get efficient and extremely efficient at collecting taxes and enforcing tax laws, shifting some of the government employees into those functions and keeping the whip ready would make a difference.

Interesting ... news to me and so I looked it up on line, act 148 - requires a christmas bonus in PR - happy days for workers in PR!;   but the article noted:     

http://www.pf-cpa.com/christmas_bonus.html

Employees in agricultural activities, domestic activities, charitable institutions, and the government are excluded from the application of Act No. 148.

If the govt. is exempted, why are they paying a bonus now, to only lay off employees in a few months?

Not sure why you think florida need to have a republican vote. Do your research. The only people who care about pr is democratics.  I am not speaking of Hillary .She is a piece of craps. But bernie Sanders , and Elizabeth Warren and several others have been fighting for Puerto rico

Hi Sandra,

     My remark was a technical one about process.  Texas is more in play for Democrats than NY & CA is for Republicans.  The point is that Republicans can be strong in this state or that, but since they will never win in NY & CA it is always a daunting task to win any national election.  Florida has grown so much in recent times the way the electoral college plays out as a practical matter the Republican party can not win a national election without winning both Ohio and Florida.  Both are swing states and while Mexicans and Dominicans generally will vote Dem, the south Florida Cubans tend to be more conservative.  Now with the huge number of Puerto Ricans living in Florida, the Latino vote in this state is freshly reconfigured.  And of course folks from PR registered to vote will vote for whoever they think is best for Puerto Rico.  And they alone could well swing the state.  And thereby choose the next U.S. president.

So tell me DGD, I'm sure you believe in equal protection under the law.  Constitutionally, that is.  If the Merchant Marine/Maritime laws passed in about 1920 (aka Jones Act) exempted the US Virgin Islands because it would cause a financial hardship, why couldn't PR bring an unequal treatment challenge to that part of the statute?  To say not a problem?  I think the 4 of 5 largest companies based in Jacksonville paid somewhere around $75 million in uncontested fines between them to the feds for price fixing just a few years ago.  That tells a person a whole lot.  And c'mon, I mean you can almost spit to the USVI they're so close.  And PR is not in financial hardship?  Sumpthin' ain't right here.  Course what's new?

The Jones Act I am familiar with only from my practice re:  guys injured working on barges/tugs in the River or on ships on whatever is left of Great Lakes maritime shipping. So, I have a different knowledge of the Act. But I recently have been reading how it affects PR, eg all oil shipped to PR has to be on an US flagged ship is what I got out of it, which quadruples the price?

Changing that will take an Act of Congress of course, and the new Speaker of the House, Paul Ryan, (R-WI) has said the House will come up with a definite plan to help PR's debt issue by 3.31.  That was the pledge the Minority Leader, Nancy Pelosi (D-CA), extracted in exchange for her endorsement of the trillion dollar spending bill that avoided a shutdown 2 weeks ago. Sticking a knife in that part of the Jones Act would help PR. But, like every change where big money is involved, big money ain't going to take it lying down. No secret I know. But, I hope they stick a fork in that part.

Your q is a good one, but for a lawyer or lay person much more knowledgeable about the Jones Act.

Jones act covers ALL items shipped between US and PR, not just oil/gas.
With PR consuming mostly from outside (about 85%) each extra dollar makes a big difference. Not only that but any failure on the shipments and a lot of people starve or have no meds. PR currently only have about 30 days of food queued. That boat that went down caused a lot of problems to the island and that was a single failure.

Storms, accidents, terrorism, acts of war agains the shippers and the island is in a world of hurt.

The goverment is trying to increase agriculture and local meat production but it is very slow processes.

ON THE JONES ACT:

      Yes DGD, the original act was mostly all about protection and regulation of commercial shipping and sailors (merchant marines).  The domestic shipping restriction was toward the end of the legislation and a "small" part.  It was to protect American shippers and give them a market monopoly.  The US Virgin Islands are completing a power conversion project from heavy petroleum to propane, instead of using liquified natural gas like PR.  The great price savings and ease of transport from the huge supplies in Houston, TX ought to have been very important to PR, same as the USVI.  But the deal is they don't play on equal playing fields, the USVI are exempt from the Jones act.
     The Jones act forces only the use BETWEEN TWO U.S. PORTS of ships built, owned, and staffed 100% American.  Major antiquated, we build few ships and are not competitive in the world market.  This means Houston can competitively ship propane (LPG) by sea to Europe, but not New Jersey.  And "little" Puerto Rico, utterly dependent on sea shipping and unable to use a rail alternative or pipelines like the mainland, is caught in the net.  So the protected U.S. shippers have come up with a piggyback tank system for container ships (like the lost at sea El Faro that was headed for San Juan) and liquefied natural gas instead of easier to transport propane.  The federal gov't takes away the previous business tax advantages but leaves PR hamstrung in container shipping commerce.  Did someone mention the government chooses winners and losers?
     If only PR's one congressman had a real vote in the House of Representatives it would make a huge difference.  I can dream, can't I. 

     Oh & BTW, my brother-in-law works for a major lobby firm in Sacramento.  He spent time in Washington lobbying in Congress and has a good friend who lobbies for maritime interests.  I brought the issue up with my very lib, connected sister one time.  The smile totally drained from her face even inside family.  These are definitely fighting issues.  Likelihood of a knife getting anywhere near the Jones Act anytime soon not good.  Or so says Karl the Knife.

Wow didn't know this at all. But didn't understand why the statute would prevent economical shipping TX to NJ, your example. Both USA ports.

Couple Jones Act examples:

     My American company Whirlpool fridge uses a compressor made in Brazil.  Let's say a Panamanian registered container freighter leaves Brazil with Whirlpool fridge parts, Embraer Brazillian-built commuter plane parts, wholesale refrigerated orange juice concentrate, etc.  Many of these items are bound for Venezuela, Panama City, Havana, Santo Domingo, and the U.S. via std Atlantic port New Jersey.  Maybe some stuff could be off loaded in San Juan.  And PR has stuff it would be advantageous to send on to NJ.  And the extra business makes it good for the shipper to stop in San Juan.  No can do.  The Jones act prohibits the foreign flag ship to carry PR's goods to NJ.  So instead a special Jacksonville FL route just for the PR is created stuff transferred to rail for distribution.  So rather than stop in PR the ship goes on to the U.S. and the PR's stuff is transshipped.  All for a territory down to about 3 million Puerto Ricans and 300K Dominicans.  Where the USVI, a U.S. territory a few miles across a bit of water, has no such restriction.  What this does is create an abnormal in Latin America transportation cost peculiar only to Puerto Rico adding to the cost of virtually everything.  In order to protect a mainlander special interest group.
      So the reality is DGD that a Houston refiner/LPG intermediary would use the standard cheapest way to transport LPG, refined petroleum, or raw crude from one place to another.  The Jones Act prohibits the business from making a market decision solely based on the technicals, but rather protects a special interest if and only if shipping to an American port.  Net result is a decision process that is not free market and creates an artificial pipeline, rail, foreign country destination advantage.  Therefore, the by sea to New Jersey decision artificially is the least attractive when it should be the most efficient to the consumer.
     This unjust government intrusion in the market is hugely important to Puerto Rico.  TropiGas, a big propane importer in PR, tried to make a case about clean burning LPG for the PREPA power generation conversion to the PR gov't, but the politically correct liquefied natural gas won out instead.  And we got overstock propane with great prices domestically.  Wholesale was down to about 45 cents a gallon a few months ago.  Just that the whole process should not have mainland special interests injected into the middle of trying to dig out PREPA.
      Hope that clarifies how all plays into Puerto Rico.

Karl: I appreciate the time you put in this post. I am not at all in your league on this subject and I am glad you brought my ignorance to mind.

So be patient with me when I re-ask the q in my attempt to grasp the Jones Act as it relates to PR's debt issue. I understand as I mentioned in an earlier post that the statute requires only a ship under US colors to deliver oil from stateside to PR. And I now gather from you and Rey that a US ship also is required for anything shipped to the island. OK so far. But I still don't get your earlier point why a US ship can't take a boatload of oil or gas from Houston to NJ, another US port.

Forgive me if it's obvious. The words to that Toby Keith song are appropriate to understand my comprehension level the last 6 hours:

"I ain't as good as I once was but I am as good, once,  as I ever was."  The problem is I used my "once as I ever was" for today when I tried at dinner to understand my elder bro's harangue about how stupid I am for moving to PR, jjjjjjj. 

Hey, thx DGD Law.  That thing about your brother's harangue about you moving to PR was the best laugh of the day.  And do I EVER get the Toby Keith song.  Now hopefully you will take this in the best way it is meant.  Your problem is you have a mental flaw that is precisely like the one I have tried beat out of myself with only modest success.  If you hear something and take it in incorrectly, once in it tends to override hearing it correctly even if the next time it's the opposite again.  "I hate it when I do that."  )
      I didn't say a U.S. flag tanker couldn't carry oil to New Jersey.  I said that the Jones Act requires the ONE AND ONLY tanker that can carry oil or LPG from Houston to New Jersey is a
- ship built in the U.S.
- ship owned by an American corporation or company
- ship where every employee working on the ship is part of the American merchant marine employment structure (like say a union)

whereas

      ANY internationally registered tanker can carry oil and LPG (assuming it's a legal cargo, feds have given permission to export) to the U.S. Virgin Islands, St Kitts, Sint Maarten, Uruguay, Portugal, et. al.  And this applies to any and all cargo shipped on navigable water by a ship originating in an American port.  The obvious wildly distorted market is Hawaii where the average price for a KWh of electricity is about $0.38, most expensive in the U.S.  (Sure you wanna become a state PR?)  One gallon of LPG contains the BTU's of about 27 KWh's.  That's $10.26.  Remember also I said the LPG/propane glut, full storage capacity in U.S. situation had wholesale price of propane at the dock in Houston at $0.40.  Now I know it's a ways from Houston to Hawaii, but I think maybe a bit of pork in there.  Could be this maybe illustrates the federal government completely measured by what they do, not by political noise, is anti consumer, energy industry, little places like Puerto Rico, etc.  And in favor of protecting politically connected special interests.
     Hmmm.  Tell me something I didn't know.  Sorry, it's just that Hawaii with it's Giagante, Beacoup tourista $$ can afford better the pc economy.  Our poorest state, Mississippi, has a GDP per capita of about $24K, avg U.S. about $48K.  Puerto Rico has made a lot of their own problems.  At an avg GDP per capita of about $5K, stuff like the Jones Act kicks folks while they are down.  And I'm enough of a fair play guy that I really don't like it when the little guy gets bullied to the bully's advantage.  Get's my dander up.  Now let's see, this is a thread about sovereign debt.  Our discussion does indeed strongly relate.  Takes the thinking cap on though.  DGD, you have eminently proved you own one. 

And to Rey,

     I don't mean to disparage the hard working sailors and other employees of Sea Star/Tote, Crowley Maritime and the other 3 that work the Florida - San Juan route.  But the companies did collude to charge the Puerto Rican people a non-competitive price when they were already protected.  And it's the gov't protected monopoly that invites the corruption.  You are correct that when competition is limited and concentrated, PR's lifeline to it's consumables is that much more precarious.
     My part of northern California has growing rice down cold.  I wish the old sugar cane plantations could try rice instead.  I even know one of the big independent producers, Lundberg Farms.  Big time sustainability, organic & all that jazz.  Look em up.  Very nice folks.  Bet they'd help that lady Ag Commissioner.
     Luv to meet you sometime when we're both there.

Politicians love to talk out of their @$$ and only convey the message they need to convince people that what they offer provides the greatest results.

The PNP (Pro Statehood party) is telling people that this and many other inequities would melt away if we were a state, which is partly true, the part that they are not talking about is the Federal taxes and the greater importance of the English language when it is a state, laws and everything will likely have to be in English. Yet even as a state, the Feds still try to impose their laws into the states and chip away at the states sovereignty. The goverment in PR is corrupt and extremely inefficient, it could never survive on a tax rate like the 50 states, it needs a lot more to function as it has been functioning. PR as a state is looking at a tax rate of probably 40% between Fed and the island taxes. The poor will pay little but the middle class barely out of poverty will be driven into poverty by taxation. Yes, the government should not be corrupt and should be efficient, but even if we change, it is likely to take 20-30 years or more to effect those changes, mean time the taxes will kill what little economy remain, driving the grey economy even further. Statehood is not going to be easy for the island and the US does not have to grant it. More american businesses will close and more people will be without a job. People think they will get a lot more and equality, yet reality says otherwise: http://www.huffingtonpost.com/adrian-br … 70172.html and http://www.huffingtonpost.com/2014/04/0 … 76388.html



The PPD (Pro Commonwealth party) is up in arms as the US Government just declared that Puerto Rico has no sovereignty and that American citizenship could be taken away. This basically call the PPD a bunch of liars. The PR constitution and how it is interpreted by the US congress is in question. I quote In a legal brief filed before the United States Supreme Court on December 23, 2015, the United States Government abruptly reversed course, and took the position that the Constitution and laws of the Commonwealth of Puerto Rico do not emanate from the people of Puerto Rico after all.  The brief takes the position that, under the United States Constitution, Congress has no power to authorize the people of a territory to engage in an exercise of popular sovereignty by democratically enacting their own Constitution, which then serves as the ultimate source of their laws.  Under this view, there can be no such thing as meaningful self-government by the people of Puerto Rico under the U.S. Constitution.
http://blog.constitutioncenter.org/2015 … ng-status/

This plays right in the hand of the several pro independence parties, heck, there is even people asking Spain to come back and take over the island!!!!! I think a lot of this is going to grow the independance parties and if they unite, PR may separate from the US. Not very likely as the movement has not grown much, they been around 5 percent for decades. But if they grow, they will grow faster than before. Unfortunately a lot of these parties are communist and totalitarian parties in disguise. However each of the independence parties have very different views of the future so their first goal is to prevent PR from becoming a state since that would be a permanent union and they will loose the battle for independence.

While I would love PR to become independent and stand on it's own 2 feet, neither communism, nor a totalitarian government are what the island needs. From the Kettle to the fire. Cuba is trying to influence the island future, Russia is also trying to influence and many others.

For now I think that PR should stay as it is and chip away at each of the inequalities and make preparations for the future like get rid of corruption and become an efficient form of government while facilitating Agriculture and locals businesses to grow and become less dependand on the US and its welfare system.

Rey

Oh OK, I get it more. But now I am shot for the rest of the day, I used up my "as good, once, as I ever was"  for Tuesday.  Thanks Karl.   

I have been reading everything I can on the debt issue and have for 2 months? The Jones Act comes up but not from Governor Broke who is leading their charge, as he should, nor from the their resident commissioner aka non voting member of congress, Pedro Pierluisi.  Maybe they have but just not covered by the press or analysts or I missed it.

It seems so logical in this current situation to blow the Jones Act "out of the water". The original intent as it relates to PR seemingly moot, archaic in view of current int'l trade norms, and now only serves as a money maker for the Aristotle Onassis' of the gringo world.

They also need to start regulating the Bond market in PR which is Exempt from US regulations. The issue there with the default is partly because those Bonds were not being regulated.

Now we need the super chapter 8 to start moving to the black, otherwise it will remain in the red and the big default is looming.

http://money.cnn.com/2015/12/28/news/ec … t-default/

Here's a 4 minute video interview with the Governor by CNN Money from yesterday.  Not much
new in it but worth the time.

The question I can't seem to find the answer to is a point he made without expounding on what he meant. "We need the Ch 9 relief (BK) to avoid  'a humanitarian crisis'  ".  I predict if only Ch 9 bankruptcy  relief will help, PR is indeed in for the humanitarian crisis--I don't think congress is going to allow hedge funds and millions of people with PR bonds in their 401(k) portfolios to take the hit when they bought them with the guarantee PR could not file BK.  Other ways?  Maybe.  But the Gov thinks, and he has to know,  what relief will save PR from a humanitarian, and he repeats that only Ch 9 modification to include PR is going to do it.

So here comes the "humanitarian crisis". 

Here's my q:  What does humanitarian crisis really mean practically speaking for people living in PR?

Schools?  Electric?  Water?  Police?  Fire?  Public Hospitals?  No petro?  Garbage collection?  Riots? Looting?  Impunity?  The National Guard deployed?

Hey guys,

     Realistic futuro?  Statehood for the near term is crazy.  PR keeps most of its own $ in taxes and gets more in return from the feds.  And they get way more than say Espana could provide.  Spain is in debt on books 200% of its GDP.  They're broke for heaven's sake, part of the EuroZone, politically unstable and 1/2 under 30 don't work.  Yeah back to Spain a great idea.  And lemme see, how are Chavez and the communistas workin' out for Venezuela?  You think PR has got food problems.
     Unfortunately, most Latino's think and speak with the heart.  (Of course the heart is what makes them who they are.)  Pragmatic analysis is U.S. territory status is a super advantage.  Political leaders have squandered the advantage and painted PR into a corner.  And U.S. politicians in both parties that pander and talk about statehood maybe outta figure out the truth and solutions first.  But what the emotional Latinos want is sovereign independence AND attachment to the U.S.  It's called "having your cake and eating it too."  Not connected to reality.  What PR's citizen's really don't get is what they have for free, U.S. citizenship, is the most sought after political possession in the world.  In the immortal words of Joni Mitchell, "You don't know what you've got 'till it's gone."  If the beautiful Latino spirit of the Puerto Rican people and the heritage of American freedom could be combined, the vision of an island paradise could get close.  Big dream.
     As to the Jones Act and finding a way out of debt, the archaic aberration to normal commerce put upon Puerto Rico by Uncle Sam is unconscionable.  But, it is only one piece of a bigger puzzle.  Making the PR's muni bonds more attractive then any other in the U.S. is a wildly dumb idea.  Give politicians an easy way to borrow and they will run straight at it.  Putting a stop to that is another puzzle piece.  Being careful not to sell too much of the island to the John Paulsons of this world is important also.  But somewhere in some middle ground; some way, some how Puerto Ricans themselves will have to learn to put on big boy pants and stop expecting the way of handouts to be the path to self sufficiency.  PR has to compete in the business world.  They possess great assets and do have a place and a people that are capable of succeeding.  But they need to reject the quid pro quo of goodies for votes, dump the "do for me" mentality, and decide get a backbone and do for themselves.  Trying to plaster over with a solution will not work.  How to get there?  Well, let's see what the U.S. mainland does after the crisis that is virtually upon us.  If they can't find themselves again, who among the world will including Puerto Rico?
    What a time to move.  Hey DGD, don't give my number to your brother.  Already got enough noise of my own goin on here.

Additional to Rey's and DGD's addl'l posts:

     The start of regulation to PR bonds is to not give them a special status that makes them more attractive than any other in the U.S.
     As to Chapt 9 bankruptcy, no it isn't "fair" to the buyers.  For those of us who believe in the rule of law, the concept is "ex post facto" law.  One changes the rules after one starts the game.  Of course we need only look to the sterling example of our current Presidente for support as to respect for the rule of law.  Real alternatives?  Well, enough money doesn't exist.  PR is in a taxation death spiral.  (Sorry, the truth hurts.)  Either they are going to break faith with the people and not provide services, or they are going to break their promise and default on the loans they got.  Probably a combination of both.  And the feds will have to step in.  Oh happy day.  Someone needs to lead and present a real overall plan that has a reasonable chance of success, not just ask for another form of bailout.  The U.S. President and Congress are no judge for a plan however 'cause  they, for all practical purposes, just ran the national debt out to $20 TRILLION.  These are difficult times.  The odd ace in the whole for PR is that they are separated from the U.S. tax system.  A blessing in disguise.  A real PR leader could devise a plan outside of the trap of being a state and beholden to the feds precisely because their status is "territory".  For Garcia Padilla to say chapter 9 is the only possible solution is a way of thinking of government as ever and always the solution, not as it being the problem.  Do I hear in faded memory a former president?
    Happy New Year to all, and a genuine wish for good things to come.

OK I won't give him your number.    He just called me and started again with the "stupid  efin  etc".   

Karl, what's your interpretation of what a humanitarian crisis means to boots on the ground? And I forgot to list as a possibility "bare shelves in the Mercado" and as we saw in Greece "frozen bank accounts".

Carlos, you wrote "They possess great assets." Please list those assets. My question is an honest one, and I am curious about specifics.

Carlos - I see that you've sent a private message, perhaps to answer my question. I'm afraid that I  won't be reading it. Feel free to post it here if it is relevant.

Only said I would post here a real answer a bit later.  Gotta get some work world stuff done. 

Indeed.

Poster 1:
"The problem with laying off public employees is that then they go into unemployment and welfare. Money comes out of a different pocket but it still come out."

Poster 2 responded:
"That is totally correct. Layoff is a short term solution causing long term problems. What does an unemployed workforce do? Either leave the island, start a business or consider desperate acts of crime."

Totally incorrect.   Layoff is a short term problem but a long term solution.  Excess government employees are a waste of resources.  They instead need to find jobs in the private sector.  With less government employees, the tax burden on all citizens can go down. 

The public employees need to be fired and instead get jobs in the private sector where they are contributing TO the economy instead of being a drag on the economy.  Taken to the logical conclusion, with your suggestion, everyone on welfare/unemployment should be given a government job doing nothing?   Of course not.  Certainly the government could hire 100,000 unemployed/welfare recipients to dig holes wth shovels, and another 100,000 to fill in those new holes.   Is society any better off?   Its just pointless wheel spinning.  Taxes need to be reduced, employees need to be fired.  Buying votes by giving away free stuff and unnecessary jobs is bad government.  The government almost always does worse with capital allocation decisions than the private sector.  There are far too many unneeded government employees in PR.   If your job is the one to go, Im sorry, but it needs to happen for PR to be able to prosper. 

Think of it this way.  100 years ago, a majority of the population in the USA worked in agriculture.  With mechanization, 98% of those people are no longer needed due to the productivity gains such as with tractors, combines, etc.  Afterwards, those people transitioned into doing other work, such as computer-based, office work, other manufacturing, etc.   Would it be progress to destroy all the tractors and other mechanization, simply so that we can employ more people on farms again?  Of course not. 

As such, this illustrates the silly wastefulness of excess government employees, that should instead be working in the private sector.  In turn, the citizens of PR could be taxed less since over 25% of the government employees could be cut from the payroll.

I am not nearly as well versed in Economics. The diff between Micro and Macro still perplexes me.

But, I get your point, well taken. Go get a job. We all have had to adhere to that order on occasion.

In a fair/good economy, like I have read PR had until the tax credit stateside manufacturer's got starting in 1976 by starting a biz in PR (AKA Sec 936 IRS Code) was capped at 10 more years in the Clinton Administration, I suppose a guy could find a job.

From a reliable journal I recently read: "In an era of massive off-shoring to destinations with even cheaper labor, Section 936 expiration led to recession, as manufacturers fled Puerto Rico, leaving few job-creating industries behind. According to World Bank data, after Section 936 was established in 1976, Puerto Rico enjoyed 28 out of 29 years of economic growth. Since 2005, as the tax credit faded away, the island has experienced negative growth eight out of ten years, with its gross national product falling 10 percent."

I do not know PR as well as you do, but currently are there realistic employment opportunities in PR for a layed-off government worker sufficient to support a family of 1-4?  Probably not a bunch otherwise 80,000 islanders would not have left in 2014. Not saying the government isn't bloated. It no doubt is.

CSMI, I see your point and for the most part I agree, however PR has a very high unemployment (around 12%) which means those Government employees are not very likely to find jobs.

Also we can not be certain that those people that are released were sitting on their hands and being non-productive.

While you are right that the goverment needs to scale down by A LOT that does not mean the workers were not productive or that they will find jobs in the private sector.

In my opinion the outdated processes and procedures require the larger number of workers, they are productive within an inefficient system. So the system needs to change and the unnecessary people need to be let go. They will continue to be a drain in the system as they are not likely to find a job in the private sector since there is not much of a private sector.

But I do agree with the basis of your point.

Carlos when in RD wrote:

For Garcia Padilla to say chapter 9 is the only possible solution is a way of thinking of government as ever and always the solution, not as it being the problem.

Being able to go bankruptcy is the "solution" that so many people choose when they are over their head in debts. I'm afraid the governor (as well as most people who raise their hand) don't think any further than that their problem is gone after the bankruptcy is there.

Neither think of  who is picking up the bill and WHY they got to the point that they couldn't pay their creditors anymore.

If there's no huge change in running the financial household the same will happen again. I don't know of any politician here on the island who has even the beginning of a plan to stay out of financial trouble. Whatever is going to happen, PR will be in financial problems again in the future.

Lack of leadership has and continues to be a problem, not only in PR but in most of Latin America. Mis-Appropriation of funds and favors to friends end up costing the people what little there is to have. So yes PR will be in trouble in the future, but one step at a time.

The people need to wise up and select better leaders to represent them. At least Venezuela is in worst shape than us.

Just like you and me that need have money in order to be able to write a check, governments need a balanced budget, no money then no expenditures and no parties. The government credit card is Full (bonds), time to renegotiate and have a payment plan that works. Time to eat Yuca instead of Caviar.

Quote: "Neither think of  who is picking up the bill and WHY they got to the point that they couldn't pay their creditors anymore."

Probably not, but I can think of 70 billion reasons taxpayers should.

In the unlikely occurrence that Congress extends Ch 9 (BK for cities, not states, nor for whatever term you prefer for PR--Possession? Colony?) as the Dept of Treasury is recommending Congress do, then the investors, with a high percentage of those now being the various Hedge Funds, are the ones who will take the hit and not taxpayers. But, zero chance of a Ch 9 BK for PR bill passing in the Republican controlled House, in my count. Ah those Repub fiscal conservatives, never waiver from their promises to watch our money.  jjjjj.

They will block a Ch 9 for PR, and are pushing for a US bail-out paid by taxpayers and not the bond investors, mainly hedge funds  also known as the Committee to elect Marco Rubio.

This opinion posted in yesterday's Seattle Times I think is a fair summary as to who will pay in the event Congress extends Ch 9 Bk to PR, and who will pay for a US bail-out.
http://www.seattletimes.com/opinion/bon … r-bailout/

I like it when people use the credit card analogy like Rey because it helps us put it in a real perspective.  Who is going to pay off my credit cards if I default?  From DGD's article: "One of two things can happen, short of doing nothing and setting off a humanitarian crisis."  This is the pc way of framing the situation.  3 possibles, but one of them is unthinkable.  The only one that is unthinkable is the one that follows the RULE OF LAW  and the players take their lumps.  Every time we suspend the rules, the lesson learned is the law isn't real.  So why the hell should the law matter anywhere, in illegal immigration, a cop trying to do his job, etc.
    As to bailout or Ch 9 Bk, the Seattle Times misses one key point about investors taking their lumps for buying the risky bonds.  The hedge funds twisting the politicians arms (aka vultures) were circling the dying carcasses and bought the bonds in the secondary market at a steep discount thereby waaay increasing the effective rate of return.  The spooked original buyers already took a big lump when they sold, allowing for the much higher effective return on investment to the hedge fund than to the original buyers.  So the little guy's hit has already been absorbed by the the market.  This kind of progressive/collectivist redistribution of wealth always seeks out and finds the dumbest folks to hurt first.  The hedge fund, Wall St types buy their insider political clout in both parties (pardon me, I mean contribute to campaigns) and uses us taxpayers to subsidize their ill gotten gains.  And any of us who argue in favor of letting the rule of law take it's natural course are the ones responsible for "setting off a humanitarian crisis", like we'd take food out of the baby's mouth and let them starve.  And there is nothing in the news article about the politician who put his wife's cousin in a good middle mngt position w/great benefits at PREPA and passed out subsidies to the "needy" and then paid for the operating budget shortfalls by putting more on the credit card (i.e. sold bonds).  And so it goes.