(WTNH) With the eyes of the financial world on Greece as the European nation slouches toward default on billions of euros in loan payments, a crisis much closer to home — in fact, it kind of IS home — is brewing 1700 miles south of Connecticut, on the island of Puerto Rico. And it’s not getting nearly as much media attention as Greece despite some metrics that show it could impact America more directly.
With a population of 3.6-million people, roughly the same as Connecticut, Puerto Rico finds itself facing a mind-boggling $72-billion debt, which nearly matches the island’s total annual economic output. Just two years after assurances from PR Governor Alejandro Garci Padilla that creditors would be repaid, this week he sang a completely different tune, telling The New York Times, “the debt is not payable.” You don’t need a Ph.D in economics to figure that out.
What’s more, Puerto Rico — a commonwealth of the U.S., which makes it neither a state nor a city — doesn’t even have default as an option, as Greece has. Detroit was able to declare bankruptcy two years ago, which cities can do. Puerto Rico doesn’t have that option. In fact, as Errol Lewis of the Daily News reports today, it is “legally unclear how, when and whether the island government can restructure or repudiate public debts.”
It’s a heartbreaking situation for what is a beautiful corner of the tropical world. There’s been literally no economic growth in Puerto Rico since 1996. The island’s population is decreasing by an incredible 36-thousand people each year, as middle class residents leave to look for better opportunities. Unemployment is 14%. Vacant storefronts and buildings are everywhere.
There’s another reason for people here in America to be more concerned about our sister to the south than Greece. Most of PR’s debt is held by American lenders, hedge funds, and retirement plans. If Puerto Rico can’t pay back any of it, the funds you might be depending on for your golden years could lose tens of billions of dollars.
The island’s hopes for restructuring its debt now falls on Washington, where unlike with the mess in Greece, barely a word has been heard. A bailout will not be politically popular here, to say the least. But just leaving PR to collapse is not an option, either.
Back in the days before we had kids, my wife and I frequently went to Puerto Rico for a few days of R&R. You can get there by direct flights, the climate is as perfect as anywhere in the Caribbean, and while we always got the feeling we were visiting some exotic destination, it was still, essentially, America. Five-million people of Puerto Rican descent live in the U.S. — over a million in New York, a half-million in New Jersey, more than a quarter-million in nearby Massachusetts. Not to minimize Greece’s problems in the Eurozone, but this country needs to look out for the America zone at least as much.