Got your summer vacation plans squared away? Many Texans will be heading to Puerto Rico, a destination that’s especially appealing due to a common currency, no real language barrier and the ambiance of a place that’s as much an idyllic resort as it is rich in history.
But as Texans consider temporary travel southward, many Puerto Ricans are permanently migrating to Texas. With an economy twice as poor as Mississippi, the poorest state in the U.S., Puerto Rico is preparing to go through a process equivalent to bankruptcy.
Michelle Kaske, who has been covering this story for Bloomberg, says the blame falls on financial mismanagement, Wall Street complicity, and good intentions gone awry.
“There are a lot of people at fault here,” Kaske says. “Puerto Rico is at fault for just piling on too much debt it can’t afford. Investors were eager to buy this debt, so they were complicit in the sense that they were eagerly lending Puerto Rico money over years of their economy shrinking.”
Kaske also pointed to the mass exodus of Puerto Rico’s population headed for the U.S. mainland, as well as the Wall Street banks responsible for structuring the deals.
Puerto Rico is also burdened by a legendary bureaucracy, with over 80 agencies, an extensive public university system and a massive government payroll that contribute to costs.
“They’re going to be forced to spend less money, and their budget is going to need to change,” Kaske says. “They can’t have the type of payroll that they have. That’s really going to be the hard part of this. As well as reducing the overall debt and the bonded debt, structure of government is going to need to change.”
Once those changes are made, citizens, companies, public institutions and even partnering governments can enjoy reduced debts and a more promising economic future.
“The number one thing that needs to happen is its economy needs to start growing again,” Kaske says. “It’s shrunk in the last decade, we’ve basically had this lost decade, and it will help everyone if Puerto Rico’s economy can turn around.”
Kaske says the most important thing is that bankruptcy proceedings begin to move forward, so that Puerto Rico can start to heal.
“The longer this takes, the worse it is for Puerto Rico, the longer it takes then for investors to get their money back, and she really wants to do this in an orderly fashion where everyone is going to have to make some sacrifices,” Kaske says.”
Written by Lila Weatherly.