Cue it up, Jack Nicholson.
The New Progressive Party (PNP) of Puerto Rico, who is actively campaign for incumbent pro-statehood and Republican Governor Luis Fortuño, has taken issue with a Reuters story called Puerto Rico is America's Greece. The article, written by Reuters contributor Cate Long, dives deep into the island's economic woes and compares Puerto Rico's situation to that of Greece's. Such information has been available for the last few months, as a recent economic report revealed in December, 2011. This is just part of what Long writes:
But it’s Puerto Rico’s massive debt load that makes it resemble another crisis-stricken country that’s been in the news lately: Greece. Although the commonwealth’s debt load is only 89 percent of its GDP, Puerto Rico’s underlying finances are weakening, and a big reason why it has balanced its budget so far is because it sold tax anticipation bonds and transferred the funds into the general fund. In 2011 public revenues were $8.17 billion while expenditures were $9.07 billion. This shortfall was plugged with official funds from the COFINA Stabilization Fund, a government subsidiary that sold bonds to be paid off with future sales tax revenues.
So what does the PNP do? Post an image on Facebook and they go on Twitter to call Long an "activist of Occupy Wall Street." So, when in doubt, personally attack a reporter. That won't play well, will it?
Granted we could be snarky and ask the PNP to actually edit their spelling errors in Spanish (Espana, pais), but we won't. However, we do find it laughable and sad that a 15.2% unemployment rate is being seen as "good news" for the island. In addition, the chart also confirms that Puerto Rico's credit rating is pretty low as well. Finally, the chart does nothing to combat the original findings of the December report, which we will share here:
Two Drops of Water
According to the firm [WSC], there are many similarities between Puerto Rico and Greece, Italy, and Spain, which the report describes as “weak European economies, among them: insolvent pension plans, high unemployment, and poor management in the collection of revenues into the treasury.
Of all the similarities, however, the debt level would be the most alarming indicator, according to the report. WSC estimated that is one were to divided the central government debt by the population of the island, every Puerto Rican owes about $ 7,837. Meanwhile, the island’s per capita income would be at about $ 13.675. Percentage-wise speaking, this means a debt ratio of 57.3% to income.
If the calculation considers other $ 28 billion of debt issued by public corporations and municipalities, each Puerto Rico would owe about $ 17, 265 in debt.
As Indebted as Portugal
“(The figure) aligns more with Portugal, near to that of Spain, and well above the lowest per capita income in Puerto Rico,” said WSC.
The per capita debt of Portugal, as WSC states, is about $ 16,402. In Spain it is estimated to be $ 17,539.
However, this indicator in states like New Jersey would be about $ 3,669, in Hawaii it would be around $ 3,996 and in Connecticut, the debt per capita would be in the vicinity of $ 4,859. Percentage-wise speaking, the debt of these states in proportion to income per capita would be 7.2%, 9.6% and 8.8%, respectively.
The firm estimates would be higher if one considers that WSC did their numbers based on a total debt of around $ 64 billion
On November 20, El Nuevo Día outlined that public debt was about $ 65.5 billion.
That figure, as a proportion of Gross National Product (GNP) could be equal or exceed the size of the local economy. This means that the debt of the Island in relation to GNP, could range between 92% and 100% or more, something that the research identifies as a serious economic burden for the development of any society.
Poor Reputation
“Despite having a conservative governor in fiscal terms, the history of Puerto Rico is tainted by cronyism and irresponsible fiscal decisions,” the firm said.
He added that unless the debt is reduced or the island’s economy grows faster than debt, Puerto Rico is aimed at a “critical moment” for its finances before the end of this decade. At this juncture, in light of fiscal conservatism “rampant” in the federal capital, it would be “unlikely” that the US Congress would help the island. So, if the situation does not improve “materially and fast,” the island would be in serious trouble and the U.S. municipal debt market may face “a significant credit hurdle,” said WSC. Puerto Rico’s debt has grown at a rate of 9% annually in recent times. Meanwhile, the Puerto Rican economy has shrunk almost 12% since the start of the recession.
The BGF Refutes Findings
“It is clear that we have to keep working,” Batlle said when asked about the report.
“In 2009, we indeed were on the path to being Greece,” admitted the banker. ”But we have succeeded in keeping Puerto Rico from falling off the cliff,” Batlle said, referring to the period when the island lost access to capital markets by the growing fear of degradation.
Batlle preferred to emphasize that the report acknowledges the progress of the fiscal reforms that the Fortuño administration has implemented. In response to questions about the possibility of restructuring the island’s debt, Batlle said it will not be necessary if they continue to apply that fiscal discipline measures have already been implemented.
Here is a Storify of the latest tweets.
