Saturday, May 6, 2017

Puerto Rico: A Way Out

Various media sources are reporting on economic troubles in the U.S. Common'wealth' of Puerto Rico; it's the second large island southeast of Cuba. The (') marks are intentional, wealth is hard to find in Puerto Rico these days. Hat tip to Drudge Report for the link.

The island government just went to federal court to attain something resembling bankruptcy protection offered by the recently passed Promesa act. Expect debt restructuring, a severe "haircut" for creditors, cuts in pensions, a curtailment of the safety net, and other economies. Closure of over a hundred schools has already been announced.

It's economic difficulties result from Congressional meddling, plus the people voting themselves government largess without raising sufficient tax revenue to pay for it. They used borrowed money to pay current operating expenses, almost always a mistake.


As we have written before, over time the problem will solve itself. Many Puerto Ricans will move to the mainland to find work, property prices on the island will crater, and those low property prices will attract thousands of Norte Americano purchasers looking for a warm place to retire.

Eventually PR will become a Caribbean avatar of Hawaii, an American island focused on lifestyle and retirement. Those who remain will be employed by the tourist industry, plus whatever military installations the U.S. locates there. Hawaii "works" using that model, there's no particular reason PR can't do the same.

Should it become a state? Sure, when the economy achieves something like equilibrium, probably not before.