It’s been clear for a while that Puerto Rico is going to have to default on its debt:
Puerto Rico has $70 billion in debt outstanding, all of it needing to be repaid with interest -- and the simple fact is that there’s no way it’s going to be able to do that, if its economy continues to shrink and its most talented nationals continue to decamp for the mainland, where their prospects are much brighter. Labor mobility from Puerto Rico to the rest of the US, and particularly to Florida, has never been higher, while most of the migration in the other direction comes in the form of retirees, who are not exactly going to kick-start the economy. In fact, in terms of the labor force participation rate, they’re just going to make matters worse, on an island where only 1.2 million of the 3.4 million inhabitants are employed.
In many ways, Puerto Rico is similar to those other tourist destinations, Portugal and Greece -- it’s highly indebted; it’s not particularly well educated (only half of Puerto Ricans over 25 have graduated from high school, and only a quarter of high-school graduates go on to get a bachelor’s degree); and it is hobbled by being unable to devalue its currency.
All of this is a clear recipe for default: if Puerto Rico can’t repay that $70 billion in debt, then it won’t.
Puerto Rico has $70 billion in debt outstanding, all of it needing to be repaid with interest -- and the simple fact is that there’s no way it’s going to be able to do that, if its economy continues to shrink and its most talented nationals continue to decamp for the mainland, where their prospects are much brighter. Labor mobility from Puerto Rico to the rest of the US, and particularly to Florida, has never been higher, while most of the migration in the other direction comes in the form of retirees, who are not exactly going to kick-start the economy. In fact, in terms of the labor force participation rate, they’re just going to make matters worse, on an island where only 1.2 million of the 3.4 million inhabitants are employed.
In many ways, Puerto Rico is similar to those other tourist destinations, Portugal and Greece -- it’s highly indebted; it’s not particularly well educated (only half of Puerto Ricans over 25 have graduated from high school, and only a quarter of high-school graduates go on to get a bachelor’s degree); and it is hobbled by being unable to devalue its currency.All of this is a clear recipe for default: if Puerto Rico can’t repay that $70 billion in debt, then it won’t.
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