Puerto Rico did its best to steal the limelight from fellow debt donkey Greece – which reopened its financial markets today after a five-week closure – by being a little boss and admitting its bonds have sent it broke.
Puerto Rico defaulting on its debt after regrettably handing over a mere morsel of the payment amount is like Bill Cosby trying to convince the future victims of a long wolf shooting tirade to stop by his place to ‘try the drinks I made’ – both fates are tragically doomed from the start.
Ratings agency Moody’s announced Monday that the debt-riddled territory had made only a partial repayment to creditors on bonds issued through the island’s Public Finance Corporation.
How much is too little to appease its lenders for a hall pass?
A partial payment on the interest to the tune of $628,000, on a pesky bill amounting to $58 million. Puerto Rico – America’s 51st state and holiday hotspot for those residing in the U.S. without a visa – is stone cold broke. After openly admitting its IOUs were as valuable as a rotting fish, the government quietly disclosed in a financial filing later that afternoon that it had temporarily stopped making contributions of $92 million a month into a fund that is used to make payments on an additional $13 billion in bond debt.
Today’s fractional payoff reflects Puerto Rico’s deepening debt crisis, the latest since the hot mess over in Greece. The blow comes amid increasing concerns about global growth, sparked by opaque data out of China, and concerns about the Puerto Rico’s liquidity as it struggles to restructure its $72 billion debt black hole.
U.S. open-end municipal bond funds own more than $11.4 billion of Puerto Rico’s debt, while hedge funds hold about one-third. A desperate last-ditch report commissioned by the island’s government has called for the less-than-palatable implementation of wage cuts below the federal minimum, slashing of paid holidays and the reduction of energy costs.
So basically going to prison would be a better option, if that were even possible.
Meanwhile, in the U.S., the SEC is forced to grapple with the disproportionately grievous decision of whether to force publically traded companies to publish the ratio of CEO pay with that of the typical worker, of which any Puerto Rican would happily trade places.
Unlike the case of Cosby, in which his lawyer has taken the victim-blaming highway approach by claiming, ‘People are willing to say many things in order to get money,” Puerto Rico’s top dogs have been quick to admit the island’s flaws.
This is, in part, due to the public perception of the territory’s ability to pay even a fraction of its dues is as believable as Adam Sandler convincingly acting in a culturally sensitive film about culture clashes, such as Spanglish, when you know he would refer to the flick to his friends as, ‘that one with the European actress, I forget her name, that one about sleeping with the help,” before turning back to his latest project, the one where he tried to hire Native Americans to play a deeply and offensively stereotypical version of themselves.
Its flailing tourist industry remains the saving grace for the pretty, tropical island, which is rapidly heading into an economic death spiral.
Puerto Ricans are reportedly fleeing the island in droves in search of jobs elsewhere – unemployment is skyrocketing and the economy is shrinking at the pace of a frozen margarita melting in the blistering Puerto Rican sun.
Adding to the former tourism darling’s woes is the niggling issue of a harrowing drought, which has resulted in government-issued water sanctions, whacked on non-tourist destinations towns, with many towns having currently gone without running water for two days.
Even the hotels are pulling up stumps.
In April, the Radisson Ambassador Plaza closed its 233-room doors, after struggling in an economy that’s been in a recession for nearly a decade, while its casino had suffered from increased competition from the proliferation of illegal slot machines.
With the island’s residents leaving in droves to look for jobs on the mainland, it only squeezes the tax base further, making it harder for the beleaguered sandy land to pay its debts; which is kind of like being forced to go snorkeling on one of Puerto Rico’s pretty coral reefs, but 12-feet under, for three hours, without oxygen.
The exodus has seen residents flee mainly to central Florida and New York, not one of their moving stories likely having been inspired by the wistful adage, ‘I love you more than Puerto Rico.’
While the island’s current nightmare may place it in a different category to debt-riddled Greece and Detroit, the fact that it’s added a measly 7,000 hotel rooms in the past 40 years, despite ‘tourism’ being the sole bullet point on its dance card, the island could well benefit from taking a leaf out of its bedfellows at the front of the ‘we’re broke, need cash’ country pawn shop line.
Puerto Rico’s failure to keep up with the Jones in terms of its tourism infrastructure and marketing spend has left it an evil, red-headed stepsister to its more developed, tourist-friendly neighbors, namely, [insert any sunny Caribbean or Central America hot spot here.]
Despite today’s default, the simple fact is that Puerto Rico, and its pristine white-sand beaches, palm trees and friendly, though depleting, locals, remains a sunny spot on the map.
But whether it’s worth making the trip to San Juan for hello body shots off a 25-year old local at Senor Frog’s to help the island’s directive to ‘save water by drinking tequila’, is a solution to the territory’s H2O and fiscal survival that requires a more challenging proposal than the promise of cheap hard liquor.
