News Is My Business / November 4, 2014)
By Larry Luxner
WASHINGTON — On Nov. 6, the Brookings Institution — one of Washington’s most prestigious think tanks — will delve into the origins of Puerto Rico’s $73 billion debt crisis and what can be done to nurse the island’s ailing economy back to health.
The event features three panelists: David Hitchcock, senior director of public finance ratings at Standard & Poor’s; Palmira N. Ríos González, director of the University of Puerto Rico’s Graduate School of Public Administration, and Barry P. Bosworth, a senior fellow at Brookings who has written extensively on Puerto Rico.
Moderating the panel will be Darrell West, vice-president and director of governance studies at Brookings.
“We’re doing this panel because the debt levels in Puerto Rico are very high, and the economy has been very poor for a number of years. Also, with the recent S&P debt downgrade, it seemed like a good time to do this,” West told NIMB.
In July, S&P cut the Commonwealth’s general obligation rating to BB from BB+, citing enactment of a new law that lets corporations restructure their debt. It had already been cut to junk-bond status in February. The ratings agency also slashed COFINA’s first lien sales tax bonds to BBB from AA-.
The Government Development Bank said Puerto Rico’s economic activity index fell by 1.1% in August, following a 0.7% reduction in July. And according to H. Calero Consulting, personal wealth on the island has tumbled by 22% between 2009 and 2013.
Meanwhile, Puerto Rico’s unemployment rate hovers around 13.5%, and the island’s population continues to fall as residents flee to the U.S. mainland. Today, Puerto Rico has an estimated 3.62 million inhabitants, down by about 200,000 since 2000.
“The thing that makes Puerto Rico interesting for us is the tie-in with the U.S. government,” said West. Yet the Brookings event — the first in years to touch on Puerto Rico — won’t offer a platform for elected officials in either Washington or San Juan to express their views.
“We decided not to have any speakers from the [Commonwealth] government, because we wanted to hear outside voices,” West explained. “Some people argue there are governance challenges that have made the economic challenges much worse, so we opted for independent voices as opposed to people serving in government.”
More than 100 people have registered to attend, including lawmakers on Capitol Hill, business executives, representatives of nonprofit agencies and officials of the British, French, German and Chinese embassies. Organizations such the World Affairs Council of Puerto Rico as well as Puerto Rico Clearinghouse — which provides bondholders with independent research and analysis on legal and legislative efforts to restructure the island’s municipal debt — will also be in the audience.
“This is timely and useful, for better or for worse,” said David Lewis, vice-president of Manchester Trade Ltd. “We know what Brookings had to say in the past, and it has never been anything shockingly new. It’s very status quo, and that’s not what Puerto Rico requires right now. The island’s economy is in the midst of a major structural change that basically requires a breakup of the model of the past 40 years.”