News about the economy

As I understand constitutionally PR can not be in the for more than 15% of the receipts which is around 9.8 billion, So the most they should be able to pay over a 35 year period is 1.47 billion a year total (principal and interest) unless the judge decides to discard what the constitution says, which is possible given that some of the complains from the bond holders is that some of the other bond holders are asking for money from bonds that were issued against the PR constitution.

What a mess.

For those who like data, this is from the Bureau of Labor Statistics, U.S. Department of Labor and illustrates that PR faces repaying debt with a shrinking economic and taxpayer base:

                                                    Jan. 2007                               March 2017
Total Employment                   1,277,000                                       999,775
Non-Farm Employment          1,037,000                                       880,800
Government Employ.                 299,000                                       221,700
Ratio of Government
Total Employment                        23.4%                                        22.2%

For comparison purposes, examining Illinois - one of the worst if not the worst state in the U.S. economically speaking, Illinois has a much lower number of government workers to total employment:
                                                        12.8%                                       12.6%

Sawman, the key of the numbers is that Illinois has a fairly efficient government working force, one of their workers will do more than 2 in PR, but they also make more money so that may be a factor.

You can do more when the process / procedures are efficient and you have a relatively efficient workforce. A lot of stuff in PR is due to old ways and inefficient ways to do things.

We need send some efficiency experts with Carta Blanch to to PR to make changes.

ReyP wrote:

Sawman, the key of the numbers is that Illinois has a fairly efficient government working force, one of their workers will do more than 2 in PR, but they also make more money so that may be a factor.

I'm personally familiar with Illinois having grown up there and returning regularly - I think you're over-estimating the difference in attitude and efficiency.  Not to get too far afield, Illinois state and local governments (namely, Cook County and Chicago Public Schools) are loaded with political patronage jobs, excess number of positions and jobs serving no public benefit whatsoever.  Higher pay does not mean productive work in Illinois!

PR probably needs to figure out how to handle government functions with around 150,000 employees, which can in part occur by outsourcing trash and other services like the rest of the U.S.  Jobs would move from public entity to private sector, who can perform these services faster, better and cheaper than government workers.  Just one example.

P.S.  It's interesting that Illinois, a state that has not passed a budget going on 3 years I think, has taken time from all of its problems and endorsed PR statehood.  I think Illinois is tired of being the ugliest kid on the block and knows the bailout PR gets will make it more difficult down the road for Congress to not bail Illinois out of its massive pension problems.

SawMan wrote:

P.S.  It's interesting that Illinois, a state that has not passed a budget going on 3 years I think, has taken time from all of its problems and endorsed PR statehood.  I think Illinois is tired of being the ugliest kid on the block and knows the bailout PR gets will make it more difficult down the road for Congress to not bail Illinois out of its massive pension problems.

You may be right on that point, if you can help someone set precedence, you can then use it for your own gain.

FOR YOUR INFORMATION :

The congress and the whitehouse have agreed to include 296 millions in the budget that will go to be voted by the end of the week in congress, this money is to help fill part of the hole in Medicaid (MySalud) in PR.

PR government was hopping for 900 million and recently requested a minimum needed to sustain the service of 540 million, but it will have to put up with the 296 million regardless.

This will help cement the negotiations with the medical insurance companies such as SSS, MCS and others which needed to be in place As soon As Possible in order to deal with July 1st new budget in PR.

A small win but not near enough to keep MySalud afloat. Removing OBAMACARE is interfering with the standard grant PR normally receives as Obamacare funding. Unlike most states, there are no market places in PR, the government instead gets a block grant of around 1.2 billion a year to supplement the program.

Very few expats in this forum are affected either way since most have some private insurance or VA, only the few that use MySalud may be affected.

Better than nothing.
Rey

Well it looks like we may be heading to bankruptcy court in the next few days.
http://www.elnuevodia.com/english/engli … t-2316528/

Bankruptcy is the only realistic option - bond holders will take a haircut.

A lesson to investors & hedge fund guys  - even municipal GO bonds can go tits up when they run out of money! 😠

Plus - think of all the money that will be wasted on court costs & legal fees fighting over the carcass- much of which is added to the public debt!   

This whole situation is FUBAB!!  The corrupt politicians and others involved in this should be prosecuted- but unlikely as the current Governor is the son of former Gov who was in office when much of this mess was pawned off on the public debt.  It really is criminal.

Here is my thoughts about auditioning the debt, you will spend millions and at the end you will still be held accountable for the money. Iregardless of who did what, we still took the money and wasted it.

You go to the car dealership, the salesman sells you an overpriced car, the bank lend you the money. A year later, can you go to the bank and tell then is their fault you made a bad deal? Are they responsible for the money?

Let's be realistic the ones that will continue to loose is the people. Specially the middle class, as alway! In the island as well as in mainland, the working class is the one that pay all the politicians broken promises and bad deals.

Sitka wrote:

Bankruptcy is the only realistic option - bond holders will take a haircut.

A lesson to investors & hedge fund guys  - even municipal GO bonds can go tits up when they run out of money! 😠

They expect to take less than 100%; but not too much of one.  PR has already offered 77% to the GO bondholders.  Interestingly, the holders of senior sales-tax debt get first priority on sales tax revenue collected.  So, as a secured creditor they have little reason to take much less than 100% as they will be paid in full from sales tax revenue anyway.  The sales-tax group wants Puerto Rico to seek Title III BR.

Well we do it to ourselves, we don't hold them responsible for their actions, we don't send them to jail, we do not seize their properties and bank accounts and in 4 years we elect their cousin.
Until the people learn to find better leaders, nothing will matter.
Some think that statehood by some magic, will give us better leaders...... nope you just get one that speaks better English while stealing your wallet

Greed all around.  Politician & bankers - no need to explain, everyone seems to get that.  Let's add The People.  They vote to get something for nothing.  They give the government lots & lots of power to take things away from others and give those things to them.  They are then shocked when known liars (politicians) instead use that power to enrich themselves and their cronies at the expense of everyone else.  And they fall for it over & over & over.

How about giving the politicians a lot less power aka everyone more liberty?  Oh no, we do not like that.  Because liberty also implies personal responsibility to fend for myself instead of hoping that the government will take care of me at someone else's expense.  And so we do the same thing over & over & over.

Who is the attorney general in PR?   Shouldn't the AG look at enforcing the law for the abuses that the public has suffered?  Is any thing being done to address the matter?

Not sure if this had been posted;
***

Adlin that looked like a political post

What do you think that means for people like me/us who are hoping to move to PR this fall?  What effect will there be for the short term and long term?  What industries could it affect?

I am considering a move in about 2 years.  Plenty of time to watch & see.  As long as basic services function (basically utilities, roads, cops, hospitals, post office), I look forward to it.  Granted, my income will be from outside PR and taxed at a very low rate.  I will also have back-ups (generator, solar, etc.) and the ability to very quickly relocate Stateside if things were to go completely (as opposed to mostly) south.  I am used to Latin culture, both the good and the bad.  I also look forward to buying bargain properties in the vacuum left by the annual exodus of Puerto Ricans to the US.  There is some risk there.  A bad economy that will be a long time in the healing (and "long" could mean "not in my lifetime") = low rents or vacancies or vandalism for the buyer.  But if the market overcompensates for those risks (and emotion-driven markets often do exactly that during crashes), then there is also upside to be had.  I'd also look for niches that are less affected by the general situation (e.g. - rentals to tourists or the like).  Buy when there is blood in the streets, and sell at the sound of the trumpets.

Summary:  "Outside income" and "basic services still present" plus "I gotta backup" for temporary crashes in those services added to "I can move again, pronto". 

Just my 2 cents.  We are coming June 5 to June 19 to explore.

dblahusch wrote:

What do you think that means for people like me/us who are hoping to move to PR this fall?  What effect will there be for the short term and long term?  What industries could it affect?

If you are looking to move and find a job in the island I wouldn't recommend it.

If you are retiring with a steady income, you need to take into consideration that some services will increase. Housing, rentals or purchasing will still be lower than in the mainland.

My suggestion is to do your homework, come for a few months. Explore different parts of the island, compare prices. Talk to the locals.

And finally, have a plan b in case you decided that you want to leave.

SteuernAnwalt Your plan is sound, if investing in properties, look with the eye of tourist / vacation rentals. Property cost will continue to erode for the next 2 to 3 years until the economy reaches some sort of balance at the low end. Significant gains not likely for the next ten years. After that yes.

dblahusch wrote:

What do you think that means for people like me/us who are hoping to move to PR this fall?  What effect will there be for the short term and long term?  What industries could it affect?

Prices are fairly low at the moment and will go lower but not by much. You could wait, but I would recommend instead to buy when you find the RIGHT place at a reasonable price and start living in the island which will overall be cheaper than the states.

None of us are getting any younger, the sooner you can destress, and start enjoying your retirement the better.
If you have your own business as I understand and your customers are in the mainland, there will be little effect to your business, if your business is local, it will likely go down since people are watching their expenses and many are leaving for the mainland. I would also suggest looking into going global if you can.

Here come the court cases: http://flip.it/F8Qv.C

Important: The governor just informed the Federal board that Puerto Rico wants to use the backrupcy option per Promesa law. Not sure who will do the actual Filing (PR or board), but this is to protect the funds on hand. Several of the suits want to freeze the government funds in case they win the case.

If this happens in the next few days, a judge will be selected by the Superior court to handle the case and all the suits would endup frozen pending the bankruptcy case. The whole thing may take 18 months or so, mean time bond holders will get no pay and their suits will be on hold once again.

PR made an offer this weekend which was turned down by the bond holders, so off to court we go.

It will be a very interesting court case, stay tuned, same bat channel.

Now that PR requested to Use the Title III of promise, the Federal Control Board will need to convene a vote (probably via email) where 5 of the 7 voting members would need to accept the request in order to move forward.

The judge will need to decide if the government and board are in compliance with Title III and if so it can authorize the legal backrupcy court case, but it may ask for more information and perform other compliance tests, which may end up delaying the case for up to 4 more months.

Assuming all is well and the FCB votes for it, and the court accepts it, then it will be the FCB that will fight the case in court, not Puerto Rico. I am sure they will pass us the bill for all the high level lawyers and expenses.

Based on how you look at it, this could help or hurt.
Some democrats in congress are asking to stop all legal actions and that the US congress or its agents conduct an audit of the debt to ensure we know what happened, how it happened, prevent it from happening again, which debt is legal and what if any federal laws were broken.

There are positives and negatives on this obviously.

http://www.elnuevodia.com/english/engli … e-2317298/

How would you predict this affecting real estate values?

This itself should have no effect. However more unemployment, more people moving out of the island and more personal bankruptcy will.

Comercial properties owned by the goverment will likely be sold for cheap

With the latest news.. What's you take on this? Looks like Title III will go through.

I think I have some bad info of the GNP to Debt. If what I have for numbers, this shouldn't have happened.  Then again, Puerto Rico has government owned business' (looks like the largest portion of debt) and we all know how government runs a business..

Oh my, there was a whole 'nother page I didn't see... You folks have been busy bees!

I thought PR couldn't file bankruptcy due to some obscure rider on a law enacted decades ago that concerned the status of territories.

Tittle III is rolling, need assignment of a judge and some dates. They had to do it, while attempting to negotiate, some of the suits started demanding full payment and breach of contract. Some wanted to be payed first and what ever was left to be used to run the country based on PR constitution. That would have paralyzed the goverment and healthcare. So, in order to keep them from freezing the bank accounts, they had to declare tittle III bankruptcy.

lgustaf wrote:

I thought PR couldn't file bankruptcy due to some obscure rider on a law enacted decades ago that concerned the status of territories.

You are right, but Promesa law gave PR tittle III which is a form of bankruptcy and it applies to the entire government unlike regular bankruptcy.

Technically PR is not requesting bankruptcy, the Federal Control Board has filed for it since they are in charge of PR finances above the government. The Federal board lawyers will also be the ones going to court to defend it.

Wow, this is one of the toughest look-ups I've done.
What is Puerto Rico's Tax revenue income?

Total take is around 12 billion grossed, latest budget with all the cuts is around 9.8 billion.
I could be wrong

Federal Control Board requested PR new budget to implement around 3.5 billion cut.

Full budget to be balanced in 3 years.

Imagine balancing the US budget in 3 years.

ReyP wrote:

Total take is around 12 billion grossed, latest budget with all the cuts is around 9.8 billion.
I could be wrong

Federal Control Board requested PR new budget to implement around 3.5 billion cut.

Full budget to be balanced in 3 years.

Now, what is Government expenditure?

I can typically find these numbers, but it's so well hidden..

The goverment typically spends about 12 billion but collects around 9. That's how they got in the hole, by issuing debt to pay for the difference.

I think total economy including private businesses is around 35 billion