San Juan: The sun is bright and the beaches are great but there’s trouble in paradise: Puerto Rico is drowning in debt and its people are feeling the sting of economic crisis.
People in this US island commonwealth in the Caribbean are seeing their work hours reduced, for example.
Sales at stores are way down because of a big increase in sales tax aimed at helping the government raise revenue.
Those who can are simply packing up and leaving for the US mainland, to places like Florida and New York.
Consider the plight of Jorge Telon, who runs a chain of department stores frequented by working class Puerto Ricans. He’s had to cut his prices to stir demand, so his profit margin is down to almost nothing.
“We have to sell really cheap,” Telon, 55, said.
His stores are strung along Paseo de Diego, which used to be a major commercial thoroughfare. Now it is desolate: many stores are shuttered and others are begging for customers.
“Things are tough. People don’t want to buy,” said Telon, who added that his saving grace is that he owns the stores. “If we had to pay rent, we’d be finished.”
Then there’s Rosaura Guzman, who runs a food stand on the street. “Before, on a Saturday, I would do 1,000 dollars in business. Today it is never more than 300,” she said.
Indeed, merchants on this island of 3.5 million people are feeling the pain from an increase in sales tax from 7 percent to 11.5 percent.
Governor Alejandro Garcia Padilla said last month that Puerto Rico owes $73bn and cannot pay it back.
He is seeking a moratorium from creditors so money that would go toward debt payments can instead be used to stimulate economic growth.
The economy of Puerto Rico has posted negative growth for eight years. Ratings agencies like Moody’s classify Puerto Rican debt as junk bonds.
The governor asked the people of Puerto Rico for effort and sacrifice.
Because it is a commonwealth and not a state, Puerto Rico cannot file for protection from creditors under US bankruptcy law, as, say, the city of Detroit has.
So starting Monday the government will begin tough negotiations with bondholders to try to win a moratorium and avert default. In the meantime, life grinds on for everyday people facing a jobless rate of 12.4 percent, compared to 5.3 percent in the United States.
AFP
