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Down and out in San Juan as Puerto Rico debt disaster looms

People walk through the streets after Puerto Rican Governor Alejandro Garcia Padilla gave a speech regarding the government's $72 billion debt on June 29, 2015 in San Juan, Puerto Rico. The Governor said in his speech that the people will have to sacrifice and share in the responsibilities for pulling the island out of debt.
People walk through the streets after Puerto Rican Governor Alejandro Garcia Padilla gave a speech regarding the government's $72 billion debt on June 29, 2015 in San Juan, Puerto Rico. The Governor said in his speech that the people will have to sacrifice and share in the responsibilities for pulling the island out of debt. Getty Images

Nine years ago, Roland Santiago earned $120,000, paid a mortgage on a house and drove a luxury car. Now, he’s collecting unemployment while he looks for a job that will cover rent at an apartment and other living expenses.

“Even for people who are prepared and experienced, there is little stable work available that pays well,” said Santiago, 45, who sold medical devices for a company that has since closed. “Things have really deteriorated.”

Signs of a struggling economy are evident: At shuttered restaurants and bars in previously thriving Old San Juan. In businesses across the island where owners spend much of their day coaxing customers through the doors. In statistics that show the population has plunged over the past decade. And by the exasperation expressed by those living through the turmoil.

“This is a disastrous situation,” said Carey Delgado, 32, who said she had to quit her job as a preschool teacher in December to ensure that her children, ages 14 and 6, stay on course at public schools that provide little more than basic instruction.

“I lost my job, my house, my car,” said Delgado while awaiting services at an unemployment office in the Cupey neighborhood. “Now, I’m in public housing, on food stamps and collecting unemployment. Like me, there are many others in the same situation.”

Delgado’s woes are part of the harsh reality outlined by Gov. Alejandro García Padilla, who says the U.S. territory can’t pay back some $72 billion in public debt and has called on Puerto Ricans to share in making sacrifices.

On Tuesday, the governor’s team began meeting with legislators and other leaders to discuss how best to resolve the financial crisis. He has said he wants a debt repayment moratorium of several years as part of a plan to bolster the islands finances and revive its economy.

Puerto Rico has the highest municipal bond debt per capita of any U.S. state.

For many of Puerto Rico’s 3.6 million residents, who have been dealing with economic uncertainty for years, life is about to get more expensive.

A new sales tax of 11.5 percent — the highest compared to any U.S. state — takes effect Wednesday. Meanwhile, Puerto Rico’s power company faces a Wednesday deadline for an estimated $416 million debt payment that it may default on.

Jaime Martinez, a meter reader who has been working for the electric company for 16 years, said employees are bracing for a bumpy road ahead.

“We haven’t been told anything except to get ready for tough times,” said Martinez, 42. “The problem is that nobody pays their light bills. The government gives too many subsidies. That’s what’s brought us to this point.”

Sergio Marxuach, policy director at the Puerto Rico-based consulting group Center for the New Economy, drew parallels between the economic problems in Greece and Puerto Rico.

“If we look at how the government operates, the lack of transparency of public finances, the bad quality of statistics, the massive tax evasion, the government corruption … it’s the same in Greece like in Puerto Rico,” Marxuach told the Associated Press. “When it comes to the magnitude of the crisis, obviously Greece is at a much more complicated and deeper level … and I hope we don’t end up there.”

Taking hard steps now to avoid a worse calamity was the message García Padilla tried to convey in his televised address on Monday night.

“We must act now,” he said. “If we don’t assume that responsibility today, we risk not having solutions within reach or, even worse, losing control over them, giving the power of decision to others.”

García Padilla’s address followed the release of a grim report by former International Monetary Fund economists that suggests that Puerto Rico is in serious need of structural reforms, fiscal adjustment and debt restructuring.

“Unless a comprehensive approach is taken, the inevitable will happen and be far more damaging to the people of Puerto Rico,” Anne Krueger, a former World Bank chief economist who worked on the report, said during a presentation to government officials, the AP reported.

The report’s authors also stated that government policy failures have hurt Puerto Rico’s economy.

“Growth has not just been low, but output has actually been contracting for almost a decade now, which is remarkable for an economy suffering neither civil strife nor overt financial crisis,” the report said.

“For me, its not any worse now than it has been,” said Jessaily Otero, 25, a secretary at a medical office. “It’s just that the government can’t hide it anymore.

“We have to reinvent ourselves,” Otero said. “We cant just give up. The economic crisis is all over, not just here in Puerto Rico.”

García Padilla has urged Washington to amend rules to allow government agencies to file for Chapter 9 bankruptcy protection.

Some relief may come.

On Tuesday, several U.S. lawmakers sponsored a bill to allow Puerto Rico’s government agencies to file for bankruptcy.

The White House has said a federal bailout of Puerto Rico is not under consideration.

The governor’s team has until Aug. 30 to develop an economic and financial reform plan, which must be approved by the island’s legislature.

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