Puerto Rico Economic Crisis may force Bankruptcy

Puerto Rico has been struggling with economic problems for years now but now, it all seems to have come crashing down into a situation that is impossible to turn around. They now appear to be resigned to the fact that the economy is bankrupt and this is evident from the bankruptcy protection equivalent that they have field for. An oversight board had been appointed earlier to help the territory get back on its feet, in financial terms. However, the board has made it clear that there is no way to continue to give the citizens' effective services' under the current state of affairs in Puerto Rico.

Massive debts crush the economy

Puerto Rico has a whopping $74 billion in debt, a sum that the territory has not visible means of paying back. In addition, it also owes nearly $50 billion to pensioners. The people who will be most badly affected by the bankruptcy filing are the pensioners because they are not likely to have any means of augmenting their income, post retirement.

Other affected parties are the many investors who poured money into the economy when it was performing well. While there are many institutional investors who have a big stake in the island's economics, there are also quite a significant number of American individual investors who have invested here. In main, many American retirees have a stake in the island. With the island's finances taking a tumble, all of these entities now face huge losses.

The silver lining 

While investors are in a bad position right now, the situation may just take a slight turn for the better for Puerto Ricans who have been facing immense challenges even to get basic necessities fulfilled. By filing for bankruptcy protection, the board may have just given the residents of the island a respite because now attention may shift to preserving the basics. Health care is one area which has taken a massive hit thanks to the economic crisis and safety is another. The problems have been exacerbated by politicians who resorted to an increase in tax and borrowed heavily, thus increasing their economic burden. In addition, unrealistic promises of high pensions were also given, which were, as expected unfulfilled.

The current situation in Puerto Rico is that over half of the population in unemployed and about half is part of the Medicaid program which results in a drain on the resources. As they are U.S. citizens, Puerto Ricans can enter the U.S. at will and leave the island with a diminishing number of tax payers, further worsening the situation.

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