What’s Next in Wake of Puerto Rico Municipal Bond Crisis? D. DAXTON WHITE
Oct 15, 2013
As some of Puerto Rico’s municipal bonds
are slipping into “junk” territory and brokerage firms are warning their brokers to steer clear of about $70 billion of Puerto Rican debt on the market, the logical question is what is next for investors already stuck in this quagmire. Puerto Rico’s debt has for years been popular with U.S. investors because of its high yields and special tax benefits. However, the plunge in Puerto Rico’s bond values has tracked Puerto Rico’s worsening economic troubles. The problems are not exclusive to direct municipal bond investments either. According to Morningstar, some 77 percent of U.S. municipal-bond mutual funds hold bonds sold by Puerto Rico.
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Puerto Rico, the US territory which homes some 4 million people, is struggling through the seventh year of recession. US bond insurers MBIA and Assured Guaranty are facing hard times amid predictions that Puerto Rican credit rating may be downgraded one or two categories. The experts say it might lead to the default. Vivianne Rodrigues, a Financial Times US capital markets reporter and former FT Tilt Latin America bureau chief, in an interview to Voice of Russia talked about the situation in Puerto Rico.Ms Rodriguez started by explaining why the current situation in Puerto Rico appears so desperate. She said the territory has been in the recession for many years now, and to fund itself, Puerto Rico issued a lot of debt and these bonds ended up being part of many portfolios in the US. Puerto Rico, being a territory of the US, is tax exempt. Tax-exempt bonds mean that people don’t pay taxes on these assets, and they are very popular throughout the US.
“So, now basically 80% of all municipal bond portfolios in the US carry some sort of exposure to Puerto Rico debt. So, if the territory really has a problem paying its debt, it is really going to hit hard the US markets,” – Ms Rodriguez explained.
Read more: http://voiceofrussia.com/2013_10_16/Domino-effect-Puerto-Rico-to-have-major-impact-on-US-economy-expert-3120/
Ranking the Caribbean By GDP Per Capita
Click here to download the Complete World Bank report.
October 16, 2013
Caribbean Journal Staff
The World Bank released its 2014 World Development Report report.
The richest country in the Caribbean Community, ranked by GDP per capita is the Bahamas, with a GDP per capita of $21,280, followed by Puerto Rico, which has a GDP per capita of around $18,000.
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