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Puerto Rico just had its bond rating downgraded to "junk status" by two of the three main rating agencies, Standard & Poor's and Moody's. The government is now starting a round of budget cuts and austerity measures to try to turn the economy around.
The economic problems in Puerto Rico have the potential to ripple through the U.S. bond market, since 70 percent of U.S. municipal funds hold some Puerto Rican debt.
Here & Now's Jeremy Hobson speaks with Carlos Rivas, director of the Office of Management and Budget for Puerto Rico, and to Javier Maymí of the Spanish-language newspaper Centro Tampa.
Carlos Rivas on the possibility of a U.S. bailout for Puerto Rico
"There’s excellent communication at a very high level both with the White House and the Treasury Department. And they’re very up to date and very up to speed on what’s happening here and what our plans are. But we don’t, right now — we’re not looking for a bailout, per say, or a loan or that kind of structure. The have been clear on that, they have to be consistent in their approach to different jurisdictions."
Rivas on why Puerto Rico has so much debt
"I think there are two reasons. Number one, our economy has been shrinking consistency since 2006. So the economy has shrunk about 15 percent, and that obviously makes it very hard to swim against the current fiscally, so to speak. And secondly, there have been some decisions made in the past that have not been the most fiscally responsible decisions, particularly the financing of the operating deficits over the past few years. So we are at the point where the debt burden is significant. And we got ourselves into this situation. We’ve been working hard since January of last year in the change of administration to get out of this situation and we will continue the plan to do so.
Rivas on the exodus of people from Puerto Rico
"We have had some migration and it is up to Florida in particular, also to the Northeast, people seeking better employment opportunities. And that is precisely why we need to restart economic growth, and why the governor is working so hard to do so, to get those people to stay in Puerto Rico. People love being here, they love living here, they're very committed to Puerto Rico, and we as a government have to make sure that all the opportunities are there for people to have their livelihood and their employment."
Javier Maymí on why people - including himself - have left Puerto Rico
"For middle class Puerto Ricans, it becomes extremely difficult to — it's not a question of living in Puerto Rico, it’s more like surviving in Puerto Rico. And as economic opportunities shrink, obviously in search of better opportunities, better pay, better future, we look towards the U.S. because we have that ability to do that... You know it basically begins with quality of life. Because of the economic situation and quite frankly, this is not new, this has been going on for over a decade now. The recession started in 2006, but as early as the year 2000 you could see the downturn coming as different companies started closing and closing and closing and crime began rising and rising. In my case in particular, it became a question of a personal decision and I saw a better future in the United States."
This segment aired on February 10, 2014.