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Puerto Rico Makes a Poor Case for Statehood


Two stories from Bloomberg News paint an ugly picture of Puerto Rico’s economy. First, investors are starting to think Puerto Rico’s credit has been overvalued and have started to price it like distressed debt:

Yields on some general obligations set record highs last month. Investors demand about 5.2 percentage points of extra yield, or 520 basis points, to own 10-year Puerto Rico debt instead of top-rated securities, up from about 3 percentage points in mid-August, data compiled by Bloomberg show.

Recent yields on Puerto Rico bonds have “gone up about two to 300 basis points, depending on the credit, and it may have another 150 to 200 basis points to go once they really get through this,” [Peter Hayes, head of municipal debt at BlackRock Inc.] said.

Then, Moody’s reacted accordingly:

 The credit rating on Puerto Rico’s sales-tax revenue bonds was lowered two levels by Moody’s Investors Service as the commonwealth tackles recurring budget deficits and a struggling economy.

Moody’s said today it cut the rating to A2 from Aa3 on $6.8 billion of senior sale-tax bonds, saying Puerto Rico’s weak economy has significantly limited growth in sales-tax revenue. The New York-based company affirmed its A3 grade on $9.2 billion of other bonds issued by the Puerto Rico Sales Tax Financing Corp., known as Cofina.

Puerto Rico is in big trouble. We don’t see any indication that it’s collecting the necessary revenue or making the necessary cuts to stop the bleeding in its budget deficit, pension liabilities, or other debts. It looks like the government may have to cut more services and sell off more roads and airports.

If Puerto Rico ever wanted to join the US as a state, problems like these certainly wouldn’t help its case.

[Puerto Rico image courtesy of Shutterstock]

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  • Pete

    The idea of statehood is absurd.

    Puerto Rico is a Third World entity which has as good a standard of living as it does only because of massive welfare transfer payments made to the island.

    Keep P.R. as a commonwealth ….or cut it loose entirely via independence. But in no way make P.R. a state as it does not come even close to fitting cultural or linguistic with America.

    P.R. as a state would not help the U.S.; it would drag us down.

    • Corlyss

      Worse than not helping the US, it would immediately become the playground of future Chavezes and like-minded mischief makers. We was fooled once about Cuba when we didn’t seize it. We ain’t making that mistake again.

  • Corlyss

    They could make the best case for statehood in the universe and they wouldn’t get it. Period. It’s a figment of liberal anti-colonialists that statehood is equivalent of manhood for males. The same is true of the District of Columbia. Both Puerto Rico and DC would like to run with the big dogs. Ain’t gonna happen just to salve their microscopic egos.

    • Bruce

      But the Dems dream about it. They would elect Dems reliably.

      • Corlyss

        Exactly. They lust after DC statehood too, partly as a residue of their glory days in the 60s civil rights drama, but as you say, mostly because it would be reliably Democratic forever.

      • Pete


        And imagine the U.S. Senate with four more leftwing Democrat Senators, each of whom would make Dingy Harry Reid look normal.

  • lukelea

    The problem is that Puerto Rico is not an English speaking country. Americans no longer share a common religious tradition, an unavoidable consequence (unintended) of the First Amendment. If we jettison a common language there will be nothing to hold us together as a culture and a nation. Diversity is a bitch.

  • Marcelino

    Mexico will be come the 51st. state before Puerto Rico.

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