Mis­ery deep­ens for those left in Puerto Rico

The China Post - - FEATURE - BY DAN­ICA COTO

Most ta­bles are empty at Wal­ter Martin’s cof­fee shop in San Juan’s colo­nial dis­trict. His brow is fur­rowed with con­cern and glis­tens with sweat in the swel­ter­ing Caribbean morn­ing.

He’s turned off the air con­di­tion­ing to lower his power bill. With fewer cus­tomers, he’s cut staff hours and tried to make up the lost in­come by rais­ing some prices. But Puerto Rico’s en­trenched eco­nomic cri­sis is lead­ing peo­ple to ei­ther cut their per­sonal spend­ing to the ba­sics or flee to the main­land to search for jobs, con­tribut­ing to the strug­gles of those left on the is­land.

“We’re mak­ing ev­ery sin­gle ad­just­ment needed,” Martin said. “We have to make these de­ci­sions be­cause if not...”

He trailed off, hes­i­tant to com­plete the sen­tence.

Nearly 10 years into a deep eco­nomic slump, Puerto Rico is no closer to pulling out, and, in fact, is poised to plum­met fur­ther. The un­em­ploy­ment rate is above 12 per­cent. Some 144,000 peo­ple left the U.S. ter­ri­tory be­tween 2010 and 2013, and about a third of all peo­ple born in Puerto Rico now live in the U.S. main­land. Schools and busi­nesses have closed amid the ex­o­dus. The pop­u­la­tion of 3.5 mil­lion is ex­pected to drop to 3 mil­lion by 2050.

The gov­ern­ment has tried to boost rev­enue by hik­ing the sales tax to 11.5 per­cent, higher than any U.S. state, and clos­ing gov­ern­ment of­fices. Its debt-bur­dened power util­ity al­ready charges rates that on av­er­age are twice those of the main­land, and is un­der pres­sure from bond­hold­ers to raise them higher.

A US$58 mil­lion bond pay­ment due Satur­day went un­paid. If de­faults con­tinue, an­a­lysts say Puerto Rico will face nu­mer­ous law­suits and in­creas­ingly lim­ited ac­cess to mar­kets, putting a re­cov­ery even more out of reach.

The ex­o­dus of peo­ple from the is­land, mainly to cen­tral Florida and New York, is pal­pa­ble. Nearly ev­ery­one knows some­one who has left, or plans to do so soon. The im­pact of the de­par­tures, and the de­cline in spend­ing of those re­main­ing, is ob­vi­ous.

Crowds have thinned at restau­rants and movie the­aters; fam­i­lies like Dav­ila’s have cut back on sum­mer ex­cur­sions to beaches and moun­tains; and even San Juan’s no­to­ri­ous traf­fic jams have dwin­dled some­what.

Jose Her­nan­dez said his com­mute into San Juan’s colo­nial dis­trict, once about two hours, now takes roughly 20 min­utes.

The 62-year-old lottery ven­dor would join the de­par­ture, too, if not for the grand­chil­dren he helps sup­port — even though he rec­og­nizes do­ing so would only add to the trou­ble.

“Fewer peo­ple means there are less of us to help boost the econ­omy,” he said. “This is the worst I’ve seen it. ... There are no peo­ple on the street. They’ve dis­ap­peared.”

His lottery busi­ness has fallen by nearly 10 per­cent, forc­ing him to keep gro­cery shop­ping to the ba­sics and to cut back on lux­u­ries such as movies and restau­rants.

“What you used to do three or four times a month, now you only do once,” he said. “You cut out a lot of things.”

Dav­ila said her monthly US$600 So­cial Se­cu­rity pay­ment isn’t enough to cover ex­penses. She and other rel­a­tives are pool­ing their money to buy back-to-school sup- plies for her 12 grand­chil­dren. She cares for them while her own chil­dren work and study, but she yearns to move back to New York.

“We don’t have money to live,” she said.

A list of cost-cut­ting mea­sures pro­posed by a group of hedge funds that holds US$5.2 bil­lion of Puerto Rico’s debt has riled is­lan­ders: lay­ing off teach­ers; cut­ting Med­i­caid ben­e­fits; and re­duc­ing sub­si­dies to the main public univer­sity.

Mean­while, a re­port com­mis­sioned by the gov­ern­ment called for wage lev­els to be set be­low the fed­eral min­i­mum, paid hol­i­days cut, and energy costs re­duced.

The ad­min­is­tra­tion of Gov. Ale­jan­dro Gar­cia Padilla has ar­gued public agen­cies, in­clud­ing the util­i­ties, should be al­lowed to de­clare bank­ruptcy. As a U.S. ter­ri­tory, Puerto Rico is barred from do­ing so even though sup­port­ers say it would pro­vide an or­derly way for the is­land re­struc­ture its debt.

U.S. open-end mu­nic­i­pal bond funds own more than US$11.4 bil­lion of Puerto Rico’s debt, while hedge funds hold about one-third. Morn­ingstar said in­vestors likely face more volatil­ity and cuts to their in­vest­ments.

In ad­di­tion to the al­ready dif­fi­cult sit­u­a­tion, Puerto Ri­cans are brac­ing for a new ser­vices tax set to take ef­fect Oct. 1.

Some econ­o­mists warn that mea­sures like new taxes could fur­ther de­press the econ­omy, a con­cern shared by small busi­ness own­ers.

“They’re go­ing to keep go­ing un­til the peo­ple can’t take it any­more,” said Ig­na­cio Veloz, who owns a con­do­minium ad­min­is­tra­tion busi­ness.


A pri­vate se­cu­rity guard sits in front of a closed-down busi­ness in the colo­nial dis­trict of Old San Juan, Puerto Rico, Sun­day, Aug. 2.

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