From the Headlines: Puerto Rico’s Debt

December 13, 2013

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Puerto Rico’s economic woes were splashed across the headlines  this week, as Moody’s Investors Service warned that the Commonwealth’s general-obligation debt may be soon downgraded (See Bloomberg and Reuters for more information.) This is the latest in a series of events that have exposed Puerto Rico’s significant economic troubles.

Puerto Rico holds $70 billion in government debt, in addition to $37 billion in unfunded pension obligations, according to The Washington Post. These obligations are coupled with an economic recession on the island, resulting in significant job loss. According to The Post, “just over 41 percent of working-age Puerto Ricans are in a job or even looking for one.”

This makes Governor Alejandro Javier Garcia Padilla’s job particularly difficult. He must simultaneously seek to stimulate the economy while balancing the government’s budget. Padilla has looked to corporate taxes to achieve this and collected $120 million more in revenue than projected for the first quarter of 2014 fiscal year (according to Bloomberg). Nonetheless, Reuters reports that the island’s economy still shrank during the same time period.

The ramifications of a potential default in Puerto Rico would be wide ranging. Puerto Rican bonds are held by 75 percent of municipal bond mutual funds, according to The Post. Puerto Rico is also not eligible to file for bankruptcy, and protections in the Puerto Rico Constitution ensure that payments to bond holders take precedence over paying pensions or government employees.

The Puerto Rican economy is an important issue in the municipal finance markets. For this reason, the Global Interdependence Center has decided to dedicate a conference to the topic. “Puerto Rico Debt: Questions & Answers” will take place from 8:30 a.m. to noon on Jan. 15 at the New York Athletic Club. The event is open to the public, and speakers include the following industry experts:

  • Natalie Cohen, managing director and head of municipal research at Wells Fargo;
  • Joseph Engelhard, senior vice president of Capital Alpha Partners;
  • Mary Francoeur, managing director at Assured Guaranty;
  • David Kotok, CIO of Cumberland Advisors and GIC vice chair of the central banking series;
  • Robert Kurtter, managing director for U.S. State and Regional Ratings, Moody’s Investors Services;
  • John Mousseau, executive vice president and director of fixed income at Cumberland Advisors;
  • Joseph Mysak, Jr., editor of “Municipal Market;”
  • Don Rissmiller, founding partner of Strategas Research Partners; and
  • Tom Tzitzouris, vice president and fixed income strategist, Strategas Research Partners.

To learn more or register for this event, visit

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