Friday, July 17, 2015
State Reputation
Puerto Rico is Greece -- a bankrupt nation unable to pay its bills. Unlike Greece, Puerto Rico potentially can rely on the US government to help restructure debt and get out of a hole dug deeply into the earth. Like Greece, however, and Argentina, Puerto Rico has damaged its reputation as a fiscally conservative country. This will make its debt more expensive, and will have investors and rating agencies looking carefully at its financial health. Puerto Rico's mismanagement of its affairs has been known for some time. Now it faces the penalty for it. The question is whether the Puerto Rican citizens are ready to accept restrictions on the country. They can revolt like Greek citizenry but ultimately, they, like the Greeks, may need to accept an onerous bailout -- bitter medicine. This might start an exodus to the US which wouldn't be the first time many have left the island.
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