Understanding Puerto Rico’s Debt Crisis

http://www.telesurtv.net/english/analysis/Understanding-Puerto-Ricos-Debt-Crisis-20150710-0034.html →

Many analysts predicted the Greek debt and have been following the economic development of the Mediterranean country for years. However, the recent pledge made by Puerto Rico’s governor Alejandro Garcia Padilla, who claims the island’s debt is unpayable, caught  many by surprise.

As Puerto Rican Economics Professor Ismael Muller explained to teleSUR, the current situation is  more difficult to solve because the local government does not control all its budget and has to follow federal limitations. “The federal government controls 70 percent of our budget (17 billion dollars out of 28 billion dollars from the total budget) and the rest is administered following federal law restrictions,” said Muller. 

However, the local government has created packages of tax exemptions to continue luring big investors to the island. Only last year, 250 high net worth individuals invested on the island to profit from Act 20 or 22, two laws passed by Congress to allow tax incentives for Puerto Rico. Many suggest  the island has become a tax haven. 

But the high influx of investors has not provided benefits to the island. As Muller explains, on the contrary, the government has invested in helping them.