Puerto Rico finance officials warn a government shutdown may be only months away. Puerto Rico is saddled with $70 billion in debt and has been unable to sell the billions in bonds it needs to avoid running out of money.
Heidie Calero, a business consultant there, says the question is whether Puerto Rico’s lawmakers will overhaul the tax system.
“Right now we have so many suspense stories that it’s really terrible,” she says.
This crisis didn’t happen overnight. Government spending has outpaced revenue for years. U.S. tax breaks made the island attractive for businesses, and Puerto Rico had itself a moment. Those tax credits ended, but spending went on.
“From investment grade that we were before, a very coveted financial paper, we are now the status of junk,” Calero says.
Luiz Mesquita, a business professor at Arizona State, blames mismanagement. Take the troubled Puerto Rico Electric Power Authority, which is state run.
“And because of these mismanagements, you see the cost of energy for local businesses to go up significantly,” he says.
And when it’s expensive to do business in Puerto Rico, companies just don’t see the appeal anymore.