Federal officials are expected to announce incentives to boost Puerto Rico’s economy in the next few months, a top legislator from the commonwealth said this week, responding to investor concerns about the island’s rising debt costs and bleak growth.
The help is unlikely to include direct financial aid, Puerto Rico Senate President Eduardo Bhatia said at an investor gathering in New York. He did not provide specifics.
The assistance would come in response to the last four years of recession in the Caribbean territory, Bhatia said. It has been given added urgency due to a spike in Puerto Rico’s debt yields in the recent months, he said.
The selloff in Puerto Rico’s bonds has been driven by worries about the territory’s shrinking economy, its high jobless rate and per capita debt, which are far higher than that of any U.S. state. The U.S. commonwealth’s unemployment rate is nearly 14 percent, higher than any U.S. state.
“We are waiting to hear an announcement from the Treasury and the White House. We know for a fact they have been very aggressively thinking of how to be sure that they can help Puerto Rico send a very strong signal of stability right now,” Bhatia told the meeting.
Puerto Rico’s debt is held widely by mutual funds, increasing the systemic risk. The island will not be entitled to Chapter 9 municipal bankruptcy.
Puerto Rico’s debt costs have soared this year. In May, 30-year general obligation bonds carried a yield of about 5.3 percent and hit a peak of 8.6 percent in mid-September. The debt is now trading with a yield of 8.1 percent, which is far higher than any U.S. state’s. Puerto Rico’s debt is rated BBB, one notch above junk.
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