Home' Trinidad and Tobago Guardian : July 9th 2015 Contents JULY 9 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
REGIONAL | BG21
assessing the probable
net result, especially
when it comes to trade.
Brazil has had liberalising
spells before, only to
revert to protectionist
No matter how often
they say "abertura"
(opening), Brazilian offi-
cials cannot shake off a
with exports. Unless
prompted, ministers in
Brasilia hardly mention
imports, which are still
impeded by tariffs and
As for Obama s talk of
Brazil as a "global power"
whose "national interests
and values align" with
America s, he is busy
forging a huge free-trade
deal with Pacific
excludes China, and a
trans-Atlantic one with
the Europeans. Both
these projects leave Brazil
on the sidelines.
On the positive side,
Brazil s more outward-
looking mood is a reflec-
tion of something more
than the president s per-
Many Brazilian busi-
ness leaders have realised
that to survive the next
wave of globalisation
they will have to learn to
compete with foreign
rivals at home as well as
abroad. Some, notably
Brazil s highly efficient
farmers, are already
happy to do so, if it
means gaining access to
foreign markets, and
their voice is being heard
"The biggest threat to
is Katia Abreu," one
insider remarked, refer-
ring to the formidable
whom Rousseff has
recruited from the private
For Brazil to achieve
its long-discussed poten-
tial as a global player,
both economically and
diplomatically, it will take
more than a politically
Fortunately, plenty of
other influential Brazil-
ians, both inside and
outside politics, finally
seem to understand that.
From on Page 20
Take a walk around the old town
in San Juan, and you would be
hard pressed to find evidence of
the abominable situation Puerto
Rico is in with its public finances.
The bars appear to be thriving, the restaurants full
and there seems no shortage of the tourists that flock
to this Caribbean sun spot.
But behind the facades, things are bad.
Porfiro is 22. Tall, lanky, and slightly balding, he
is the new generation of businessmen. He is following
in the footsteps of his grandfather, running the harbour
brewery. The business specialises in craft beers, all
brewed on the premises.
"It s tough," he says. "Sometimes we get good
business, sometimes we don t."
He says the customers are unpredictable. Some
Fridays the bar can be full, others it is completely
And that can only get worse, he says, when the
sales tax is raised by 4.5 per cent on 1 July; one of
the measures the government here has introduced
to try to get a grip on its debts.
The scale of the problem is shocking.
Puerto Rico has US$72bn (£46bn) of public debt.
That makes it by far the most indebted territory or
state per capita in the United States.
Not only that, but unemployment here---at almost
14 per cent---is more than double the national aver-
Add to all that a decade of little or no growth and
you have an economy that has deep structural prob-
lems, teetering on the edge of oblivion.
The government s response has been to spook the
bond markets by suggesting that it could default on
its debt payments.
Governor Padilla told the New York Times that
the island s debt "is not payable."
When the governor, Alejandro Garcia Padilla,
dropped that bombshell at the beginning of the week,
the island got a new nickname: the Greece of the
That threat seems to have brought the New York
money men to the table to start negotiating how
Puerto Rico can begin to dig itself out of the hole
it is in.
A couple of big payments have been made:
US$600m worth of general debt servicing on Wednes-
day, and the island s power company has found a
few hundred million to keep its creditors at bay.
But none of this addresses the long-term issue.
Alex, owner of Pinky s Restaurant in the Carolina
district, rails against the bureaucracy that is stifling
He has been trying to expand his outlets, wanting
to set up a food cart in another part of town. Because
the developer failed to pay for a permit to tarmac
the area, the government, he says, is preventing his
and other businesses from moving in and creating
30 jobs. He has been ready to open up for six months.
Others choose simply to leave..
The island has been losing one per cent (around
30,000 people) a year to Florida and other parts of
the US. And it is mainly the economically active
young who are leaving.
"I think there s no future for me here," says Jose,
a nursing student. "In like one or two years, I think
I will move out to the States. Because here for me
in Puerto Rico there s no future."
Luis, who s training to be a pharmacist, agrees.
"My personal opinion would be that professionals
in Puerto Rico have almost no future."
Melba Acosta, head of the development bank which
controls public finances, tells me that the adminis-
tration has cut spending and raised taxes and will
do so again.
But with a damning report from several former
International Monetary Fund (IMF) economists on
her desk, she accepts that a restructuring of the debt
will be necessary.
"Come to the table and talk," is her message to
the hedge funds that have allowed Puerto Rico to
finance years of deficit with debt.
"We understand that the first option for the cred-
itors is to have their money now," Acosta says. "But
we don t have access to the market now, so we can t
keep borrowing to pay our debts."
The government is rejecting some recommendations
from the IMF economists, notably the idea of allowing
employers to pay less than the federal minimum wage
of US$7.25 per hour. There is also resistance to cutting
the bloated public sector, which accounts for almost
20 per cent of the workforce.
Puerto Rico has also been lobbying to be allowed
to file for bankruptcy, much as Detroit did in 2013.
That would give it a breathing space and certain
rights to restructure the debt. But that option is not
open to the island legally, and thus the creditors have
the government here over a barrel.
The federal government has hinted that it might
be a good idea for Congress to consider changing
the law to give Puerto Rico bankruptcy rights, but
has itself ruled out any kind of bailout.
And the island s status as a territory, with no voting
members in Congress, gives it little political clout.
Pedro Pierluisi is the island s sole representative
in the nation s capital, and he has no voting rights
at all. He says this lack of clout means Puerto Rico
also does not get its fair share of federal funding for
"It s pretty embarrassing to be a citizen of a nation
where you cannot vote for the president...The same
goes for Congress," he says. "And lastly to be treated
unfairly, not to say discriminatorily, in key federal
programmes like Medicare and Medicaid."
For the time being Puerto Rico has avoided default-
ing on its debts, but only just. The problems here
run deep and they will take years to sort out.
By the time that happens, young Porfiro may have
already left---heading for a medical degree in Flori-
da---leaving the lovers of craft beer to fend for them-
Puerto Rico: The Greece
of the Caribbean?
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