You’ve probably been hearing a lot about Puerto Rico’s crushing debt, here is where it all started…Libergirl
On May 1, 2016 Puerto Rico’s Government Development Bank (GDB) defaulted on a $389,000,000 bond payment.
The GDB, which according to recent financial disclosures shows less than $600,000,000 in total assets was subjected recently to capital controls via executive order issued by Gov. Alejandro Garcia Padilla that have frozen almost all withdrawals, while also suspending lending.
The default immediately closed the island’s access to capital markets and simultaneously halted the issuance of almost 1 billion in tax revenue anticipation notes the Puerto Rican Government was expected to issue through the end of 2016.
The Puerto Rican economy was forecast to be somewhat compromised by provisions in the North American Free Trade Agreement(NAFTA) which was agreed upon and ceremoniously signed on December 17, 1992, by Canadian Prime Minister Brian Mulroney, Mexican President Carlos Salinas, and U.S. President George H.W. Bush.
These provisions, which were officially signed into law by President Bill Clinton on Dec. 8, 1993, would go into effect on Jan. 1, 2014 taking away a key trade advantage held by the island over many Latin American countries with regard to duty-free imports to the U.S.
Further exacerbating the potential for economic stagnation were the federally mandated minimum wage laws, which gave non-minimum wage countries in the Caribbean a pronounced economic advantage over the commonwealth.
With those factors in play, the Clinton administration made a shortsighted decision to increase revenue intended to reduce the federal deficit by proposing elimination of Section 936 of the Internal Revenue Code, which gave mainland U.S. companies an exemption from federal taxes on income earned in Puerto Rico.
Posted by Libergirl