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Puerto Rico is fighting to stay afloat in a rising sea of debt.
Though many of Puerto Rico’s problems are reminiscent of Greece’s — tax noncompliance, a stagnant economy, years of issuing long-term debt to cover short-term payments — investors have had a nearly insatiable appetite for its bonds.
But now their support is dwindling. Some big investors are pruning their holdings. That is beginning to widen the cost of borrowing for Puerto Rico relative to other states and municipalities, which are benefiting from a big decline in borrowing costs. The interest rate its 30-year bonds now pay is about 2.5 percentage points higher than other municipal borrowers’, up from a difference of just 1.5 percentage points at the beginning of 2012, according to Municipal Market Data.
The possibility of a credit downgrade also hangs in the air, something that could lead to more selling.
“There is no specific event looming on the horizon,” said Alan Schankel, a managing director at Janney Capital Markets in Philadelphia. “But it’s a problem of immense magnitude, and it’s very challenging to sit here and see how they work their way out of it.”
Well if they were our 51st State, we would of probably bailed them out and absorbed much of their debt....which for a small island, I can't imagine their economy being much worse than Mississippi.
Well, maybe that is why they want to become a state....BAILOUT !!
Possibly, it would be a good move on their part and they would have representation in our federal government.
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