In their historic request to the Federal Court for bankruptcy for the government of Puerto Rico, the Fiscal Control Board (FCB) listed what they believe are the ‘institutional problems’ that lead to the crisis and bankruptcy, and none of them are the corruption or bad administration that the average person would mention among their primary reasons for the institutional decline on the island.

‘A desolate spiral has commenced… the Puerto Rico crisis has reached a point of bankruptcy’, the entity in charge of the public finances sustained as they summarized a debt of $74,000 million in the central government and $49,562 million on pensions.

As they listed ‘some of the mayor institutional problems that lead to an ample impact or the fiscal crisis’ they included:

-The fact that bonds in Puerto Rico are ‘triple exempt’ from contributions making them highly appetizing to investors in the United States.

-That the Constitution of the Commonwealth altered the definition of a balanced budget to include resources that are not proper government income, as funds they receive from the federal government can be, which ‘opened the floodgates to recurrent deficits’.

– Measuring the limit of the public debt as a percent of income instead of a percent of property value.

-The derogation of the tax credits in Section 936 of the Code of Federal Internal Revenue, which lead to an escape of business ‘of a lot of capital volume’.

-‘Masive pension responsabilities brought about by the fact that more money was extracted from the Pension systems than what was placed in them.

-Poor management and release of financial information with late annual reports, highly optimistic income projections and a deficient taxes payment.

-An underestimation of the real deficil of the government in the accounting system of the government.

-A collapse on housing and inversion.

-The negative effect of the Great Depression that the United States lived in the last decade.

-‘Problems and lack of capacity of credit at the bank.

-Low employment rate and high cost of labor.

-Immigration and loss of population.

-High cost in energy

-High transportation costs due to the Jones Act (cabotage).

-Legislation which impedes the competition in business and drives off investment.

You may see the report from the FCB here.

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