Financial advice radio host Bob Brinker used to say “no state has ever defaulted on General Obligation Bonds – don’t worry!”. That’s technically still true since Puerto Rico is not a state (yet).
http://money.cnn.com/2016/07/01/investing/puerto-rico-defaults-general-obligation-bonds/index.html
General Obligation Bonds are debt that has to be paid before everything else. They should be risk free since they have first rights to the revenue stream. Revenue bonds are the other main type of government bonds – they are used to build specific things – sewer projects, toll roads, airports, etc… That should have a revenue stream to pay them back. In the event of default, the lender can take over the asset, but can’t go after all of the taxpayers.
Puerto Rico has a peculiar history that doesn’t blend well with the United States. Up until the Spanish American war in 1898, Puerto Rico was a colony of Spain. Like much of the Carribean, it was at the heart of the African slave trade. Slavery ended in 1873, with slaves required to work three more years to get their freedom.
When the US won the Spanish American war, Cuba was given its freedom, but Puerto Rico has been in limbo ever since – neither a country nor a state. Puerto Ricans are US citizens but don’t pay federal income taxes as long as their income is in Puerto Rico.
One obstacle to the economy of Puerto Rico is the unresolved question over who owns the mineral rights around the island. Surveys say there may be 8 billion barrels of oil within two fields and natural gas reserves, but the oil companies won’t put money into developing them until the issue is resolved. Typically, the rights holder gets 1/7th of the value of oil and gas. At $50 bbl, 8B x $50 X 1/7 = $57B… The amount in default today is $2 billion, but their total debt is about $167 billion.
Perhaps they need to build some toilet paper factories.
Puerto Rico used to be a wonderful place. My dad was US Air Corps military and I was born at Ramey AFB. I have wonderful memories of the place. The people were very hard working and family-oriented. Suddenly, in the late 60s after LBJ’s “Great Society” most Puerto Ricans decided they would go on the dole and let the US Gov support them. Crime increased 500-600% until the National Guard had to be activated to fight crime. Retirement income was at 100% after 20 years. Unions were rampant in their demands. Guess what party governed PR during these difficult times? The Popular Democratic (Socialist) Party, a mini branch of our own Democratic Party. It is no wonder. This is a preview of where we are headed. Time to wake up, America.
Blame it on Leonard Bernstein.
Reading that everyone is fleeing the island and housing is getting cheap, I decided to pull up San Juan and look at real estate ads. People selling condos were not making any effort to fix them before listing the property. Even by my low standards, they were universally dumps. Lots of indications crime is rampant. Prices ranged from $35 to $140 a square foot.
The one supermarket ad I looked at seemed to indicate lower prices. Maybe food stamps work differently. A lot of the debt has been run up by the electricity company.
Puerto Rico is very unusual from a radio perspective. Because it has an inpenetral mountain range, it takes three radio stations to cover the entire island. It is one of the few places that still has licensed AM boosters that retransmit an AM station.
Just over 25 years ago I was in Venezuela and the eastern Caribbean. I looked forward to nightfall so that I could tune into 1030 WOSO San Juan PR. It was an English language news station and a CBS affiliate. For someone that spoke no Spanish, it was the only way for me to know what happened that day.
Oh my:
“As many of you know, as of the 21st of October 2014, WOSO Radio has been off the air and the silence is deafening. This wasn’t a decision made by choice but rather the result of a series of unfortunate events that led to what we hope is a temporary cease of operations. After almost 40 years, a great lot has been said and a good deal more remains to be shared. Nevertheless, much as we would like to convey how we yearn to talk and discuss all the news and events of the day with you, our audience, the right words fail us. ”
http://www.wosoradio.net/
Running radio stations on an island appears to be an impossible proposition. The stations in Puerto Rico, Hawaii, Virgin Islands, etc seem to have frequent changes in ownership. Electricity is probably part of the problem. If a station needs generators to have reliable power, getting diesel fuel to transmitter on top of a mountain is a huge burden.
Residential electricity in Puerto Rico is $.26 to $.29 per kWh and businesses pay even more. The national average is around $.10
http://www.neo.ne.gov/statshtml/204.htm
The station is in the list of “vewy quiet” stations . They have a series of requests to remain silent going back to 2013.
One way AM stations get in trouble is by selling their transmitter site to a tower management company who wants to put on cell phone equipment or FM transmitters. That gets an infusion of cash, but now the transmitter is a cash expense. When they next get in trouble and don’t pay the tower company, they get locked out of their transmitter site and maybe even have their equipment sold. Since AM radio is very much tied to a specific tower at a specific location, selling an FCC license with no tower and no equipment is hard to do. You are essentially having to build a brand new station in a market that has proven unable to support a station. Making it even harder, in the 1950s, nobody cared if you put up an AM tower out in the country. Now the land is in the city and city governments don’t view it as “best use” (highest tax revenue) for the land. The WMAL tower land in the Beltway is being sold for $75 million to a high end residential housing developer