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Puerto Rico is imploding. Every major media outlet in the world has written about our government's failure to repay billions in loans to the United States and private investors who put their money into government bonds.
Chapter 9 is part of the solution to Puerto Rico's complicated debt and liquidity crisis. The alternative -- doing nothing and watching bondholders subject Puerto Rico to years of litigation and chaos -- would be a disaster for a business community that thrives on predictability and order.
Today, the Earth got a little hotter, and a little more crowded.
When the Puerto Rico debt crisis burst into the news, Puerto Rico Governor Alejandro García Padilla pronounced that the Commonwealth's debt crisis "is not about politics." Of course, to paraphrase H.L. Menken, when a politician says something is not about politics, chances are it's all about politics.
Because of Puerto Rico's colonial status, the island's residents have never had any say over the imposed U.S. economic, trade and monetary policies which contributed significantly to the current economic crisis. So why are they now being asked to shoulder the bulk of the burden through austerity?
Could marijuana legalization save the Puerto Rican economy? Right now, marijuana possession in Puerto Rico is a serious crime and first-time offenders are slapped with a felony, two to five years in prison and up to a $5,000 fine. But with legalized pot, Puerto Rico can use the tax revenues and fees it collects to help pay off the debt.
Given Puerto Rico's heightened media visibility, no doubt the world now has its eyes on how the United States will respond to the needs of the island, one of the last colonies in the world.
Although a variety of suggestions have been proposed to save the island from default, here are four reasons a clearly articulated, multi-year transition to independence is the only long-term viable solution for Puerto Rico.
Puerto Rico's economic crisis is nothing to laugh about. Drawing comparisons to Greece and Detroit could be illustrative, but the context of Puerto Rico's case is far different. Neither Detroit nor Greece has a state monopoly over energy responsible for a significant portion of their debt.
Skewed media coverage can cause policymakers and members of the American public to draw erroneous conclusions. If you genuinely want to understand why Puerto Rico is mired in a crisis, but you disregard or downplay the lack of political and civil rights in the territory, then you are missing a core point.
The economic crisis in the island is suffocating the people. Water and electricity bills have skyrocketed. Public services are far, way far, from good.
Puerto Rico is on its way to one of the largest debt defaults in history, right up there with Greece and Argentina. Economic stagnation, or contraction, is not merely a result of an economic cycle but of major long term problems that make the island uncompetitive. But is there a way out?
If Greece's creditors seek to help the country eventually stand on its own two feet, it should provide the debt relief that could make Greek products more competitive internationally. Supporting businesses is one side of the equation. The other part is investing in human capital.