Tuesday, May 02, 2006

Puerto Rico On Brink of Crisis

And today’s Latin American collapsing country is Puerto Rico.

Puerto Rico’s Government has literally run out of money and can’t pay salaries: “Government closed schools and suspended other nonessential public services on Monday after last-minute bargaining failed to yield a budget deal”, Reuters reported

The reason behind the budgetary crisis is all but a secret: Government
employs 30% of the island work force. Payroll represents more than 80% of government spending.

Since one out of three Puerto Ricans is employed by Government, the potential economic effect of a shut down would be devastating.

Observers expect the crisis to be solved in a matter of days. They reckon Government will resort to taxation and borrow money to keep going.

Hopefully this crisis will help the case for restructuring.


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