No easy way for Puerto Rico to overhaul government debt

30 Jun 2015 | Author: | No comments yet »

Puerto Rican debt crisis could hit South Florida, say business leaders.

As Puerto Rico’s government looms on the edge of a $72 billion default, local business and community leaders with ties to the island territory voiced concerns that a prolonged crisis on the island could hurt South Florida’s economy. SAN JUAN, Puerto Rico (AP) — Puerto Rico’s governor says he will create a financial team that will meet with bondholders and seek a moratorium on debt payments. Many South Floridians do business in Puerto Rico and vice versa, said Luis De Rosa, president of the Puerto Rican Chamber of Commerce of South Florida. She said she expects tourists will weigh their options more carefully as they plan future vacations, though — and will likely reroute to the Dominican Republic, St. Exporters of consumer goods such as cars and clothing have always found willing trade partners in San Juan. “If God forbid we default,” he said, “it would delay shipping.

Martin, Aruba and Miami. “Miami may benefit from it,” agreed John Cook, president of QuoteWright, a travel insurance comparison website headquartered in Hartford, Connecticut. “I would suspect that if people are concerned about going to Puerto Rico, there are only two other warm places you can travel without a passport: That would be Miami and the Virgin Islands.” Pay with a credit card. Buy travel insurance that offers “default coverage.” This option will cover a traveler if the tour operator, airline or cruise line goes bankrupt. A crisis looms.” Still, De Rosa said he is optimistic that the Puerto Rico will reach an arrangement with its creditors — or, in the worst case, that Congress will pass legislation allowing the U.S. territory to file for bankruptcy, something current law forbids. “I don’t think it would be in the interest of the United States to allow this to happen,” De Rosa said. “There are so many Puerto Rican-owned businesses here.

Census, Puerto Ricans — who are U.S. citizens — owned nearly 17,000 businesses in Miami-Dade County in 2007, the last year for which Census data is available. Florida has become an attractive new home for Puerto Ricans seeking better jobs after a deep recession pummeled the island’s economy during the financial crisis. In the meantime, Puerto Rican banks could be threatened by a government default, which might have ramifications for financial institutions in South Florida, too. The island’s biggest banks both have major offices in Florida: First Bancorp., which owns FirstBank Florida, has its regional headquarters in Miami, and BancoPopular North America is based in Orlando. (Doral Bank, Puerto Rico’s third-biggest bank, also had offices in Miami but was shuttered and sold by federal regulators earlier this year.) Shares of Popular fell 10 percent Monday, and First Bancorp was down 13 percent, Reuters reported. Ken Thomas, a Miami-based banking industry analyst, said that average account holders don’t need to worry about about bank failures because the federal government insures deposits of up to $250,000.

A bigger problem could arise if South Florida banks have bought large chunks of Puerto Rican debt, as have many investment and pension funds around the country.

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