Puerto Rico Economy Still Destroying Wealth

No matter what any politicians or news agencies would like to claim that Puerto Rico's economy has turned the corner, I say bollocks.  Any minor fluctuations in GDP is merely lipstick on a pig, because the evidence continues to tell a different story.

According to Reuters, since July 2012, 3 different blocks of Puerto Rico government bonds have been downgraded. The three blocks account for $20 billion in Puerto Rico government-backed bonds. 

While I don't have the details on the exact return on the bonds, but it is common practice to increase the dividend rate on bonds if their ratings decrease.  The logic goes something like this.  The riskier a bond is or becomes, the higher the return.  Bond issuers must promise those higher returns in order to lure investors to take a gamble on the high risk bonds.

In short, since July, instead of the Puerto Rican government owing investors $20 billion + their original rate of return, let's say 7%.  We now owe $20 billion + 8.5%, as an example.  The bottom line is the Puerto Rican debt has increased, so we now owe more, but have not received any increase in tax revenues.  Hard to make any budget work when debts increase and revenues remain the same.  It all points to a weaker economic stability when these bonds are due.