July 2017, Lara Merling, Kevin Cashman, Jake Johnston, and Mark Weisbrot
As Puerto Rico enters the legal debt restructuring process, this paper examines the future prospects for an economy that has had no growth over the last ten years — a lost decade. The fiscal plan approved by Puerto Rico’s Financial Oversight Board, according to their own projections, foresee approximately another lost decade; this paper shows that negative growth is likely to extend even further than that. Nor will the proposed restructuring satisfy creditors, who may then further impede economic recovery by taking legal action in an attempt to collect the full value of the bonds they hold. The paper also notes the recent historical and structural causes of the economy’s decline, which led to the debt crisis; and that these, too, will need to be addressed if Puerto Rico is ever to have a sustainable recovery.