Puerto Rico Economic Pulse ©

February 2016: Can PR Remain a Going Concern?

Analysis of recent financial and economic events

On February 2nd, 2016, the PR Department of Treasury released a draft of the FY 2014 unaudited Commonwealth of PR Basic Financial Statements. Management’s Letter indicated “The risks and uncertainties facing the Commonwealth, together with other factors described in the basic financial statements, have led management to conclude that there is substantial doubt as to the ability of the Primary Government …to continue as a going concern..” Furthermore, “if the Commonwealth’s financial condition does not improve, … [it] will not be able to honor all of its obligations as they come due while at the same time providing essential government services.” This shocking statement discloses a long history of deficit financing during the past decade. Since the announcement that PR’s public debt was not payable, the island has had no access to the bond market and its liquidity problems have worsened. This issue presents an analysis of current fiscal problems and government’s proposal, which does not address the real causes of our fiscal problems.