Puerto Rico Economic Pulse ©

August 2010: The Bankruptcy Epidemic

Facts behind this growing trend in Puerto Rico

Bankruptcy filings in PR rose 25% in calendar 2009 compared with the previous year, according to statistics published by the Boletín de PR. This takes filings to their highest point since tougher bankruptcy laws were introduced at the end of 2005. That change brought a spike of bankruptcies, as companies and individuals rushed to declare themselves broke under the more lenient old regime. The data suggest that an older trend is reasserting itself. This is more bad news for PR. These numbers reflect the impact of the current recession, which started in FY2006 and continues to the present. And judging by the rise in unemployment, lower pay, massive layoffs, fewer people with health insurance, the mortgage and foreclosure crisis, depressed sales, and tighter credit, the situation may get worse rather than better. This issue examines bankruptcy in PR, its historic trends, changes in bankruptcy law, most affected economic sectors and municipalities, and finally explains what bankruptcies entail for our economy.