Spain occupied Puerto Rico beginning in 1493, when Christopher Columbus arrived on the island. Puerto Rico was ceded to the United States after the end of the SpanishAmerican War in 1898. The US then refused to pay the colony’s creditors, claiming they were owed a dreadful amount.
Before 1898, the people of Puerto Rico had Spanish citizenship; after 1898, the people of Puerto Rico did not have either independent nor colonial citizenship. President William McKinley signed the Foraker Act in April 1900, allowing only the House of Representatives of Puerto Rico to be elected by popular vote. Puerto Rico was characterized as an unincorporated “territory appurtenant and belonging to the United States, but not a part of the United States under the revenue clauses of the Constitution” in the Insular Cases, a series of Supreme Court decisions from the early 1900s.
Although legally defined as a commonwealth or protectorate, Juan R. Torruella considered Puerto Rico’s relationship with the United States to be colonial because the US Federal Government has ultimate economic and political decision-making authority and Puerto Rican citizens do not have full constitutional rights. Puerto Rico is subject to US legislation due to its political position. One of these laws is the Jones-Shafroth Act, which exempts interest payments from bonds issued by the government of Puerto Rico and its subdivisions from federal, state, and municipal income taxes (the so-called “triple tax exemption”), regardless of the bondholder’s location. Puerto Rican bonds were appealing to municipal bond investors because of this right. Because of this, Puerto Rico was able to issue bonds that were always attractive to municipal investors, regardless of the state of the island’s finances. As a result, Puerto Rico began issuing debt to cover its expenses, a practice that it has continued since 1973. The island also started issuing debt to pay off earlier debt, as well as refinancing older debt with low interest rates with debt with higher interest rates.
Puerto Rico was officially prohibited from declaring bankruptcy under Chapter 9 of Title 11 of the United States Code by Congress in 1984. Congress withdrew the tax credits between 1996 and 2006, resulting in the loss of 80,000 employment on the island and caused its population to drop and economy to contract in all but one year since the Great Recession began. Because Puerto Rico’s constitution stipulates that “all available resources” must first be used to pay the Commonwealth’s general obligation bonds, the Commonwealth began issuing Puerto Rico Sales Tax Revenue Bonds in 2006 to circumvent the constitution’s restrictions by being paid directly into a separate urgent interest fund. The sales tax has been raised to 11%. In 1958, the last property tax assessment was completed. Between February 4 and 11, 2014, three bond credit rating agencies downgraded Puerto Rico’s bonds to non-investment grade (commonly known as “junk status” or speculative-grade) when the island’s outstanding debt reached $71 billion, roughly equal to 68 percent of GDP. Bond acceleration clauses were activated as a result of the downgrading, requiring Puerto Rico to repay some debt instruments in months rather than years. Investors were fearful that Puerto Rico might default on its debt at some point. Puerto Rico’s ability to issue bonds in the future would be harmed if it defaulted. Puerto Rico now claims that it will be unable to maintain current operations unless dramatic actions are taken, which could result in public upheaval. Protests against the austerity measures have already taken place. Puerto Rico’s present debt problem is the result of these events, as well as a succession of governmental financial deficits and a recession.
What is the status of Puerto Rico bonds?
MIAMI, Florida On Tuesday, a federal judge approved Puerto Rico’s exit from bankruptcy under the largest public-sector debt restructuring plan in US history, nearly five years after the financially beleaguered territory claimed it couldn’t pay its creditors.
Hurricanes Irma and Maria, a series of earthquakes, and the coronavirus epidemic have only exacerbated Puerto Rico’s economic woes since it declared bankruptcy.
The restructuring proposal will cut the government of Puerto Rico’s debt, which totals $33 billion, by nearly 80%, to $7.4 billion. In addition, the agreement will save the government approximately $50 billion in debt payments.
Puerto Rico will also begin repaying creditors, albeit at a reduced rate, something it has not done in years. In 2015, the government announced that it would be unable to repay its debts.
How much money does PR owe?
The public debt of Puerto Rico could be lowered from $70 billion to $34 billion, with debt from the Public Buildings Authority and general obligations bonds cut from $18.8 billion to $7.4 billion.
“It will save Puerto Rico a lot of money,” Pierluisi added. “We’ll be paying a third of what we were paying in debt service before the bankruptcy.”
“I am sure that it is an affordable plan of adjustment, and hopefully we will be out of bankruptcy very soon,” he said.
How are bonds in Puerto Rico taxed?
Federal, state, and local taxes are not levied on bonds issued by the government of Puerto Rico and its subdivisions (so called “triple tax exemption”). Unlike other triple tax-exempt bonds, however, Puerto Rican bonds maintain their exemption independent of the bond holder’s location. This has made Puerto Rican bonds very appealing to municipal investors, who may benefit from owning a bond issued by a state or municipality other than their own. This benefit seeks to overcome the limitation imposed by municipal bonds with triple tax exemptions, which only apply to bond holders who live in the state or municipal subdivision that issues them.
This, among other factors, prompted Puerto Rico to issue bonds totaling US$71 billion, or roughly 68 percent of the island’s gross domestic product (GDP). Puerto Rico’s government debt crisis was precipitated by these acts, as well as a sequence of negative cash flows and a downturn.
When did the bonds of Puerto Rico default?
Puerto Rico first defaulted on its general obligation bonds in July 2016, when it failed to pay creditors about $1 billion, and it hasn’t made any payments since.
“It is a very positive development for Puerto Rico that a cross section of large bondholders has worked with the Oversight Board to develop a consensual restructuring agreement that will expedite the Commonwealth’s exit from bankruptcy, respect the lawful priority of valid public debt, and help restore capital markets access,” said Susheel Kirpalani, an attorney from Quinn Emanuel Urquhart & Sullivan who represents bondholders in the Lawful Constitutional Deficit Resolution.
According to public disclosures, hedge funds GoldenTree Asset Management, Monarch Alternative Capital, Whitebox Advisors, and Taconic Capital possess nearly $1.4 billion in constitutionally backed debt.
According to a person familiar with the settlement agreement, the proposal, which took about three months to negotiate, is expected to be lodged with the court within 30 days, with bondholders anticipating final approval by early 2020.
The Puerto Rican government issued a statement rejecting the agreement, citing the administration’s strong opposition to pension changes, which are included in the updated budgetary plan on which the restructuring agreement is based.
In a statement, Christian Sobrino Vega, the CEO and president of the Puerto Rico Fiscal Agency and Financial Advisory Authority, said, “Not one word of the PSA (Plan Support Agreement) is considered acceptable to AAFAF.” The Spanish acronym for the agency’s name is AAFAF.
“And we can firmly state that no legislation, executive action, or other administrative approval required from the Puerto Rico government will be taken to implement an agreement that directly or indirectly supports a Plan of Adjustment that decreases payments to our retirees,” Sobrino Vega said.
After being appointed in 2017 to monitor the $73 billion reorganization, which is the largest in the history of the US municipal bond market, the island’s oversight board has made some progress in 2019.
U.S. District Judge Laura Taylor Swain, who is supervising the unprecedented bankruptcy-like proceedings, authorized a plan in February to restructure approximately $17 billion in sales tax-backed bonds, dubbed COFINA for its Spanish name. Senior bondholders received 93 percent of their money back, while junior bondholders received 53 percent.
In addition, the court granted a debt restructure for the Government Development Bank worth roughly $4 billion.
A tentative arrangement for around $8 billion in debt issued by the island’s troubled electric power authority has also been reached. The monitoring board also announced a tentative agreement on Wednesday to restructure more than $50 billion in unfunded pension liabilities.
Is Puerto Rico a tax haven?
Puerto Rico is a U.S. unincorporated territory, and Puerto Ricans are citizens of the United States; nevertheless, Puerto Rico is not a state, but rather a U.S. insular area. As a result, while all citizens of Puerto Rico pay federal taxes, many are exempt from paying federal income taxes. Customs taxes, federal commodity taxes, and federal payroll taxes are all examples of federal taxes in the United States (Social Security, Medicare, and Unemployment taxes).
Employees and businesses in Puerto Rico are not required to pay federal income taxes. Only federal government employees in Puerto Rico, residents who are members of the United States military, those with income sources outside of Puerto Rico, individuals or corporations who do business with the federal government, and Puerto Rico-based corporations intending to send funds to the United States are required by federal law to pay federal income tax.
What was Spain’s motivation for wanting Puerto Rico?
In the 16th century, the Spanish began bringing additional slaves from Africa in order to produce cash crops like as sugar cane, ginger, tobacco, and coffee. They also spent a lot of money to turn San Juan into a fortified military outpost, constructing a fortified governor’s palace (La Fortaleza) and two massive forts (San Felipe del Morro and San Cristobál) that could withstand repeated attacks from rival powers like England, the Netherlands, and France.
Puerto Rico has different degrees of economic and political autonomy under Spanish colonial control over the centuries. However, by the mid-nineteenth century, a wave of independence movements had spread throughout Spain’s South American territories, including Puerto Rico.
Are ZIP codes used in Puerto Rico?
If you’re looking for Puerto Rico zip codes and area codes, you’ve come to the right place. We’ve put up an easy-to-understand guide with statistics, an image map, and a sortable/searchable table containing all of Puerto Rico’s zip codes and area codes.
“What is the zip code for Puerto Rico…the area code?” is a frequently requested question. or “What is the San Juan, Puerto Rico zip code?” It’s not a simple answer, to be sure. In Puerto Rico’s 78 municipalities, which are similar to counties in the United States, there are currently 176 postal codes in use. Puerto Rico’s “Mainland” has 174 zip codes. The offshore islands of Vieques and Culebra each have their own zip code, bringing the total to 176. San Juan, Puerto Rico’s capital, is also a municipality with 36 postal codes on its own. The United States Postal Service (USPS) is in charge of mail delivery in Puerto Rico, just as it is in the United States. Standard, P.O. Box, and Unique (to an organization or firm) are among the USPS zip code classifications or “Types” that appear in the table below.
Puerto Rico’s major phone and mobile/cellphone area codes are 787 and 939, respectively.
939 was added primarily to accommodate the influx of new mobile phone users.
The country code, like that of the United States, is “+1” (i.e. 1+787+###+####).
Calling Puerto Rico from within the United States is the same as calling out-of-state (same as calling California from New York).
Below is an interactive chart that we created to help you look for zip codes and/or area codes for cities, towns, municipalities, and other places in Puerto Rico (or vice versa).
To get the information you need, either (1) type a location, zip code, or other criteria into the “Search:” box at the top right of the table below, or (2) sort any column by simply clicking on the column heading.
The table displays 25 rows of data “entries” per page by default.
You can adjust this setting at the upper left of the table to show more or fewer rows if needed.
How did Puerto Rico become so indebted?
The debt issue in Puerto Rico has numerous causes. Investors in Puerto Rican municipal bonds, in particular, have benefited from preferential tax treatment for many years. This perk was taken advantage of by bond investors from all 50 states who purchased Puerto Rican bonds. When a government issues bonds, it is essentially lending money to bondholders with interest. Puerto Rico issued too much bond debt, owing in part to the tax benefit, and began relying on borrowed cash from bond issues to balance its budget.