The stark reality is that the US is no longer an endless source of risk-free capital for Puerto Rico.
The future of the island’s economy may ultimately rest with the hedge funds that are now monitoring the government’s performance.
Puerto Rico’s future is dim. If the hedge funds have their way, the Puerto Rican government will extract more revenue from its beleaguered citizens and small businesses, slash government services and employment, and enforce the austerity measures dictated by the hedge funds.
Yet a politically unstable, economically devastated Puerto Rico is not good for the US’ image. The Federal Reserve is monitoring the situation, eager not to let the situation deteriorate much further.
However, a Band-Aid approach will not fix Puerto Rico’s utter dependency on the US for its survival.
The US must develop a long-term program to redefine Puerto Rico’s territorial relationship. The US has no other option.
Statehood for Puerto Rico is not a realistic option: neither Puerto Ricans nor the US want an independent Puerto Rico. But it is also the case that the long-standing “commonwealth relationship” doesn’t work.
If nothing is done, Puerto Rico may well have to endure an economic and social crisis akin to that of the Great Depression that it managed to escape in the 1930s.