Puerto Rico Suffers from High Living Costs and a Bad Economy

According to a recent report from Puerto Rico’s Institute of Statistics, groceries are 21 percent more expensive than the United States, according to The Guardian. The cost of living is also 13-percent higher than many urban areas in the United States. The commonwealth’s high living costs does not bode well for an economy that cannot pay off its debts and is on the verge of bankruptcy. The economy is $72 billion in debt, and the governor has stated that the debt is not repayable.

According to a recent report from Puerto Rico’s Institute of Statistics, groceries are 21 percent more expensive than the United States, according to The Guardian. The cost of living is also 13-percent higher than many urban areas in the United States. The commonwealth’s high living costs does not bode well for an economy that cannot pay off its debts and is on the verge of bankruptcy. The economy is $72 billion in debt, and the governor has stated that the debt is not repayable.

To make matters worse, over 40 percent of Puerto Rico’s population is entrenched in poverty, and the average citizen only makes $19,000 a year. Everyday items such as cornflakes, sugar and lettuce have seen price increases across the board, only shrinking the amount of money people can put back into the economy. For instance, a bag of potato chips will set shoppers back $4.55, with the U.S. average being $3.49, and bread hovers around $2.39 compared to $1.39 for the United States. High grocery costs are one thing, but housing is becoming increasingly difficult to find, as the average price of a home is $310,500, which is more than an average of $304,000 in the United States. With Puerto Rico’s tough job market and lowered incomes, many people simply cannot afford housing market prices.

Some analysts are surprised at Puerto Rico’s downturn, given its once rising status as a contending economy. Various tax laws enacted by the U.S. Congress allowed many companies to amass a great deal of profits, switching Puerto Rico from a largely agrarian economy to one centered on manufacturing. However, this all changed when Congress allowed the tax credits to expire in 2005, and Puerto Rico has been steeped in a recession since 2006. The United States also did not do Puerto Rico any favors upon closing various prominent military bases around the region, causing massive job layoffs and hundreds of millions of dollars in lost revenue annually.

At this point, Puerto Rico may have no other option but to ask the U.S. president and Congress to allow the commonwealth and its public corporations, which provide water and electricity services, to enter bankruptcy for restructuring the debt. Some analysts place direct blame on the United States. For example, Puerto Rico was largely exempt from taxes on its debt, allowing the commonwealth to borrow more and at low rates. Puerto is third in the largest debt issuer at the state and local levels in the United States, ranking behind New York and California.