Puerto Rican budget and statehood wrangles will worsen

Significance

Fiscal pressures are causing controversy in Puerto Rico, but so too is fiscal policy-making. On July 5, Governor Ricardo Rossello announced that he would seek a court injunction that would prevent the budget he has signed from being disallowed in favour of the nearly 9-billion-dollar budget devised by the US-based federal fiscal control board.

Impacts

• Domestic and foreign investor confidence in Puerto Rico is likely to fall further, complicating economic recovery and reform.
• The episode will further damage Puerto Rican politicians’ credibility when they make representations to Washington.
• The polarisation over Puerto Rico’s long-term future, and the US statehood question, will deepen.
• Delays in repairing the island’s economy, and then reforming it for the future, could see worker outflows.