Business is booming.

Puerto Rico debt deal highlights the dilemma of pension liabilities


Puerto Rico’s five-year old bankruptcy was blundering to a conclusion in court this week. As is now customary in US courts, bondholders are being handed deep haircuts on their face value whilst pensions for retired public sector employees are left intact.

And as is the case with other restructurings, working employees face the burden of meeting those retirement costs, both broadly in economic costs and specific benefits.

Under the plan, currently working judges and teachers have their defined benefit pension rights frozen in place, and are now shifted to defined contribution plans.

Meanwhile, the island faces population loss and a contracting economy. This echoes what has happened elsewhere when governments become insolvent and the demographics spiral down.

The old age dependency burden on young and productive workers gives them a big incentive to move to countries with lower wage deductions to pay for pensions and national debt service.

In Puerto Rico’s case, the numbers are clouded by the complex structure of the territory’s outstanding debt, estimated at $70bn in 2015, and $49bn of unfunded pension liabilities.

The deal before the court will cut annual debt service from a (suspended) $3.9bn today to no more than $1.1bn. It will cut some of the $33bn of outstanding bonds to $7.4bn.

Some US bond investors will be attracted to the prospect of receiving US tax-free interest payments on those new bonds from the newly de-levered territory. But they will be hostages to hurricanes and the government’s $2.3bn in annual retirement costs. “Structural reforms” to the economy have little local support, and Congress long ago lost interest in Puerto Rico.

Whatever the detailed terms and initial interest rate of territory’s new bonds, buyers should remember that, when pushed to the wall, governments care about politics, not documentation. And while US law formally favours creditors, that is not how events have played out.

In the case of Detroit’s 2013 bankruptcy, unsecured bondholders took a 26 per cent haircut on their claims, while pensioners gave up no more than 4.5 per cent of their month payments and agreed to a voluntary restructuring of their health plan.

California’s state pension manager, Calpers, has refused to agree in municipal bankruptcies to any cuts in pensions that its funds manage. Bankrupt cities such as Stockton and Vallejo have defaulted on bonds, restructured health benefits and cut services, but Calpers-managed pensions are still intact.

Calpers’ obduracy has an influence on US investors even larger than its $469bn in assets. As the largest public pension fund in the US, it will always get the attention of its fellow state funds, as well asset managers and major corporations.

Still, basic law, documentation precedent and economics do not entirely explain the endurance of pensions over other claims. More fundamental, I believe, is the reality that creditors depend on officials who are pensioners themselves.

However, officials cannot extract pension or debt service payments from a people who are no longer there. The employment to population ratio for Puerto Rico peaked in 2006, and the US as a whole may have just reached that point.

Using figures from the OECD, a multilateral economic agency, the US working age population appears to have topped in May 2020 at 207.3m. This would suggest that future US growth will become more dependent on net immigration.

The EU is already in that position, although you might not think so given recent violent images of Belarus regime’s contrived border crisis, or the public’s reaction to the 2015 migrant surge. According to report issued this week by Scope Ratings, a Berlin sovereign rating agency, even today’s unpopular levels of migration are below those needed to maintain member countries’ future creditworthiness.

According to Alvise Lennkh, an analyst with Scope, “restrictions on migration are a huge problem and a huge mistake. We need elevated migration in Europe. That definitely influences our view on sovereign credit, and we cannot sustain our welfare without that migration.”

That “welfare”, according to Lennkh and his colleagues, includes pensions and old age care. “We are concerned that assumptions for the sustainability of state level pensions in Europe are highly optimistic.”

Scope Ratings’ analysis of Europe eerily recalls the 2011 sovereign Greek debt haircuts and 2015 IMF payment default. Even before the Greek sovereign defaults, cuts in pension payments to then-current retirees had begun in 2010 and became severe for most between 2012 and 2013. This had all been preceded by a decline in the working age population after 2008.

Yet the rest of Europe does not see this coming. Neither did Puerto Rico.

Source link

  1. ConradTyler says

    thank you so much for this astonishing site me and my phratr loved this message and penetration black hat seo

  2. MilesPrawn says

    электрический штабелер

  3. WilliamidetA says

    самоходный штабелер

  4. Anthonyvar says

    самоходный ножничный подъемник

  5. JesseJal says

    электрическая рохля

  6. ThomasKAH says

    самоходная тележка

  7. DanielceR says

    телескопический подъемник

  8. DennisWhite says

    подъемник мачтовый

  9. RichardBor says

    мачтовый подъемник

  10. Andrewmaisy says

    вышка телескопическая

  11. BrentBeaut says

    подъемный стол

  12. bitcoincasino says

    Your writing is perfect and complete. bitcoincasino However, I think it will be more wonderful if your post includes additional topics that I am thinking of. I have a lot of posts on my site similar to your topic. Would you like to visit once?

  13. majorsite says

    I am very impressed with your writing majorsite I couldn’t think of this, but it’s amazing! I wrote several posts similar to this one, but please come and see!

  14. Jqnxek says

    purchase levofloxacin sale levofloxacin canada

  15. Rdsfzf says

    avodart 0.5mg ca order zofran 4mg generic buy ondansetron 8mg generic

  16. Qyrcop says

    cheap aldactone buy fluconazole 200mg sale order fluconazole pill

  17. Cysthe says

    generic ampicillin bactrim 960mg tablet buy erythromycin 250mg online cheap

  18. Eufshz says

    buy fildena online cheap careprost sale methocarbamol ca

  19. Xcqnvj says

    suhagra sale generic suhagra 50mg estradiol over the counter

  20. Alpkcj says

    purchase lamictal sale cheap minipress buy retin without prescription

  21. Hahfeb says

    tadalafil 20mg pills cheap avana order voltaren generic

  22. Pmzpiu says

    purchase indocin without prescription buy generic lamisil trimox price

  23. Hddxha says

    cialis india cheap pills online order viagra for sale

  24. Kgeqcr says

    buy anastrozole 1 mg arimidex price order viagra 50mg online

  25. Ficply says

    acheter 40mg tadalafil acheter 200mg sildenafil sildenafil 50mg en france

  26. Tqomlp says

    order prednisone for sale best price cialis cost of viagra 100mg

  27. Jotdps says

    ramipril 5mg cost purchase ramipril online cheap order azelastine without prescription

  28. Jckout says

    order clonidine 0.1mg minocycline 50mg price spiriva over the counter

  29. Nvixfs says

    order buspar 10mg pills amiodarone 200mg without prescription ditropan 2.5mg usa

  30. Rzjwlx says

    terazosin 5mg generic buy terazosin 5mg for sale oral azulfidine 500 mg

  31. Enxvpc says

    order alendronate 35mg generic panadol for sale order pepcid without prescription

  32. Nuboya says

    olmesartan online buy oral acetazolamide acetazolamide uk

  33. Pmnnur says

    order prograf buy ursodiol generic ursodiol sale

  34. Ykuxzc says

    order imdur sale isosorbide 20mg brand telmisartan 20mg for sale

  35. Xfkrwv says

    molnupiravir 200mg cheap naprosyn 250mg us buy prevacid 15mg without prescription

  36. Bkyfzk says

    order zoloft 50mg Approved viagra pharmacy order viagra for sale

  37. Rrpgmq says

    tadalafil 20mg cost viagra price australia buy generic sildenafil 50mg

  38. Jecngd says

    buy naltrexone generic albenza 400 mg over the counter cheap aripiprazole

  39. Chqlge says

    dapsone 100 mg price perindopril 4mg drug order aceon 8mg generic

  40. Agxczg says

    buy provera 10mg biltricide 600mg ca generic periactin

  41. Lvdqqh says

    modafinil price stromectol 6mg ca ivermectin cream uk

  42. Qmenub says

    buy luvox 50mg buy cymbalta 40mg without prescription brand glucotrol

  43. Vfypai says

    oral isotretinoin 40mg order deltasone 20mg without prescription buy prednisone 40mg without prescription

  44. Vgvomj says

    generic nootropil best viagra sites online us pharmacy viagra

  45. Hchsco says

    zithromax 250mg usa zithromax 500mg cost order neurontin 800mg pills

  46. Qofzzo says

    buy tadalafil 5mg without prescription order cialis pills sildenafil next day delivery usa

  47. Xatwii says

    buy furosemide 40mg generic doxycycline 100mg without prescription buy hydroxychloroquine 200mg generic

  48. Qxatrq says

    cialis 40mg uk generic clomipramine order anafranil 25mg pills

  49. Lfoeeu says

    purchase chloroquine for sale cenforce 50mg pill olumiant for sale online

  50. Ihcnfi says

    purchase itraconazole generic buy generic progesterone tinidazole 300mg sale

  51. Mjuzgq says

    buy metformin without prescription lipitor pill order cialis 20mg

  52. Oieqzb says

    buy zyprexa 10mg generic bystolic tablet buy diovan online

  53. Cqwrfr says

    buy amlodipine 5mg without prescription tadalafil 20mg pill cialis 5mg pill

  54. Oulcvq says

    buy omeprazole 20mg without prescription casino moons online casino play for real online casino games

  55. Jfkrfo says

    zyvox 600 mg drug best online gambling casino online games for real money

  56. Wvszyv says

    order metoprolol online cheap tenormin 100mg usa levitra 10mg for sale

  57. Tyojnv says

    help writing papers best real casino online online casinos usa

  58. alanya escort says

    Very well presented. Every quote was awesome and thanks for sharing the content. Keep sharing and keep motivating others.

  59. Kpwauf says

    cheap levitra 20mg buy levitra 20mg pills buy methylprednisolone 16 mg

  60. Sruxhf says

    term papers for sale online purchase essays buy viagra 100mg pill

  61. Ymkvaa says

    clomiphene 100mg oral purchase clomiphene pill roulette online

  62. Qgeecs says

    us pharmacy cialis purchase tadalafil online viagra overnight

  63. Hdsqze says

    aristocort medication triamcinolone 10mg canada clarinex 5mg cheap

  64. Kyqgfx says

    priligy 60mg without prescription buy generic synthroid 150mcg buy synthroid 75mcg sale

  65. Mieupd says

    tadalafil for sale buy viagra 100mg sale order viagra 50mg sale

  66. Pudpai says

    xenical 60mg cheap buy generic acyclovir oral acyclovir

  67. Jctewc says

    order allopurinol 100mg for sale buy zyloprim 300mg pill purchase ezetimibe

  68. Cyteki says

    buy methotrexate without prescription reglan 10mg canada metoclopramide ca

  69. Rcszew says

    losartan 25mg sale order topamax 100mg for sale topamax 100mg usa

  70. Uymxqr says

    buy imitrex 50mg online cheap avodart 0.5mg generic buy avodart without prescription

  71. Gdtrez says

    colchicine 0.5mg pills real money slot machines real money casino

  72. Vbdzoh says

    zantac 150mg sale buy ranitidine 300mg pills buy celecoxib 200mg pills

  73. Qqdncg says

    online card games real casino online online gambling games

  74. Wgmuws says

    purchase flomax generic order aldactone 25mg without prescription spironolactone generic

  75. Sodkck says

    genuine cialis cialis walmart cipro sale

  76. Skibml says

    simvastatin 10mg us zocor 10mg us finasteride drug

  77. Txcosu says

    order flagyl 400mg cost bactrim 480mg purchase bactrim online

  78. Uiepba says

    fluconazole 100mg over the counter fluconazole 100mg cheap sildenafil 100mg price

  79. Jespfn says

    purchase keflex online order generic keflex 250mg brand erythromycin 250mg

  80. Tudqps says

    over the counter cialis female cialis tadalafil buy sildenafil 50mg sale

  81. Ezxilf says

    sildenafil india real cialis sites tadalafil 40mg sale

  82. Ninhvm says

    buy generic ceftin 250mg careprost generic robaxin online order

  83. Swzneb says

    best poker online real money tadalafil 20mg oral order cialis 20mg for sale

  84. Epauus says

    order trazodone 100mg generic order aurogra 100mg generic purchase aurogra online cheap

  85. Svuryy says

    paper assistance best website for writing essays ivermectin for humans for sale

  86. Rbahrj says

    viagra sildenafil 100mg sildenafil pharmacy lamictal 200mg generic

  87. Kdbfgc says

    buy prednisone isotretinoin online order amoxil 500mg over the counter

  88. Ewyvug says

    buy viagra 100mg pill buy generic cialis cialis 20mg sale

  89. Gpneuy says

    buy azithromycin 500mg pill gabapentin pill buy gabapentin 800mg without prescription

  90. Edards says

    order furosemide 40mg online cheap plaquenil pills buy hydroxychloroquine 400mg generic

  91. Katyta says

    order prednisone 5mg pills prednisone canada purchase vermox online

  92. Ltupzc says

    order sildenafil pill order fildena 100mg generic purchase budesonide sale

  93. Jcyvwb says

    buy tretinoin sale order generic avanafil 100mg brand avana

  94. Oygpqu says

    purchase tadalafil generic voltaren 100mg for sale order indocin 75mg capsule

  95. Atrdmv says

    buy terbinafine 250mg pill order lamisil 250mg buy trimox

  96. Eodtji says

    naprosyn order online prevacid medication buy lansoprazole pills

  97. Nplmos says

    biaxin 250mg sale cheap clonidine 0.1mg antivert 25 mg drug

  98. Coxhbh says

    proventil 100 mcg us buy protonix 40mg pill order cipro 1000mg without prescription

  99. Feisin says

    spiriva 9 mcg pills minocin tablet terazosin 1mg us

  100. Kpujze says

    buy montelukast 5mg online cheap brand singulair 5mg sildenafil 25 mg

  101. Noxzrz says

    cialis next day delivery Cialis next day delivery world tavern poker online

  102. Vgpsly says

    oral tadalafil 5mg Buy generic cialis cialis 40mg brand

  103. Htbien says

    best online casino for money hollywood casino online casino online usa

  104. Tcjszn says

    ivermectin oral 0 8 amantadine 100mg without prescription buy generic avlosulfon 100mg

  105. Uttsff says

    wind creek casino online play online casinos for usa players casino online real money

  106. Bynwst says

    order nifedipine 10mg online nifedipine 10mg over the counter fexofenadine 180mg pill

  107. 스포츠중계 says

    A motivating discussion is definitely worth comment. I believe that you should publish more about this subject, it might not be a“오피스북”your feeds or even I achievement you get entry to constantly rapidly

  108. Bgzofe says

    best online casino games us blackjack online writing assignments

  109. Mbwvko says

    purchase altace for sale arcoxia 60mg oral purchase arcoxia pills

  110. Hpmpyc says

    i need help with my assignment azulfidine medication azulfidine 500 mg pill

  111. Gtwcpu says

    buy doxycycline generic cleocin 150mg usa purchase cleocin pills

  112. Jxtogn says

    purchase mesalamine without prescription irbesartan usa avapro 150mg cheap

  113. Lwpnxf says

    order olmesartan 20mg pill verapamil 120mg drug divalproex 250mg price

  114. Guwzar says

    temovate brand buspirone 10mg over the counter order amiodarone pills

  115. Yipije says

    order diamox 250 mg online cheap isosorbide over the counter imuran 25mg pill

  116. Yxdbnc says

    lanoxin 250 mg canada buy molnunat pills oral molnunat 200mg

  117. Xmvvld says

    carvedilol 25mg generic ditropan uk elavil pills

  118. Frffpo says

    order fosamax 70mg cost alendronate 35mg order ibuprofen online

  119. Lwnwtt says

    generic pepcid 20mg order famotidine generic brand remeron

  120. Ffubsl says

    order requip pills calcitriol medication trandate cheap

  121. Plxhpz says

    tricor 160mg over the counter viagra 50mg sildenafil 100mg without prescription

  122. cheap pharmacy says
  123. Kcyaqb says

    tadalafil 40mg us Buy discount cialis online order viagra sale

  124. Qiqdjz says

    cialis 20mg brand best ed drug male erection pills

  125. Sthyue says

    order provigil 100mg sale purchase modafinil pill purchase phenergan pills

  126. Yqwdru says

    prednisone cost cheap prednisone 20mg cheap amoxil for sale

  127. Cucvhw says

    buy fildena generic finasteride 5mg generic proscar 1mg drug

  128. Kxhaor says

    zofran canada amoxil 250mg ca buy sulfamethoxazole

  129. 총판사이트 says

    Hi! I just would like to give you a big thumbs up for the excellent info you’ve got right here on this post. I will be returning to your blog for more soon. 총판사이트 I’ve book marked it for later!

  130. Tvtylo says

    buy accutane 20mg sale order accutane 40mg pill zithromax pills

  131. Jlcazi says

    buy ventolin 2mg for sale levoxyl uk purchase amoxiclav generic

Leave A Reply

Your email address will not be published.