I understand Padilla is meeting the problem head-on with the statement but he is not leaving himself room to negotiate. Creditors will likely allow for a restructuring of payments but the terms will be less favorable given the Governor had already shown his hand. How is Puerto Rico expected to pay off the debt with a shrinking tax base? As more people leave the island, the tax base shrinks. The current state is only encouraging a larger and more drastic exodus. Creditors also realize the impact of this scenario.
Act 20/22 were supposed to help alleviate the problem but it's a case of too little too late. The tax benefits largely only benefit the Americans moving to Puerto Rico to take advantage of them. The island was supposed to experience the secondary effect of increased consumption from the 20/22 participants
Where do the opportunities lie? Land! Property! Real estate! These assets will become distressed as the island navigates the debt fiasco. Given the relationship with the U.S., it is highly likely that actions and regulations will be favorable for Puerto Rico. Relief in the form of direct investment, favorable legislative actions to promote American business, or bailout will all promote a recovery in Puerto Rican hard assets. When will it happen and timeline? Considering the layers of uncertainty, only long term plays are viable.
