Archive for the ‘business’ Category

Running out of people’s money: Puerto Rico UPDATED

Tuesday, August 4th, 2015

Puerto Rico just defaulted for the first time

The commonwealth paid a mere $628,000 toward a $58 million debt bill due Monday to creditors of its Public Finance Corporation. This will hurt the island’s residents, not Wall Street. The debt is mostly owned by ordinary Puerto Ricans through credit unions.

And (emphasis added)

On Monday, Puerto Rico had to make a monthly debt payment of $483 million. Puerto Rico paid all its debt due except the $58 million due to creditors of its Public Finance Corporation. The government is strategically choosing not to pay the PFC debt because the entities that own the debt, credit unions and ordinary Puerto Ricans, have little legal power to fight back in court.

The Economist:

The PFC’s 99% missed instalment [sic] is unlikely to set off an immediate cascade of lawsuits or further defaults. Its paper is technically nothing more than a “moral obligation”, backed only by a flimsy letter of credit from the Government Development Bank (GDB), and is mostly held by pliant local investors like credit unions. Just three days before the PFC stiffed its lenders, the GDB duly made a $170m payment on its own debt. Nonetheless, the PFC’s default sharply accelerates Puerto Rico’s debt crisis: it extinguishes any hope that the island’s creditors might all emerge unscathed, and cuts off whatever access to short-term financing the government might have had left.

It may well have been Mr García Padilla’s intention to provoke a sense of urgency.. . .After the island passed its own version of Chapter Nine last year, federal courts struck it down, on the grounds that municipal bankruptcy falls exclusively under federal jurisdiction. That left the governor with no choice but to beseech America’s Congress to bring his territory under Chapter Nine, a plea that has so far fallen on deaf ears. By letting the weakest link in its payment chain snap, Puerto Rico has made the spectre of a chaotic, piecemeal default—which once seemed remote—immediate. In theory, that could spur Congress into taking swift action.

Even if the ploy of taking-oneself-hostage were to succeed, however, the extension of Chapter Nine to America’s overseas territories would not be a cure-all. That law would not cover the restructuring of Puerto Rico’s $13 billion of “general-obligation” (GO) debt, which is protected by a constitutional pledge that it must be paid before all other obligations,

What it comes down to is, Puerto Rico has triggered the biggest municipal default in US history (emphasis added)

It implies a sweeping default on much of its $72 billion debt burden, equal to 100% of Puerto Rico’s gross national product (GNP) and more than five times the debt ratio of California or Texas.

That’s what massive overspending looks like.

Former Puerto Rico Governor Luis Fortuño discusses how Puerto Rico can avoid defaulting on debt.

Instapundit calls it “RUNNING OUT OF OTHER PEOPLE’S MONEY.” Yes, but they government defaulted by screwing the people who elected them first, as I linked to above,

“The government is strategically choosing not to pay the PFC debt because the entities that own the debt, credit unions and ordinary Puerto Ricans, have little legal power to fight back in court.”

They ran out of their own people’s money, but you can be assured they will continue to spend like crazy because 20% of the workforce is on government jobs, which gives the ruling party a built-in constituency. As I have pointed out before, it’s in the governor’s best interest to keep those happy, even if it means to default on all debt in order to meet payroll.

Puerto Rico: The bets are on

Friday, July 24th, 2015

Wall Street, Seeing Opportunity, Invests in Struggling Hotels in Puerto Rico

On Thursday, the island received a lift from one of its biggest cheerleaders, John A. Paulson, the billionaire hedge fund manager, who is investing $20 million for the San Juan Beach Hotel. This week, Fundamental Advisors, another Wall Street investment firm, bought the iconic El San Juan Resort and Casino for $71 million from Blackstone.

Romantic fools, or do they know something we don’t?

Puerto Rico: Default looms

Friday, July 17th, 2015

Headlines today:
How Socialism Destroyed Puerto Rico, And Why More Defaults Are Looming

Puerto Rico’s PFC did not transfer funds for bond payment -filing. The PFC missed a payment of $93.7 million to a trustee. If it doesn’t make an additional payment on August 1, it could constitute a default.

Mother Jones thinks
Puerto Rico Is Doomed, and It’s Our Fault | Mother Jones. Don’t listen to Mother. The blame for Puerto Rico’s upcoming default rests squarely on the Puerto Ricans’ shoulders.
Stop the infantilizing.

NYSE down

Wednesday, July 8th, 2015

Was DUQU Virus Responsible for Today’s Widespread Computer Crashes?

Is This What The First World Cyber War Looks Like: Global Real Time Cyber Attack Map

The NYSE halted trading due to “technical glitch”, but NYSE stocks are trading at NASDAQ. The NYSE says all open orders will be cancelled.

You can watch live at CNBC.

United Airlines computers were down earlier today.

Pretty sure there was a Tom Clancy novel about this.

ADD: apparently Zerohedge & WSJ down, too, now back up.

Argentina: Cristina cheers for Greece

Tuesday, July 7th, 2015

Greece has cheerleaders,

Latin America celebrates Greek austerity ‘No’ vote

Argentine President Cristina Kirchner, whose country defaulted on a mountain of debt more than a decade ago, called the vote a victory.

“Greece: decisive victory for democracy and dignity,” she wrote on Facebook Sunday, expressing Argentina’s “solidarity with the brave Greek people and their government.”

“We hope Europe and its leaders understand the message from the vote. You cannot require anyone to sign their own death certificate,” she said.

Evo Morales and Raul Castro joined in.

Pope Francis says let Greeks have dignity, while urging responsible decisions

China joins Greece, Puerto Rico on investors’ watchlists

Puerto Rico: Countdown to the Greecespot

Tuesday, June 30th, 2015

If you didn’t see this coming, you haven’t been paying attention.

From Drudge:


Lurking debt threatens cities, states…

Reality hits San Juan streets amid Puerto Rico debt woes…

Businesses shuttered…

Residents living day to day…

Fallout Will Hit Florida…

Investors scramble to avoid losses…

Can’t say we didn’t see it coming: From the October 26, 2013 Economist, Puerto Rico
Greece in the Caribbean
Stuck with a real debt crisis in its back yard, America can learn from Europe’s Aegean follies

Like Greece, Puerto Rico is a chronically uncompetitive place locked in a currency union with a richer, more productive neighbour. The island’s economy is also dominated by a vast, inefficient near-Athenian public sector. And, as with Greece, there are fears that a chaotic default could precipitate a far bigger crisis by driving away investors, and pushing up borrowing costs in America’s near-$4-trillion market for state and local bonds.

I have yet to find any moves by the Puerto Rican government towards structural reforms that would stimulate economic growth, reduce bureaucracy (and the accompanying red tape), and foster a business-friendly environment. Instead, the governor tells bondholders to “share the sacrifices.”

Welcome to the Greecespot.

Brazil: Dilma wants U.S. investment

Tuesday, June 30th, 2015

Dilma Rousseff is visiting Pres. Obama today, and she’s saying she welcomes U.S. business . . . while keeping Brazil’s protectionism:

Brazil’s President Seeks Investment During U.S. VisitBusiness friendly environment is needed to attract investors and restore growth, Rousseff says

Her visit comes amid a widening investigation into alleged price-fixing and corruption surrounding government-controlled oil giant Petróleo Brasileiro SA, or Petrobras. Several Brazilian companies are being investigated in connection with the scandal. Some are cooperating with investigators; some have denied wrongdoing. Some of those executives who have made plea deals have alleged that Ms. Rousseff’s campaign received some of the illegal funds.

Her party created the Foro de Sao Paulo  (initially named Meeting of Left and Anti-imperialist Parties and Organizations of Latin America) in 1990.

Obama: We Have Common Values with Brazil; Similar History – “Similar history”?

Argentina: The tissue’s race to the bottom

Thursday, June 18th, 2015

Tissue World Magazine reports on Argentina: the impact of inflation and price controls on tissue.

Missing all the strength consumers need, with the softness they want* (emphasis added):

For many consumers, waiting for the crash has become something of a national pastime, with tissue consumers perhaps even being forced back to the bidet, the now little-used convenience still found in the corner of most Argentinian bathrooms. While it is typically rare for consumers to trade out of tissue, the situation in Argentina appears so precarious that for many this is becoming a very real prospect.

In the absence of a sensible combination of comfort, absorbency and value**, Argentinians console themselves by repeating the mantra,

While things are bad, consumers have by all accounts tended to remain quite sanguine as the situation is far worse in Venezuela

H/t Iowahawk’s Twitter feed,

Mexico: House Votes to Remove Country-of-Origin Labels on Meat Sold in U.S.

Friday, June 12th, 2015

House Votes to Remove Country-of-Origin Labels on Meat Sold in U.S.Washington seeks to prevent a long battle over the labels with Canada and Mexico. It’s not just meat,

Wednesday’s 300-131 vote repealing the country-of-origin labels for meat follows a series of rulings by the World Trade Organization finding the labeling discriminates against animals imported from Canada and Mexico.

Canada and Mexico won a final WTO ruling in May, and are now seeking retaliatory actions valued at a combined $3.7 billion a year. Canada has threatened trade restrictions on a range of U.S. products, including meat, wine, chocolate, jewelry and furniture.

I can understand why tracking Canadian and Mexican imported animals slaughtered in the U.S. is expensive and inefficient; however, I have qualms when it comes to chicken from China.

Linked to by Pirate’s Cove. Thank you!

Ecuador: Hotlanta PR doesn’t come cheap

Friday, June 12th, 2015

The government of Ecuador has paid at least $867,000 to Miren LLC, based in the Suwanee suburb of Atlanta, an American public relations firm run by a former high-level government official, reports Lachlan Markay:
Documents Reveal Ecuadorian PR Efforts in Suburban AtlantaEcuador’s attorney general has paid at least $867,000 for PR services

Miren is owned by Tomas Peribonio, Ecuador’s former Minister of Commerce and Industry. According to a U.S. public relations consultant with whom he has worked, Peribonio served as an adviser to the attorney general, Diego Garcia, while being paid for PR services in the United States.

The attorney general’s expenditure reports say the payments were for “for media services, public relations, and imaging of [the Attorney General] and the Republic of Ecuador in major U.S. cities.”
. . .
A Justice Department spokesman confirmed that neither Miren nor Peribonio is or ever has been registered as an agent of a foreign government.

Compared to the $6.4 million contract between the government of Ecuador and Brooklyn-based MCSquared, the $867,000 is chump change.