–Saturday, August 15, 2015
Yesterday, Wall Street made it clear, that it wants Puerto Ricans to leave the island.
In the middle of a historic drought, a rating service in New York City demanded the highest possible interest rates (aka “yield”) from the Puerto Rico Aqueduct and Sewer Authority (PRASA).
PRASA provides water to 97% of Puerto Rico residents and commercial enterprises, and sewer service to 59% of its residents. If PRASA cannot function, there will be no water in Puerto Rico. Without PRASA, Puerto Ricans will die of thirst.
Knowing all of this, the Moody’s Investor Service today assigned a “Caa3” rating to $750 million worth of PRASA bonds. This puts PRASA deep into Junk Bond territory.
A Caa3 rating also means that the interest rate (or yield) on PRASA bonds will be very high. The buyers of PRASA bonds will make extreme profits: all paid by the people of Puerto Rico.
To give you an idea of these profits, here are the yields from recent Wall Street investments in the Puerto Rico Electrical Power Authority (PREPA) and Puerto Rico general obligation bonds:
When you factor in the triple tax exemption for both of these bonds, the PREPA and general obligation bonds are currently providing yields of 20% and 17% annually.
This is the type of yield that the PRASA bondholders will receive…17% to 20%.
Let’s place this in context:
At this very moment, Puerto Ricans are suffering through a severe drought. Water is being rationed in every town – even in San Juan.
People wait to use an osmosis water purifying machine in San Juan. 24-hour water rationing has been announced in the metropolitan area.
For the past two months, the island government has enforced drinking water rationing for 200,000 users in the San Juan area, permitting households to draw water only every third day. Rivers and streams are drying up at a record-breaking pace. It’s become one of the worst droughts in the history of Puerto Rico.
The island is becoming desperate for clean drinking water, in every single town.
In the midst of this crisis, Wall Street is jacking up the price of water…by declaring the PRASA bonds as “Junk Bonds”…so that hedge funds and investment banks can make higher profits.
This is the sad situation in Puerto Rico.
It is why 400,000 Puerto Ricans have moved out of the island over the past 12 years.
If this keeps up much longer, Puerto Rico is going to need a magic faucet…just to keep from dying of thirst.
As ridiculous as this photo looks, it is less ridiculous than expecting Puerto Ricans, whose water rates have risen by 67% in the last eight years, to pay even more for their water, just to meet the interest payments on the “Junk Bonds” from Wall Street.
This can’t go on much longer.
A profound change is needed in Puerto Rico.