Latin American Economy & Business - October 2013 (ISSN 1741-7430)

In late October 2013, the government of Puerto Rico mounted a major PR campaign to reassure investors in its General Obligation (GO) bonds, and other securities issued by the government and its agencies, that they will be paid. In the first nine-and-a-half months of this year, the GOs had fallen in price by around one-fifth, and had grossly underperformed other securities in the US US$3.7trn municipal bond market. Although Standard & Poor's Ratings Services (S&P) confirmed the rating of the GOs at BBB-, the lowest investment grade, they have been trading at yields normally associated with high yield bonds. In part because of the City of Detroit's filing for Chapter 9 bankruptcy in mid-July 2013, there has been very widespread media comment on the considerable problems, both structural and financial, of Puerto Rico.