Latin American Economy & Business - February 2014 (ISSN 1741-7430)

The downgrading of Puerto Rico’s sovereign rating to below investment grade by the three major agencies merely confirms the perceptions of market investors. A financial crisis is not imminent, just as it wasn’t in October last year, when there was widespread comment in the mainstream media about the government’s financial problems. In essence, the government’s funding costs have risen – and it is increasingly being supported by High Yield, rather than US Municipal Bond investors. The main problem remains stagnation in an economy that has enjoyed only one year of growth since 2006.