Monday, October 6, 2008

Tough Economic Times

Puerto Rico's economy has officially been in recession for the past two years. According to the government figures in 2007, unemployment was estimated to be around 10.7% (note: this number should be a lot higher today) and inflation is also in the double digits. In addition, the government is continuously running a budget deficit. Everywhere you go, people are shaking their heads with a worried look on their face, and say "la economía está bien mala." Translation: the economy is really bad. None of the local banks have gone bankrupt, or in desperate need of federal assistance just yet, as they weren't neck-deep in the subprime mortgage mess, but they are certainly not susceptible to what goes on in the mainland U.S.

The global credit crisis means it will also be tougher for Puerto Ricans to borrow money. It's safe to say that most consumers here rely heavily on their credit cards. For the longest time, there was zero sales tax here in Puerto Rico. This changed two years ago, when the government slapped on a 7% sales tax. Certain essential items are exempt, like bread, milk and other staples. The cost of living in the island is certainly not cheap. Here are some examples:

1) Low-fat milk (1 gallon): $5.60
2) Gala apples (1 pound): $1.89
3) Brocoli (1 bunch): $3.50
4) Holsum white bread (1 loaf): $2.67
5) Farm-raised salmon (1 pound): $7.99

Please keep in mind the average income in Puerto Rico is only $18,400. Also, the agricultural sector here makes up a very small percentage of the economy. As a result, practically everything here is imported. Generally speaking, wages are also much higher in the mainland. I suppose this explains why so many Puerto Ricans have migrated to the States in search for better economic opportunities. With such a high cost of living, which just seems to be going nowhere but up, everybody's wallet is definitely feeling the pinch. This also helps to explain why the economy is of utmost concern for the majority of Puerto Ricans in the upcoming elections.

(Cartoon by KAL, The Economist)

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