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Puerto Rico was the poorest and most struggling part of America even before Hurricane Maria hit in September 2017. Its bonds had been in default for over a year, and were trading at around 60 cents on the dollar before the hurricane knocked them down to a low of less than 23 cents in December 2017.

Expand chart
Data: FactSet; Chart: Chris Canipe/Axios

Today, those bonds are back to their pre-hurricane levels, and Puerto Rican debt has proven to be 2018's top bond investment.

Very few people are happy about this development, beyond the distressed-debt specialists who own the bonds.

  • The back-of-the-envelope math is simple: If Puerto Rico has $70 billion in debt, and it gets paid off at (say) 71 cents on the dollar, that's $50 billion being sent off the island at precisely the moment that the Puerto Rican economy needs all the financial help it can get.
  • That $50 billion outflow will do nothing to help, and quite a lot to harm, the island's recovery from Hurricane Maria.
  • Puerto Rico will end up receiving about $82 billion of disaster relief money — much more than most people expected it would get, this time last year.
  • As ever, official disaster-relief sums dwarf charitable inflows: The Red Cross raised $72 million for Puerto Rico, including the value of donated goods. That's less than 0.1% of what's going to end up being spent by the federal government.
  • Trump has accused “inept politicians” in Puerto Rico of using disaster relief money to repay their debts. And though all disaster relief money is going to be used on disaster relief, it's certainly true that without the $82 billion coming in, there's no way that Puerto Rico could afford to spend $50 billion paying back its debts.

Puerto Rico needs that $50 billion, even after the disaster relief inflows. Its pension liabilities alone are more than $50 billion.

  • More than 40% of the population currently lives below the poverty line, including about 60% of children on the island.
  • Since the financial crisis, Puerto Rican GNP has shrunk by 20%, labor participation has hit a record low of 38%, and the island’s population has fallen by 10%.
  • Student enrollment has declined by more than 50% since its peak in 1980, and by about 33% in the past decade.

Puerto Rico has mind-boggling amounts of debt, given its size and the fact that its population is going to continue to shrink indefinitely.

  • The island's debt load is 55% of GDP, compared to a US state average of 2.6%. It’s also equivalent to 102% of state personal income, vs an average for U.S. states of just 2.9%.

The bottom line: Bondholders will always push to receive as much as they can possibly get. But Trump and the island's elected politicians are right to worry about money flowing out, just when Puerto Rico needs it most.

Go deeper

World leaders react to "new dawn in America" under Biden administration

President Biden reacts delivers his inaugural address on the West Front of the U.S. Capitol on Wednesday. Photo: Alex Wong/Getty Images

World leaders have pledged to work with President Biden on issues including the COVID-19 pandemic and climate change, with many praising his move to begin the formal process for the U.S. to rejoin the Paris Climate Agreement.

The big picture: Several leaders noted the swift shift from former President Trump's "America First" policy to Biden's action to re-engage with the world and rebuild alliances.

Updated 4 hours ago - Politics & Policy

In photos: The Biden and Harris inauguration

President Biden and first lady Jill Biden watch a fireworks show on the National Mall from the Truman Balcony at the White House on Wednesday night. Photo: Chip Somodevilla/Getty Images

President Biden signed his first executive orders into law from the Oval Office on Wednesday evening after walking in a brief inaugural parade to the White House with first lady Jill Biden and members of their family. He was inaugurated with Vice President Kamala Harris at the U.S. Capitol on Wednesday morning.

Why it matters: Many of Biden's day one actions immediately reverse key Trump administration policies, including rejoining the Paris Agreement and the World Health Organization, launching a racial equity initiative and reversing the Muslim travel ban.

Republicans pledge to set aside differences and work with Biden

President Biden speaks to Sen. Mitch McConnell after being sworn in at the West Front of the U.S. Capitol on Wednesday. Photo: Erin Schaff-Pool/Getty Images

Several Republicans praised President Biden's calls for unity during his inaugural address on Wednesday and pledged to work together for the benefit of the American people.

Why it matters: The Democrats only have a slim majority in the Senate and Biden will likely need to work with the GOP to pass his legislative agenda.