A beautiful tragedy is still a tragedy.  That’s the way I see the U.S. territory of Puerto Rico.  I fell in love with her beauty in 1970 when I first visited her, with her lush hills surrounded by white beaches and crystal-clear azure water.  I worried about her in 2006 when the U.S. withdrew the income tax credits that had transformed her agricultural economy into a growing manufacturing one.  In 2013, Detroit became the largest municipal bankruptcy in history at $8.9 billion.  This week, beautiful Puerto Rico became the largest at $73 billion – over eight times worse than Detroit.  That’s a tragedy!

It has been a long, slow slide for this island of less than 3.5 million, beginning in 2006.  It is the only predominantly Catholic nation that has been losing population.  With gallows humor, residents joke that some citizens leave their key in the front door and their car in the airport parking lot, when they leave, for the benefit of those that cannot leave.  

Despite this “bankruptcy” filing, hope for Puerto Rico is on life-support, as the negotiations unfold with bond-owners, that include numerous “vulture” hedge funds and contentious bond insurers.  And, nobody has addressed the additional $45 billion in unfunded liabilities from their overly-generous pension obligations.  Again, it has been joked among economists that Puerto Rico existed for the sole purpose of paying pensions.

A comparison with Venezuela, another Latin American nation-state that is circling the drain, is both interesting and useful.  With the large tax credits in Puerto Rico and the oil riches in Venezuela, both economies boomed.  Some of that new wealth was spent on infrastructure and healthcare, but most was of it was wasted on providing unnecessary jobs and lavish pensions.  There was no financial room for an economic slowdown, which is always inevitable.  That is the similarity between them.

Their differences are obvious. Venezuela became just another socialist dictatorship, while Puerto Rico retained democracy as its political system and capitalism as an economic system.  Puerto Rico will suffer but survive without killing its people.  Venezuela is already killing its people.  It will not survive, as we know it, and will disappear into the drain.  If you have family or friends in Venezuela, just send them a one-way plane ticket.  If you have family or friends in Puerto Rico, send them a round-trip ticket.

Puerto Rico was a beautiful place and will be again . . . but not for years.  Venezuela will be a bloody state . . . hopefully not for years.