Hedge Funds: Puerto Rico Will Be Fine If Puerto Ricans Just Pay Their Taxes

If the Times' translation can be trusted, this woman is advertising her refusal to pay taxes to a policeman.

According to the hedge funds owed a few bucks by the U.S. territory, Gov. Alejandro García Padilla’s statement that the island’s debt is “unpayable” is only true if the taxes it is already owed are uncollectable. Or just uncollected.

“There may be an issue of liquidity in the short term,” in Puerto Rico, “but the debt itself, in global terms, is sustainable,” said Claudio Loser, the chief executive of Centennial Group Latin America, which will officially release its report Monday morning. The consulting firm, based in Washington, was hired several months ago by the group of hedge funds and other investment firms to analyze Puerto Rico’s economy and finances….

The economists also said they were not suggesting that Puerto Rico ought to impose any more tax increases on residents who were already paying the taxes they owe. Mr. Loser said the commonwealth was managing to collect far less of the taxes due than the 50 states, and that it would not have to increase tax rates at all if it could capture what residents are now supposed to be paying.

This is not exactly the collaborative, all-hands-on-deck solution that the Puerto Rican government, which would like a five-year time-out from paying its bills, has in mind.

In a response to the report Sunday night, Víctor Suárez, chief of staff to Gov. García Padilla said, “The simple fact remains that extreme austerity placed on Puerto Ricans with less than a comprehensive effort from all stakeholders is not a viable solution for an economy already on its knees.”

Puerto Rico Should Collect Unpaid Taxes, Hedge Fund-Backed Economists Say [DealBook]