It’s 2 a.m. at the La Factoria bar in Puerto Rico’s Old San Juan, a hipster joint with a sagging couch, tile floors, and Christmas lights that wouldn’t be out of place in Brooklyn’s Williamsburg. While Get Lucky plays, tipsy couples slink out the doors onto the colonial city’s cobblestone streets and into this warm April night. At the bar, a 28-year-old hedge fund trader—the type of person who posts his SAT results on his LinkedIn page—is ranting about the tax code. He’s obsessed with it, complaining that the U.S. is the only major country taxing citizens on their worldwide income, no matter where they reside. That’s why he moved here. ... Struggling to emerge from an almost decadelong economic slump, the Puerto Rican government signed a law 18 months ago that creates a tax haven for U.S. citizens. If they live on the island for at least 183 days a year, they pay minimal or no taxes, and unlike with a move to Singapore or Bermuda, Americans don’t have to turn in their passports. (Puerto Ricans are U.S. citizens but cannot vote in federal elections.) About 200 traders, private equity moguls, and entrepreneurs have already moved or committed to moving, according to Puerto Rico’s Department of Economic Development and Commerce, and billionaire John Paulson is spearheading a drive to entice others to join them. ... Most of the new arrivals downplay Puerto Rico’s fiscal problems, which include runaway pension obligations and an underground economy that leads to low tax collection rates. They’re also convinced their 20-year contracts with the government guaranteeing the tax benefits are sacrosanct. They will survive the inevitable Internal Revenue Service audits, they say, as long as they follow the residency rules.
“We’ve lost credibility in the market,” said Sergio Marxuach, director for policy development at the Center for a New Economy, a nonpartisan research institute in San Juan, the capital. “We used all that money to finance current expenditures, to refinance debt that had little or no impact on the real economy.” ... Colon de Armas said Puerto Rico’s leaders haven’t done enough to make local industry competitive in the global economy and are instead counting on tax incentives or other assistance from Washington to protect businesses. The global slowdown and Detroit’s bankruptcy are less important, he said. ... “We were in recession when the world was having good economic times,” he said. “It’s true that the world has had bad economic times recently, but we are uniquely depressed.” ... Besides the economy, rising crime is also persuading people to leave. The homicide rate is about 27 for every 100,000 people, compared with the U.S. average of 4.7, according to 2012 data from the FBI.
Something else must be driving the fall in Chinese equities. ... What could that be? Have China’s banks overextended themselves more recently? Central planning or not, as we all learned in 2008, a surge in shadow banking can lead to terrible things. ... I am no expert on China, but it is very tempting to conclude that the Chinese gambling spirit has simply migrated from Macau to Shanghai. ... Relative to 1999, when the euro was first introduced as an accounting currency, Greek workers had at one point (around 2009-10) enjoyed almost twice the wage growth compared to the average German worker. Although much of the advantage has since been given up, Greek workers have still out performed their German colleagues since the introduction of the euro – at least as far as wage growth is concerned ... Ukraine, the Middle East and Puerto Rico are all in the dumps – but for three very different reasons. ... the deflation talk is likely to blossom up again, and several countries on either side of the Atlantic could be flirting with recession later this year or early next. Consequently, yields on long bonds could fall further, and stock markets may be in troubled waters for a while. I don’t expect this to be anywhere nearly as bad as 2008, though. It is a normal cyclical downturn, which may not even be strong enough to be classified as a recession. But a slowdown it is. ... I think the U.S. economy will substantially outperform most other OECD economies over the medium as well as the long term – even if there is a modest cyclical slowdown just around the corner.
Of the 1,301 mosquito-borne cases recorded in the U.S., 97 percent of them are in Puerto Rico, neither a state nor a sovereign nation, but whose people are, nonetheless, U.S. citizens. As of early June, the start of Puerto Rico's long, hot and rainy summer, there are 1,259 recorded cases on the island, though some health officials believe the true number may be more than 80,000. ... unlike Ebola, which causes gruesome symptoms often followed by death, Zika is somewhat of a stealth virus. Most people infected will have no symptoms. Some may come down with conjunctivitis or break out in a skin rash, or experience muscle or joint pain or run a fever. Within a week or so, all of the symptoms, if they even emerged, are gone. In a certain number of cases, however, this may only be the beginning. ... the CDC estimates that it could cost $10 million to care for one microcephalic child. Zika, which seems to be particularly drawn to neurological tissue, may also cause swelling of the brain or spinal cord in adults, and has been linked to Guillain-Barré syndrome, an autoimmune neurological condition that can cause severe, if usually temporary, paralysis. ... But the scariest aspect of Zika is how little scientists actually know about it. ... Zika was first discovered in 1947 in the Zika Forest of Uganda, where researchers were studying the impact of mosquito-borne viruses on rhesus monkeys. Over the next 60 years, there were only 14 documented cases of Zika in humans, mainly in Africa and parts of southern Asia. ... given the prevalence of a host of factors, ranging from effective sanitation to the ubiquity of window screens and air conditioning, this kind of outbreak anywhere in the continental U.S., and much of Europe, for that matter, is unlikely.