Laden with debt, its economy in recession: Is the US territory of Puerto Rico poised to become another Greece?
The Caribbean island of 3.7 million has sent shivers through investors holding its $65 billion in bonds and through the administration of President Barack Obama, still trying to shake the country free of the 2008 financial crisis.
The White House has sent a team to help the territory strengthen its finances and economy, as debt rating agencies keep a close watch for signs of further weakness and financial analysts speculate of a possible default.
The debt load, which has doubled over ten years, now amounts to 93 percent of the island's GDP, more than troubled Spain, though still far short of Greece's 176 percent.
That has sparked worries, especially after the city of Detroit, once the power center of the US auto industry, filed for bankruptcy.
"Puerto Rico's challenges didn't develop overnight, and they will not be solved overnight," the White House task force for Puerto Rico said candidly last month, announcing its plans to support the island.
Annexed by the United States in 1898, the mainly Spanish-speaking island is larger in population than many of the 50 US states.
As a territory it operates under a hybrid system, with its own elected territorial government but under US laws, oversight from the US Congress, and some federal financial support.
The island's economy has been stuck in recession since 2006 -- with a brief rebound last year -- and is expected to contract a further 0.8 percent in 2014.
That record has left Puerto Rico with an official unemployment rate of 14.7 percent, more than double that of the United States.
"There's a lot of pessimism in the air," said Argeo Quinones-Perez, professor of economics at the University of Puerto Rico.
He said that citizens continue to leave the island due to the dismal economic prospects, with 27,000 fleeing in 2012.
The economy was once more dynamic, built up by a Washington-backed strategy known as Operation Bootstrap that attracted investment to build an industrial sector on top of the island's traditional sugar plantation economy.
Manufacturers, pharmaceutical and even bio-technology firms have set up in Puerto Rico, drawn by corporate tax exemptions and environmental standards lower than in the US mainland.
But the tax breaks were wound up in 2006, pulling out a crucial support for the economy just as the rest of the United States began slipping toward recession and the global economy slowed.
Quinones-Perez said the island's development model has to be entirely rethought, now that the competition for foreign investment has gotten much tougher.
"When this strategy was adopted after the WWII, the amount of countries that were competing to attract foreign investment was perhaps 50 in the world. Now you have close to 200."
The island began pumping out bonds over the past decade to raise funds to boost economic development. US pension funds readily sucked up the debt, attracted by high yields and tax breaks.
But that has not turned into economic growth or reversed the island's fiscal deficit. Today the Puerto Rican government has to pay out 14 percent of its budget for debt service.
The governor, Alejandro Garcia Padilla, insists that it will pay its creditors.
"Puerto Rico cannot default. It's a moral obligation, I will pay," he said last month.
He also said he had not asked Washington, which furnishes more than one-fifth of the Puerto Rico budget, for a bailout.
"We are not in need to go to the markets right now, we have no liquidity problems," he added.
Still, time is short to fix the problems, and the options are limited. Like the 50 US states, the island commonwealth is legally blocked from declaring bankruptcy.
It is also hampered, like Greece, by its currency: since Puerto Rico uses the US dollar, it cannot devalue its way back to competitiveness.
Justin Velez-Hagan, founder of The National Puerto Rican Chamber of Commerce, says restructuring the debt it almost inevitable, even if it risks damaging the island's image in the eyes of investors.
"That's something that Puerto Rico could maybe look at doing now," rather than putting it off to later, he told AFP.
"It would be a way to tell the markets: we're pulling the band-aid off, we're moving forward."