"The State of Puerto Ricans, 2013" collects in a single report the most current data on social, economic, and civic conditions of the Puerto Rican population in the United States

Is Puerto Rico’s Population Drop Really a ‘Brain Drain’?

Tuesday July 8th, 2014 at 8:21 AM

Puerto Rico Report

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Puerto Rico is seeing an exodus: The territory’s population has been decreasing by about 100 every day for the past few years, according to U.S. Census Bureau figures. Most of the drop is due to Puerto Ricans moving to the States for the better life that a State offers than a territory does.

A sampling of headlines of news media reports on the migration makes the general media take on the issue clear:

Puerto Rico, they say, plagued with economic troubles and high crime, is losing its best and brightest to the mainland.

However, the Center for Puerto Rican Studies questions whether it is accurate to refer to this exodus as a “brain drain,” as many journalists have. Its research concluded that the loss has been largely among young people — but not just young professionals or even young workers.

Many of the people moving to the mainland are children moving with their families. Among the working people, there seems to be a normal distribution of skills and education, with people in blue collar fields as likely to leave as professionals, according to the Center study.

The result, it says, is not that Puerto Rico is losing its professionals so much as it is that Puerto Rico is losing its youth. More than 77% of the people leaving for the mainland are under age 45 and nearly all the rest are under 65. Add in the number of Puerto Ricans who came to the States in their youth and choose to retire to Puerto Rico, and the result is a substantial level of aging in the population.

Carlos Vargas-Ramos, one of the researchers, says, ““Puerto Rico’s best resource is its people, its human capital, no matter the skill set… Puerto Rico is losing its most natural, precious resource” referring to the young, who are the future of any community or society.

Whatever the demographics, it is also clear that so many Puerto Ricans are voting with airline tickets for statehood for themselves and their families that the population is in serious decline. The territory, which had 3.809 million people in the year 2000, had only 3.721 million in 2010, and the Census Bureau’s estimate was that this number fell to 3.615 million a year ago.

Is There Really a Brain Drain

Tuesday July 8th, 2014 at 8:21 AM

Centro De Estudios Puertorriqueños

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Is There Really
A Brain Drain Migration to the U.S.?

By Clarisel Gonzalez

While the common perception is that Puerto Rico is losing its best, brightest and youngest professionals, who are leaving the island in droves for jobs and better opportunities in the United States, Centro researcher Kurt Birson said there is no evidence of a brain drain on the island.

In his article “Puerto Rican Migration in the 21st Century: Is There a Brain Drain?” published in Centro’s new book The State of Puerto Ricans 2013, Birson counters the prevailing brain drain notion, noting that yes, there is an exodus of mostly younger Puerto Ricans leaving the island, but the data does not support that they are – as it has been long perceived, widely accepted and commonly reported in the media – largely professionals. Just recently the Wall Street Journal ran just such a story on its front-page, focusing on how the island’s woes are sparking an exodus, particularly among many of the young professionals.

Following the method used of the Institute of Statistics of Puerto Rico (2010), Centro used data from the Census Bureau’s annual American Community Survey (ACS) and the Puerto Rico Community Survey (PRCS) one–year estimates to create a profile of Puerto Ricans migrating between the United States and Puerto Rico. By comparing ACS and PRCS, Centro was able to identify migrants by an individual’s residence one year prior to the survey.

Data for emigrants derived from the ACS for 2000-2011, Birson said, show that this “particular cohort of migrants tended to be younger, neither more nor less educated, more attached to the labor force and made up of more blue-collar workers than their counterparts on the island who stayed behind.”

In his article, Birson finds instead that “emigrants were less educated those remaining on the islan with the majority (55 percent of those leaving the island having a high school education or less. Fifteen percent held a bachelor’s degree, and just five percent had attained a graduate degree, a slightly smaller representation than for those remaining in Puerto Rico.”

Among those migrating to the U.S., men had lower educational attainment than women, representing a larger percentage with a high school diploma or less than the women, while a higher percentage of women had either some college or a bachelor’s degree.

Although emigrants did not constitute the island’s most educated or most skilled workers, Birson said migration flows have surely meant the loss of significant proportion of workers to the United States. These emigration patterns, he said, “do represent a collective departure of Puerto Ricans from all corners of society that threatens to further debilitate an already struggling Puerto Rican economy.”

Data show that younger people are leaving the island, probably because of high unemployment there. More than 77 percent of emigrants were younger than 45 years old, compared with nearly 62 percent remaining on the island.  Nearly 66 percent of emigrants were of working age (between 18 and 65). “The highest percentage of migrants (almost 27 percent) came from the group under 18 years old, suggesting that when people choose to emigrate to the U.S., they migrate as households,” Birson said.

Research shows that emigrants, whether professional or not, joined the labor force after arriving stateside, but they were underrepresented in professional jobs and overrepresented in lower-skill industries, especially among men. They were especially involved in the construction, maintenance and agriculture industries.

While emigrants show higher rates of participating in the labor force in the U.S. compared to those who remain in Puerto Rico, they also experience higher rates of unemployment (The Labor Force category includes both employed and unemployed individuals). Emigrants were unemployed at a rate of 24.6 percent after their migration, compared with the 17.2 percent unemployment rate for Puerto Ricans who remained on the island during the same period. “This surprising finding may be the result of several factors,” Birson said, such as English language ability, work history or the competitive job market.

Centro researcher Carlos Vargas-Ramos, one of the editors of The State of Puerto Ricans 2013, said media reports have been putting too much attention on the professionals leaving the island and not on the unskilled and semi-skilled population when data shows that overall migrants leaving the island generally are representative of the population that remains there.

Vargas-Ramos said the impetus to emigrate is primarily due to the economic conditions on the island, which are once again creating an unsustainable environment that leads to migration to the United States of the island’s professionals and most skilled workers as well as the unskilled and semi- skilled populations. The migration issue, he said, speaks to the real problem: the Puerto Rican government has to stimulate the economy in a sustainable way and, regardless of political party, come up with a different economic policy for the island that works.

“Puerto Rico’s best resource is its people, its human capital, no matter the skill set, "he said" and the island is not utilizing it in the most productive manner. Puerto Rico is losing its most natural, precious resource.”

You can read the entire report in The State of Puerto Ricans 2013, available at the Centro Store at www.centropr-store.com

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The State of Puerto Ricans 2013

Tuesday July 8th, 2014 at 8:20 AM

Centropr Store: Latest News

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The State of Puerto Ricans 2013

Edited by Edwin Meléndez and Carlos Vargas Ramos

The State of Puerto Ricans, 2013 collects in a single report the most current data on social, economic, and civic conditions of the Puerto Rican population in the United States available from governmental sources, mostly from the U.S. Census Bureau. The report presents a pictureof endurance and resiliency in the midst of declining opportunity.

• ISBN/EAN13:1878483722 / 9781878483720
• Publication Date:Sep 11 2013
• Language:English
• Page Count:92
• Product dimensions:8.5" x 8.5"
• Color:Full Color with Bleed

Puerto Rico's Debt Woes Could Spread

Tuesday July 8th, 2014 at 8:15 AM

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July 8, 2014 5:59 a.m. ET

The novela that is Puerto Rico's debt drama continues.

On Monday, the struggling Puerto Rico Electric Power Authority made a deal with its bank lenders to delay certain payments on its credit lines. That provides Prepa with a bit of breathing room while it negotiates terms with its bankers on their $800 million in credit lines needed to finance the purchase of fuel oil to power its generators.

But the effects of legislation to allow restructuring of the debt of the U.S. territory's so-called public corporations continue to ripple through the municipal bond market. Thus far, those ripples have been contained, with little spillover into the broader muni market.

That could change, however, when holders of tax-exempt bond funds -- especially the high-yield variety -- get their June 30 statements. How these individual investors react to the funds' declines from their exposure to Puerto Rico debt could hit the broader muni market if funds are forced to liquidate bonds to meet shareholder redemptions.

Selling by large institutions, including hedge funds, drove down prices of Puerto Rico securities. Municipal Market Advisors managing director Matt Fabian pointed to the spike in large trades in Puerto Rico-related bonds at prices under 50 cents on the dollar following the downgrade by Moody's Investors Service last week (discussed in this week's Barron's print edition.)

As a result, Fabian writes, some high-yield muni funds may have given back one-third of their gains scored so far this year. Mutual funds' valuations depend on the latest prices, which may reflect a relative handful of recent trades. In the stock market, thousands of trades make it simple to determine a price of a company's shares. In the bond market, it's more akin to residential real estate, in which a few comparable transactions, or "comps," provide an inexact guide to valuations.

Moreover, he continues, as funds with heavy exposure to the commonwealth sell non-Puerto Rico credits to meet redemptions, their PR concentrations will rise. To be sure, many of the biggest fund companies long ago slashed their holdings of Puerto Rico-related bonds and should be relatively unaffected. But, as the tide goes out, some fund holders may be surprised they were exposed, to paraphrase Warren Buffett's metaphor.

Fabian also posits the passage of legislation to restructure Puerto Rico's public corporations' debt also could have implications for other U.S. territories, notably Guam and the U.S. Virgin Islands. The latter have a tiny fraction of the $70 billion-plus of debt that Puerto Rico's entities have outstanding, but their obligations are highly sought-after because of the tax-free status of their interest in every state and locality as well as from Uncle Sam. Fabian suggests investors should consider selling their Guam and Virgin Island bonds before the market realizes the risks of those territories' following Puerto Rico's lead to enact legislation to permit restructuring of their debts.

As Barron's has previously reported, the various bond insurers have significant exposure to Puerto Rico, which has been reflected in the hits to stock prices of MBIA ( MBI mbi -2.82% MBIA Inc. U.S.: NYSE $10.00 -0.29 -2.82% July 7, 2014 4:00 pm Volume (Delayed 15m) : 9.11M AFTER HOURS$10.00 0.00 0.00% July 7, 2014 7:55 pm Volume (Delayed 15m): 172,030 P/E Ratio 5.62 Market Cap$2.01 Billion Dividend Yield N/A Rev. per Employee N/A 07/07/14 Trouble Could Be Looming for P...04/20/14 Commercial Property: What's th... 04/16/14 BofA Fixed-Income Revenue Fall... More quote details and news » mbi in  Your Value Your Change Short position ) and Assured Guaranty ( AGC.agc -0.13% Advent Claymore Convertible Securities & Income Fund II U.S.: NYSE $7.65 -0.01 -0.13%July 7, 2014 4:00 pm Volume (Delayed 15m) : 57,095 AFTER HOURS $7.65 0.00 0.00% July 7, 2014 4:02 pm Volume (Delayed 15m): P/E Ratio N/A Market Cap N/A Dividend Yield 7.37% Rev. per Employee N/A More quote details and news » agc in  Your Value Your Change Short position ) But, MMA observes, even if Puerto Rico bond holders and the bond insurers fare as poorly as they might, insured PR bonds will likely see a full or near-full payment.

Beyond that, MMA doubts Puerto Rico's debt straits major few implications for most muni issuers, which mainly use the market to fund infrastructure projects and not to paper over budget deficits. Even if there is greater scrutiny of credits, Fabian writes "there are very few fish to be caught in these tighter nets."

But there could be future implications for the tax exemption of munis. As I noted in my column last week, Puerto Rico's ability to borrow so promiscuously was enabled by investors' demand for high triple-tax-free income, which led them to turn a blind eye to the excess indebtedness of the commonwealth and its public corporations. The implicit subsidy comes at a cost to the U.S. Treasury and has helped facilitate the over-borrowing, which may result in political blowback, including from anti-debt Tea Party types.

That demand resulted in Puerto Rico-related bonds comprising a lopsided portion of the long-term muni market. Fabian writes that PR credits account for 15% of all current tax-exempt bonds with maturities of 30 years or more, and 30% of all maturities of 40 years or more. "Meaning PR's rampant deficit financings account for a significant chunk of tax-exemption's future cost to the U.S. Treasury," Fabian writes.

Clearly, Puerto Rico finally is facing the cost of putting off expenses to manana.

E-mail: randall.forsyth@barrons.com

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