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A Prolonged Government Shutdown Threatens Puerto Rico's Economy

Federal funding provides nearly 40 percent of all government revenue.

Posted on October 2, 2013, at 1:59 p.m. ET

A protracted government shutdown would hurt many states, but particularly Puerto Rico, where federal funding makes up 40% of all government revenue, Reuters reports.

Stringer / Reuters

The island's economy has been weak in recent years, with Puerto Ricans leaving to the U.S. for better opportunity.

Stringer / Reuters

Half of Puerto Rico's 10,000 federal government workers will be affected.

Even the temporary loss of as many as 5,000 jobs could be enough to raise the unemployment rate on an island with fewer than 900,000 jobs. The unemployment rate is already the highest of any U.S. state or territory at 13.9 percent. And the economy, which last year emerged briefly from recession after six years, contracted by 5.4 percent in August from its level a year earlier.

"Around 27 percent of Puerto Rico's personal disposable income depends on federal government payments," said Gustavo Velez, an economist at Inteligencia Economica.


"I am concerned that in this environment, Puerto Rico's economy looks very vulnerable to any change of these federally funded programs."

Puerto Rican federal workers have already been hurt by the sequester, dealing with mandatory furloughs or unpaid days off stemming from its automatic spending cuts.


"I am worried about my finances. As a single mom, head of household with three kids, I don't know how long I will be able to sustain this," said Brenda Reyes, an employee of the Environmental Protection Agency and a member of the AFGE union.