DETROIT 2?: Puerto Rico's Economic Outlook is striking fear in many Investors

While all eyes have focused on Detroit’s record bankruptcy, an economic crisis is deepening in Puerto Rico that many experts say may be far more harmful to the U.S. economy. 

Puerto Rico has been mired in economic recession for almost eight years, with public debt skyrocketing to $70 billion and unemployment climbing to 14 percent, higher than that of any U.S. state. The island’s debt load accounts for 93 percent of its GDP.

Many economic experts worry that Puerto Rico could default on its debt, having a potential direct impact on mainland United States. 

In September, Puerto Rico's Government Development Bank announced it would cut bond sales after investors pushed the yield on Puerto Rico bonds above 10 percent. The island's general obligation bonds have been hovering at just above near-junk status. That worries economic experts who note that many Americans’ retirement funds include Puerto Rico bonds.

“It’s not just the residents of Puerto Rico” who are affected, said Tom Schatz, president of Citizens Against Government Waste, based in Washington D.C. “It’s Americans across the country who are at risk as well.” 

The situation on the island is so critical that residents are fleeing in the largest numbers in decades, ushering a quiet exodus. Tens of thousands have left for mainland U.S. between 2010 and 2012, according to The Washington Post.

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Companies also are eyeing the exits. 

Pfizer announced recently that it was closing one of its three plants in Puerto Rico, leaving an unknown number of people unemployed. The move came just days after Merck announced it would stop active ingredient production at its plant in Barceloneta, a Puerto Rican city that was once considered a pharmaceutical hub.

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