For Puerto Rico, Partial News Was All Too Common
In a year when the phrase “fake news” entered our national vocabulary, we believe that the media’s coverage of developments in and related to the Commonwealth of Puerto Rico could best be described as “partial news.”
As has been the case for several years now, news reports have focused on Puerto Rico’s debt-service obligations, its fiscal conditions and budget deficits, the regulations that hinder economic growth and how these tend to make life harder for the territory’s 3.5 million residents. Gov. Alejandro García Padilla, who was elected in November 2012, faulted many culprits, including bond ratings agencies, the U.S. Congress, the prior administrations in the Commonwealth who put forth “misguided and unscrupulous public policies” and investors in municipal bond funds that hold securities issued in the Commonwealth.
The governor’s finger-pointing, we gather, was more clickable than what the reports often left out. As a result, investors who rely on mainstream media reports may not be aware that:
- The total returns on securities issued in Puerto Rico were highly attractive in 2016, according to Bloomberg Barclays Municipal indices that measure performance.1 Overall, Puerto Rico securities had a 2016 total return of 8.6%. High-yield bonds issued by the Commonwealth performed even better, offering a total return of 11.4%.
- Puerto Rico securities contributed favorably to the 2016 total return of every Oppenheimer Rochester municipal fund that remained invested in the Commonwealth’s paper.
- At $9.175 billion, Puerto Rico’s revenues for the fiscal year ended June 30, 2016 were the highest in 10 years. As of December 31, 2016, revenues for fiscal 2017 exceeded expectations and the comparable period of fiscal 2016, driven in part by increased revenues from the sales and use tax and the motor vehicle excise tax.
- The net investment income produced by municipal bonds issued in Puerto Rico is generally exempt from federal, state and local personal income taxes.
Developments in five areas were especially headline worthy in 2016: debt payments, the Recovery Act, PREPA (Puerto Rico’s electric utility authority), the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) and the PROMESA-mandated Congressional Task Force on Economic Growth for Puerto Rico.
Learn about our current fund lineup, which now includes 3 national funds, 2 national high yield funds and 15 single-state funds. All 20 Oppenheimer Rochester funds have been designed to help investors reach their goals for tax-free income. For more information on the news, market trends and investing strategies that made a difference in 2016, read our full Annual Overview.
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1Bloomberg Barclays indices are unmanaged and cannot be purchased by investors. Our funds’ investments are not limited to the investments comprising these indices. Index performance – which includes reinvestment of income, but does not reflect transaction costs, fees, expenses or taxes – is provided for illustrative purposes only.