Bankruptcy and loans in Puerto Rico:an exploratory overview of their relationship

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Marta Álvarez

Keywords

Brankruptcies, Loans, Correlation, Puerto Rico, Tendencies

Abstract

Puerto Rico has been going through a period of economic downturn since 2006, beginning a little before the global economic recession. This paper examines the behavior of loans granted by the commercial banking sector and their relationship with the number of business bankruptcies filed in Puerto Rico between 1999 and 2011. Findings draw attention to the fact that from 2006, there has been a steady decline in the number of personal, commercial and mortgage loans approved by the commercial banking sector, as well as in their value. An increase in the filing of bankruptcy is also observed. The number of loans approved by banks in Puerto Rico show a strong correlation with the economic activity index (EAI) and other economic indicators that help to explain the island’s employment situation (total employment, labor force participation rate and unemployment rate).

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