Tuesday, November 21, 2017

Puerto Rico government awaits certification of five fiscal plans

By on April 21, 2017

SAN JUAN – Almost two months have gone by since the Puerto Rican government handed five public instrumentalities’ plans over to the fiscal control board, but the Congress-created creature has yet to act on it.

“This limits us to a certain degree,” Gov. Ricardo Rosselló told Caribbean Business. He said he has already taken measures to execute the plans that his administration had drawn for these entities. He added that his actions are based on “the premise that the plans are correct”.

That would be the case at the Government Development Bank (GDB), where the sale of properties continues, at the same time that “incentivized resignations” within the bank’s staff take place.

Gov. Ricardo Rosselló (Juan J. Rodríguez/CB)

Gov. Ricardo Rosselló (Juan J. Rodríguez/CB)

“We can’t continue waiting. Otherwise we run out of time and we won’t be able to execute,” he said regarding the plans his administration submitted to the board Feb. 21 for the GDB, the Electric Power Authority (Prepa), the Aqueducts & Sewers Authority (Prasa), the Highways & Transportation Authority (HTA) and the Cooperatives Supervision & Insurance Corporation (Cossec by its Spanish acronym).

Although some of the actions contemplated under these plans are already underway, full details are still unknown. The Rosselló administration told Caribbean Business it would not divulge information on the matter until the board certifies the documents.

Meanwhile, just days before the stay on litigation dictated by Promesa (the Puerto Rico Oversight, Management & Economic Stability Act) is set to expire, the government and these instrumentalities’ creditors—except in the case of Prepa—will not be able to sit at the negotiating table until the board certifies these plans.

“The same thing that happened with the [central government’s] fiscal plan—that we were unable to sit down with creditors without a certified fiscal plan—is happening to a certain extent with [these entities],” the governor admitted.

On March 13, banker and board member Carlos García explained that “the board’s focus has centered on the central government’s fiscal plan” and that evaluation on the documents submitted for the five government entities had just begun.

Meanwhile, groups of GDB and HTA creditors have already sued the government of Puerto Rico. These legal actions would resume May 1, once the stay mandated by Promesa expires, which would jeopardize the operations of both government instrumentalities.

Plans still a mystery

When asked by Caribbean Business on the matter, Rosselló simply said that the circumstances involving each instrumentality “are different”, while not providing additional details regarding the scenario they soon must deal with.

He noted the case of Prepa, which will change its fiscal plan following its new restructuring support agreement (RSA). Although the board has yet to certify a plan for the public corporation, Prepa had sat at the negotiating table with its creditors for more than two years and the board had already called for changes to the RSA signed early last year.

The secrecy surrounding the individual plans has prevailed since the administration delivered what they called at the time as “drafts”. Sources close to the work done at these government entities said that while they each face different challenges, they all must deal with the implementation of politically non-attractive measures.

For instance, a possible hike in the Prasa rate has been discussed. Meanwhile, HTA is attempting to secure additional funding to cover its operating expenses, which could include highway concessions and toll increases. The challenge for this public corporation becomes even greater after May 1, when the it would stop receiving funds retained by the government since 2015 under moratorium orders and which HTA has used to meet its operational needs.

Moreover, it is still uncertain how the government will tackle its debt with the GDB—which exceeds $5 billion—as well as what will happen with agencies’ and municipalities’ deposits that remain frozen at the bank. In the case of Cossec, sources indicate that its plan would include the consolidation of several credit unions experiencing financial difficulties.

Meanwhile, the University of Puerto Rico must submit its fiscal plan on or before April 30. It must include the steps that would be taken to achieve adjustments of up to $450 million a year, as required by the fiscal plan certified by the board for the central government.

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