Thursday, November 23, 2017

What is Puerto Rico’s fiscal agent doing in aftermath of María?

By on October 19, 2017

SAN JUAN — Long before Hurricane María, Puerto Rico’s fiscal agent was already working in the midst of several storms, namely a financial control board, the implementation of austerity measures and the bankruptcy process of the commonwealth government.

The Financial Advisory Authority & Fiscal Agency Authority (Fafaa) was created in April 2016 after the collapse of Government Development Bank (GDB), which had been Puerto Rico’s fiscal agent for more than 60 years. Fafaa’s work includes management of the commonwealth’s liquidity, the implementation of the fiscal plans approved by the board and the bankruptcy cases in federal court under Title III of the federal Promesa law.

“We have worked nonstop before, during and after the hurricane because there are many major issues,” said Gerardo Portela, director of Fafaa. He emphasized that, nowadays, obtaining federal disaster relief funds is high on the entity’s priority list.

“I can’t predict the future, but we are still working under the current budget. There are a lot of big issues, not only debt restructuring, but also government restructuring.” (Yoel Parrilla/CB)

Fafaa staff—about 35 employees—and advisers are working mainly from the Sheraton Hotel in the Convention Center District in San Juan. Like most of the island, the Minillas Government Center, where Fafaa’s offices are located, remains without power and its generator broke down this week.

Roughly a month after Hurricane María, Portela sat down with Caribbean Business to discuss some of the work Fafaa is conducting, at a time when the rest of the government focuses on stabilizing the situation in Puerto Rico.

CB: What has Fafaa’s role been during the emergency?

As the fiscal and financial agent of the government, Fafaa has been working with the liquidity numbers, assisting with the government’s recovery efforts and maintaining all the work streams, which include Title III, Title VI, necessary reporting, maintaining visibility on government finances and working with the right-sizing efforts under the fiscal plan.

CB: Will Fafaa hire new advisers for work related to Hurricane María?

We are still working with the same advisers: Rothschild, O’Melveny, Greenberg Traurig, Conway MacKenzie, Ankura. We are not currently considering retaining additional advisers, but I can’t predict the future. For now we are working with the ones we have.

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CB: Fafaa’s budget for this fiscal year is $90 million. Will it need more funds?

Again, I can’t predict the future, but we are still working under the current budget. There are a lot of big issues, not only debt restructuring, but also government restructuring.

CB: Gov. Ricardo Rosselló Nevares admitted that it is possible that some of the immediate objectives under the fiscal plan won’t be achieved after Hurricane María. Will the government meet the right-sizing targets for this fiscal year? Which areas won’t be met?

This is an iterative process. There are more than 120 agencies. It has to be taken into account that we have to do a deep-dive analysis of the legal, financial and operational aspects, with our governor’s vision of making the government more efficient. It is also the way we envisioned under the fiscal plan. We are still working the model or blueprint of what we want to do in terms of the different agency consolidations that may be done.

CB: Will the government achieve the savings of $851 million in government right-sizing the fiscal plan sets for this fiscal year?

A lot of people have talked about this, [board executive director] Natalie Jaresko made some comments, as well as the governor and several government officials. We have been working on that right-sizing. Obviously, two hurricanes hit Puerto Rico back-to-back and our focus on rescue and immediate response, saving lives and really rebuilding Puerto Rico is important […] Yes, we have very important fiscal and economic issues, but we must bring Puerto Rico back on its feet again.

CB: Before Hurricane María, the government was in the middle of bankruptcy proceedings under Title III of Promesa. What can you tell us about these efforts? Does the mediation process between the government and its creditors continue?

The most important thing for us is to continue with these processes. Legal uncertainty is not beneficial to Puerto Rico in economic and investment terms. Yes, we want to continue this process and try to resolve this debt chapter, with a sustainable debt level and a fair solution to both bondholders and the people of Puerto Rico. We want to continue to move on with the process and end this legal uncertainty.

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