Friday, December 6, 2019

[Annotation] Make it rain, Gerardo!

By on September 7, 2018

Editor’s note: The following originally appeared in the Sept. 6, 2018, issue of Caribbean Business.

ith public indebtedness at the highest levels, not just in Puerto Rico but in most advanced economies across the world, the immediate and logical solution is the sale of assets owned by the government. Call it privatization, call it monetization of assets, call it as you wish: It is always about converting something that you own (and may not necessarily need) into cash, for example, to pay off some of the debt.

While I agree in principle with those who say some of a government’s assets should never be sold, given the amounts of debt in play, I, personally, would rather have it all on the table. Touch even the most precious of the “golden cows.” Most governments, however, are reluctant to explore some opportunities to raise revenue. In Puerto Rico, this has led to some obvious projects not being touched or being touched in a mainly public relations way but without a real concept or vision. Most of the time, because it might face opposition. And God forbid, a politician would touch a project that not everybody might like, but it is the right thing to do!

If you personally were heavily in debt and, on the other hand, had some properties you could sell, you wouldn’t think twice but get on with it and sell them. Erasing debt, the pest of our times, is nothing to be done with emotion—it’s done with cash. And to establish a Chief Investment Officer (CIO) for Puerto Rico to facilitate the creation of that cash is a good idea. But it cannot stop there. Gerardo Portela, the CIO of the Government of Puerto Rico, now needs constant empowerment by the Governor, to whom he reports directly, so the colleagues of this administration understand the importance and opportunity with this appointment and, more importantly, so he will be granted some leeway to do things differently, go for some quick wins and touch the “golden cows” in new ways.

Just looking at a few opportunities that come to mind and strictly looking for the low-hanging fruit—from such assets as land or real estate that could be easily sold, zoned or rezoned—permitted by a task force right there at the CIO’s office is positive. And, all of that, combined with the private sector’s profit-seeking behavior in general, this one office could become a key component to solving the puzzle that is Puerto Rico’s economic future.

Portela’s No. 1 task should be to focus exclusively on facilitating the monetization and produce cash from it, combined with identifying where opportunities are. In any investment banking boutique firm in the private sector, one would (1) start with producing an inventory of assets. Then (2) scan through that inventory and define a shortlist of opportunities. (3) Add to that shortlist the opportunities that the private sector will bring to the CIO’s office anyway, and you’ll end up with a list of projects that can be started immediately. Then (4) categorize them into high priorities, “quick wins,” and don’t shy away from complicated undertakings. Lastly, get your task force to work and help them get all necessary permits, etc. and step aside so the private sector does its work.

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