Monday, June 1, 2020

Fiscal team details plan of action to restructure Puerto Rico debt

By on February 9, 2017

SAN JUAN – In Gov. Ricardo Rosselló‘s administration, the first order of business is to present its fiscal plan, make Puerto Rico’s finances more visible, and establish a protocol to prioritize disbursements. It also assured it will be an “open book” during the public debt’s restructuring process.

“All [these steps] are important for negotiations in good faith [with creditors],” explained Puerto Rico Fiscal Agency and Financial Advisory Authority (Fafaa) Director Gerardo Portela during the 2017 Government Caucus organized by the Puerto Rico Manufacturers Association (PRMA).

As part of the “Perspectives and Agenda on the Debt” panel, the Fafaa official and the governor’s representative before the Fiscal Oversight & Management Board, Elías Sánchez, emphasized the importance of validating the government’s numbers, which were last audited time in fiscal year 2014.

See also: Fiscal control board is ‘unfocused,’ Elías Sánchez says

“The dates imposed by the board [to present the fiscal plans] are very aggressive. Is it realistic to present a 10-year fiscal plan—with the macroeconomic impacts it entails—in 28 days? Perhaps it isn’t the best timetable. Does this process without audited statements for 2015 and 2016 have credibility? That is a good question,” Sánchez said during the panel.

However, the official added that the administration will publish the pending audited states as soon as possible, while it works “hand in hand with the board” to obtain accurate numbers that will allow the government to achieve consensual agreements with its creditors.

Meanwhile, Government Development Bank (GDB) President Christian Sobrino assured that the entity is looking for ways to stabilize and maximize the institution’s value, identifying a consistent and realistic cash flow for the bank, within the central government’s fiscal framework.

Reacting to those who say the GDB “should close now,” Sobrino warned that such a decision can’t be made “in a week” because that would entail millions of dollars in losses for both the government and the bank’s creditors.

For his part, former GDB president and leader of creditor group ‘Bonistas del Patio’ Jorge Irizarry emphasized the importance of taking into consideration the more than 60,000 Puerto Rico residents who invested in the island’s bonds.

Irizarry said that, unlike other creditors, members of Bonistas del Patio “put their entire savings in this [Puerto Rico’s bonds],” and they have been “losing capital” since 2008.

Meanwhile, Latin American Business Council director and former GDB President Lizzie Rosso also called for the incorporation of the private sector in the debt’s restructuring, and for the government to take concrete steps to tackle what she called a “trust crisis.”

“Trust is earned with actions not promises,” Rosso said, adding that before reaching an agreement with creditors, the government must restructure its operations.

For his part, Sánchez, said the former administration’s management of liquidity “damaged our credibility” with creditors and, therefore, the government’s possibilities to achieve consensual agreements.

“I have cataloged it as a great Ponzi scheme the government of Puerto Rico was running to, artificially, hide reality,” the representative to the board said, adding, “We won’t fail you. You will have the information and we will be an open book, and negotiations will be transparent, so we can achieve consensual agreements.”

Meanwhile, Portela spoke about Fafaa’s immediate goals, as well as recently approved laws and executive orders “that implement fiscal responsibility in a long-lasting, expeditious and sustainable way.” He reminded that meetings with creditors have already begun, although “preliminarily.”

During his presentation, the Fafaa official also detailed the steps taken toward stabilization– including a short-term liquidity plan, control, procurement and payments–among which are found having defined the essential services and zero-based budgeting; execution of the fiscal plan; and the administration’s monitoring to straighten out the island’s fiscal path.

Portela highlighted Fafaa’s new organic law, signed by Rosselló, which bestows more faculties to the fiscal entity to ensure the government’s compliance with the budget and certified fiscal plan, as well as negotiating on behalf of the government.

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