Former Puerto Rico Governor: It was the only viable route
SAN JUAN – Former Gov. Alejandro García Padilla said that Wednesday’s determination by the fiscal control board, announced by Gov. Ricardo Rosselló, is not only the correct one for Puerto Rico but “the only viable route.”
In an interview with Caribbean Business, the former governor said that what happened Wednesday vindicates his administration’s actions during the past political term for Puerto Rico to address its fiscal situation before an impartial judge.
“Now the people of Puerto Rico will have the opportunity to appear before an impartial judge to say how much can reasonably be paid to creditors and also invest in the economic development of the country,” he said.
García Padilla explained that for this next phase, Puerto Rico—through the fiscal control board and the island’s representative to the board established by U.S. Congress—will be able to argue why some expenses are important and should have priority over paying creditors.
“We will be able to defend, for example, why the university is an investment and not an expense. Why without that investment industries, the hotels, the banking sector, agriculture would be affected. It is a process so an impartial judge evaluates which spending is the most important” for the island’s development, he said.
The former governor emphasized that if Puerto Rico successfully capitalizes on this process, it will emerge with a strengthened economy, as evidenced by the experience of cities such as New York and Washington D.C.
“Experience tells us this must be the beginning of Puerto Rico’s rebirth. Before New York went through its restructuring process it was ugly and one of the most violent cities in the United States. Now it has a thriving economy and a better quality of life, and the same happened with Washington, D.C.,” he said.
On Wednesday morning, Rosselló revealed in a press conference that he requested the oversight board to prevent the mechanism known as Title III. The fiscal entity created by Congress presented in the U.S. District Court of Puerto Rico the legal action that sparks the beginning of the biggest debt restructuring process in the history of the municipal bonds market.
On Wednesday, Rosselló revealed at a press conference that he had asked the fiscal control board to seek to activate Promesa’s Title III mechanism. The governing entity then presented in federal court the legal action that marks the beginning of the largest debt-restructuring process in the history of the municipal bond market.
In December last year, García Padilla sent a letter to the incoming governor in which he insisted on his recommendation to use Title III of the federal law to restructure the public debt.
In the letter, dated Dec. 28, García Padilla stated that, even if a brief extension of the stay on litigation, which expired Monday, were obtained the government would face difficulties in fulfilling its obligations.
“The Commonwealth should not accede to a debt service that is not sustainable in the long term,” García Padilla said in the letter, which was addressed to the fiscal board’s members as well.
“I want to warn that there will be attempts to amend Promesa’s Title III to give priority to certain creditors over other bondholders … The government must be vigilant of all attempts to diminish the powers of the restructuring process,” he added.