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Bacó talks about GDB misconceptions

By on November 21, 2016

SAN JUAN — Government Development Bank (GDB) President Alberto Bacó cleared up misconceptions regarding the bank’s insolvent status Monday, saying that although the financial institution has deposits totaling $3.5 billion, it only has some $170 million in liquidity that could, at most, rise to $200 million by the end of the year.

Alberto Bacó Bagué (CB/Yoel Parrilla)

Alberto Bacó Bagué (CB/Yoel Parrilla)

During the beginning of the transition hearings between the administration of Gov. Alejandro García Padilla and the incoming government of Gov.-elect Ricardo Rosselló Nevares, the GDB president said the bank had been used solely to finance the commonwealth’s deficit after the Section 936 program was phased out on the island, to the point where the practice became unsustainable.

“The GDB is not at fault for being used that way. Right now, it has $3.5 billion in deposits and only $170 million in liquidity. There’s no way to honor all those deposits, so we have honored what few deposits we’ve could per the governor’s priorities, which are federal funds, payroll and other emergency [funds],” he explained.

“The Legislature also assigned $120 million to the GDB in the new budget to honor deposits. [That’s why] we believe that the incoming administration will have $200 million to work with,” Bacó added.

The GDB president went on to say that, since taking the reins of the bank in August after the exit of Melba Acosta, the bank has increased its liquidity by $20 million to its current $170 million mark.

“[The bank has] increased its liquidity in small steps, but we have been more rigorous in collecting money and managing assets,” he added.

Due to the GDB’s precarious liquidity levels, the bank president acknowledged that he has received legal notices from some federal agencies raising questions about the availability of the federal funds that must be deposited, and he has been warned about possible legal action against the GDB.

The executive director of the incoming transition committee, William Villafañe, questioned Bacó about how much of the $3.5 billion in GDB deposits consists of federal funds, but the bank president couldn’t say for certain.

“Future priorities include recapitalizing the GDB,” Bacó noted. “Second, we will renegotiate and look at the real value of loans across the board. The bank can be restructured.”

Regarding municipalities and their GDB deposits, Bacó said they have continued to collect the money, but with certain limitations.

“During the past four years, we have worked with a major crisis. First we must solve the government’s macro problem and make decisions from there. We must ask ourselves whether the bank is necessary, and from that standpoint determine whether to recapitalize the bank after we do renegotiations,” Bacó said.

One of the GDB’s biggest challenges is the debt that the Highways & Transportation Authority (HTA) owes the bank, which totals around $2 billion.

“Efforts were carried out to bring HTA to the market. The loans totaling $2 billion were issued by past administrations for operational expenditures and projects such as Tren Urbano [Urban Train],” he explained.

Finally, regarding the $400 million loan that San Juan Mayor Carmen Yulín Cruz Soto took out at the beginning of her term, Bacó clarified to members of the committee that said loan is being paid off via the collection of municipal property taxes.

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