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Puerto Rico Gov’t Faces ‘total collapse,’ Elías Sánchez warns

By on January 17, 2017



Elías Sánchez is the head of the incoming administration’s transition team and Gov. Ricardo Rosselló’s representative before the fiscal oversight board.

SAN JUAN – The lack of payment between agencies and the “internal liquidity game” to claw back funds from certain government entities to correct general fund deficiencies hinder the process of certifying the government’s real deficit.

So said Elías Sánchez, president of the incoming Transition Committee, during the presentation of the summary of the final transition report before a group of legislators and heads of agency at the Puerto Rico Convention Center.

This has caused the deficit to range between $6 billion, as confirmed by the incoming Transition Committee, to more than $7 billion, as the Fiscal Oversight and Management Board established by the Promesa law claims. “They dipped into all the government’s purses and nothing was said about it,” said Sánchez as he criticized the outgoing administration’s “lack of transparency.”

Thus, if no action is taken to correct this and other governmental deficiencies, there could be a government shutdown and even a “total collapse” of the government, said Sánchez, who is also Gov. Ricardo Rosselló’s representative before the fiscal oversight board.

“There is an indisputable reality: The Puerto Rico government’s numbers are still a great mystery…. I predict that if Puerto Rico does not make a dramatic adjustment in the coming months, it could experience a total collapse. If it does not make the corresponding adjustments, there could even be a [government] shutdown,” the incoming Transition Committee president said during a press conference Tuesday.

In addition to this situation, the report details other findings that will be sent to the Governor’s Office, the Office of the Comptroller and the Legislature should an in-depth investigation and corresponding action be decided on, Sánchez said.

The official suggested that this final transition report will justify the public policies to be established during the government’s initial months—which include the controversial labor reform being decided on in the Legislature or the fiscal plan that the government must submit shortly.

“Everything that is not essential must be cut because the crisis is real. And what agencies will face is a challenge never seen before and maybe in a few weeks we will find out just how severe things could be here due to the negligent actions of the outgoing administration,” he said.

In the absence of a protocol to define what is essential in the government, Sánchez said a group of attorneys was asked to discuss, together with the fiscal board, what will be defined as essential for the Rosselló administration.

“The challenge falls on the current leadership to make budget adjustments, make whatever cuts are necessary to guarantee essential services, to guarantee public servants and to protect pensions that are in a very delicate situation today,” he said.

Harsh findings

The findings presented in the final transition report include a deficit of more than $230 million at the Department of Education, primarily for failing to pay rent to the Public Buildings Authority (AEP by its Spanish acronym), the more than $500 million owed by the Highway and Transportation Authority (HTA) to its suppliers and the more than $1.4 billion in losses over four years at the Puerto Rico Electric Power Authority (Prepa).

In the case of the Government Development Bank (GDB) the situation is critical: “It does not have a treasury [division]. It does not have the capacity to operate as a bank,” Sánchez said. He added that after deposits were frozen through the Moratorium Law, the GDB is exposed to fines for also having frozen federal funds.

The report also denounces that $6 million are spent on the Energy Commission “without producing any benefits for the population.” There is a $1.9 billion deficit in the Infrastructure Financing Authority (AFI by its Spanish acronym) caused by the transfer of HTA debts—which had to be paid off with a multimillion-dollar bond issuance that never took place—and the Metropolitan Bus Authority (AMA by its Spanish acronym) has accumulated a deficit of more than $98 million.

The AMA, however, acquired 25 new vehicles that do not feature handicap ramps or fare processors, Sánchez said.

Other findings denounce the lack of payment of the University of Puerto Rico’s (UPR) debt despite “having the funds” to do so and the investigations for alleged corruption in the Labor Development Administration and the Puerto Rico Aqueduct and Sewer Authority (Prasa) following the case of former Popular Democratic Party (PDP) fundraiser Anaudi Hernández.

As for the Fire Department, 125 positions were appointed without having the $3.25 million needed to pay for them.

See also: Fiscal Board Says Fiscal Measures Must Go Before Debt Restructuring


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