So far, bondholders, Government and the Board do not seem to find common ground to avoid what would be another blow to the economy and the citizens stability. (vertical-x1)
So far, bondholders, Government and the Board do not seem to find common ground to avoid what would be another blow to the economy and the citizens stability. (Archive/GFR)

New York - The lack of reliable information from the government, the legal strategy that has adopted the Oversight Board and the possible collapse of the Restructuring Support Agreement (RSA) of the Puerto Rico Electric Power Authority (PREPA) are the sure recipe against a greater decay of the econmIsland’s economy, assured yesterday two bondholders and two executives that work over the debt of the Island.

In contrast, the Public Policy director of the Center for a New Economy (CNE), Sergio Marxuach, anticipated that after the approval of PROMESA, the austerity doses approved by the Board in the fiscal plan will result in an additional reduction of the population and in that, those that actually stay on the Island, will see less income among retired people, the chance that 900,000 people lose access to health insurance, as well as a picture of higher poverty and inequality. That picture of decay could be of such scale that Puerto Rico could end in what is known in literature as a “double economy”, where sophisticated people with access to capital will live together with those that fight for their survival.

Both sceneries – which of them with worst predictions for the 3.5 million residents of Puerto Rico - appeared yesterday in the auditorium of the Graduate School of Journalism in New York (CUNY). Here, in a training event coordinated by the Ravitch Public Finance Program for journalists, different bondholders, lawyers and analysts of the fiscal and economic situation of the Island described, to a greater or lesser extent, the same adverse picture for the Island predictable future at the same time that they focus that, so far, bondholders, Government and the Board do not seem to find common ground to avoid what would be another blow to the economy and the citizens stability.

“We can end with another lost decade”, said Marxuach, at the time that he said that Puerto Rico will try to adjust its finances right when Trump administration policies will bring more trouble to Puerto Rico.

According to Marxuach, the fiscal plan that barely starts to be implemented will represent a blow to the economy that would round 8%, while at the same time it starts from the wrong assumptions.

For example, Marxuach stated that the fiscal plan contemplates that “by means of the magic” of competition between health providers, the Government would cut the costs of every enrolee of Mi Salud and, at the same time, would give space for another 50,000 persons to benefit from the insurance.

However, according to Marxuach, the truth is that if the Government can not achieve the allocations of Medicaid’s federal funds, up to 900,000 people could be left out without insurance.

Marxuach comments about what is awaiting for the people of Puerto Rico were produced after Héctor Negroni, executive of Fundamental Advisors; Jorge A. Gana,  Director of the municipal insurer Assured Guaranty; Eric Friel,  executive of Stone Lion Capital; and Stephen Spencer, the financial advisor of PREPA bondholder group and of the main institutional bondholders of Puerto Rico, stated that the way that the Board and the Government have undertaken will drive the investors away of the Island.

PREPA agreement

“We don’t know what are we going to do”, said Spencer when El Nuevo Día asked him if his clients would be willing to extend PREPA RSA again, in light of the delay of the Board to establish the course of the transaction.  

“If this agreement falls, it will be very harmful for the people of Puerto Rico”, added Friel when he was asked about the impact that will have the failure of the only voluntary negotiation, which took three years to emerge.

According to Friel, Puerto Rico is facing a delicate situation, since, in order to reactivate the economy of the Island, it is necessary to bring investment in and it will not happen until Puerto Rico and the Oversight Board adopt a transparency and law enforcement attitude.

Gana agreed with it and maintained that, if Puerto Rico started to disclose its finances in a proper manner, that might establish the conditions for a public debt negotiation. Gana pointed out that it might even be useful within the framework of the mediation process proposed by Judge Laura Taylor Swain, who presides the public debt renegotiation cases under the Title III of PROMESA.

However, so far, the experience of the bondholders has been frustrating, said Negroni on his part.

According to the executive, who has been investing in the Island´s bonds his entire life and has relatives in Puerto Rico, the experience with Alejandro Padilla administration has been disgusting, but the situation has not changed drastically with Rosselló Nevares administration, who, as a matter of fact, promised to honor the debt obligations with them.

From the point of view of the bondholders, the disclosure of the government liquidity report -in which a more beneficial position than the estimated by the Oversight Board itself is presented- reveals a lack of transparency not only towards the creditors, but also towards the press and citizens.

In contrats, yesterday, when Rosselló Nevares addressed the journalists in a conference call, he reviewed what his administration has done to put the government in the right path, while he affirmed that his team works hand in hand with the Oversight Board and that has made efforts to provide information. However, he recognized he does not have neither the technology nor the human resources to accomplish with the disclosure requirements demanded by the federal entity.


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