Steven Mnuchin, U.S. Secretary of the Treasury. (horizontal-x3)
Steven Mnuchin, U.S. Secretary of the Treasury. (Vanessa Serra Díaz)

U.S. Secretary of the Treasury Steven Mnuchin understands that Puerto Rico is advancing its recovery process after Hurricane María, but stressed that completing the transformation of the power grid and identifying investment alternatives are priorities that have to be addressed to boost the island´s economic development.

On his second visit to Puerto Rico, Mnuchin said he was pleased with the federal government's efforts after the disaster and was confident that the Oversight Board and the administration of Ricardo Rosselló Nevares will reach an agreement on the budgetary dispute.

"I was informed about the matter. I am sure that both (the Board and the government) will be able to work on that," Mnuchin said when El Nuevo Día asked if the legal controversy over the implementation of the budget is a matter of concern for the Federal Treasury.

"What we are really focused on is what we are going to do to help the economic development. Although we appreciate that we are kept abreast of matters such as litigation between the two parties, that is not our focus," he said.

Mnuchin - who has the responsibility of channeling President Donald Trump's economic plan - arrived yesterday at 11:00 a.m. to the Luis Muñoz Marín International Airport, in Carolina, to participate in a two-hour meeting in La Fortaleza.  According to the Secretary, energy and and an update on the efforts associated with the reconstruction of Puerto Rico were the main points in the agenda.

On the way back to the Airport, where he was to take plane for the G20 meeting in Argentina, Mnuchin talked to El Nuevo Día about the progress made, and reiterated that with the necessary adjustments and the injection of federal funds that will come, Puerto Rico can become a success story.

A visit amid complications

Mnuchin's visit was anticipated a few weeks ago. Last March, the Secretary promised quarterly visits to Puerto Rico to see, first hand, the steps taken by the federal government and the use of funds that the island will receive as a result of the devastation caused by Hurricane María.

But, in turn, Mnuchin came a week after the leadership of the Puerto Rico Electric Power Authority (PREPA) colapsed with the resignation of its executive director Walter Higgins, the ephemeral appointment of Rafael Díaz Granados as his successor and the mass resignation of non-governmental members from the Governing Board of the public corporation under PROMESA Title III. Mnuchin arrived in Puerto Rico just 24 hours after Rosselló Nevares appointed José Ortiz as the new head of PREPA.

Yesterday, Mnuchin met Ortiz - he said had reviewed Ortiz´s resume in advance - and the new Board members appointed by Rosselló Nevares, and said that he received details of the process that will be followed to transform the power grid. El Nuevo Día learned that executives from Citigroup - the firm that advises the government and the Board in PREPA’s privatization process - participated in the meeting.

To questions of this newspaper, Mnuchin seemed to give a vote of confidence to what was done in energy matters, despite recent setbacks.

"I think they have a very good short-term and long-term strategy to really transform (the power grid)," Mnuchin said, adding that when talking with Puerto Rican government officials he insisted that the island should have a "competitive" power grid, with ample availability of energy resources at reasonable prices.

In that sense, he seemed to rule out the possibility of the US Treasury taking control of PREPA´s  privatization process as contemplated in draft bill authored by Republican Senator Don Young that circulated a few months ago amid the operational limbo experienced of the public corporation.

Two fronts

Mnuchin divides economic restoration efforts into two areas. Those specifically related to the recovery after María and the efforts directed to correct those structural problems that Puerto Rico faced before the hurricane and that are the Secretary´s main focus.

On the recovery aspect following the disaster, Mnuchin stressed that the Treasury has made substantial progress in matters under its responsibility. That includes the agreement between the Federal Emergency Management Agency (FEMA) and the Puerto Rican government to access funds from the emergency Community Disaster Loans (CDL) program.

The agreement was signed on July 11, but La Fortaleza announced it yesterday after Mnuchin left the island.

Regarding disaster funds from the federal Housing Department, Mnuchin said he was pleased with the allocations the island already receives.

"I cannot be more pleased with the work that FEMA and other areas of the government have done," he added.

According to Mnuchin, who acknowledged the initial criticism received by the federal government for the response to the disaster, understanding the complexity of Puerto Rico and the antiquated nature of its power grid is necessary to assess what has been done, both by the federal government and the Rosselló Nevares administration.

"They are doing an excellent job on a lot of complicated issues," he said.

Tax reform

But, according to Mnuchin, the key for the recovery of Puerto Rico is what will be done to capitalize on "the tremendous opportunity" that federal reconstruction funds represent.

Mnuchin did not especifically refer to the over $ 125 billion that the Puerto Rico Central Recovery and Reconstruction Office estimates necessary for the island´s recovery and reconstruction.

"What I could say is that obviously, there is a large amount of federal money already committed for Puerto Rico that will come and that will have a huge impact on this economy," said the federal official.

Although Mnuchin said that the focus of his administration is the economy, in that search for alternatives there seems to be no need to make changes to the Tax Cuts and Jobs Act.

After the approval of the federal tax reform, the government and the private sector have lobbied in Congress to provide an amendment so that US foreign companies that operate on the island are not subject to special tax rates for the use of intangibles. For tax purposes, Puerto Rico is a foreign jurisdiction and, therefore, companies on the island are subject to provisions that apply to international jurisdictions.

For Mnuchin, the federal tax reform, as approved, can contribute to the economic development of Puerto Rico.

According to the Secretary, one of the issues he discussed with Rosselló Nevares yesterday is the potential of the tax benefits that the federal tax reform grants to those who invest in Opportunity Zones.

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