Over the past three years, Puerto Rico has invested more than $ 500 million in financial advisors, lawyers and restructuring experts, as well as in the Oversight Board and despite all this, the "lack of will" among politicians seems to curb the US territory recovery.
That was revealed yesterday by the Board´s Executive Director Natalie Jaresko who accepted that the new public finances projections are better than those certified about six months ago, but they are still insufficient. And if that were the case, despite the fact that in the short term about $ 80 billion in federal funds would come, any debt renegotiation would be useless. This is because, according to the Board´s most recent projections, by 2033, there will be no money to pay bondholders, pensioners and government expenses, with that and the renegotiation of the Puerto Rico Sales Tax Financing Corporation (Cofina, Spanish acronym).
Yesterday, for the first time since Jaresko was entrusted with implementing PROMESA, the former Ukraine Minister of Finance admitted that there is not enough "will" in Puerto Rico's political class to make the changes that are needed.
"While this plan includes several structural reforms, there are others that remain and that were not included because the political will to adopt them simply does not exist," Jaresko said during a press conference held yesterday at the Board´s headquarters in Hato Rey.
Today, the Board will hold its fifteenth public meeting, where they would approve the new version of the central government's fiscal plan and whose most optimistic scenario served to boost the price of Puerto Rico bonds in the municipal market. It is also expected that the Board will approve the fiscal plan of the University of Puerto Rico - a document that still aims to reform that pension plan - consolidate administrative operations and increase tuition rates.
The government reacts
Yesterday, the representative of the government before the Board, Christian Sobrino disagreed with Jaresko indicating that "widespread accusations about political will in response to differences of opinion are inopportune and undermine the foundations of Title III mediation process, to which the Government of Puerto Rico keeps engaged".
Sobrino, also director of the Fiscal Agency and Financial Advisory Authority (FAFAA) also recalled that last month, the government recommended the Board to temper the cuts proposed for public spending, due to the bonanza expected with the federal funds associated with recovery after Hurricane María.
"This balanced approach is what really promises long-term fiscal solvency and enables sustainable agreements with our creditors," said Sobrino Vega in written statements.
A more favorable scenario
As a direct consequence of these federal funds, the Board now estimates that the economy measured by the gross product will grow 5.3 percent during this fiscal year, even if structural reforms are not adopted and 7.8 percent if they were adopted.
But that boost would be vanish in the next four-year period - fiscal year 2023 - when the post-María federal contribution is expected to decrease.
According to Jaresko, by 2033, given that the government of Ricardo Rosselló Nevares will not take the decisive and "deep" actions needed, the government would go back into deficit.
"We can lose this window of opportunity," Jaresko said.
She explained, for example, that while continuing in conversations with the Legislature about the tax reform, that exercise will not be comprehensive and, therefore, its impact on economic activity would be less than anticipated. The same would happen with other reforms such as the one that sought to repeal Law 80 of Unjust Dismissal.
However, the favorable picture displayed in the fiscal plan between this fiscal year and 2023 rests on assumptions that, from the outset, would not occur.
For example, the Board insists on cutting pensions and eliminating the Christmas bonus that Rosselló Nevares has already rejected.
In addition, during this fiscal year, the fiscal plan contemplates that the government give way to some 128 adjustment measures. Among these changes, there is agencies reorganization, an increase in rates and adopting measures in the processes of contracting and purchasing goods and services.
Regarding those, Jaresko said that they have only begun with the implementation of four measures, such as the closure of schools and savings in the inmates health program by the Department of Corrections and Rehabilitation.
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