The inflow of federal funds to deal with the devastation left by Hurricane María cannot divert Puerto Rico from its inescapable responsibility to solve the fiscal and debt problems that obstruct its economic development.
It would be unwise to presume that the funds - up to $ 82 billion- that the United States government could disburse in four years to rebuild the island's infrastructure is a financial rescue for Puerto Rico. Such a presumption would divert our island from the goal of having a truly balanced budget by 2023.
The Fiscal Plan – recently announced by the Oversight Board – assumes that the real economic growth would be 7.8 percent in fiscal year 2019; 5.5 percent in 2020; 2.9 percent in 2021 and 2.5 percent in 2022. The plan also foresees a budget surplus until 2033, that will be used to pay part of the debt.
The estimated growth and surplus are mainly tied to the federal injection for reconstruction, combined with structural reorganizations. According to the Board, they will only materialize if local authorities proceed with the 10 percent reduction of public pensions in a staggered way, put an end to bonuses, cut municipalities funds and limit the number of public entities from 114 to 35.
The government of Puerto Rico wants to allocate the surplus to appease the cuts in retirement plans, bonuses and public payroll, aspects contained in the fiscal plan.
It is necessary to put the risks of this position in perspective.
Current projections, although better than those of previous fiscal plans, are insufficient for sustained growth. Once non-recurring funds are exhausted, local public finances would be in the same critical condition that now prevents them from complying simultaneously with public employees pensions, government services and manageable debt payments.
Puerto Rican people would be trapped, once again, in a paralyzed economy, condemned to the recurrent crisis that push it into exodus. Meanwhile, investors would turn their backs on the economy of an island incapable of demonstrating to the world that it can be governed with wisdom.
That scenario is inadmissible.
It is unprecedented that the $ 500 million spent in fiscal balance efforts and obligations restructuring during the past two years has not been translated into concrete actions to straighten the island´s fiscal health. Public struggles and judicial litigation, that curb the reforms that our island needs, remain. Remarkably, they include energy, labor and business reformulations, as well as a cost-effective restructuring of the retirement systems that ensures the welfare of this vulnerable population.
It is time to start the reconstruction, which was the base of the projected growth for the coming years. But, at the same time, we must undertake structural reforms and fiscal adjustments that will permanently balance the public Treasury.
For that purpose, the local government and the Board must work in the same direction: seeking a truly balanced budget that would convince the bond market to return capital investment –for the long term- to Puerto Rico. That coordinated effort must strengthen Puerto Rico during its debt reorganization in Federal Court, through PROMESA Title III.
Our politicians have to move away from the temptation to take advantage of the federal funds flow to build a platform of political opportunism that sacrifices the welfare of future generations of Puerto Ricans. That would represent the most ill-advised political will that our leaders could show, not only to Washington and investment markets, but to our children.
It would be a big mistake to assume that the temporary bonanza that federal recovery funds bring, would replace the fiscal adjustment agenda to straighten the budget and undertake the debt restructuring. Puerto Rico has to take advantage of the current window of opportunity.
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