Madagascar Development

Puerto Rico bonds rallied in high volume on Friday, pushing yields lower after lawmakers agreed to a series of tax measures late on Thursday that could help stabilize the island's finances and pave the way for a new financing deal. Yields fell on the island's general obligation bonds (GOs), as well as on bonds backed by sales tax revenues, after lawmakers said they would increase the sales tax to 11.5 percent from the current 7 percent in a package of tax measures. The agreement, which needs to be ratified by the legislature, would raise tax revenues by $1.2 billion, officials said, and could help Puerto Rico avoid a government shutdown while allowing it to raise as much as $2.95 billion in financing. "It's good for the GOs and also I think it's good for the sales tax revenue bonds even more so because you are going to be generating so much more sales tax proceeds," said Howard Sitzer, a municipal debt analyst at CreditSights. The agreement provides clarity af...

Puerto Rico's governing party reached a tentative agreement on new tax measures, officials said Thursday, potentially avoiding a government shutdown and paving the way for a bond deal that could raise as much as $2.95 billion. Under the terms of the agreement, which must be formally voted on in the legislature, Puerto Rico will increase its existing sales tax to 11.5 percent from its current 7 percent, while moving to a value added tax (VAT) within a year, according to Governor Alejandro Garcia Padilla. If ratified, the agreement would help remove a major uncertainty for the U.S. territory which is struggling with $72 billion in debt and a stagnating economy. Puerto Rico's budget plans have been is disarray after an earlier VAT proposal was defeated in the House of Representatives last month when six lawmakers from the governor's Popular Democratic Party (PDP) refused to back it. Padilla said the government would gain $1.2 billion in tax revenues under...

Puerto Rico’s Senate approved a bill, with amendments, that increases the cash-strapped island’s sales tax, potentially raising revenue that will help balance the fiscal 2016 budget. The Senate passed the measure Monday in a 14-12 vote, with an amendment to exempt certain processed foods. The amended bill now goes back to the House of Representatives, which narrowly approved the sales-tax hike last week. Governor Alejandro Garcia Padilla and lawmakers from his ruling Popular Democratic Party agreed on a framework for the tax boost May 14. The bill would raise the levy to 11.5 percent from 7 percent through March, after which it would transition into a value-added tax. “The time has come in which we need to be responsible to the country and not do the same thing that’s been done in the past,” said Senator Jose Nadal Power, chairman of the Senate Finance Committee, referring to the $72 billion of the government and its agencies have accumulated. “We have obligations that we have to ful...

The Puerto Rico Senate approved Monday the tax bill that calls for the implementation of an 11.5% sales tax at cash registers, up from the current 7% paid under the sales & use tax (IVU by its Spanish acronym), after being approved Thursday by the House of Representatives amid much debate and opposition. However, it will still need to be ratified by the lower chamber after amendments were introduced by the Senate before voting on it. The bill was passed with 14 yea and 12 nay votes, which included Popular Democratic Party (PDP) Sens. Ángel Rosa, Antonio Fas Alzamora and Gilberto Rodríguez, as well as the New Progressive Party delegation and Puerto Rico Independence Party Sen. María de Lourdes Santiago. PDP Sen. Rossana López didn’t attend the session. It now heads back to the House for a decision on the changes introduced by the Senate. Among the several amendments introduced on the floor by the lower chamber, one called for applying the 11.5% sales tax on frozen, refrigerated, ca...

Puerto Rico's governor is reviving his push for a value-added tax despite previous opposition from legislators as concerns grow about the U.S. territory's economic crisis and the government's ability to fix it. Gov. Alejandro Garcia Padilla told reporters Tuesday that legislators from his party are debating a 13.25 percent value-added tax as one option. If that proposal is approved, it would be accompanied by $300 million in budget cuts, he said. But if a lower tax is approved, cuts will increase to $500 million, said Garcia. "We have reached the point where we have to solve this problem," he said. "Those who are worried about the crisis have reason to be concerned." Garcia, whose party controls the legislature, said he will meet with additional lawmakers and government officials Thursday to craft a final bill that he believes will be approved. He said that if a value-added tax is approved, it would be implemented in stages. "I am not offering mag...

Resident Commissioner Pedro Pierluisi issued the following statement regarding yesterday’s oral argument before the United States Court of Appeals for the First Circuit on the constitutionality of the “Puerto Rico Public Corporation Debt Enforcement and Recovery Act,” and highlighted that the arguments made by the plaintiff bondholders in that case undercut the arguments these same bondholders are making to oppose Pierluisi’s bill to include Puerto Rico in Chapter 9 of the federal Bankruptcy Code: “Puerto Rico, unlike the states, is not entitled to authorize its insolvent municipalities—including its government-owned corporations—to seek protection under Chapter 9.  Puerto Rico’s exclusion led the territory’s government, in July 2014, to enact the Recovery Act, which sought to authorize certain government-owned corporations to restructure their debts. Several investment firms that own bonds issued by Puerto Rico’s electric power authority, PREPA, sued the Puerto Rico government, ...

Puerto Rico's governor said Friday he will soon submit one of the most austere budgets in the island's history and appealed to President Barack Obama's administration and a divided local legislature to work together in finding solutions for the U.S. territory's fiscal crisis. The call from Gov. Alejandro Garcia Padilla came just hours after Puerto Rico's Government Development Bank released a report warning of a possible moratorium on debt payments. The bank also said it and the government could run out of money in the first quarter of fiscal year 2016 if new revenue isn't generated soon. "Liquidity is significantly strained," the report said. Bank officials also said the government might not have enough money to fund public programs and services and honor debt payments unless it goes through with a planned bond sale or approves an alternate measure to raise money. Puerto Rico is struggling to raise new revenue as it faces $72 billion in public debt. ...

The island of Puerto Rico is many things: a tropical paradise, a U.S. territory and an economic mess. After years of deficits, state-owned institutions in Puerto Rico owe investors some $73 billion. That's four times the debt that forced Detroit into bankruptcy two years ago. The bill is now due. One of the most visible signs of the crisis is a tent city on the plaza in front of Puerto Rico's historic Capitol building in San Juan. For several weeks, a group of protesters has been camped out, with signs, rallies and music. The group is opposing plans by Gov. Alejandro Garcia Padilla to raise taxes to help cover Puerto Rico's crippling debt. Labor organizer Javier Lopez says, "We want fair reform. Those who have more should pay more, not the working poor." For months now, the financial crisis has been front page news in Puerto Rico, and people are getting angrier. PR GU RI MA CT NH NJ VT HI AK NY WV ME DE IL WI KY MT SC NM MD WA LA SD PA IN MI MO CA MS OR VA OH ...

Puerto Rico bonds fell to a new low Thursday as its financial crisis deepened. The Commonwealth’s general obligation bond maturing in July 2035 was selling for just 78.5 cents on the dollar Thursday morning. The latest in a collection of increasingly grim headlines came across the wires after legislators rejected the Governor’s tax plan in a Wednesday night vote. Gov. Alejandro Garcia Padilla warned the ‘no’ vote could bring the Commonwealth’s finances to the brink. It was just one week ago that top finance officials warned the government could shut down in a matter of months if the legislature doesn’t pass tax increases that would pave the way for the Commonwealth to borrow more money from investors. The real problem with the vote is that it indicates there is political discord brewing, says David Tawil , portfolio manager at Maglan Capital , which invests in distressed debt, but is currently avoiding Puerto Rico. “It was a surprise that it did not go through,” Tawil says. “Now...

Due to the shortage of liquidity and the lack of access to traditional banking and bond markets, it is imperative to take the measures necessary to first close the budget and projected cash flow gap for the current FY, including implementing immediate measures to reduce expenses…. All these measures are key elements in this effort and delaying their approval puts at risk the financial stability of the government. Investors were unimpressed by the legislature's reluctance to lift taxes, and sent the yield of the $3.5bn bond issued early last year – before debt markets slammed shut for the island – to a new high of 10.6 per cent, up 34 basis points on the day. Puerto Rico's governor Alejandro Garcia Padilla was also unhappy, and said in a statement that legislators that voted against the bill put the future of the country at risk to further their personal agenda, according to Reuters . The lawmakers who voted against the measure will have to answer to history for their irrespo...