Madagascar Development

Puerto Rico is an economic basket case. It’s been in a recession for nearly a decade, its skilled labor is leaving the island in droves, and the island’s government recently told its bondholders that it is unable to fully repay them. To emphasize that point, it recently failed to meet some bond payments, putting a portion of its debt technically in arrears. Its plight has grown severe enough that Congress feels obligated to study the morass to consider whether it should act to alleviate this crisis.The Senate Finance Committee convenes this week to study the issue, and the House Judiciary Committee met earlier this year on the topic.  The island’s government should probably not hold its breath: the odds that Congress will extend Chapter 9 bankruptcy protection to the island - the government’s most fervent desire - are slim, although I’ve argued that it may very well make sense to do so. Also off the table are anything that could be remotely construed as a bailout, so there wi...

Puerto Rican officials will appear before a skeptical United States Senate panel on Tuesday to explain why the island may need federal assistance by the end of the year and how lawmakers preoccupied with the federal debt might help without setting an unwelcome precedent. Officials on the island recently warned that their government would, in effect, run out of cash in November, even though it owes big payments to creditors in December and early January. Puerto Rico has not issued audited financial statements for the last two years, and some members of the Senate Finance Committee say that before the federal government commits funds to help tide it over its crisis, they need to know more about the federal money the island has already received and how it was used. “It would be extremely difficult to ask Congress to make important decisions, and appropriately allocate resources, without first understanding what the facts are and what problems need to be fixed,” said Senator Orrin G. Ha...

At a time when creditors of crisis-hit Puerto Rico are gearing up for negotiations on restructuring the Island's debt in smaller alliances, the group of hedge funds was believed to be split off.  The hedge funds group comprising over 36 firms is holding a debt of $5.2billion of ailing Puerto Rico. According to unconfirmed news, since Puerto Rico governor Alejandro Garcia Padilla said that government's debts were unsustainable, there's surfacing difference of opinion among hedge group members. In the latest development, a group of activists in the Island has started raising voice against the participation of Antonio Weiss in the restructuring plan negotiations as his connections with the Wall Street lead to a conflict of interest. Some members of hedge funds group, according to sources on a condition of anonymity, are not willing to form nimble groups to support the restructuring package for the Puerto Rico Island. Governor Padilla in June said debts were unsustainable fo...

To the Editor: I respectfully disagree with the eight House Democrats who recently urged Treasury Secretary Jacob J. Lew to support bankruptcy for Puerto Rico (“ Hispanic Contingent in Congress Asks Treasury to Prevent ‘Catastrophe’ in Puerto Rico ,” Business Day, Sept. 15). The 2008 bailout of two automotive companies is just not an imitable case study for Puerto Rico given the significant difference in scope and complexity.  Democratic lawmakers who demand a one-size-fits-all blueprint are doing Puerto Rico, as well as all Americans, a disservice. Now is not the time to put political posturing over solutions. Even the continued discussion of Chapter 9 bankruptcy is harming the island by damaging its credibility with investors and raising the cost of borrowing. Puerto Rican families and businesses need real, substantive reform that will create opportunity and economic growth.  Democrats are pushing a political agenda that might work for them on Capitol Hill, but instead we sh...

— The U.S. Department of Education is awarding a total of more than $29 million to eight universities in Puerto Rico to boost their curriculum and resources. Resident Commissioner Pedro Pierluisi says the funds will be spread out over five years. He said Wednesday that the grants come under a program for colleges whose student populations are at least 25 percent Hispanic. Most are private institutions. Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Puerto Rico universities to receive $29M in federal funds

New Report Highlights that Weiss Received More than $21 Million from Lazard Frères, an Investment Bank Deeply Tied to the Puerto Rico Debt Crisis Washington, DC — Today, a large and diverse national coalition of advocacy groups sent a letter to Antonio Weiss, Treasury Department Counselor to the Secretary, requesting that he immediately recuse himself from all activities relating to the Puerto Rico debt crisis. The groups highlighted that upon joining Treasury, Weiss received a golden parachute worth more than $21 million from Lazard Frères, his former employer, an investment bank that has invested and traded extensively in Puerto Rican debt. The national coalition letter was signed by the following organizations: Rootstrikers, the Center for Popular Democracy, Democracy for America, the Florida Institute for Reform and Empowerment, Hedge Clippers, Make the Road Connecticut, Make the Road New York, MoveOn.org Civic Action, New York Communities for Change, Organize Now, Presente.org...

Puerto Rico's Economic Activity Index for the month of July fell 0.7 percent year over year, while the index for the month of August was flat year over year, the Government Development Bank of Puerto Rico reported on Thursday. Preliminary data shows lower cement sales, less gasoline consumption and less electric power generation appear to have contributed to the decline in economic activity. (Reporting by Robin Respaut ; Editing by Chris Reese ) Puerto Rico's economic activity index for July falls 0.7 pct y/y

Puerto Rico’s $72 billion debt burden overshadows another financial threat to the Caribbean island: a government workers pension fund that’s set to go broke in five years. As Governor   Alejandro Garcia Padilla prepares to push for bondholders to renegotiate debts he says the commonwealth can’t afford, he’s also contending with an estimated $30 billion shortfall in the Employees Retirement System. The pension, which covers 119,975 employees, as of June 2014 had just 0.7 percent of the assets needed to pay all the benefits that had been promised, a level unheard of among U.S. states. If not fixed, the depleted fund could jeopardize a fiscal recovery by foisting soaring bills onto the cash-strapped government even if investors agree to reduce the island’s debt. The system is poised to run out of money by 2020, which would leave the government on the hook for more than $2 billion in benefit payments the next year alone, according to Moody’s Investor’s Service. That’s equal to about on...

The Obama administration urged Congress to move quickly to address Puerto Rico's debt crisis after commonwealth officials warned they might run out of money before the end of the year. “Given the commonwealth’s projection that it will exhaust its liquidity later this year, Congress must act now to provide Puerto Rico with access to a restructuring regime," the Treasury Department said in a press release after Treasury Secretary Jacob Lew met with the territory's Gov. Alejandro García Padilla on Thursday. "Without federal legislation, a resolution across Puerto Rico's financial liabilities would likely be difficult, protracted, and costly." The letter suggested to some observers that the administration wants to go beyond the bankruptcy legislation proposed so far, and that that Puerto Rico itself - and not just its public corporations and municipalities -- should be given access to a restructuring process. Earlier this year bills were filed first in the U.S...

My colleague Joe Harpaz has the details of the new proposal and law that Puerto Rico will impose a value added tax on the island(s). For the details go there, my job is to talk about macroeconomics so here’s the macroeconomics of such a VAT. In general, if you want to gain more tax revenue out of an economy then a VAT is a good idea: but it should be made very obvious that it is an increase in revenues and it’s going to be the consumers, the residents, of the island that pay it. Not that that is all that unusual about tax rises: there’s only us humans around to pay taxes anyway. Sure, we can levy a tax upon corporations, or minerals, on spectrum, anything we like, but it does always end up being one or another group of humans who find their pocketbooks getting lighter as a result of the tax. As Joe says : In the case of Puerto Rico, a 10.5% VAT will be applied to a wide range of goods and services effective April 1, 2016. The move is part of a sweeping plan to inject $1.5 billion in...

Puerto Rico has finally issued a plan to dig itself out from under $72 billion of public debt — more than any state in the union except California and New York. It’s a pretty good plan, too, except for one thing. The island’s legislators can’t be trusted to stick to it. The Working Group for the Fiscal and Economic Recovery of Puerto Rico describes the scale of the problem. Even after calling for spending cuts and higher revenue, it predicts a $13 billion funding shortfall over the next five years, with a cash crunch of $500 million as soon as next June. And, it says, “available resources may be insufficient to service all principal and interest on debt that has a constitutional priority” — a dark hint that general-obligation bonds might have to be restructured, too. Puerto Rico’s bondholders, including hedge funds lured by high yields, want deeper cuts in spending. They’re right, though caution is warranted: Too much austerity would make it harder for the economy, trapped in a prolo...

Gov. Alejandro García Padilla of Puerto Rico has offered a comprehensive proposal for reversing the territory’s downward spiral. Unlike prior proposals, which focused solely on restructuring Puerto Rico’s debt or cutting its spending, the new plan recognizes the urgent need for both. It could actually work, but only with a major assist from Congress. Although the Puerto Rico Fiscal and Economic Growth Plan released last week outlines a wide range of proposals, its essence lies in two key features: Puerto Rico would establish a financial control board with broad budgetary authority, and it would restructure much of its $71.1 billion debt burden. The governor’s recommendation of a financial control board suggests sincerity about reform. The proposal would give the board authority to approve a five-year plan and to implement “structural” reforms. Central governments have imposed such boards in the past. In the 1990s, when Washington faced a deep fiscal crisis, Congress created a contro...

Puerto Rico development bank officials are preparing to enter confidential debt restructuring talks with a group of the agency’s bondholders as soon as next week, said three people with knowledge of the matter. The Government Development Bank, which hasabout $5 billion of debt andacts as a lender to the U.S. territory and its local governments, has drafted a non-disclosure agreement that would govern talks with a bondholder group represented by law firm Davis Polk & Wardwell LLP, said the people, who asked not to be named because the information is private. Puerto Rico representatives will ask some of the creditors to sign the agreement in order to start negotiations as soon as Sept. 8, the people said. The bondholder group, which hired financial advisory firm Ducera Partners to represent it in July, is one of at least four major sets of creditors who’ve formed alliances in order to negotiate with the commonwealth and its agencies over how to restructure $72 billion of debt. Most o...

Puerto Rico has dangled a carrot in front of the investment community in the form of a 77-page fiscal and economic growth plan that incorporates stimulus measures, spending cuts, fiscal reforms and the creation of a financial control board. It remains to be seen whether the measures are enough to persuade investors to work with the government as it restructures about $72 billion of debt -- or whether they can garner the needed political support on the island. The document, released Sept. 9, won plaudits for being "comprehensive" from Peter Hayes, the head of Blackrock's municipal bond group, and Moody's Investors Service vice president Ted Hampton. Advantage Business Consulting president Vicente Feliciano praised the plan for going beyond past proposals that had simply presented revenue and spending measures. Sergio Marxuach, the public policy director at the Center for a New Economy, however, dismissed the document as, "more of a wish list than an actual pla...

Puerto Rico's debt problems have thrust the U.S. territory into a "critical period" that requires cooperation from all stakeholders, a U.S. Treasury official said on Wednesday. The official said the Treasury was "carefully reviewing" a fiscal and economic growth plan released Wednesday by a task force created by Puerto Rico's governor. (Reporting by Jason Lange ) U.S. Treasury official says Puerto Rico in 'critical period

Trying to balance the demands of anxious island residents on one side and powerful financial institutions on the other, the governor of Puerto Rico announced a plan Wednesday for bailing the island out of debt that would require at least five years of bruising reform if it is to succeed. In a speech live on television and online, the governor, Alejandro García Padilla, stepped up his populist talk, seeming to take the side of residents against investors, who would face losses on their Puerto Rico bonds if the plan goes into effect. “We may be publicly attacked by outside interests who will want to force us to pay,” Mr. García Padilla said. “They will attack us, because they’ll want to see us on our knees.” But even as the governor sought to buoy the spirits of his fellow Puerto Ricans, who face what many say will be painful cutbacks in services under the plan, he also sought to show the island’s many creditors that they would be better off working with him than fighti...

Governor Andrew Cuomo wrapped up his visit to Puerto Rico with a presentation on how the island can save money on health care costs. Zack Fink filed the following report. SAN JUAN - The New York delegation got to the heart of its visit to Puerto Rico Tuesday with a roundtable discussion focused on lowering rising health care costs. "New York went through this same fight. We went through it about a year ago," said Governor Andrew Cuomo. "This is not unique to Puerto Rico." Because Puerto Rico is commonwealth and not a state, it receives a lower reimbursement rate for Medicare and Medicaid. 68 percent of the island's residents rely on government health care. "Puerto Rico paid the same, so we are entitled to recieve the same money," said Alejandro Padilla Garcia, the governor of Puerto Rico. Last year, New York applied for a Medicaid waiver from the federal government, which allowed it to change the formula for reimbursements. It ultimately saved th...