Madagascar Development

When I testified before the Senate Energy and Natural Resources Committee last month, I was the only voice among a panel of esteemed colleagues to oppose allowing Puerto Rico’s electric utility, known as PREPA, to file for Chapter 9 bankruptcy. I stand by that testimony, not because I have a lack of empathy for the residents of Puerto Rico, but rather, just the opposite. I believe that changing the current law to allow PREPA to file for Chapter 9 restructuring would be a further setback for the island’s economy. A declaration of bankruptcy would effectively dry up PREPA’s access to the capital markets for the foreseeable future, making borrowing new money extremely costly, if available at all, erecting yet another obstacle to the recovery of the already stagnant economy. While PREPA is just part of a much larger fiscal crisis, I believe a consensual settlement where all stakeholders address PREPA’s near term liquidity needs by better aligning its financial obligations with its reven...

If anything stands as a symbol of how Puerto Rico ended up mired in billions of dollars of debt, it is an oceanside golf resort going to seed some 15 miles east of San Juan. Known until this month as the Trump International Golf Club Puerto Rico, it was built as a for-profit venture, subsidized by federal taxpayers and backed by the island’s powerful Government Development Bank, which sold to investors and guaranteed repayment of more than $50 million in tax-exempt bonds. Despite the Trump name, which the former owners licensed from the billionaire investor and now presidential candidate Donald J. Trump, the resort failed to attract enough golfers since the first tee-off in 2004. This year, it went bankrupt. (Mr. Trump was not involved in the financing or operation of the club, but he is a creditor.) Then, about a week ago, a buyer scooped up the property, wine cellar and all, for a mere $2.2 million and is rushing to get it ready for a Professional Golfers Association tournament i...

Last week, we brought you the latest from Puerto Rico’s debt debacle. The commonwealth is desperately trying to restructure some $72 billion in debt while staring down a $354 million bond payment due on December 1. As we discussed at length on Friday, some $270 million of what’s due next week is GO debt guaranteed by the National Public Finance Guarantee Corp. Defaulting on that is bad news and as Moody’s warned earlier this month, a missed payment on the commonwealth’s highest priority obligations “would likely trigger legal action from creditors, commencing a potentially drawn-out process absent swift federal intervention.”  Make no mistake, federal intervention is likely to be anything but “swift.” A Senate judiciary committee headed by Iowa Republican Charles Grassley will meet on December 1 to discuss a legislative proposal to assist the Padilla government, but it’s hard to imagine that a decision will be made in time to avert at least a partial default. Ultimately, the ...

Firing teachers, closing over 150 schools, increasing taxes, laying off public sector workers, proposing to reduce the minimum wage, waiting in emergency rooms due to a lack of nurses, forcing migration to the United States, increasing unemployment and underemployment, separating families and food insecurity. This is Puerto Rico's new normal under the weight of the crushing $72 billion debt owed primarily to hedge funds and private investors. Much has been said and analyzed about the bleak economic viability of the island's future that the crisis has provoked. The truth is Puerto Rico owes more than its Gross National Product (GNP), with no immediate relief in sight. The human impact is both visible (professionals and students leaving the island to seek employment in the United States) and invisible (the elderly and ill laying in cots in hospital hallways for days at a time, waiting for a room to become free). Blame runs unbridled -- hedge funds engaged in risky, and perhaps ne...

Puerto Rico faces a dilemma: pay bondholders $354 million on Dec. 1 or hold on to the cash to ensure it can keep the government running. The decision may mark a turning point in the long-simmering fiscal crisis for the Caribbean island, which is seeking to cut its $70 billion of debt by persuading investors to accept less than they’re owed. While it began skipping payments on bonds backed only by legislative appropriations in August, next week’s payment includes debt that the central government has guaranteed, giving investors legal recourse. Another $957 million is due from Puerto Rico and its agencies on Jan. 1. If there’s a default, bondholders may sue for repayment, igniting a legal battle that could upset efforts to negotiate a debt-restructuring agreement. Talks with creditors are only just beginning , and Puerto Rico has yet to disclose the terms it will offer investors to exchange their debt for new securities. The commonwealth is doing “everything possible” to make the paym...

Puerto Rico legislators have approved an amended bill restoring more power to a fiscal control board in an effort to appease bondholders and help pull the island out of an economic crisis. The move comes as the U.S. territory runs out of time to approve measures as it seeks to restructure $72 billion in public debt that the governor has said is unpayable. Gubernatorial Chief of Staff Victor Suarez said Wednesday that the government will meet this week with advisers of the bondholders to present a restructuring plan. He said that Gov. Alejandro Garcia Padilla is pleased with the amended bill that legislators approved late Tuesday and expects to sign it in upcoming days. Lawmakers last week had agreed to strip the board of most of its powers, but revised the bill after a lengthy debate. The board now has the authority to endorse a five-year fiscal reform plan but it does not have the power as originally proposed in Garcia's measure to approve government agencies' budgets or dem...

Therefore, the view of Treasury is that Puerto Rico is closer to Detroit in the 2010s than it is to either New York in the 1970s or Washington, D.C., in the 1990s. In fact, the population loss in Puerto Rico in 2015 will be similar to the one experienced by Detroit during 2000-2010. Consequently, Treasury put forward a plan that would entail concessions and adjustments by the people of Puerto Rico, the federal government and bondholders. The plan received widespread acceptance among the political parties and business community in Puerto Rico. However, it has not gained traction among bondholders and the members of Congress who support them. The Treasury proposal provides federal funding to address structural impediments to economic growth in Puerto Rico such as the Earned Income Tax Credit (EITC) program. The plan also provides federal funding to shore up Puerto Rico's fiscal deficit, like equal participation in health programs such as Medicare (for which Puerto Ricans pay under t...

D.R. Martin ( Puerto Rico’s ‘colonialism’ pretext , The Hill, Nov. 2) is exactly right about complicity of the local “commonwealth” regime of territorial government in public sector fiscal and economic policies leading to the current failed client state syndrome that Puerto Rico is experiencing. He is dead wrong to deny the federal government’s role enabling and even instigating decades of experimental command economics at the local level.  One does not need to prove the colonial nature of the island’s current status in order to recognize that Washington acted in collusion with local elites thriving under the status quo to create and exploit a crippling economic and political dependence on federal subsidization. The Cold War made it inconvenient to enable Puerto Rico to attain either statehood or nationhood.  So the artificial construct of the “commonwealth” regime as a form of indefinite “autonomy” was contrived.  The effect was to exclude the last large...

Top Senate Republicans with jurisdiction over Puerto Rico are working on a legislative proposal to help the commonwealth as it struggles with more than $70 billion of debt, countering a plan by the Obama administration. The proposed bill will be finished “soon,” Robert Dillon, spokesman for the Senate Energy and Natural Resources Committee, said by phone Thursday. Republicans would prefer that Puerto Ricans solve the crisis on their own, but if they can’t, lawmakers will probably seek to impose “something like” a federal control board, Senate Finance Committee Chairman Orrin Hatch said in an interview Thursday. It would be the first attempt by congressional Republicans to address the cash crunch on the island. Dillon didn’t specify whether the plan will be announced before Dec. 1, when Moody’s Investors Service expects Puerto Rico to default on a portion of $354 million payment due that day. The island has   already defaulted   on bonds from its Public Finance Corp. The O...

Puerto Rico lawmakers approved a bill to establish a local fiscal adjustment board, a key measure in Governor Alejandro Garcia Padilla’s plan to lighten the island’s $70 billion debt burden. The bill now goes before the governor for approval. Details weren’t immediately available. Lawmakers haven’t acted yet on another bill to authorize a restructuring of the commonwealth’s main electric utility. Tuesday is the final day of the current legislative gathering. Garcia Padilla can call a special session to require lawmakers to continue working on the measure. Who holds sway over the island’s financial decisions has been a point of contention among Puerto Rico officials, bondholders and federal lawmakers. The Obama administration has advocated a federal control board as part of a proposal to give the island access to bankruptcy. Pedro Pierluisi, Puerto Rico’s nonvoting member of Congress, rejected the idea of a federal board to oversee the territory’s finances, saying in Washington on Tue...

 Puerto Rico’s congressional representative on Tuesday blasted the idea of a federal board to oversee the territory’s troubled finances, saying it would amount to a “dictatorship.” Pedro Pierluisi (D), Puerto Rico’s nonvoting member of Congress, dismissed the idea floated in the Capitol as an unforgiveable breach on Puerto Rico’s autonomy, even as the territory turns to Congress for help steering through its unbearable debt load. Some Republicans, including Senate Judiciary Chairman Chuck Grassley (R-Iowa), have suggested a federal board similar to the one used in the District of Columbia during the 1990s could help the territory reconcile its troubled finances. But Pierluisi did not mince words in dismissing it. “That would be a blatant exercise in colonialism like I haven’t seen in recent history,” he said Tuesday. “Whoever proposes that is going to be facing me, and facing anybody that believes in democracy in the world.” Pierluisi made his comments at an event devoted to P...

Iberia will resume flights between Madrid and San Juan, Puerto Rico on May 15, 2016, after a three-year absence on the route. The announcement was made during the Latin American and Caribbean Air Transport Association (ALTA) Airline Leaders Forum in San Juan. “This is a very satisfying day for us,” Iberia chairman and CEO Luis Gallego said in a statement. “When we suspended flights to Puerto Rico nearly three years ago, we promised to resume them as soon as we were able to make the route economically sustainable, and that moment has now arrived.” Iberia, a subsidiary of International Airlines Group , will fly the route 3X-weekly using new Airbus A330-200s; the Spanish airline’s first A330-200 is expected to arrive next month. The aircraft will be configured with 19 business-class seats and 269 economy seats. San Juan will become Iberia’s 20th destination in Latin America. Rendering of A330-200 in Iberia livery Airbus Aaron Karp Iberia to restart Madrid-Puerto Rico flights in 20...

The Puerto Rico House of Representatives approved a fiscal oversight board, part of the government's effort to boost investor confidence. The House's action late Thursday followed the Puerto Rico Senate passage of a similar bill Wednesday. In early September the Puerto Rico Working Group for the Fiscal and Economic Recovery of Puerto Rico   proposed a local control board as part of its Fiscal and Economic Growth Plan. Gov. Alejandro García Padilla proposed a control board following this recommendation. Like the Senate, the House modified the governor's proposal to make the board an oversight board rather than a control board, said Michelle Gonzalez Tobaja, spokeswoman for House President Jaime Perelló Borrás. However, there are some differences between the House and Senate versions of the bill. Representatives of the bodies will meet in conference to reconcile the two versions, Gonzalez Tobaja said. The conference should complete its work by   Nov. 20 , when the current leg...

Tourists are still flocking to its beach resorts. Malls, anchored by department stores like Macy’s and JCPenney, are full of shoppers. At rush hour, roads are clogged with late-model luxury SUVs. But after years of borrowing to prop up the island’s stagnant economy, the government faces $720 million in debt payments in the next two months, and it may run out of cash as early as December. Government officials say meeting those obligations may leave them short of the cash they need to cover payroll, retirement benefits, and Christmas bonuses. Governor Alejandro García Padilla has said he’ll consider cutting hours for public workers to keep essential functions running. García Padilla has already closed some schools, delayed tax rebates, and suspended payments to government suppliers. The Obama administration has offered a way out. On Oct. 21 the Treasury Department put forward an assistance package that would sustain the island’s medical system by increasing reimbursement rates for Medica...