The Congressional Task Force on Puerto Rico’s Economic Development released a progress report last week, as mandated under the PROMESA law, that did not include any specific policy recommendations. The 8-member group complained about the lack of accurate data regarding Puerto Rico’s economic and financial status, and said they would consult with other federal sources to get the most up-to-speed numbers possible. PROMESA requires the Task Force to release a final report, on or before December 31, 2016, on adjustments to federal policies that could improve the economic wellbeing of the Commonwealth.
Financial Control Board holds “informal” meeting in DC
The Fiscal Oversight Board, whose members were appointed in late August, has held informal meetings – in-person and over the phone – prior to their first official in-person meeting, expected to be held in Washington, D.C. this week or the following. The informal meetings have not been attended by the Governor’s representative to the board, former New York Lieutenant Governor Richard Ravitch. The board is under pressure to meet a September 30 deadline to appoint a chair, chose an executive director, and approve its bylaws. The board must also evaluate and approve the Governor’s proposed 5-year fiscal plan.
Some analysts believe that the board will not make any major decisions until a new government is elected in November. Others are concerned that the window for voluntary negotiations – a prerequisite before the board considers approving debt restructuring – is too narrow as many creditors would prefer to hold out on debt negotiations until a new administration is sworn-in. The stay in litigation related to creditor collections is also limited, with a deadline of February 15 (with the possibility of a 75-day extension by the board).
PREPA restructuring not yet finished
The Puerto Rico Electric Power Authority (PREPA) has not yet finalized its debt restructuring agreement with creditors. Two major steps that remain to be taken are:
- A new bond issuance according to the securitization process; and
- Approval of a new rate structure by the Energy Commission of Puerto Rico.
To overcome the first hurdle, credit rating agencies have to rate the new bonds as investment grade. The chief restructuring official, Lisa Donahue, who’s company Alix Partners has earned over $43 million in the last two years, is expected to submit an exit strategy by December this year.
Board designees under heavy criticism
Recently appointed member of the Financial Control Board, Carlos García, and rumored potential Executive Director Bill Cooper have both come under fire from politicians of both stripes in Puerto Rico. García, who was the head of the Government Development Bank (GDB) under the previous administration of Luis Fortuño, has been criticized for having a possible conflict of interest given that he will now have the power to audit and oversee the restructuring of transactions that he presided over. Under his watch, the GDB led transactions of close to $11 billion in COFINA and other bond issues. Critics argue that many loans executed under his purview were made without a source of repayment and aggravated Puerto Rico’s fiscal crisis. Anger over his designation was such that House Finance Chairman Rafel “Tatito” Hernández (PDP) sent a letter to President Obama requesting that he remove García from his position.
Hernández and former NPP President and candidate for Governor Carlos Pesquera also criticized the designation of Cooper. Pesquera feels that Cooper is inclined in favor of one particular industry, and that there is a conflict of interest in Cooper’s writing of the law and his potential position as Executive Director. Prior to his role in the House, Cooper was the head of a natural gas trade association.
Among other politicos who have criticized the García designation and/or the possible Cooper appointment are PDP candidate for Resident Commissioner and former House Majority Leader Héctor Ferrer, Senate President Eduardo Bhatia, and Center for the New Economy”s Public Policy chief Sergio Marxuach.
Unemployment rate drops 0.7%, labor force participation increases
The unemployment rate in August dropped to 11.3%, which is 0.7% less than at this point last year. Meanwhile, labor force participation rose to 39.9%, which is 0.3% more than August 2015. In addition, total employment experienced a year-over-year growth of 11,000 jobs. The total number of Puerto Ricans working in the island is now 1,004,000. These numbers were released by the Puerto Rico Department of Labor and Human Resources.