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SAN JUAN (Reuters) – The federally appointed Puerto Rico Financial Supervisory Board unanimously approved a revised tax reform plan to bankrupt the island on the path to creditworthiness, but its elected government opposed its severity.
FILE PHOTO: Natalie Jaresko, Executive Director of the Federal Tax Commission of Puerto Rico, attends a meeting of the Financial Supervisory and Oversight Council of that institution at the San Juan College of Engineers and Land Surveyors , Puerto Rico, October 31, 2017. REUTERS / Alvin Baez / Photo File
The seven board members voted in favor of the plan, although some worried about its ultimate viability to help Puerto Rico regain fiscal balance and economic growth.
"Frankly, I do not like this financial plan," said board member Ana Matosantos, who was worried about the extent of government spending cuts, which could "seriously weaken" services to citizens. .
As in previous versions, the revised Commonwealth budget plan includes a range of fiscal and structural reforms as well as strong cuts in public spending.
In addition to the revised actual revenue and expenditure data, the new plan has been updated to take into account the low levels of migration from the island following Hurricane Maria last year. and additional federal funding of $ 20 billion for disaster relief. It also imposes more cuts in government spending, which has sparked opposition from the island government.
"This is not a financial plan for economic development, it is a plan of austerity," said Governor Ricardo Rossello at the meeting of the board of directors in San Juan to approve the revised budget plans of the Commonwealth and the University of Puerto Rico.
The revised plan for the Commonwealth provides for a reduction of $ 427 million in government spending per agency for this fiscal year, which is expected to nearly double to $ 926 million by fiscal year 2020.
Overall, the plan also forecasts a cumulative surplus of $ 30 billion over the next 15 years, primarily due to funding of over $ 80 billion in disaster relief for the island. Caribbean after Maria and Hurricane Irma.
Rossello said that "the money will be available to bond creditors, but at the expense of the most vulnerable and our population. It's just unfair. "
US President Donald Trump entered the fray on Tuesday with a tweet accusing Puerto Rican politicians, without providing any evidence, to use "huge and ridiculously high amounts of funding for hurricanes / disasters" in order to pay off money. Other debts, and said that he would not allow a bailout with relief money.
However, Natalie Jaresko, executive director of the board of directors, and its president, Jose Carrion, immediately rejected the idea that funds allocated to disaster relief would be used to pay debts.
Asked on a press conference about the tweet on Tuesday, Jaresko said that federal disaster relief funding does not come directly into the calculation of the amount of surpluses, except for the impact of this money on the economy of the island.
Carrion added that there is no indication that the federal government is using disaster relief funds for purposes other than those for which they were allocated.
In an interview with Reuters last month, Rossello said the island had only received a small fraction of federal funding, between $ 3 billion and $ 4 billion. She had to get back on her feet and access to the rest could take more than a month. decade.
The federal government has earmarked only $ 60 billion to $ 65 billion for the recovery, compared to $ 139 billion that the Rossello administration believes should be fully recovered, the governor said in an interview.
POLITICAL WILL
On Monday, Jaresko said during a conference call with reporters that there was a "continuing lack of political will" to implement certain measures, such as changes in labor legislation aimed at making Puerto Rico competent jurisdiction.
"Labor reform is not the ultimate solution," said Christian Sobrino, the governor's representative on the tax commission created by the so-called federal PROMESA law. "You can count on our collaboration to succeed, but we will not be doomed to failure," he added.
The council released the latest version of the financial plan to the public on Monday, prompting a resumption of the government's overdue general obligation.
Investors explained how the plan shows an ability to pay for debt service costs. The GO reference debt matures in 2035 with an 8% coupon maintained just below Monday's high at 59.875 cents on the dollar, at a price of 0.375 point, according to Refinitiv data.
Report by Luis Valentin Ortiz in San Juan; Additional report by Makini Brice in Washington; Edited by Daniel Bases, Paul Simao and Jonathan Oatis
