Bankruptcy-like move paves path toward Puerto Rican prosperity

 A little over 100 days ago, Ricardo Rosselló was sworn-in as the new governor of Puerto Rico with a clear mandate: top to bottom government reform. Our bold campaign pledges to bring back fiscal prudence, transparency, credibility, free enterprise and economic growth persuaded a majority of Puerto Ricans to endorse a drastic change in governance.

With 10 years of economic contraction, population loss and crippling debt, it’s clear we face a colossal task. The people of Puerto Rico are aware that it will take hard work and sacrifices to make lasting change, and with that in mind, we are working to finally put this crisis behind us.

{mosads}While our first 100 days have been marked by a myriad of measures to bring back fiscal stability and economic growth to Puerto Rico, 10 years of economic stagnation and reckless spending left the island with over $112 billion in debt. A large portion of the debt is held by creditors, with whom Puerto Rico’s government has been negotiating in good faith so we can establish a path forward without jeopardizing services to the most vulnerable of the population.

In 2016, Congress passed the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA). PROMESA created a Fiscal Oversight Board tasked with overseeing Puerto Rico’s finances and providing a bankruptcy-like process, known as Title III, as an option for the government to restructure its debts.

In accordance to PROMESA and the board, we submitted a fiscal plan, approved and certified by the board, that includes $1.38 billion in new annual revenues and $1.623 billion in reduced annual expenses.

The plan outlines new efficiencies in Puerto Rico’s healthcare system that will result in savings of $299 million, while also protecting access to care to those who need it the most. Our approved fiscal plan also contemplates annual debt interest and principal payments of close to $800 million.

Debt service contracted by previous administrations required a payment of nearly $3.5 billion per year, severely constraining liquidity for government operations and economic growth. While it is a cutback of approximately 80 percent on debt service payments to creditors, the Rosselló administration established good governance practices as a priority: transparency, protecting services for the most vulnerable and retention of our public workforce.

The government has been closely involved in negotiations with creditors for over 95 days, and there have been successes. An agreement with Puerto Rico Electric Power Authority’s (PREPA) creditors yielded savings of $2.2 billion on the debt. Puerto Rican households will now see some relief in their energy bills.

Nevertheless, lawsuits have been initiated by uncompromising creditors, who wish to be paid in full. These uncompromising creditors are asking the courts to freeze 100 percent of government revenues. We have the responsibility to protect our citizens and to maintain a functioning government. Recognizing that responsibility, our administration decided to seek the protection of Title III under PROMESA to enable a court-supervised restructuring of the debt.

It was not an easy call, but we remain steadfast in our desire to negotiate in good faith with creditors. The provision of essential services to the most vulnerable, including children and the elderly, is non-negotiable and we will not accept being strong-armed by a small group who refuses to compromise. We are drawing a new path forward, and it will require tough decisions. Puerto Ricans are counting on all of us to get there.

Luis G. Rivera Marín is the secretary of state for Puerto Rico.

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