Puerto Rico group to meet with creditors Monday regarding fiscal steps

By Caroline Salls

Pittsburgh, July 9 – Commonwealth of Puerto Rico Governor García Padilla and the Government Development Bank for Puerto Rico (GDB) said Thursday that the Working Group for the Economic Recovery of Puerto Rico will host a meeting with Puerto Rico’s creditors on July 13 as part of the group’s efforts to communicate the steps the commonwealth is taking to address its fiscal condition and long-term economic growth.

According to a news release, former World Bank chief economist and former deputy director of the International Monetary Fund Anne Krueger, economist and American University professor Andrew Wolfe and GDB president Melba Acosta Febo will brief members of the investment community on Krueger and Wolfe’s report on Puerto Rico’s fiscal condition.

“Ensuring the commonwealth’s long-term economic health and sustainability will require a comprehensive set of solutions to the deep fiscal issues we currently face and we are committed to having honest conversations with all of the stakeholders with interests in the island,” Padilla said in the release.

According to the release, the group, led by Victor Suarez, Melba Acosta, Cesar Miranda and the presidents of the Senate and House, is tasked with preparing, in coordination with the legislative branch, a long-term fiscal and economic development plan.

The group will establish the parameters of that plan with a view to balance government-wide budgets by the end of the adjustment period. Additionally, Padilla and the GDB said the plan will outline specific proposals to improve and diversify the commonwealth’s economy, reduce costs of doing business and ensure the long-term development of Puerto Rico’s economy and the stability of its finances.

These proposals include promoting collaborations with the private sector to provide services currently provided by the public sector, building on the success of the Teodoro Moscoso bridge, the Luis Muñoz Marín international airport and highway PR-22; promoting structural fiscal and economic reforms designed to promote economic development, which may include changes to the labor and welfare laws of the commonwealth; further revenue-enhancing reforms for the tax system, including corporate and property tax regimes; and implementing additional cuts in spending.

Padilla and the GDB said the group will also seek to ensure that the total debt burden of the commonwealth is adjusted so it can be repaid on sustainable terms while ensuring pension obligations are honored over the long-term and essential services for the people of Puerto Rico are maintained.

The group also bears responsibility for designing and creating a fiscal oversight board, which will guarantee the continuity and honor of the commitments agreed upon by the commonwealth during the restructuring process, according to the release.

Advisers to the group include Cleary Gottlieb Steen & Hamilton LLP and Millstein & Co. Cleary will act as legal adviser and Millstein will act as restructuring adviser. Citi will act as lead broker-dealer in connection with potential liability management transactions.

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