Puerto Rico Economic Pulse ©

September 2015: Quo Vadis Puerto Rico – Part I

Past, present, and future with PR’s proposed fiscal plan

On September 10, 2015, S&P downgraded PR’s GO bonds to ‘CC’ from ‘CCC-‘, signaling an imminent default. This occurred the day after the Governor’s Working Group for the Fiscal and Economic Recovery of Puerto Rico submitted its Fiscal Restructuring Plan. It called for public debt restructurings and a Financial Control Board to close the huge $28bn financing gap forecasted thru 2020. With Puerto Rico already classified as a pariah in the municipal bond market, the financial alternatives for the government to grow the economy and address the fiscal crisis have become ever more difficult. Part I of this issue analyzes how PR arrived at this situation. Why public debt and fiscal restructuring are essential to a process of economic growth. Part II will analyze the government’s proposed fiscal Plan, measures and recommendations. We will review the experience of Financing Control Boards in other US jurisdictions and the fate of Puerto Rico if the Plan does not work. How we arrived at this point warrants a historical background.