It’s been eight months since Governor Vázquez issued the first lockdown order in Puerto Rico due to the COVID-19 pandemic. After some initial success in controlling the spread of the virus, Puerto Rico has registered a significant surge in infections and hospitalizations recently, while approximately 1,000 people have unfortunately died. In the United States, the situation is essentially out of control as we report in Our Radar section below.
We have received some goods news recently though from two vaccine developers who report that initial data from Phase 3 trials indicate the new vaccines appear to have an effectiveness rate of at least 90% in protecting against the disease. Once the vaccines are approved for widespread use, however, we face the complex and difficult task of manufacturing and distributing them. So we still have a ways to go, but we certainly have reasons for hope and to be grateful.
We celebrate another, happier, milestone this week as CNE turns 22. We have a special message from our founder and president, Miguel A. Soto-Class, to commemorate the occasion. We then move on to a report from Jennifer Wolff, director of CNE’s policy bureau in Spain, regarding some effective public health policies implemented in the Valencian Autonomous Community. We close with an analysis of the most recent Plan of Adjustment proposed to Puerto Rico’s creditors by the Fiscal Oversight and Management Board.
Finally, a quick note to let you know we will not be publishing the Weekly Review on November 26, as we take a brief respite to celebrate Thanksgiving Day. While 2020 has been a tough year for all of us, we are still grateful if for nothing else for the strength to ride out the storm, as Robert Nichols, one of World War I famous “soldier-poets” writes in this poem.
We will be back on December 3. Until then, keep well, stay strong, and Happy Thanksgiving.
—Sergio M. Marxuach, Editor-in-Chief
Message from CNE’s President and Founder on CNE's 22 Anniversary
Time has taken a special dimension this year of lockdowns, mobility restrictions, and postponed plans. Life has seemed to move in slow motion, accelerating in bursts either when relishing moments of joy with family or when rejoicing in hard-fought victories with colleagues. Celebrating CNE’s 22nd anniversary this week is one of such time-enhancing moments.
Since 1998 we have tackled a myriad of complex challenges: how to increase Puerto Rico’s competitiveness, how to forge a path to economic recovery, how to ensure a fair and just reconstruction, how to reform the island’s energy infrastructure, and how to restore the government’s fiscal health. Time usually brings gravitas to people and patina to objects. In our case, time has demonstrated the value of our meticulous data-driven approach to complicated matters and strengthened our commitment to unbiased analysis. It has also deepened our unwavering dedication to Puerto Rico and has gained us the trust of diverse stakeholders, both on the island and in the U.S.
Looking back on the legacy of these 22 years helps put into perspective these seemingly strange months. We look forward to continuing this journey with all of you who share our belief in a better future for Puerto Rico.
–Miguel A. Soto-Class, President & Founder
Insights + Analysis from CNE
Public Health and the Pandemic?
By Jennifer Wolff, Ph.D., Director – Madrid Policy Bureau
Watch Jennifer Wolff’s conversation with Salvador Peiró (in Spanish)
Lack of data, scarcity of tests, and an initial failure to track the contacts of COVID-19 patients: these have been some of the shortcomings in the government’s response to the pandemic in Puerto Rico. Not all has been negative, however: the island has found a silver lining in the Municipal System for Case Investigation and Contact Tracing (SMICRC) a program created from the ground up at the municipal level and developed at the state level by accretion. The SMICRC has shown the capacity of the island’s health professionals, its scientific community, mayors, and public officials to generate an effective, innovative, and forceful response in the midst of an emergency. How can we build on this experience to strengthen the capacity of the Puerto Rico health system to respond effectively to extraordinary situations like this one in the future?
Salvador Peiró, researcher at the Foundation for the Promotion of Health and Biomedical Research (FISABIO) of the Valencian Autonomous Community in Spain, provides some answers to this question. The Valencian Autonomous Community – one of 17 regions or autonomous communities in Spain – developed early in the evolution of the COVID-19 pandemic a robust contact-tracing program that has identified and tackled outbreaks with relative effectiveness. The Valencian COVID-19 program was not created in a vacuum: it was built by capitalizing on an already-existing effective surveillance system that was a crucial component of Valencia’s public health structure. This pre-existing epidemiological program is anchored on, among other things, a comprehensive data system that works in real-time, a network of epidemiologists who are integrated in the health system at different levels, and a permanent team of seasoned contact tracers experienced in a variety of epidemiological situations. In the video above (in Spanish), Peiró offers some useful pointers from Valencia on how to strengthen Puerto Rico’s public health system.
Revised Plan of Adjustment
By Sergio M. Marxuach, Policy Director
Back in February of this year, the Financial Oversight and Management Board for Puerto Rico (“FOMB”) reached an agreement with holders of $10.6 billion of Puerto Rico’s General Obligation Bonds (“GOs”) and filed a proposed Plan of Adjustment (“POA”) with the Title III court. That initial proposal sought to adjust approximately $35 billion in creditor claims against the government of Puerto Rico and included not just the GOs, but also bonds issued by the Public Building Authority (“PBA”), the Employees Retirement System (“ERS”), certain bonds payable from tax streams that were subject to the “clawback” provisions of the Puerto Rico Constitution, and other claims made by unsecured creditors.
The initial plan implied a 41.3% blended recovery for creditors, reducing outstanding liabilities from $35 billion to about $15 billion. Total consideration offered consisted of three elements (1) approximately $6 billion in cash; (2) almost $5 billion in new COFINA Jr. bonds; and (3) $4 billion of new GOs. Note, however, that recovery by creditor class varied significantly, from close to 78% for some holders of PBA bonds to 3% for unsecured creditors.
The economic impact of the COVID-19 pandemic forced the FOMB to revise its proposal on August 18. As shown in the chart below, the August FOMB proposal reduced total creditor recovery from $15.2 billion to about $10.9 billion. This new offer consisted of (1) approximately $6 billion in cash; and (2) $4.9 billion in new GO bonds. The COFINA Jr. element was eliminated.
The creditors countered with a proposal to recover $15.3 billion, but changed the composition of the consideration they were willing to receive. Its counteroffer consisted of (1) $7 billion in cash; (2) $3.3 billion of COFINA Jr. bonds; (3) $3.3 billion of new GO bonds; and (4) approximately $1.3 billion in the form of a contingent value instrument (“CVI”), payable only if Puerto Rico SUT revenues outperformed its annual target set forth in the Fiscal Plan.
On Our Radar...
COVID-19 Pandemic in the U.S. – The COVID-19 pandemic is essentially out of control in the United States. Richard Danzig, James Lawler, and Thomas P. Bossert write in the Washington Post that in order to curtail super-spreader events, the short-term policy emphasis should “be on three interventions, executed in concert, in any region with case counts over 20 per 100,000 persons per day. These are to temporarily (1) restrict all indoor gatherings of adults to no more than 10 people; (2) close indoor restaurants, bars and clubs; and (3) mandate universal mask-wearing in public.”
An Uneven Economic Recovery – The Wall Street Journal reports that “The coronavirus has dealt a blow to the world economy, idling workers and bankrupting businesses around the globe. But a clear divide is emerging between manufacturers and many service providers.” In general, “Countries, workers and industries that rely on making stuff—from computers to furniture to toys—are getting by, or even thriving, amid the economic maelstrom. Meanwhile, those who provide the sort of face-to-face services that people avoid out of fear of infection—traveling, eating out, going to the movies and some child care—are struggling. Services that don’t require physical proximity—such as many financial services, software and telecommunications—have been less badly hit, as have construction and farming.”
Reckoning with the Trump Era – After four years of President Trump’s abuses of power, corruption, racist hatred, and denial of a deadly pandemic, journalist Masha Gessen, argues in favor of a public reckoning with the damage he and his acolytes have done. To do this, writes Gessen in The New Yorker, “We don’t need to invent an entirely new set of rituals, because some existing institutions provide them. A reckoning may include congressional hearings, special-counsel investigations, court proceedings, town halls, journalistic projects, truth-and-reconciliation commissions, and some yet-to-be-invented formats. All of these are ritualized ways to acknowledge and document the injury, to tell stories—and to tell these stories not in the company of your closest friends and family, who have heard them before, but in public, before an audience of people, some of whom are very different from you.”