Letter to Fiscal Oversight Board regarding Fiscal Plan

I am writing on behalf of the Center for a New Economy (“CNE”), a Puerto Rico, non-partisan, not-for-profit, independent think tank, to convey our analysis of the Fiscal Plan presented by the government of the Commonwealth of Puerto Rico on October 14, 2016 (the “Fiscal Plan”), pursuant to the formal Invitation to Comment issued by the Financial Oversight and Management Board for Puerto Rico (the “FOB”), which you preside. We thank you and the FOB for this opportunity to present our analysis and comments on the Fiscal Plan.

Una estrategia de crecimiento económico para Puerto Rico

Puerto Rico experimenta una de las peores recesiones que se han registrado en el mundo durante la pasada década, segunda solo a la de Grecia que acumuló una caída de 28% en su Producto Interno Bruto (PIB) entre 2007-2015. La contracción de la economía de Puerto Rico comenzó en 2006 (antes que la crisis financiera de 2007 en EEUU) y ha ocasionado una reducción cumulativa de 14% del Producto Nacional Bruto (PNB) de la isla. Es por esto que se podría decir que la economía de Puerto Rico ha experimentado ya una “década perdida”.

Devising a Growth Strategy for Puerto Rico

The Puerto Rican economy has already experienced a “lost decade”—to use the term that the Economic Commission for Latin America and the Caribbean, ECLAC, coined in the 1980s for Latin America and that has been widely used at the international level since then—and, if no action is adopted soon, it will continue on a negative path for the foreseeable future.

HR 5278 Analysis

CNE has analyzed Puerto Rico’s economic and fiscal situation for more than a decade. During that period, we have carefully surveyed and considered the socioeconomic context and the rapidly deteriorating financial position of the island, and attempted to address some of the most pressing problems.

Análisis del HR 5278 y resumen ejecutivo

El proyecto NO cumple con el principio 1. El HR 5278 le confiere a la Junta de Control Fiscal poderes que exceden los necesarios para ejecutar una función de monitoreo y supervisión fiscal. La Junta será una entidad del gobierno de Puerto Rico pagada con fondos públicos de Puerto Rico, pero no estará sujeta al control o la supervisión de funcionarios locales; podrá forzar la ejecución de recomendaciones que hayan sido rechazadas por el Gobernador o la Legislatura de P.R.; podrá prohibir la ejecución de ciertas leyes, reglamentos, órdenes o contratos; podrá requerir la ejecución de medidas de privatización y comercialización de actividades gubernamentales; y de manejo de los fondos de pensiones de los empleados públicos.

Policy Brief: Possible Consequences of a Default on Puerto Rico General Obligation Bonds

Puerto Rico faces a serious fiscal and economic crisis. The island is over-indebted: with $70 billion in public debt outstanding and an additional $43 billion in unfunded pension liabilities, Puerto Rico has more debt, in absolute terms, than any U.S. state government except California and New York, while its economy is smaller than Kansas. The following chart compares Puerto Rico’s tax–supported debt (excluding debt issued by state-owned enterprises) and unfunded pension burden with three of the U.S. mainland’s lowest rated states.