Posts Tagged ‘Alejandro García Padilla’

Puerto Rico: Default

Monday, July 7th, 2014

Mary O’Grady writes, Puerto Rico’s Borrowing Bubble Pops
Moody’s measure of ‘expected default’ for Puerto Rico is higher than Argentina and Venezuela.

A Puerto Rican default should not surprise anyone. According to Carlos Colón de Armas, acting dean of the School of Business Administration at the University of Puerto Rico, for eight years from 2005 through 2012, government expenses exceeded revenues on average by approximately $1 billion annually. The dean told me by telephone that total commonwealth debt is now around $73 billion and in 2013 it was 101% of the island’s gross national product (GNP) up from 57% in June 2001. (Although gross domestic product is the most widely accepted measure of an economy’s size, it reflects the profits of large multinational corporations booked for tax purposes in Puerto Rico but not retained in the local economy. Therefore, GNP, a measure of what is produced by locals, is a more accurate tool to assess the economy.)

Unlike Luis Fortuño, the previous governor, current governor Alejandro García Padilla

increased expenses by almost $600 million in his first budget. While he is now cutting spending, the cuts are mostly from that increase, according to Mr. Colón de Armas. Some $500 million-$800 million in fat—from subsidies to special interests to funding for political parties—remains untouched in the $9.6 billion budget.

Fortuño lost by 12,000 votes since García Padilla (known as Agapito) promised the moon and the stars.

And there it goes: a certain default.

Added,

Puerto Rico: Growth yes, more taxes no

Tuesday, February 11th, 2014

Says Monica Showalter of IBD, and I wholeheartedly agree:
To Avoid Becoming The Next Detroit, Puerto Rico Needs Growth, Not Taxes

Too much bureaucracy, much of it for welfare, and too much rewarding failure over success drive up costs and drive out the productive. Puerto Rico’s most talented citizens are voting with their feet. The island loses about 1% of its population a year, a deadly loss compounded over the years for any economy.
To bring these people back, the governor has to fight to cut taxes and really go after the country’s entrenched special interests with a baseball bat.

The 39% corporate tax has to go.

He [governor Alejandro García Padilla] also must fight in the U.S. Congress to reinstate Puerto Rico’s special tax break that ended in 2006 so that investment will once again return.

Finally, he must also take on Big Labor’s favorite, the Jones Act, which artificially drives up shipping costs, putting local manufacturers at a disadvantage, demanding Congress at least give Puerto Rico an exception.

Read the whole thing.


Puerto Rico: Junk bond status

Thursday, February 6th, 2014

Only about 1 percent of American municipalities have been given a junk rating by S&P:

Puerto Rico GO Bonds Inch Higher After S&P Downgrade
A Sign That Some Buyers Are Relieved To Have The Downgrade Behind Them

S&P on Tuesday lowered Puerto Rico’s general obligation bond rating to double-B-plus from triple-B-minus, stripping the island of its investment grade rating. The rating firm said it cut the rating because of Puerto Rico’s “reduced capacity” to borrow and the contraction in its economy in all but one year since 2006. It kept the island’s ratings on watch and warned of further cuts if the island is unable to raise money.

Puerto Rico has also been weighed down by large pension obligations, a 15% unemployment rate and big losses in the value of some of its debt. But the Puerto Rico government has been taking steps to bolster the economy and improve its fiscal outlook by overhauling pensions and raising taxes.

Despite the benign response to the downgrade, the cut adds pressure on Puerto Rico to shore up its finances with a near-term borrowing, analysts said. Puerto Rico, which has $70 billion of debt, has been able to put off borrowing in recent months, but its flexibility is fading, said Daniel Hanson, a credit analyst at Height Securities LLC.

Island officials have been planning a bond offering of some $2 billion in coming weeks, according to people familiar with the matter. The officials have been weighing how to raise money with offerings backed by sales taxes or the island’s general fund, or a deal structured by hedge funds and other distressed investors who may demand yields near 10%.

[T]he yields it will have to pay of up to 10% could likely scare off investors and further reduce confidence in Puerto Rico’s finances.

Moody’s and Fitch are expected to be next with their downgrades.

The White House Says There Are No Plans To Bail Out Puerto Rico

Gov. Alejandro García Padilla is finally trying to cut the budget and reduce the deficit to $75 million, something he’s been avoiding, considering how his predecessor, Luis Fortuño, was not re-elected for doing just that.

To add to García Padilla’s woes, a misspelling of his name caused a flurry of tweets under the hashtag #GobiernoPandilla (gangster government), including the news that the administration-appointed telecommunications board (Junta Reglamentadora de Telecomunicaciones) granted contracts to partisans, and that the University of Puerto Rico’s administrators’ payroll increased by 35%:

Monumental payroll increase UPR for #GobiernoPandilla’s #FriendsOfTheHeart

No word as to whether García Padilla, commonly referred to as Agapito (for Alejandro GArcía PadIlla + “to“), has considered laying off his five relatives working for the government.