Doral is working a strategy to counter the government’s decision to pull back on giving it a tax credit. (Credit: © Mauricio Pascual)
Doral Financial Corp. has hired a couple of Washington, D.C-based firms to back up its fight against the Puerto Rico government’s decision to rescind on an agreement signed in 2012 granting the bank a $230 million tax refund.
Crisis management firm DCI Group and Robert Shapiro, former U.S. Undersecretary of Commerce for Economic Affairs under the Clinton administration, are heading up the bank’s strategy to “caution that Puerto Rico’s disregard of contractual obligations sends a troubling signal to potential U.S. and foreign investors.”
Later today, Shapiro — a renowned economist who has advised President Clinton, Prime Minister Tony Blair, and many other leading figures and major corporations — will discuss the broader implications of the Treasury Department’s decision.
“The current Puerto Rican government’s decision to declare a 2012 closing agreement between the government of Puerto Rico and Doral Financial Corp ‘null and void’ will have serious consequences for the Commonwealth’s ability to attract lenders and businesses to the island,” said Shapiro.
Puerto Rico’s failure to meet its contractual obligations comes at a time when the Island is hugely indebted. Its last bond sale was accorded “junk” status and required special provisions to enlist participation from an adequate amount of investors. The commonwealth has also announced that it intends to issue another $500 million of new debt, adding to already strained fiscal conditions.
“By refusing to honor its obligations, the Puerto Rican government joins such deadbeat sovereigns as Argentina, which will measurably reduce the flow of direct investments to Puerto Rico,” Shapiro said. “That’s what happens when a government fails to uphold the rule of law and abide by its contracts.”
During a conference call, Shapiro will explain how the Government’s recent steps could have dangerous repercussions for the people of Puerto Rico.