Governor-elect Alejandro García-Padilla said the recent downgrade by Moody’s Investors Service of the Commonwealth of Puerto Rico’s General Obligation bonds “further signal the need for fiscal discipline at the central government and in our public corporations.”
“In working toward fiscal balance and stability, my administration will focus on job creation and economic development initiatives, meaningful pension reform, and implementing prudent austerity measures,” said the now Senator who will take office Jan. 2.
On December 11, García-Padilla named his economic and fiscal team, which includes long-time banker David H. Chafey, Jr. as chairman of the Government Development Bank for Puerto Rico’s board, corporate attorney Javier D. Ferrer as president of the GDB, attorney and CPA Melba Acosta as Treasury Secretary, and attorney Carlos D. Rivas as the director of the Office of Management and Budget.
“I recently named our new economic and fiscal team who will reach out to the rating agencies and the investor community as soon as possible after the inauguration in January,” he said. “We fully recognize that timely action is required. As it has done in the past, Puerto Rico will continue to honor its obligations and protect the investment quality of our debt in the marketplace.”
Meanwhile, Chafey, former Banco Popular president, said the incoming administration will “act swiftly and decisively to continue on the road towards a balanced budget, a return to economic growth and stability in our bond ratings. The Moody’s ratings report highlights the challenges that we know we face, but that the new administration will tackle head on, without delay.”
Last week, Moody’s downgraded Puerto Rico’s general obligation rating Thursday to Baa3 from Baa1, affecting about $38 billion of the island’s debt held by more than a handful of agencies. The announcement came as the current and incoming administration are in the midst of transitioning and working together for the upcoming change of command.
“Although the transition process is still under way, our team is working on specific budget control and revenue enhancing measures. GDB transition reports show adequate levels of GDB liquidity,” said Ferrer. “We are also evaluating various strategies to address the budget gap for the current fiscal year. We remain committed to delivering timely and accurate economic and financial information to the market.”
The new economic and fiscal team will be meeting with the rating agencies and investors as soon as practicable to discuss its goals and objectives for the remainder of fiscal year 2012-2013 and fiscal year 2013-2014 and the measures they propose to implement to achieve them.
“Our team is seasoned, with significant experience in both public and private sectors,” Acosta said. “I look forward to simplifying the tax code, increasing tax compliance and identifying measures to increase revenues in order to tackle the recurring structural deficit.”