Puerto Rico House Speaker Jaime Perelló said Monday the island’s “only option” regarding its $73 billion debt is continue moving on the path of negotiating with creditors.
Furthermore, he said a fiscal oversight board like the one being proposed by Gov. García-Padilla’s administration and currently under legislative scrutiny “will not make sense until we sit down to negotiate.”
“Because before that, that’s what the Office of Management and Budget is for. That is a board for when we sit down to negotiate the debt, so there’s certainty that the terms will be met,” he told reporters following a meeting with García-Padilla and Senate President Eduardo Bhatia at La Fortaleza early in the day.
“But we haven’t even been able to start negotiating anything yet. So we have to carry things out in order, but always looking to protect the island, it’s economic development and the people,” he said.
Puerto Rico is carrying the weight of its debt under some extreme circumstances, including dwindling cash reserves at the Treasury Department and the Government Development Bank. The months of December and January are particularly challenging, as the government will have to come up about $240 million to cover payroll and Christmas bonus payments.
Furthermore, the GDB is facing a Dec. 1 debt service payment of some $354.7 million, of which some $267 million is guaranteed by the Commonwealth, which in turn is facing $176 million in General Obligations bonds due Jan. 1, 2016.
Late Friday, the GDB released a 233-page report offering details of the commonwealth’s fiscal condition, which discussed the possibility of requiring a receiver for the agency in case it becomes insolvent.
On Monday, Treasury Secretary Juan Zaragoza said the bank — which has historically served as the principal source of short-term liquidity for the Commonwealth and its instrumentalities — will be “at a critical point” on Dec. 1.
“If the bank can address its liquidity problems in early December, that will free Treasury up fiscally. But the perfect storm here will be if they don’t solve their problems and then we won’t have the option of turning to them for funds,” Zaragoza said.
“We’re trying to avoid a default, but it’s something we’re looking at on a day-to-day basis,” he said when asked if there is a possibility the GDB will miss its upcoming payment.