Puerto Rico GDB head reacts to Barron’s cover story
Puerto Rico has made significant progress in addressing its financial challenges and continues to focus on taking aggressive action to achieve fiscal stability and promote economic growth, said Government Development Bank for Puerto Rico Acting President José Pagán, in response to a story by published respected weekly paper Barron’s.
“When this administration took office,” Pagán said, “Puerto Rico had an insolvent pension system, a nearly $2.2 billion budget deficit, and public corporations in crisis. Since then Puerto Rico has moved diligently to correct the problems that were weakening our credit rating and restraining Puerto Rico from sustainable economic growth.”
In the story titled “Troubling Winds,” Barron’s compares Puerto Rico’s situation with Detroit’s saying the island “is grappling with a stubbornly weak economy, persistent budget deficits, and onerous debt.”
While he said Barron’s accurately reported that the financial community and the major rating agencies have recognized the progress made by the Puerto Rico government in addressing its financial challenges, Pagán said the weekly “failed to give a balanced or accurate portrayal of the island’s financial and economic situation.”
“The actions of this administration have been recognized by the rating agencies and the financial community. Specifically, we have delivered on our long-standing promise of enacting a meaningful and comprehensive pension reform that is sensible to the needs of our retirees and eliminates an unsustainable burden for the General Fund,” he said.
“We have approved a responsible budget that significantly reduces our budget deficit and we have begun transforming our public corporations, including the Puerto Rico Aqueduct and Sewers Authority and the Puerto Rico Highways and Transportation Authority, to make them self sufficient,” Pagán added.
He said the article contained misleading information as to the magnitude of Puerto Rico’s debt per capita because it did not include each state’s portion of the U.S. federal debt in its comparison.
“In fact, the total federal, state and local debt per capita in the states for fiscal year 2011 was approximately $57,000, which is more than three times the public debt per capita in Puerto Rico,” Pagán said.
Barron’s article also drew a reaction from Richard P. Larkin, senior vice president and director of credit analysis for bond underwriting firm HJ Sims, who said it was a “tired retread from last year.”
“The Barron’s article merely rehashes the familiar complaints about the island commonwealth’s economic problems and deficit history. While it does point to some positive things occurring (tax hikes, utility fee increases, etc.), it adds nothing new to a discussion that started last August, with analysts making ‘sell’ recommendations across the board.