This page has been archived and commenting is disabled.
Puerto Rico To Run Out Of Cash By Year End, Faces $13 Billion Shortfall
Remember when two months ago Schauble jokingly offered Jack Lew to "trade" Greece for Puerto Rico? Something tells us in the interim period the German finmin changed his mind because while the Greek can has been kicked again, if only for the time being until bailout #4, the full severity of the Puerto Rican insolvency was laid out for all to see moments ago when top officials and outside advisors to the commonwealth released a highly-anticipated report showing that even after implementing proposed economic reforms and budget cuts, the island's whopping funding gap of $28 billion will at best be reduced to "only" $13 billion over the next several years.
Even worse, as the FT reports according to the report of the so-called Working Group, the Treasury’s single cash account and Government Development Bank would exhaust available liquidity before the end of the year, creating a cash shortfall in late November or early December. In other words, Puerto Rico is Greece, and unlike the German colony, Puerto Rico does not have any negotiating leverage to threaten a departure from the dollar zone, or threaten to print its own currency.
FT adds that "while the government will be able to manage around those year-end issues, the cash crunch will come to a head in June, when officials on the Working Group conceded it would be nearly impossible to tap financial markets. The plan, which will be closely scrutinised by investors who have just agreed a restructuring with Puerto Rico’s electric power authority, included proposals to consolidate the commonwealth’s education department, reorganise the Department of Economic Development and create a fiscal oversight board."
The plan will hardly be greeted with cheers domestically as it anticipated "austerity" that makes recent Greek sacrifices seem like a walk in the park: cost cuts identified included a continued salary freeze for government employees and a request for a waiver from the Jones Act, which requires shipping to and from US ports to be conducted with American crews and vessels, increasing the territory’s transportation expenses.
This even as only 40 percent of the working population is in the workforce and island pensions face combined unfunded liabilities that topped $37 billion in fiscal year 2013.
But while domestic cuts are inevitable, the real question is how much debt will be cut: as Reuters notes, "the financial overhaul plan, the product of a task force created in June by Gov. Alejandro Garcia Padilla, anticipates the island running out of money by next May or June, and says even with sweeping spending cuts Puerto Rico needs concessions from bondholders who include mom-and-pop investors and big Wall Street hedge funds."
Padilla's administration will now prepare for the test of trying to implement the plan in the face of potential legislative gridlock and possible resistance from teachers' unions. But the biggest pushback will come from creditors who like in the case of Greece will fight tooth and nail not to be impaired:
According to Padilla's so-called working group, comprised of officials including the Governor's chief of staff, Victor Suarez, and the head of the Government Development Bank, Melba Acosta, Puerto Rico has $47 billion of debt excluding public agencies like power utility PREPA and water authority PRASA.
Of that, $18 billion in principal and interest are due in the next five years, and this piece is targeted for restructuring, according to working group officials. This includes general obligation debt - generally seen as sacrosanct by the municipal bond market - and COFINA sales tax bonds.
One working group official said reform measures would account for around half the $28 billion budget gap with revenue growth adding a bit more, but that there is still roughly a $12 billion to $13 billion deficit that needs to be eliminated.
As Reuters wryly adds, "That could mean difficult negotiations with creditors." Difficult, but unlike the case of Greece, not impossible, as a writedown here would not impair a central bank and put fundamental moentary policy tenets under the microscope.
Next steps include the commonwealth following the approach it adopted with restructuring PREPA, a deal it struck earlier this month which saw bondholders accept a 15 percent reduction in their principal, a member of the working group said.
In terms of austerity measures to be implemented, the group recommended cutting the size of the department of education through school closures, attrition and changes to teachers' pensions, and cutting subsidies to the University of Puerto Rico and to some cities and towns, according to background materials provided.
The group tackled Puerto Rico's inefficient tax collection, suggesting overhauling collection methods and changing tax laws to promote growth.
The group said Peurto Rico must control healthcare costs by standardizing health protocols, and install new accounting systems.
Of course, hints at a bailout were not absent: the proposal said Puerto Rico should the push U.S. government for help, notably to provide access to court-sanctioned restructuring laws, exempt the island from the Jones Act, offer equitable treatment under Medicaid and Medicare funding schemes, and pass tax legislation that would promote corporate growth.
For now, however, a bailout from Washington is not expected, and while some on Capitol Hill are pushing laws or reforms that could help Puerto Rico, their prospects are uncertain. Expect that to change if and when the local population revolts at the proposed austerity measures and the next president realizes Puerto Rican votes are quite critical to any successful White House campaign.
Full Working Group proposal below (link)
»
- 20138 reads
- Printer-friendly version
- Send to friend
- advertisements -
$13B is nothing. Janet prints that every hour.
I'm not even sure $13 bill will qualify as a rounding error in today's world.
So just move everyone in PR to Detroit......problem solved.
Good plan. If every Puerto Rican were to move to Detroit that would open up like 10 NYC apartments too!
pods
What was the old tag line for Doritos? Something like: "Eat up... we'll make more".
So, what's the big deal with Peurto Rico and all other nations today?... "Borrow up, we'll print more".
Tyler- technical foul. You MUST put the pictures of the hot chicks IN THE ARTICLE so I can actually see it clearly. My monitor isn't big enough and my glasses aren't strong enough to see that little thumbnail next to the article header.
Very frustrating. Like trying to view porn on an Apple Watch.
Tip: Click Printer-friendly version at the bottom of the article for full size pict. Sadly, upon closer inspection, Bruce Jenner looks to be in this one. Time for new Puerto Rico click-bait.
I demand to know the EU's compulsory quota plan for taking in some of these poor PR refugees.
And how does the EU plan on handling the Chicago refugees? Why does the U.S. have to be entirely responsible for them? Time for the EU to step up to their moral responsibility and save those poor people. Stop using the Atlantic Ocean as an excuse.
Trump says we have to take refugees from Europe so I'm guessing they will see we need to import Puerto Rico too before long. On the bright side those chicks really like to wear 6 inch heels and mini skirts so you guys may get some intertainment out of the deal.
Hell with that. If they all leave Puerto Rico, I'm moving there.
pods
PR is a lot like France ,, both are great places except for the people... Puerto Ricans are the nastiest greediest "GIBSMEDAT" bunch imaginable...
Hillary(!) takes that in "charitable donations" for political favors every six months. Drop in the bucket.
For the children...
$13 bill
A $3 bill on steroids?
Seriously, in an effort to raise revenues, the Property tax agency in PR(CRIM) has collapsed the real estate market.
PR has a generous Homestead exemption for primary residences. CRIM has been going after owners that don't actually
live in their houses. These are getting hit with huge tax bills. Revenue projections probably include projections of collecting
these bad debts. I checked the #1 real estate web site. 2/3's of new listing are foreclosures. 6 months ago there were very few.
Recently, sales tax was raised to 11 % with a proposalt to go to 16% net year. I wouldn't be surprised if 100,000 leave PR this year.
There may be a great opportunity to purchase retirement property for Americans. Move there and vote for statehood.
https://www.facebook.com/photo.php?fbid=10201439683539651&set=a.10201123...
Tunga filed suit against the Secretary of Internal Revenue in 2011. Alleging Fraud, Slander and Unlawful Simulation of Legal Process, the Judge in the Case went AWOL leaving Tunga to commandeer the court and declare summary judgment for a combined total more than $20 Trillion payable in Silver coin of the realm.
Poor Melba Febo. Her office never even tried to negotiate, now it's crumbling like toast.
$13 billion is nothing. US debt increased from $60 trillion in 2003 to $210 trillion in 2014 per Kotlikoff. So the US was adding $37.4 billion per day to its debt in those 11 years
Maybe the wookie should vacation in Puerto Rico, She spends enough to fill that deficit.
How dare you speak of Aunt Bunny like that.
Gooneygoogoo.
If only they could CTRL-P.
What's $13 billion among friends?
It 'was' sacrosanct... until Detroit and Kevyn Orr.
Cut them loose. We don't need anymore socialists.
Seriously? PR is a regressive socialist voter breeding machine for the "mainland", it will never be turned off.
"regressive socialist voter breeding machine for the "mainland"
Apparently, they are turning themselves off...projected lifetime birth rate for PR resident women is 1.3
Puerto Rico is the Cousin Eddie of the U.S.
$13 BIllion that is like Obama travel budget....or gift's for Reggie. Heck they can print Trillions....the Obama slush fund will pay people not to work and cheat...no problem!
FSA Island. Da plane! da plane!
You know, you would think reading these things that all banks do is make people's lives miserable, by distorting the money supply so that governments have to oppress their own people under the banks command.
You would think that and you would be right.
stop with the thumbnails teasers damn you.
Open the "Printer friendly version" and you will see the full sized image.
sara eisen: "how can the fed raise rates when two credible institutions like the IMF & World Bank come out against that?"
i don't even know where to begin with that statement
You miss the whole point! They got the hottest women on the PLANET! I got through about 5 of em when I worked there! Lovely place, great, worldclass surf, hot ass, varied menu, chicken, rice and beans, what more could you ask for? I'd rather sink Manhattan first!
Here Senorita, 13 B's ain't nothing.....commmere you, ya fine thing!
garcam, - Them Porta Rican gals may be "hot" but White, they are not.
Your point being? Why limit yourself to one race of hot chicks when there are hot chicks of every race and ethnicity?
Puerto Rico is an actual welfare state - paid for by US citizens.
Their politicians are all morons and their laws are are stupider than them.
F' them are their welfare state.
When did Puerto Rico get the right to vote for US president
When they becames the 57th state.
They are a 'territory' and not a 'state' - they have their own constitution which lets them rape US citizens for income.
I think we inherited that marvelous shit hole after the Spanish/American war.
There is only 3.6 million people and they produce nothing - 3.6 million and that much debt.
Uhhmmmm, that was a joke referencing Obama's comment about how we have 57 states.
Yeah - sorry - figured that out later
Who raped who?
It was congress that gave them the right to sell tax free bonds to nonresidents.
....so they did!
When it was convenient for the leftists
The word of the day is, "malinvestment."
Cut expenses...why cant a politician figure that out...cut the damn expenses....that means salarys....pensions....everything....live within your means
"Expect that to change if and when the local population revolts"?
people don't revolt, they move to New York.
expect Puerto Rico to run out of cash because they do it often, hence the debt
I admit to clicking on this article to see a larger version of the small pic of the carnival girls...
What a letdown! Now it's back to more debt-porn :(
What's the letdown? Are you so picky?
Socialists running out of other peoples money. Priceless!
Damn, do you mean the US is going to be forced to fly helicopters to Puerto Rico to drop the money...why do things have to be so hard...and I am not talking about the guy tourist with the ladies..
state sanctioned drugs gambling and prostitution on a massive scale would be my suggestion
Actually, most major hotels in the capital have gambling, my brother works the "eye in the sky" in one of the casinos. Hookers and blow? Not a problem.
All kidding aside, Puerto Rico IS to the US what Greece is to the EU. Similar solutions would work for PR.
1) Declare independence from the US and begin issuing sovereign currency. Yes, many US bond holders will be hurt. Guess what? Those bond holders are going to get screwed anyway.
2) Eliminate Income Tax, Capital Gains Tax and Corporate taxes. This will put money in the hands of the population, bring in international corporations and manufacturing and increase the standard of living in the island.
3) Sell ALL state assets (there are a couple of abandoned naval bases, an airport, electric and water companies that are criminally mismanaged) and use the funds to buy gold and silver. Mint silver coins for pocket cash and use the gold to back the new electronic only sovereing currency.
4) Cut government workforce, thru attrition and retirement, by 50%. Right now the majority of the employed work for the government either directly or indirectly.
5) Reduce congressional and executive pay to $100 dollars a year ( or equivalent in the new currency) and limit the number of congressional work days to no more than 45 days a year. Texas does something similar. Congresscritters have to hold real jobs or starve and the congressional sessions are not long enough to do much damage.
All the Puerto Ricans can come to US and rob all the convenience stores
Problem solved
Legalize heroin and export it to the rest of the world. Trillion dollar surplus overnight.
with the benefit of bankrupting Afghanistan's muslim a-holes
and bankrupting the CIA
I am amazed at all the solution for Puerto Rico (PR)..I offer another...have Ashley Madison set up an office in PR..set up a cruise ship to the island..and bring the island some business.. definitely a win-win situation for everyone...hint for Ashley Madison...have your clients use Spanish names when booking the trip...that way if your servers ever get hacked...well nobody can find out their true identities...
Judging by the ICON PHOTO, they are already cutting back on clothing.
Bitcoin $240.44
Puerto Rico is not some foreign county -- it is an US Commonwealth. The US has an obligation to deal with this issue. We throw away Bilions to people who hate us in the Middle East, certainly we can find $13B for our own. We need to fix the problems that led to this, but helping Puerto Rico is a no-brainer.
this idealism doesn't work in the USA where cronyism is the modus operandi
the system is in place to be looted, and to fix it, Puerto Rico would have to become sovereign (chase away the US parasites) and also get rid of the entitled class
(the military Industrial Complex is making a killing in the ME, that money being thrown at the ME is going to US Corporations)
that debt PR is responsible for disappeared into Crony pockets
To fix it we need to throw off the paper shackles of the Federal Reserve and its phony paper script "money". All debts based upon FRN's are based upon fraud and are void ab initio.
It's good when these shit systems fail.
I would take in one of those ladies in the picture to be my nurse.
Ah hopes da wimun folk stay thea, cuz once d'money be gone, da wealth be measuehd in pussy...if dey got 'nuff, dey gon' be arright peepses...don' be cryahn fo' all dem peepses be gettin' d'good pussy...
I hate it when the pic doesn't come with the story...as advertised. :-(
Why did we make them part of the U.S. again?? I don't understand what the strategy was behind that. Zero value added on that one. If they are part of the U.S. why did they not adopt the same tax collection systems as we have in the states to begin with? That's the first part of the problem. This was bound to happen.