Home' Trinidad and Tobago Guardian : July 6th 2017 Contents JULY 6 • 2017 guardian.co.tt BUSINESS GUARDIAN
INTERNATIONAL | BG23
Puerto Rico's top elected leaders are
doubling down on their pursuit of
statehood, even as bondholders ask
Congress and the White House to hold
off until debt payments are made.
Former New York Gov. George Pata-
ki, who represents some of the island's bondholders,
said he supports statehood, but only after Puerto
Rico's financial woes are solved.
"People may well push [statehood], but I don't
think it will be credible," Pataki said.
Puerto Rico's Resident Commissioner Jenniffer
González-Colón (R), who along with Gov Ricardo
Rosselló is leading the charge for statehood, said
statehood and the debt issue are inseparable.
"Puerto Rico's economic problem is the lack of an
economic model," she said. "The territorial condition
limits the island's growth opportunities."
Supporters of statehood for Puerto Rico say its
territorial status makes it nearly impossible for the
island's economy to become self-sustaining.
The territory has been losing economic ground---
and borrowing beyond its means---since former Presi-
dent Bill Clinton signed a tax reform law in 1996. That
law closed a loophole that gave tax incentives for US
corporations to set up subsidiaries in Puerto Rico.
"By not receiving the same funds as the states,
Puerto Rico has had to draw upon general obligation
debt," González-Colón said.
Still, Puerto Rico's officials say there's plenty of
blame to go around for the territory's US$72 billion
in red ink.
Rosselló said previous administrations allowed the
debt to grow through two practices: Using debt to
fund government operations rather than investment
projects, and "special assignments."
"Special assignments and multi-year special as-
signments were essentially funds where the govern-
ment had low visibility," Rosselló said. "[They] would
be allocated for certain services, but what typically
happened was that there was severe overspending
from what was budgeted."
Rosselló said that in 2015, US$500 million was al-
located to special assignments, and US$1.6 billion
"There was always a backstop. You could overspend
because you had bond emissions and you would punt
it to the next administration," he said.
With Puerto Rico out of the bond market for now
and under the tutelage of a Fiscal Control Board ap-
pointed by Congress, Rosselló was forced to present
a balanced budget that didn't rely on new debt.
The Fiscal Control Board approved Rosselló's
budget, with some changes, on Saturday. Puerto
Rico's fiscal year runs from July to June.
But bondholders say the budget that was approved
violates Puerto Rico's general debt obligations.
"This was supposed to be an austere time, particu-
larly when you're not paying any of your bondhold-
ers," Pataki said. "It basically says that the constitu-
tional debt that is supposed to come first comes last."
Rosselló's 2018 budget estimates US$575 billion
increase in income, fueled by US$390 million in liq-
uid asset sales from the island's pension plan. That
US$390 million is earmarked for a "pay as you go"
plan to pay pension holders as the money becomes
"We think it doesn't reflect the finances of Puerto
Rico," Pataki said last week. "It is largely driven by
the Control Board."
Pataki added that some bondholders are lobby-
ing Congress and President Trump to replace the
"I know there are those contacting the appropriate
committees, working to convince President Trump
and Congress that the Control Board appointed by
Puerto Rico faces off with
bondholders over statehood
(President) Obama is not following the
law," he said.
Even if the Control Board were re-
placed, any agreement to modify the
debt payment scheme would have to
be approved by a federal judge in New
Under the Puerto Rico Oversight,
Management, and Economic Stability
Act (PROMESA) passed by Congress
last year, Puerto Rico was afforded
the possibility of a bankruptcy-like
provision, which it exercised in May.
The island's power utility, PREPA,
which accounts for about US$9 billion
in debt, followed suit on Sunday.
Bondholders and PREPA had previ-
ously negotiated a 15 percent reduc-
tion in the utility's debt, but a deal to
prevent it from defaulting fell through
Pataki said litigating Puerto Rico's
debt is "ridiculous," given that "a
consensual agreement could still be
"The lawyers are going to make a
ton of money, it's going to drag on for
years, it's going to have a cloud of un-
certainty," Pataki said.
González-Colón said she would
rather see direct negotiation than
litigation, but added that the govern-
ment's hand was forced, leading them
to activate Title III of PROMESA --- the
Puerto Rico's government decided
to enact Title III as a deadline bar-
ring creditors from suing the island
approached in May.
"If that legislation had not provided
for the May deadline, there would have
been more time for agreements and
negotiations in good faith," González-
González-Colón added she would
push the House Natural Resources
Committee, where she sits, to hold
oversight hearings on the Control
Board's performance in August or
The battle in Washington over
Puerto Rico's budget will provide Ros-
selló with an extra incentive to follow
through on his plans for statehood.
Under Puerto Rico's statehood law,
Rosselló is naming a congressional
delegation--- two senators and five
members of Congress. On Friday, he
announced the first batch: former
Govs. Carlos Romero Barceló and
Pedro Rosselló González --- Rosselló's
father, Puerto Rico Democratic par-
ty President Charlie González, and
former Major League Baseball player
Ivan Rodriguez Torres. He'll name the
remaining three in the coming days.
Congress would have to pass a law
to admit the island as a state, which at
this point is highly unlikely.
Bondholders say the strategy will be
little more than a distraction.
"As a practical matter I think it's
going to be virtually impossible to
make a case until the financial cloud
Maersk Supply Service lands major contract in Mexico
Maersk Supply Service has secured a long-
term contract with Subtec S.A de C.V. of
Mexico, a subsidiary of Blue Marine Group,
for one of its Stingray new-building vessels.
Maersk Supply Service will enter the Mex-
ican market for the very first time with a
long-term contract award with Blue Marine
Group. Not only does this contract open up
further opportunities in the Mexico region,
it also provides significant contract coverage
for the coming years and secures utilisation
of one of the company's four Stingray Subsea
Support Vessel new-buildings.
The Stingray vessel will be operating in
the Bay of Campeche, performing general
support duties for Blue Marine and their
clients, including IRM and maintenance of
Pemex's platforms as well as enhancement
and well stimulation.
The contract will commence in autumn
2018 with a firm duration until June 2020.
is lifted," Pataki said.
It's unlikely the delegation will be seated as full
members, but they'll provide a badly needed lobby-
ing force in Washington for the island's government.
The Puerto Rico Federal Affairs Administration (PR-
FAA), the territory's representation in Washington,
has been the target of budget cuts as the economy
has faltered. From 2014 to 2017, PRFAA lost over $1
billion in yearly funding.
Rosselló said the presence of seven high-level
representatives would bolster the island's presence
in Washington, although their ultimate goal is to be
seated in Congress.
"The effort is lobbying, is symbolic, but people
should know it's had success, it's been done seven
times," Rosselló said.
"This strategy, if it was successful in the 1700s, the
1800s and the 1900s, right now in a 24-7 news cycle
with social media platforms and so forth, it should be
even more successful," he added. Reuters
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