Tuesday, February 21, 2017

The board has spoken: Puerto Rico to be hit with painful austerity measures

The newly appointed head of a federal control board that oversees Puerto Rico's finances warned on Tuesday that the U.S. territory will be hit with painful austerity measures in upcoming months.
Interim Director Ramon Ruiz said there are no other options given the island's dire economic situation and recommended that the government act quickly.
"We allowed this to reach too critical of a point," he said. "Everyone will be impacted by the decisions that will be made."
Gov. Ricardo Rossello has until next Tuesday to submit a revised fiscal plan that will outline where the cuts will be made and what essential services will be affected.
Some government officials have balked at measures suggested by the board, which include slashing $300 million from the public university's budget and cutting 10 percent from a public retirement system that is expected to run out of money within a year. Last week, nearly a dozen top university officials resigned in protest of the looming cuts, and tens of thousands of retired government workers fear for their financial future.
Ruiz said the local government is cooperating with the board, but warned that if it doesn't submit a fiscal plan with cuts needed to address an anticipated $7 billion deficit, the board will implement its own plan.
"We have to take control of the situation that exists," he said. "A lot of people, especially those who are most vulnerable, will be affected if we don't act immediately."
Ruiz also said it's unlikely the board will extend a May 1 deadline that currently shields Puerto Rico from creditor lawsuits because it would not be fair to bondholders.
His comments come just days after a federal judge said he will hear arguments from bondholder groups opposed to a debt moratorium imposed by the island's previous governor. The ruling was a blow to the government of the U.S. territory, which is seeking to keep negotiations alive with creditors and restructure nearly $70 billion in public debt amid a string of multimillion-dollar defaults.
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Ruiz declined to comment on the judge's ruling because he said it was not final and could still be appealed.
In addition to submitting a fiscal plan, the governor has approved several measures aimed at cutting costs, promoting economic development and stabilizing the economy. Rossello announced on Tuesday he would submit a measure calling for a special referendum that would allow police officers to vote on whether they want to be part of the Social Security system. Currently, Puerto Rico police officers do not receive Social Security and depend solely on the island's troubled public retirement system for their pensions.
Rossello also signed a bill aimed at retaining doctors in Puerto Rico. The territory's number of doctors has dropped from 14,000 to 9,000 in the past decade, the majority leaving for higher salaries and lower living costs on the U.S. mainland.
Overall, more than 200,000 Puerto Ricans have left the island in recent years, and many fear the exodus will worsen as new austerity measures are implemented.
Ruiz said the board is not responsible for the consequences of those measures because it's up to the local government to decide what services might be affected.
"They have to be fiscally balanced within two years," he said. "How they do that is their responsibility."
Read the original article on Reuters. Copyright 2017. Follow Reuters on Twitter.

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The board has spoken: Puerto Rico to be hit with painful austerity measures

Sunday, February 05, 2017

Puerto Rico governor approves referendum in quest for statehood

Puerto Ricans are getting another shot at voting on statehood after the island's governor on Friday approved a non-binding referendum to determine the U.S. territory's political future.
The referendum will be held on June 11 and gives voters two options: statehood or independence/free association. If a majority chooses the latter, a second referendum would be held in October and will ask voters to choose between the two.
"Colonialism is not an option for Puerto Rico," Gov. Ricardo Rossello said. "It's a civil rights issue ... The time will come in which the United States has to respond to the demands of 3.5 million citizens seeking an absolute democracy."
Backers say the referendum could help the island overcome a decade-long economic crisis as it struggles to restructure nearly $70 billion in public debt and faces a federal control board pushing for more austerity measures.
If U.S. Congress ultimately were to approve Puerto Rico as the 51st state, the island could receive an additional $10 billion in federal funds a year and its government agencies and municipalities would be able to file for bankruptcy, something that both local and federal laws currently prohibit.
Statehood supporters say it additionally would grant the U.S. territory more equality: Puerto Ricans are U.S. citizens who are not allowed to vote in presidential elections and their representative in Congress has limited voting powers. The island also pays Social Security and Medicare taxes, but receives fewer benefits than U.S. states.
Roughly half a million people have left Puerto Rico for the U.S. mainland in the past decade, leaving the government with a shrinking tax base as it struggles to find new sources of revenue despite increasing taxes and utility bills.
Puerto Ricans have voted in four previous referendums that have resulted in no action from U.S. Congress, which has final say on any changes in Puerto Rico's political status. There was no clear majority in the first three referendums. In the last one, held in 2012, 54 percent said they wanted a change in status. Sixty-one percent who answered a second question said they favored statehood, but nearly 500,000 left that question blank, leading many to dismiss the result as illegitimate.
Concerns are now growing about the way the fifth referendum is worded.
By: DANICA COTO
Puerto Rico governor approves referendum in quest for statehood