(Adds comment from government and board, confirms official
By Daniel Bases and Nick Brown
NEW YORK/SAN JUAN, March 9 Puerto Rico's
federally appointed fiscal oversight board on Thursday rejected
a fiscal turnaround plan proposed by Governor Ricardo Rossello,
saying it did not comply with PROMESA, the restructuring law
passed last year by the U.S. Congress.
The board told Rossello in a letter that his plan to put the
U.S. Commonwealth on a sustainable fiscal path was insufficient
and based on unrealistic projections for economic growth,
spending and revenues.
"The Board has determined that the Proposed Plan does not
comply with the requirements set forth in PROMESA," Thursday's
letter said. A board spokesman told Reuters the members were
looking forward to a response from the governor.
The thumbs down from the board is a blow to Rossello, who
was elected in November but has limited room for maneuver as
Puerto Rico struggles with $70 billion in debt and a 45 percent
poverty rate. The U.S. territory also faces a shrinking
population as residents move away seeking better economic
A deadline for submitting a revised proposed fiscal plan was
set by the board for Saturday March 11 at 0900 AST (1300 GMT). A
turnaround plan must be approved by the oversight board, which
is in charge of managing the island's finances.
Following the rejection of his plan, Rossello told reporters
he hoped to meet with board members face to face, saying
information gets missed in a back and forth of letters. He did
not specify if there would be a new plan by the deadline.
"Listen, this doesn’t need to be a battle. We need to
remember who gets to pay the price if this gets done in the
incorrect manner, and it’s the people of Puerto Rico," Rossello
"I just hope that we can maintain what the spirit of PROMESA
is, which is: the board makes sure they identify the magnitude
of the problem, but the governor and the government execute the
policy," he added.
Sources earlier in the week told Reuters the oversight board
was concerned about key financial projections not being based
upon sound data and would likely reject the plan.
"The Proposed Plan does not provide a path to restructuring
debt and pension obligations to reach a sustainable level, and
ensuring funding of essential services for the people of Puerto
Rico," the letter said.
Rossello's draft turnaround plan, unveiled last week, called
for $33.8 billion in fiscal reforms, including $12.9 billion in
new revenues, and forecasts the Puerto Rican government to have
$1.2 billion a year available to service debt - just 30 percent
of what comes due next fiscal year.
Thursday's letter followed correspondence between the two
sides on Wednesday in which the board recommended emergency
measures while the government called the measures unnecessary.
The board's said Puerto Rico faced a possible cash deficit of
about $190 million by July.
"Debt restructuring is necessary, but it alone is neither
sufficient nor a sustainable solution," Thursday's board letter
Matt Rodrigue, an adviser to some senior creditors holding
debt backed by sales tax receipts, known as COFINA, told a panel
in San Juan on Thursday that his group stood ready to provide
the government with bridge financing to address the island's
short-term liquidity issues. The board, however, has said Puerto
Rico should not be borrowing money given its fiscal straits.
The board said revenue projections used by the government to
calculate structural deficits are "overly optimistic,"
specifically citing projections for economic growth rates and
return to nominal economic growth.
In addition it said the projections failed "to reflect
near-certain declines in baseline revenues associated with
corporate taxes and non-resident withholding taxes.
The rejection letter was first reported by El Nuevo Dia.
(Reporting By Daniel Bases in New York and Nick Brown in San
Juan; Editing by Jonathan Oatis and Tom Brown)