We have left behind the disastrous year of 2020, which tested us and made us stronger to begin the long road of economic recovery. With cautious optimism, we welcome 2021, eager for it to be better than the past 12 months and for fate to smile on us again.
Moreover, we have also launched a new government in Puerto Rico, diverse and representative of various ideological forces and worldviews, which will have the historic task of getting us out of bankruptcy and creating the conditions for economic recovery.
The main objective of the new government and the Financial Oversight and Management Board (FOMB) is to reach the necessary agreements with the creditors of the government of Puerto Rico to overcome bankruptcy, one of the darkest chapters in our modern history. Since 2016, the island’s public finances have been managed and supervised by an external entity appointed by the U.S. Congress.
To accept the bankruptcy created by the legal framework under the [federal] Promesa law was the only option to avoid a fiscal and economic collapse due to the local government’s insolvency. Since 2016, Puerto Rico has not paid a single penny of its $70 billion public debt, which has made it possible to pay the government payroll, essential services and retiree pensions.
However, the bankruptcy process enabled by Promesa is not eternal and has had very high costs for Puerto Ricans, estimated at about $600 million. Insolvency and bankruptcy have affected Puerto Rico’s credibility in financial markets and in the international business community. The good name of the Island is in serious question as long as the government is subject to the financial tutelage of the FOMB and does not begin to pay its debt.
Lack of access to the capital markets has prevented the government from accessing new money to improve roads, modernize the energy system, dredge reservoirs and improve citizens’ quality of life. In short, bankruptcy is not something abstract and distant, but rather a problem that touches each citizen closely.
On February 11, an important hearing will take place before Judge Laura Taylor Swain, who oversees the government’s bankruptcy process. The adjustment plan that will define how much Puerto Rico will be able to pay creditors and the conditions to get out of bankruptcy are supposed to finally be stipulated. Contrary to public perception, the FOMB wants to introduce strong debt cuts, close to 70 percent, so that it and subsequent governments, together with the private sector, can guide us out of bankruptcy and create the conditions to reactivate the economy.
Facing the new year and the entry into the new decade, we must start on the right foot and act according to the times to get Puerto Rico out of the economic and social stagnation that began back in 2006. There is no time to lose.