SAN JUAN, Puerto Rico – Puerto Rico's governor submitted a revised fiscal plan Thursday that estimates the U.S. Caribbean territory's economy will shrink by 11 percent and its population drop by nearly 8 percent next year.
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The proposal doesn't set aside any money to pay creditors in the next five years as the island struggles to restructure a portion of its $73 billion public debt. The original plan had set aside $800 million a year for creditors, a fraction of the roughly $35 billion due in interest and payments over the next decade.
The five-year plan also assumes Puerto Rico will receive at least $35 billion in emergency federal funds for post-storm recovery and another $22 billion from private insurance companies — figures still far below the $95 billion in damage officials estimate was caused by Hurricane Maria, which hit in September.
Some analysts view the assumption of that much aid as risky given that the U.S. Treasury Department and U.S. Federal Emergency Management Agency recently told Puerto Rico officials that they are temporarily withholding billions of dollars approved by Congress last year for post-hurricane recovery because they believe the island currently has sufficient funds.
"I think counting on $30 billion is overreaching," Puerto Rico economist Jose Caraballo said in a phone interview. "There's great uncertainty in that sense, and especially with a Republican government that cares little to nothing about what is happening in Puerto Rico."
The plan also projects a brief burst of 7.6 percent GDP growth for 2019 — a figure Caraballo said is overly optimistic.
"Puerto Rico would grow more than Panama, Dominican Republic and China, and that seems a bit exaggerated to me," he said.
But Gerardo Portela, director of the island's Fiscal Agency and Financial Advisory Authority, said federal funds should help boost the economy by that amount and said he was confident they will arrive.
"Puerto Rico is insolvent," he said. "We need the money as soon as possible. We need to rebuild our infrastructure, we need to rebuild the electrical grid, we need to build roads."
He said the proposal doesn't discuss how much of the island's debt should be written off because that question is in the hands of a federal court.
But Utah Republican Rep. Rob Bishop, chairman of the House Natural Resources Committee, said Thursday that any plan should integrate creditors and "respect the lawful priorities and liens of debt holders," saying it would help Puerto Rico return to the capital markets.
The plan does not call for layoffs or new taxes. Instead, Gov. Ricardo Rossello once again called for labor and tax reforms and the privatization of the island's power company to help generate revenue and promote economic development to pull the territory out of an 11-year recession.
He noted that nearly half of the island's 3.3 million inhabitants lived in poverty prior to the hurricane and that Puerto Rico still faces an 11 percent unemployment rate. Nearly half a million people have fled for the U.S. mainland in the past decade in search of jobs and a more affordable cost of living.
"We must work as a government to prevent this from happening, and that's what we're focused on," he said.
Rossello said an original $350 million cut to the island's 78 municipalities will not be immediately imposed as they struggle post-hurricane. Instead, he said they will receive more money than usual in upcoming years.
Rossello also called for reducing several taxes, including an 11.5 percent sales-and-use tax to 7 percent for prepared food. More than 30 percent of power customers remain in the dark more than four months after Hurricane Maria, forcing many to spend their dwindling savings on eating out.
A federal control board overseeing Puerto Rico's finances has to approve of the plan, which it envisions doing by Feb. 23.
"The Oversight Board views implementing structural reforms and investing in critical infrastructure as key to restoring economic growth and increasing confidence of residents and businesses," Natalie Jaresko, the board's executive director, said in a statement Thursday. "Our focus in certifying the revised plans will be to ensure they reflect Puerto Rico's post-hurricane realities."
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