Planning for a Quasi Plan of Debt Adjustment

eBlog

August 3, 2018

Good Morning! In this morning’s eBlog, we consider Gov. Ricardo Rosselló’s ambitious plans for Puerto Rico.  

Governor Ricardo Rossello Nevares believes now is the time to accelerate the pace the pace and demand both programmatic and fiscal results from the U.S. territory’s agency directors to better prepare for a post-recovery quasi plan of debt adjustment. The closing of so many of the island’s schools and the emigration to the mainland of so many health care professionals, and the unhappy state of relations with not just the legislature, but also Puerto Rico municipalities appears to make this a critical point for readjustment. Or, as the Governor put it: “In general, I have always seen the government, particularly in these times, as one which has been in almost continuous transformation—or, to make an analogy with the business sector, as a time to focus on a start-up phase: “Sometimes, you run a lot as if your government was like a Fortune 500 corporation, where things are more or less the same and you keep moving forward. But the reason I aspired was to make some changes…and that requires, in addition to having very specific objectives, to understand, one, that there are changes of roles in that process, as in the start-ups, and two, to know what is the time to execute those changes.”

One area of focus appears to be making his government more open—especially after a year and a half which has seen scandal that touched several of his closest collaborators, the operational and administrative collapse of the Electric Power Authority, the closing of schools, and the flight of health professionals to the mainland. Add to that the ongoing governance challenge imposed by the President and Congress—where the issue of who is steering governance going forward is imbalanced between the Governor, legislature, PROMESA Oversight Board, and. Now, a federal judge—all as Puerto Rico is still not fully recovered from the massive Hurricane Maria—and yet finds itself in the new hurricane season, recognizing it will not receive the same level of FEMA federal assistance in the event of a severe storm as other states or municipalities on the mainland.

Nevertheless, the Governor is focusing on the future—a future beginning to emerge under his “ideas map” which he keeps on his desk: “Puerto Rico: Vision 20/20,” under which he hopes to align his team via setting objectives and what he terms “intangible characteristics” as part of his governing blueprint for the new school year and post-Maria rebuilding.

Thus, in the second half of this year, the Governor intends to focus on reducing some of the bureaucracy of governance, beginning with making the permitting process more practical and less bureaucratically cumbersome—cutting the process in half, and awarding at least three public-private partnerships before the end of the year—or, as he put it: “Accompanying some results with the restructuring of the debt, that would be a great achievement in my assessment,” adding that by November, he hopes his new model of My Health will be implemented, and, by December, new health care legislation will be enacted, followed by a new energy policy for Puerto Rico. Or, as the Governor put it: “My administration has a diversity of people who come from different administrations. My goal is not to select someone because they have gray hair or are very young or certain demographic. The main objective is the commitment to comply with the priorities of this administration and the ability to work as a team.”

A key player on the new team will be Christian Sobrino, who will take the place currently held by Gerardo Portelo, to serve as Puerto Rico’s representative before the PROMESA Oversight Board, while Mr. Portelo will become the main investment officer.

Gov. Rosselló Nevares not only has reconfigured his team of close advisers, but also has transferred to La Fortaleza the tasks to implement the fiscal plan which, until now, has been in the hands of Aafaf—indeed, the Governor has already signed an executive order on the roles of the CFO, but said he could submit legislation on the subject. (The CFO office is one of the reforms in the fiscal plan certified by the Oversight Board which the Governor does not question.)

To address the governing challenges with regard to education, health, and safety, Gov. Rosselló Nevares noted: “We are making sure that students can have a full faculty, that there are challenges and obstacles, of course. If it is a large system, and the transformation, rare as it is soft, is typically a rocky process,” noting his plan to implement educational vouchers and charter schools is still in place. With regard to the vital issue of health care, the Governor noted it is urgent to improve the processes for the response to a disaster, a criterion under which he intends, henceforward, to evaluate all the heads of the respective agencies, adding that he is committed to converting Mi Salud into a model single region with free selection of doctors by indigents. In addition, he has set a goal of reducing crime by 20%, noting that, the havoc created by Hurricane Maria undoubtedly contributed to the significant crime rate increase: “I understand, what happens is that it is not consistent then with what was happening at the beginning of the year. At the beginning of the year, in January, we had a rise particularly in the murders, and it is not after that where one, truth, the capacities to measure all these things improve; they do not get worse, because that’s where the descent happens. Everything is subject to evaluation here, but we have used the same mechanism, the same metrics.”

Restoration of Governing Authority? Asked whether he had given much thought to a post PROMESA Oversight Board governing future, the Governor said: “I have not had that conversation, honestly I have not had it…If there is space to look for something that is optimal for the people of Puerto Rico, I will consider it. But, at this moment, I believe that the Judge must decide…and I cannot predict what her decision will be…after which, we will evaluate that decision, what it entails, and we will take the appropriate actions,” adding that his objective is to present a plan to the President and Congress with regard to Puerto Rico’s reconstruction.

With regard to his relationship with the legislature, he noted: “Our objective, both mine and that of the legislative leaders, I am sure is the welfare of the people of Puerto Rico. I did not start to differences that one can and should calculate that they are going to have on the road; we have a finite time to make some great changes for Puerto Rico. I trust that now, when you see the tax reform, you will act in the best interests of the people of Puerto Rico. I trust that when we see public policy, for example, to mitigate environmental impact, we act in the best interests of the people of Puerto Rico, among other initiatives that we will be presenting. Differences will always be there. I have already established my position: we will be able to work together for the welfare of the people of Puerto Rico.

Getting Schooled in Demography. With Puerto Rico’s new school year set to start Monday, it remains uncertain how many students and teachers will be present. Secretary of Education Julia Keleher yesterday reported that 20,000 regular teachers have already been relocated, out of which only 550 have reported “difficulties” with the changes—only 18,000 students out of the island’s 305,000 have yet to confirm which school they will attend. A declining school population has created jitters with regard to which schools to close—and how to involve parents—or not to—in this Solomon-like process. Nevertheless, as one mother bitterly complained: “Parents were not involved in anything, ever.” Indeed, many parents and teachers believe that the closure was improvised. For instance, a newspaper delivery vehicle (El Nuevo Día) which had stopped opposite a school was hailed by a driver of a truck with the Education logo: its driver asked if the school was open. When they told him it was not, the man said he was to deliver food for the school cafeteria. It seems the decision to keep Jacinto López Martínez School open was taken after the Secretary of Education, along with Mayor Carlos López of Dorado, visited the school at the end of the semester—or, as Principal Lois Santiago described it: “There has been a crazy (student) relocation. The majority appears (enrolled) in the Jacinto López Martínez School, but there are first former students who‒we do not know how‒appear in the Escuela Libre de Música…There is a student listed in the Luisa Valderrama School, which is an hour away.”

Dorado Physical Education Teacher Miguel Rubildo said that, last week, he went to the Arecibo educational region to request some of the available positions, but the options he was given were in the municipalities of Quebradillas and Florida, while the principals of the schools Jacinto López Martínez and Esperanza González confirmed that, a little more than a week before the beginning of the semester, they did not know the number of teachers who would be relocated in their schools, much less whether there would even be classrooms available for them.

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