For the first time in decades, Puerto Rico will have a clean slate and will be positioned for a new period of prosperity – because of the implementation of the Plan of Adjustment and the end of bankruptcy.
With fundamentally changed economy and a dramatic reduction of the government debt, Puerto Rico will be able to focus its human and intellectual capital for a period of economic growth and prosperity for all the residents of the island. Not only are we close of emerging from bankruptcy, but the federal government has also already allocated billions of dollars of recovery funds and COVID-19 related stimulus to help rebuild our infrastructure and services to the benefit of the people of Puerto Rico.
Without the burden of the debt from the past, Puerto Rico will be positioned to regain its swagger and through the adoption of the structural reforms in the Fiscal Plan, adherence to fiscally responsible practices and strong economic development policies, we will be able to witness a bright new chapter in Puerto Rico’s history.
Some Puerto Ricans still worry that the Plan of Adjustment does not lower the debt enough, while others worry that that the plan would pay debt that previous government’s accumulated in a way that was illegal. As a fellow Puerto Rican, who participated in these negotiations as a member of the Financial Oversight and Management Board, I would like to address these concerns.
First, affordability: The plan presented by the Oversight Board would lower the government’s debt service payments to no more than $1.15 billion a year, and that includes payments of the COFINA debt. Without the plan and the ability to restructure the debt that PROMESA provided, the government’s contractual payments would be as much as $3.9 billion a year. This significant cut in debt service lowers our yearly debt payments below the debt burden of many U.S. states.
Second, the process of resolving Puerto Rico’s bankruptcy depends on accurate information about the size and nature of the debt. That is why the Oversight Board commissioned an independent investigator, Kobre & Kim, to provide a full analysis that has been an important tool to guide the restructuring process.
Lastly, pensions. I am very proud of the favorable agreement reached with our elected officials to ensure that the plan would not include pension cuts. Let’s remember that the pension fund that was supposed to be available to cover all these payments was almost fully depleted, yet the Plan of Adjustment protects all retirees and ensures that all government retirees receive 100% of their current benefits.
Active teachers and judges, meanwhile, will receive the benefits they have accumulated so far, and from now on pay into personal retirement accounts that are in the complete control of the individual employee rather than dependent on the government. Teachers and judges will also finally become eligible for social security from the U.S. Government, which has never defaulted on any of its obligations in its history.
As we navigate through this complex process towards the end of bankruptcy and position Puerto Rico for a bright new chapter in our history, we balanced the multiple interests represented in the Plan of Adjustment and listened to many different perspectives, including the ones raised by the residents of Puerto Rico during the confirmation hearing in court. As the only voting member of the Oversight Board living in Puerto Rico, I can assure you that all perspectives were considered. Our Plan of Adjustment reflects careful negotiations guided by experts in finance and law to ensure the best possible outcome for all parties involved, including the people of Puerto Rico. The Plan of Adjustment lifts a huge burden off future generations.
I firmly believe the implementation of this Plan is a necessary tool for the long-term economic success of Puerto Rico. We must end this painful chapter in our history and create the foundation for a bright and prosperous future.