Governor Alejandro Garcia Padilla prepared a turnaround plan for Puerto Rico and presented it on October 14th at the meeting of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) fiscal oversight board. Garcia Padilla presented the plan together with an address emphasizing the efforts made by his government, the hardships being faced by the people of Puerto Rico, and the need for direct financial help from federal government. The plan forecast a larger gap between income and outgo than was previously predicted — a $59 billion gap — and the governor’s address warned of a “death spiral.”
A week later, economist Joaquin Villamil, former president of the Society of Certified Public Accountants Kenneth Rivera, and Ramírez & Co head Fernando Viñas expressed concern about the plan at a Chamber of Commerce event. They claimed, according to El Nuevo Dia, that the plan didn’t meet the requirements of PROMESA, and further, that it rested on flawed assumptions.
One concern expressed was that the plan is based on the Krueger report, a report commissioned by the Puerto Rico government. This report, Villamil pointed out “puts forth proposals that make sense in a closed and national economy, but in an open economy would only result in accelerating migration.” The mass exodus of Puerto Rican residents, who are U.S. citizens, to settle in the fifty states has been well documented on the Puerto Rico Report and in other press coverage.
According to Villamil, the Governor’s Fiscal and Economic Growth Plan projections are also incorrect because they heavily rely on the Puerto Rico’s Gross Domestic Product (GDP) as a reference. The GDP measure includes funds that leave Puerto Rico, which distorts the reality of the local economy.
The experts also said that suggestions introduced in the governor’s plan could have been implemented over the past two years.
The governor responded, again according to El Nuevo Dia, that the experts “don’t understand” the plan. He continued, “The fiscal plan is something that takes months, many hours of many experts working very hard. For some person to read it and, in few hours, criticize… I do not accept the criticism.”
“The fiscal plan is very dense,” Garcia Padilla is quoted as saying. “It’s such a deep analysis that when you look at it—and someone who has not been aware of Puerto Rico’s fiscal issues looks at it—, you have to read it again and really go into the numbers to fully comprehend it.”