Official: Pandemic May Cause 5-Year Contraction
The Puerto Rico government transition hearings began Monday with presentations by the Treasury Department, the Office of Management and Budget (OMB), and the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF). Being held in the Symphony Hall at the Luis A. Ferré Performing Arts Center in San Juan, the hearings are expected to conclude Dec. 25, after which a final report will be drafted as stipulated by Act 197 of 2002, the Puerto Rico Transition Act .
AAFAF Executive Director Omar Marrero said the government’s 2020 fiscal plan, which was certified by the Puerto Rico Financial Oversight and Management Board (FOMB), will need to be amended due to the economic challenges the island is facing amid the Covid-19 pandemic.
Marrero explained that the fiscal plan only takes into account that Covid-19 restrictions imposed on economic sectors would extend over two months. However, he noted, the island’s economic activity has been affected for the past nine months, since infections began to be recorded in March.
“We hope that begins in the upcoming days,” Marrero said regarding meetings with the FOMB to review the conditions imposed on Puerto Rico to achieve a balanced budget, adding that a five-year contraction is projected due to the pandemic.
Answering questions from Incoming Transition Committee President Ramón Luis Rivera about the consolidation of agencies and other structural reforms, Marrero said the “road map is the fiscal plan.”
“Let’s forget about the pandemic for a moment. Let’s forget about the $ 11 billion in federal funds that arrived and let’s forget about the $ 83 billion for the island’s reconstruction, ”Marrero said. “Let’s think for a moment that hurricanes Irma, Maria, the earthquakes and the pandemic did not occur. The only way that Puerto Rico could head toward economic development was with the structural reforms contemplated in the fiscal plan. But now, the fact that there are federal funds available to mitigate different natural disasters, does not relieve the government from the measures and initiatives in the fiscal plan. “
The AAFAF director said the most important task to ensure the economy’s reactivation is getting out of the public debt. He said that the federal funds “will mitigate the impact, but the strategy that has to be taken is complying with the fiscal plan, which will allow for the debt to be restructured and take control over our finances.”
Rivera also asked if the government has done the analysis needed to determine whether Puerto Rico is prepared to maximize the use of the $ 83 billion in recovery aid, saying the funds will have “an annual impact, and that impact will be greater or lower depending on the capacity the island has to execute. “
“For example, is there an analysis of how many workers will be needed in the construction industry? Has there been an analysis of the construction materials that will be needed, because the [local] manufacturing companies that made those materials have closed, ”Rivera warned.
“Yes and No,” Marrero replied.
“Before Covid-19, yes, it was done,” Marrero said. “When this public servant was in a world more similar to the Federal Emergency Management Agency (FEMA), an analysis was done about the materials and logistics. We literally knew for certain how we would deal with the shortage of materials. … So that analysis has been done; we would have to see how it would need to be updated amid Covid-19. “
For her part, OMB Director Iris Santos said that the oversight board was considering a proposal by the government that would allow it to pay public workers their Christmas Bonus, for which she said the central government needs $ 63 million but “we are still identifying $ 23 million in efficiencies. “
Before the hearings began Monday, presumptive Gov.-elect Pedro Pierluisi reiterated that one of the issues he will be tackling first is how the pandemic is managed.
“Covid-19 has not only impacted the health of our people, but also the economy and the children’s education,” Pierluisi said.
He further noted that “we have a commitment to the people of carrying out the transition process in an efficient and transparent manner that leads us to guarantee to our people a comprehensive exchange of information, accountability on the state of government and continuity of government services. “
Meanwhile, Gov. Wanda Vázquez assured that the island’s reconstruction projects and the efforts taken to curb the spread of Covid-19 will be presented during the hearings “so that the transition committee can have the necessary information to continue the efforts,” Vázquez said.