Board: Puerto Rico needs reforms, pay portion of debt

SAN JUAN, Puerto Rico — Puerto Rico needs urgent structural reforms and to pay back part of its debt even after Congress' recent approval of nearly $17 billion in additional disaster funds, the president of a federal control board overseeing Puerto Rico's finances said Monday.

Jose Carrion said the U.S. territory needs to reform its labor, corporate tax and welfare systems to reboot its economy.

"We are aware that some reforms are not political palatable," said Carrion, who spoke at a Puerto Rico investment summit and warned that the additional federal funds would not solve Puerto Rico's "significant" problems given its 11-year economic crisis and struggle to recover from Hurricane Maria. "The cost of the recovery will be substantial. Not all will be reimbursed by the federal government."

He also said the island has to pay back a "reasonable and substantial" portion of its $73 billion public debt load. His comments conflict with a fiscal plan Puerto Rico's government recently submitted that does not set aside any money for debt service in the next five years. A revised version of the plan is due before Tuesday, and the board and government officials are expected to clash over some items.

Secretary of Public Affairs Ramon Rosario recently said the government would not cut any benefits for the U.S. territory's employees as suggested by the board, which is expected to approve a final fiscal plan by Feb. 23. Many Puerto Ricans fear additional austerity measures will be implemented even as they struggle five months after the Category 4 storm hit.

"The process will not be free of obstacles and challenges," Carrion warned.

Some experts clashed during the investment summit over whether Puerto Rico should pay a portion of its debt in upcoming years.

Matt Rodrigue, who represents a group that holds more than $3 billion in Puerto Rico government bonds backed by a sales-and-use tax, said the island has not been able to access capital markets since 2014. He said paying off some of the debt would help it return to the markets. But attorney Richard Cooper, whose firm previously advised Puerto Rico's government, said the focus has to be on growth for the next several years.

"That's the only way they're going to get paid," he said of creditors.

Noel Zamot, the board's revitalization coordinator, said during the investment summit that 40 development projects have been submitted so far to help Puerto Rico emerge from its crisis, including $4.8 billion in energy projects alone. He said the U.S. territory is currently looking for projects related to power, housing, waste management and transportation.

"Housing has become a critical issue for Puerto Rico right now," he said.

Puerto Rico officials have said Maria destroyed between 70,000 to 75,000 homes and damaged another 300,000 homes. The U.S. Army Corps of Engineers has installed 50,000 blue roofs across the island, with another nearly 20,000 more roofs still needed.

The island also is struggling with ongoing blackouts as more than 400,000 power customers remain in the dark more than five months after Maria. Last month, Puerto Rico's governor announced his administration would privatize the state-owned power company in the next 18 months. Carrion said the two main goals is to reduce the cost of electricity and improve the reliability of the system to help boost economic development on the island. He also stressed the need for an independent regulator.

The hurricane hit on Sept. 20, killings dozens of people and causing up to an estimated $94 billion in damage.