Due to tropical storm Puerto Rico delays reform plan

Debt-stricken Puerto Rico gets extension for delivering fiscal restructuring plan on commonwealth’s $72 billion debt burden because of negative impact of tropical storm Erika

Photo by: AP
Photo by: AP

A private security guard sits in front of a closed down business in the colonial district of Old San Juan, Puerto Rico, Aug. 2, 2015

Updated Aug 31, 2015

Puerto Rico will delay until Sept. 8 the completion of its fiscal reform plan, the commonwealth's government said on Saturday, citing time spent on contingency disaster planning by the government in the run-up to Tropical Storm Erika.

A working group appointed by Puerto Rico Gov. Alejandro Garcia Padilla had been slated to deliver a so-called debt adjustment plan on Sunday or Monday, but will hold off until as late as Sept. 8, Víctor Suárez Meléndez, Padilla's chief of staff, said in a statement.

"Since the Government's efforts in the past days have been focused on preparing for the possible impact of Tropical Storm Erika, the work of the designated group, the consultant's analysis, and the final drafting of the document have not been completed," Suarez said.

Tropical Storm Erika hit the eastern portion of Puerto Rico early on Friday, dumping much-needed rain on the drought-plagued island while doing minimal infrastructural damage. The storm fell apart on Saturday over eastern Cuba.

The awaited fiscal plan is aimed at outlining government reforms that could help tackle Puerto Rico's $72 billion debt load.

Padilla shocked investors in June by calling the debt "unpayable" and seeking concessions from bondholders. He is hoping the adjustment plan will persuade bondholders to agree to concessions by signalling his willingness to share the burden through politically unappealing reforms.

A draft of the plan, leaked to local media this week, proposed $1 billion in total spending cuts, including by reforming teacher pensions, cutting subsidies to the University of Puerto Rico and reducing vacation and bonuses for workers. The plan may change before its final version.

Getting bondholders to agree to concessions is seen as an uphill battle, in part because the proposed spending reforms may not be perceived as politically attainable 14 months ahead of a gubernatorial election.