Puerto Rico's federally appointed fiscal oversight board rejected a fiscal plan proposed by Governor Ricardo Rossello Thursday, saying it did not comply with PROMESA, the restructuring law passed last year by the U.S. Congress.
The federally appointed financial oversight board, which has been subject to harsh criticism for deepening Puerto Rico's colonial relationship with the United States, told Rossello in a letter that his plan to put the Caribbean country on a sustainable fiscal path was insufficient and based on unrealistic projections for economic growth, spending and revenue.
"The Board has determined that the Proposed Plan does not comply with the requirements set forth in PROMESA," Thursday's letter said.
Rossello, elected in November, tried to address Puerto Rico's US$70 billion debt by promising budget cuts for the Puerto Rican people who already face a 40 percent poverty rate. Apparently, his severe cuts with no regard for the plight of the island's people were not enough for the board, that serves as an overlord of the country.
A deadline for submitting a revised proposed fiscal plan was set by the board for Saturday March 11, at 9 a.m., local time. The board is not obliged to give the plan a rubber stamp and has the potential to construct its own if it sees Rosselli's as insufficient.
Following the rejection of his plan, Rossello told reporters he hoped to meet with board members face to face, saying information gets missed in a back and forth of letters. He did not specify if there would be a new plan by the deadline.
"The proposed plan does not provide a path to restructuring debt and pension obligations to reach a sustainable level, and ensuring funding of essential services for the people of Puerto Rico," the letter said.
Thursday's letter followed correspondence between the two sides on Wednesday in which the board recommended emergency measures while the government called the measures unnecessary. The board said Puerto Rico faced a possible cash deficit of about US$190 million by July.
"Debt restructuring is necessary, but it alone is neither sufficient nor a sustainable solution," Thursday's board letter said.
Matt Rodrigue, an adviser to some senior creditors holding debt backed by sales tax receipts, known as COFINA, told a panel in the capital San Juan Thursday that his group stood ready to provide the government with bridge financing to address the island's short-term liquidity issues. The board, however, has said Puerto Rico should not be borrowing money given its fiscal straits.
Puerto Rico's debt crisis is deeply tied to its status as a U.S. colony, which means the country cannot make any independent decisions about its economy, including negotiating new debt terms. All decisions about Puerto Rico have to go through U.S. Congress, where Puerto Rico has no voting representative.
Puerto Rico has been a U.S. territory since 1898 when the U.S. usurped Spain as its colonizer.