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Jenniffer González, Governor Elect
Pablo José Hernández, Resident Commissioner Elect
History in the Making Two Stalwarts Set on Progress FULL STORY ON PAGE 6
TOP STORY / PAGE 4
IN DEPTH / PAGE 10
LIFESTYLE / PAGE 11
Young Puerto Rico Doctors Take Flight
Whose Prepa Credit has More Voltage?
Si No Me Dan de Beber Lloro
Health Dep’t Tardy on Payments
Utility Debt on the Docket
Get Ready for Endless Navidades
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GOOD MORNING
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EDITORIAL
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PHOTO FINISH As this edition of the News Journal went to print, the following developments took place:
An Ode to Progress & Hope
T
he special publication you but rather as a beginning of dialogue that are reading is history in the leads to solutions. making, an affirmation in reThe pressing concerns over the many sponse to a business commuloose ends—such as creditor constituents nity in Puerto Rico starving for chomping at the bit in Puerto Rico’s energy a new narrative—of progress transformation are discussed with precision. and hope. The return to print of the News And if you want to understand challenges Journal has an emphasis on the W in the coming for the incoming administration word “news,” as in the five foundational Ws of Governor-elect Jennifer González, who of journalism—Who?; What?; Why?; When? takes office with an agenda for progress toand Where? gether with Resident Commissioner-elect We want to know Who is giving Puerto Pablo José Hernández Rivera, hell-bent on Rico reason to hope for jobs that drive our economic development, you will read about economic development, the devil in those details not with empty slogans, in this edition. but with investments and One of our many sources action—putting money beon Capitol Hill with ties to hind endeavors employing the incoming Trump adOur solemn the many talented profesministration put it best sionals across industries this: “The year 2025 promise is to ask with in Puerto Rico. We want will certainly be an excitto inform readers What ing year to look into—you wise questions makes our “empresarios” have new leadership in for essential so special—is it their belief Puerto Rico, somebody that new residential develwho has said, “I am going answers.” opment would fit the needs to focus on young people, of young families building our grandparents, and a future? Repeatedly, we trying to create as many will report on “Why is it jobs as possible—I don’t worth investing in Puerto Rico?”—because of want to put words in [the Governor-elect’s] our talented professionals, federal regulatomouth, but that is my interpretation of ry compliance, and attractive tax incentives. what she has said. And, I think the OverAdmittedly, there is work to be done—on the sight board has an interest in that because permits front and so many other works in it also has an interest in economic growth progress. Our solemn promise is to ask wise in Puerto Rico.” questions for essential answers. At this writing, it seems the Financial Readers who want to know when meaningOversight and Management Board is foful measures are coming down the legislative cused on finalizing Puerto Rico’s debt repike will want to read the News Journal; so, structuring with PREPA and securing diswill investors who want to know where to cipline in achieving structurally balanced put their money behind the next big thing. budgets. However, without much-needed In this return to a print edition—a mojob creation, we will not achieve the ecomentous occasion in itself—you will read nomic development that was stripped from about an exodus of talented physicians who this island’s progress. We believe in the are leaving the island because of the Health foot soldiers of economic development set Department’s tardiness in paying residents to thrive in this new era. The possibilities and paltry compensation. The story is not are endless; this W Journal aims to make meant as a fire and brimstone indictment, them a reality.
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Back to the drawing board During an omnibus hearing on December 11, U.S. District Judge Laura Taylor Swain again called on all parties in stalled talks over a proposed debt settlement plan for the Puerto Rico Electric Power Authority (Prepa) to continue in the mediation process, despite pessimistic statements made by the mediation team in its latest report to the bankruptcy judge. Judge Swain said that “I have to maintain hope, for the people of Puerto Rico, that a fair and efficient conclusion to this process will be achieved,” urging Puerto Rico’s Financial Oversight and Management Board (FOMB), the Puerto Rico government and utility creditors and bondholders in deadlocked negotiations to use their “imagination” to see beyond the position that they are the only ones with a reasonable position. The report says that “the arrival of the new administration in Puerto Rico as well as the advancement of proceedings in the pending case before the Puerto Rico Energy Bureau relating to PREPA and LUMA’s liquidity and cash flows present additional challenges – and perhaps additional opportunities for progress. FOMB Executive Director Robert F. Mujica, Jr. said during a press conference on Dec. 11 that despite the mediation team’s pessimistic report the oversight board was “hopeful that we can complete the process in 2025,” and that “we
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will go back into mediation and do what the court asks us to. At the end of the day, as the chairman mentioned, we need a plan that’s feasible and we need a plan that makes sure that Prepa can continue to fund the operations, repair a system that had lack of investment for decades…”
Puerto Rico’s electricity is overburdened by regulation. It will take serious work on the legislative front to start our way back to energy transformation.” — An expert source with knowledge on energy affairs
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Judge Laura Taylor Swain
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Healthcare on the Brink Looming Physician Shortage, Economic Pressures and an Aging Workforce Burden Puerto Rico’s Healthcare System
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BY LAURA RENTAS | SPECIAL TO THE NEWS JOURNAL
t’s very hard to be a physician in Puerto Rico. So hard, in fact, that two studies published in 2024 point to a looming healthcare crisis due to a steep projected decline in the number of practicing physicians available to care for the island’s aging population. The studies—one conducted by a research group led by Dr. Nelson Varas Díaz from Florida International University, and another commissioned by the Puerto Rico Pharmaceutical Association and conducted by healthcare management consulting firm FARO, LLC—point to multiple contributing factors. These include the outmigration of physicians to the mainland U.S., the retirement of a significant portion of practicing physicians, and an insufficient pipeline of trained doctors emerging from residency programs on the island. The FARO study found that by the year 2030 for at least 10 specialties, the number of specialists will fall below the optimal physician-to-population ratio of 1 per 1,000, as recommended by the World Health Organization. The specialties examined in the study included neurology, gastroenterology, rheumatology, dermatology, cardiology, general surgery, endocrinology, breast surgery, colorectal surgery, and pediatric pulmonology. Meanwhile, Dr. Varas’s qualitative study provides insights into the primary reasons for physician migration to the mainland, with economic factors being the most significant. According to a physician interviewed for the study, the reimbursement an Ob-Gyn receives for performing a Pap smear—a common medical screening procedure used to detect abnormal cells in the cervix—in the states can be as much as double what the same specialist receives in Puerto Rico. Similarly, the U.S. Bureau of Labor Statistics indicates that
Most of us want to stay and practice medicine in Puerto Rico; we are passionate about what we do. But it’s hard to stay motivated when we face such fundamental issues as not being paid on time for our work.” — Dr. Sebastián Castañer, a surgery resident and president of the Association of Residents at San Lucas Episcopal Medical Center in Ponce
the median salary for physicians in Puerto Rico is roughly 30% lower than their peers in the mainland. According to a separate study, commissioned by the Puerto Rico Medical Defense Insurance Co. and published in September 2024, the aging population of doctors is an additional concern, especially if the trend of decreasing numbers of specialists continues. Of the doctors currently practicing in Puerto Rico, 28% or 2,746 are 60 years or older. Several important specialties, such as anesthesiology, cardiology, gastroenterology, and surgery, among others, have average physician
ages over 60. This presents a future challenge if there is no increase in residency positions and if younger doctors are not incentivized to keep their practice in Puerto Rico. Meanwhile, physicians in training in Puerto Rico face ongoing hardships due to delayed salary payments from the Puerto Rico Department of Health, the government agency that employs most medical residents working in hospitals on the island. According to Dr. Sebastián Castañer, a surgery resident and president of the Association of Residents at San Lucas Episcopal Medical Center in Ponce, it’s common for residents to receive their paychecks two to three weeks late. During the end of the government’s fiscal year in June, the delays often grow longer. He recalled a time in 2021 when a group of residents had to go to the Health Department headquarters to demand two months’ worth of overdue wages. The situation has improved only slightly since then, he noted. In April 2024, the Puerto Rico Department of Health announced an economic incentive of up to an additional $12,000 per year for residents who choose to stay in Puerto Rico. Although Health Secretary Carlos Mellado assured that the retention strategy had the support of the Financial Oversight Board, Castañer stated that none of his colleagues had been able to finalize a contract with the Department of Health to receive the incentive. Beyond the more than six-month delay in implementing the program, the incentives come with restrictions that are difficult to meet for residents planning to pursue subspecialties not offered in Puerto Rico. Castañer’s case is a clear example. “The incentive requires that physicians commit to practicing in Puerto Rico and to accept the governmentsubsidized health insurance in their practice; otherwise, they must return the funds,” he said. “In my case, the subspecialty I want to pursue, vascular surgery, isn’t available in Puerto Rico.” He further explained that with only 15 practicing vascular surgeons on the island, his specialization would be highly valuable. However, since he hasn’t seen a contract for the incentive, he is unsure if he will be able to accept it. Despite his commitment to practicing medicine on the island, Dr. Castañer’s experience illustrates the many hurdles physicians face when trying to build careers in Puerto Rico—hurdles that often push them to accept higher-paying positions in the mainland U.S. “It’s clear that salaries in the U.S. are higher than in Puerto Rico—a great temptation for many colleagues who leave medical school burdened with student loan debt. For many of us, our medical residency is our first real adult job. We have financial obligations that can’t be met if we’re being paid late or not at all,” he said. “Doctors in Puerto Rico work harder for less pay, but the calling to serve our island is strong for many of us. We are eager to provide healthcare services to our people, despite the many obstacles. Most of us want to stay and practice medicine in Puerto Rico; we are passionate about what we do. But it’s hard to stay motivated when we face such fundamental issues as not being paid on time for our work,” he added.
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IN DEPTH
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W
hen it comes to the runs for presidency of Donald Trump, Resident Commissioner Jennifer González, now the Governor-elect of Puerto Rico, is probably not thinking the third time’s a charm. In 2017, González jetted to Washington, D.C., where she walked a tightrope as a non-voting member of the U.S. Congress on Capitol Hill. That is a treacherous balancing act when you are buffeted by the political headwinds of former Gov. Ricardo Rosselló, a devout Clintonite with the DNC in his DNA, coupled with the notion in the federal realm that you are not really a dyed-in-the-wool Republican. In those days, Trump was an unlikely victor in the presidential election, and “J Gov” learned to play her part behind the scenes, working both sides of the aisle. Ricky Rosselló took center stage as a protagonist of the drama unfolding over Puerto Rico’s debt crisis, where he played the part of an enfant terrible defying the dictates of an Oversight Board enabled by the Puerto Rico Oversight Management and Economic Stability Act (Promesa). Importantly, several Republicans on the Hill, then-Chairman of the House Committee on Natural Resources Rep. Rob Bishop (R-Utah) foremost among them, invested considerable political capital with important creditor constituents—namely monoline bond insurers on the hook for more than $6 billion in a towering $72 billion debt load, and the liquefied natural gas (LNG) lobby eager to “diversify” the Puerto Rico Electric Power Authority’s (Prepa) fossil fuel mix. In her two terms as Puerto Rico’s Resident Commissioner, González was a quick study of the fine print in the U.S. energy paradigm. Unlike her predecessors, Ricky Rosselló, who vowed to achieve 100 percent use of renewables by 2050 and the outgoing Governor Pedro Pierluisi, the Governor-elect has said that: “Many countries where I have discussed energy policy have used natural gas as a mechanism to transition to renewable energy. By diversifying our sources we can achieve savings en route to renewables.” In that sense, the governor-elect is fully aligned with Trump in his second term. “Those statements go right to the heart of the matter because the President’s [Trump] view is that there should be energy independence,” said one federal source with ties to the Trump administration. “And, there should be a lot of oil and gas exploration—and upstream and downstream efficiencies. That system will unleash the American economy. I think [her comments] align incredibly well.” Time was when González spent an inordinate amount of time seeking parity for Puerto Rico in Medicare and Medicaid funds. One measure on the Medicare front, called the Puerto Rico Integrity in Medicare Act (Prima) sought to give the island nearly a $3 billion shot in the arm in Medicare Advantage funds over three years. The measure included a provision that would guarantee 50 percent of those funds would go to healthcare providers. The lack of context in the Prima pitch—failing to emphasize that Puerto Rico’s residents pay into the Medicare program—left some members on the Hill with the impression that the island’s government was asking for what is known as mantengo by many detractors in Washington D.C., who see Puerto Rico as a jurisdiction addicted to “welfare heroin.” In fact, during Prima’s salad days, some
Many countries where I have discussed energy policy have used natural gas as a mechanism to transition to renewable energy.
— Jenniffer González, Governor Elect
members of Congress were unaware that Puerto Rico received only 43 percent of the national average in Medicare funding, despite paying fully into the program. Despite Prima’s failure to get past the U.S. House of Representatives, observers and lobbyists believe the Resident Commissioner made headway in educating staffers and members on the Hill. “So, you have a lot of moving pieces— with the private sector, the insurance sector, you have AARP doing something to be supportive…then you have everybody else,” the Republican source told the News Journal. “At the end of the day, the answer must be ‘yes,’ the more you talk to people about [Medicare disparities], the more they learn. That does not mean they are able to do something about it because you need legislation, or CMS [Centers for Medicare and Medicaid Services] must [get involved]. “[T] hey are making headway. They are raising awareness that people are paying into the Medicare program. So, there is a better understanding of the economics; how it affects providers in Puerto Rico.” Towards the tail end of 2016, when Promesa was still a work in progress, the policy brigades at the U.S. Treasury Department were fast at work hammering out details on Title III, which provided a Chapter 9-bankruptcy-like stay mechanism for the Puerto Rico Government under the pressing weight of a massive debt load; representatives from the energy sector, on the other hand, were in other boardrooms whittling fine print to expedite critical infrastructure projects under Title V.
Time and again, concerns kept surfacing over the lack of economic development measures that would put Puerto Rico’s economy back into gear. One New York Summit hosted by the Association of Financial Guaranty Institutions (AFGI) in October 2016, featured players in Puerto Rico’s debt game discussing economic development measures that worked to kickstart Washington, D.C.’s economy in the 1990s. The panelists—featuring former House Speaker Eric Cantor (a managing director for global bank and financial consultancy Moelis), the late economist Carlos Colón de Armas and a host of creditor constituents with skin in the game—discussed providing a temporary reduction to payroll taxes as a relief for employees and businesses. They talked about Medicaid financing arrangements; some panelists even mentioned the importance of the Economic Development Task Force created as a sidecar to Promesa on the Hill—where is that today? Seemingly nowhere. In fact, few serious people on the Hill will talk about Promesa as a vehicle for the economic development of Puerto Rico in 2025. Instead, it is all about market access and herding the fat cats clawing back claims in the bankruptcy restructuring mediation of Prepa’s debt load.
For Whom the Benefits Toll
The consensus in the hallowed halls of Congress is that it is more practical to think of healthcare, as two pieces—you have Medicare, where there are good reasons to have a broader conversation. Then you have Medicaid, for the medically indigent. When the
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Bridge Over Troubled Waters Incoming Government Faces Formidable Challenges on Capitol Hill BY PHILIPE SCHOENE ROURA | SPECIAL TO THE NEWS JOURNAL
Affordable Care Act (ACA) was passed in March 2010, under the administration of then-President Barack Obama, Puerto Rico’s government opted to receive a $5.4 billion block grant at a clip of $700 million annually. Much as happens across so many jurisdictions, Puerto Rico blew through those funds because it struggled to handle the rationing of services essential to successful managed care. On that front, González faced fiscal cliff upon cliff, fighting to secure federal Medicaid as early as 2018, when she helped obtain $4.8 billion in Medicaid funding to replenish coffers running dry. The Consolidated Appropriations Act of 2023 capped Medicaid funding for Puerto Rico at $3.325 billion in fiscal year 2024. This level of funding will continue until Sept. 30, 2027, unless new funding legislation is enacted. Puerto Rico’s government has also fought futilely to help secure Supplemental Security Income (SSI)—benefits available to disabled low-income adults and children in the mainland U.S., which are not extensive to U.S. citizens living on the island. The Supreme Court ruled in 2022 that the U.S. Constitution does not require Congress to extend SSI to Puerto Rico because of the island’s territorial status. The legislative reading of the decision by the Supremes in plain English: “If the idea is to get Congress to support these programs that are paid for by the General Fund, that the people of Puerto Rico do not contribute to, then it is not unreasonable for Congress to ask the people of Puerto Rico to pay taxes. That is in a Supreme Court decision; so it is not
only members of Congress, from the right or the left making an argument on this. It is all coming back to taxes,” one high-level advisor with knowledge of federal perspective on the dictates of taxation told the News Journal. The resident commissioner, soon to be governor, at one time introduced legislation to make Puerto Rico an incorporated territory that would bring some tax obligations to Puerto Rico. González reportedly realized that fully extending federal programs funded exclusively by income taxes were going to run into headwinds. “So, you want parity in Medicaid, so, we want parity in income tax. And, you want parity in SSI; great—we can do that. Be it SSI, Medicaid or anything else that is funded by the General Fund is going to run into the headwinds that were unpacked by the Supreme Court decision,” the Republican source added.
Tag Team Politics
The premium on real world politics will be very important for González, who is now making history as the head of Puerto Rico’s government with Resident CommissionerElect Pablo José Hernández Rivera, a proCommonwealth politician considered royalty among the Popular Democratic Party (PDP) faithful because he is the grandson of the late Rafael Hernández Colón, a former three-term governor of Puerto Rico. It is the first time that a pro-statehood governor works with a pro-commonwealth resident commissioner. The newly anointed resident commissioner
recently attended orientation and networking meetings for first time members on the Hill. He told the News Journal that the “meetings and orientation were limited mostly to first time members. But many current members participated.” Hernández ascertained much work remained to be done in explaining Puerto Rico’s challenges. “In general, there is a lack of interest—and it is not in bad taste— a lack of interest in Puerto Rico issues; it is just not top of mind for them,” he told the News Journal. “They want to learn more; they want to help; they are very deferential to what the Puerto Rico member has to say about Puerto Rico issues.” He also recognized a real opportunity to collaborate with the governor-elect on the Medicare and Medicaid front. The question then is: how do we change the narrative on the Hill; when people see it as a handout, when we already pay into Medicare? “Yes, that has to be one of the persuasive talking points when we advocate for parity in that program with them. Another persuasive talking point is that what they are not paying in Puerto Rico, they will end up paying for in Florida because some Puerto Ricans will just hop on a plane and move to Florida for those benefits.” Although Hernández says he is ready to collaborate, sources on the Democrat side of the aisle told the News Journal that the freshman representative has made quick work establishing contacts among Republicans on the Hill. “It is a foregone conclusion that he has contacts among the Democrats
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48% PERCENTAGE OF THE $81.8 BILLION IN FEMA FUNDS OBLIGATED FOR DECLARED DISASTERS SINCE 2017 THAT HAVE BEEN DISBURSED, ACCORDING TO EXECUTIVE DIRECTOR MANUEL A. LABOY RIVERA
in the legislative assembly; where he will be moving more deftly is on the Republican front,” one source with ties to the Democratic Party told the News Journal on the condition of anonymity. “So, in that sense, the governor will be doing a considerable amount of ‘housekeeping’ as pertains to the image she wants to project among Republicans on Capitol Hill.” Time was when that was not an easy task because many politicians were predisposed to seeing Puerto Rico as a slice of corruption in paradise. Thanks largely to the actions of former Gov. Ricardo Rosselló, Puerto Rico’s government was seen as a collection of entitled frat boys who preferred to control disaster relief—all told, some $90 Billion in disaster funds were earmarked for reconstruction—through the Office of Recovery, Reconstruction and Resiliency (COR3) rather than using Title V in Promesa. Lobbyists for the statehood movement confirmed they spent a lot of their time explaining that sluggish movement of reconstruction works was not a product of corruption, but rather intrinsic to the bureaucracy inside the Federal Emergency Management Agency (FEMA). Now, the pace of project completion under COR3 has come under scrutiny during transition hearings being held at the Luis A. Ferré Fine Arts Center in Santurce. In a presentation before the transition committee presided by Bayamón Mayor Ramón Luis Rivera, COR3 Executive Director Manuel A. Laboy Rivera said that just 48 percent of the $81.8 billion in FEMA funds obligated for declared disasters since 2017 have been disbursed.
Lessons Learned
Over the course of seven years, as resident commissioner, González spent her time addressing the needs of an island ravaged by Hurricane Maria. She is seen by those who have gotten to know her on the federal front as wanting to restore confidence in the private sector and getting investors to put their money in Puerto Rico. She has vowed to transform Puerto Rico’s energy grid; this involves the proper hardening of the transmission and distribution infrastructure and more efficient collaboration with the generation side of the equation run by Genera PR. There is federal funding coming down the pike, and the talk of rescission (tied to the Impoundment Control Act of 1974) that existed on the floor in 2019, is whistling in the wind as a possibility in 2025. “Think about the conditions of the American economy Continues on page 8
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today--$34 trillion in debt. Trillions of dollars of actual operational deficit every year is a drag on the economy,” the Republican source said. “So, rescission is real—how much; how little; when; how fast? And you are seeing the president moving swiftly in his engagement with House and Senate leadership. So, are conversations of rescission real? Yeah. Funds will be under rescission; I don’t see any way around it because of the nation’s economic condition. How much or how little is it going to affect Puerto Rico?—that is a different question.”
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Cidre: ‘Competitive Ecosystem’ in High-Tech Work Urges Approval of Key Measures to Face Global Challenges to Local Manufacturing
In general, there is a lack of interest—and it is not in bad taste— a lack of interest in Puerto Rico issues; it is just not top of mind for them.” Outgoing Economic Development and Commerce Secretary Manuel Cidre
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BY JOSÉ ALVARADO VEGA | SPECIAL TO THE NEWS JOURNAL
— Pablo José Hernández Rivera, Resident Commissioner Elect
The data tells that the government of Puerto Rico, since 2017, has been slow to use federal disaster funds. Some of the reasons are procedural; observers say FEMA works mostly as an insurance company. The expectation is that the local government is going to start doing work and FEMA is going to reimburse them. The source closed with this: “Puerto Rico does not have that because it does not have any money; Puerto Rico is different because it has a board that oversees all its finances. Puerto Rico is different because the folks in the FEMA process who would normally write the proposals— mayors, county commissioners; that is not the structure that Puerto Rico has. There are language barriers. Those all are differences that will come up from time-to-time in the conversation. That Puerto Rico is different is not all that hard to explain, but it must be explained—often.”
utgoing Economic Development and Commerce Secretary Manuel Cidre Miranda said that while his agency has laid the groundwork for a “competitive ecosystem” that has facilitated investments from the growing sectors of high-tech services and manufacturing in Puerto Rico, he urged the incoming administration of Gov.-elect Jenniffer González Colón to secure approval of key legislation he said is needed by the island to face the challenges of global shifts in business incentives as well as the expected protectionist trade policies resulting from a return of Donald Trump to the White House. Cidre said in an interview with The News Journal that Puerto Rico’s Economic Development and Commerce Department has facilitated the creation of thousands of jobs in high-tech services and manufacturing, information technology and aerospace sectors, while “working hand-in-hand with universities” in the agency’s 21st Century Workforce program, which he said has the aim of “training 50,000 Puerto Rico residents in the digital market.” He said the agency has shifted its focus from merely seeking out investments – a job that is now mostly in the hands of destination marketing organization (DMO), Invest Puerto Rico – to creating what he called a local “competitive ecosystem” to facilitate the setting up of business operations on the island, particularly those requiring more high-skilled workers. “This creates an ecosystem that is rich enough for technology, cybersecurity and
information technology companies, among others, to come to Puerto Rico, as did Hewlitt Packard, which transferred to Puerto Rico all of its global application platform and operates from Aguadilla. It is creating 600 jobs in the next few months,” explained Cidre, who was appointed by Gov. Pedro Pierluisi in 2021 and who plans to retire after his tenure ends on Dec. 31. He noted the exponential growth in these sectors. The information technology sector, buoyed by the establishment of such companies as Infosys and Red Ventures, now employs almost 14,000 people on the island and “which were not on the horizon five years ago,” Cidre said, while pointing out similar growth in the aerospace sector, “where a decade ago there were no more than 800 jobs and now there are over 10,000 jobs in companies such as
The world must know that Puerto Rico can collect the 15 percent tax and have a minimum effect on business owners.” —O utgoing Economic Development and Commerce Secretary Manuel Cidre
Collins Aerospace, Lockheed Martin, Honeywell, among others.” He noted that Honeywell relocated its global sales department from Arizona to Guaynabo, where more than $2 billion in products made by Honeywell are sold globally. “This is in addition to expansions in medical devices companies such as Medtronic, Aster and Stryker, which are in the process of creating new jobs,” the agency chief said, adding that eye-contact lens maker CooperVision established its center for global manufacturing in Ponce, with an investment of $700 million and 500 new jobs.
Unmet Challenges
However, Cidre acknowledged that Puerto Rico’s manufacturing industry faces serious challenges, as a growing number of countries adopt a global minimum tax while President-elect Donald Trump raises the stakes by pledging to implement protectionist policies to bring manufacturing back into the states from countries such as China and Mexico. In fact, Trump appointed Peter Navarro, who served on the White House Trade Council in his first term and had advocated for American manufacturing to be relocated to Puerto Rico, to be “senior counselor for trade and manufacturing.” “Last year, there were two plant closings – Merck Sharp and Dohme, and Bristol Myers Squibb in the area of Humacao. Within the structure of reshoring and nearshoring, closures like these must be avoided because productive capacity is lost. That is precisely what my successor must work directly with the White House or with Mr. Navarro,” the economic development chief said, adding that “those countries with the productive capacity, with the regulatory knowledge, which Puerto Rico has, have a great opportunity even with the Trump vision of bringing them back. We must be competitive.” Cidre said that local economic development policy has been hampered by the intricacies of local politics, pointing out that key measures, such as legislation that would locally implement the global minimum tax rate of 15 percent without affecting investments under existing corporate tax decrees as well as a bill that would provide inventory tax relief, have been held up in the Legislative Assembly. “The global minimum tax is a great opportunity if we do it well. The issue cannot become a political football. The world must know that Puerto Rico can collect the 15 percent tax and have a minimum effect on business owners,” the founder of the Los Cidrines bakery chain said, acknowledging that countries such as Ireland, Singapore, and Germany are moving away from tax-based decrees and creating incentives based on energy, labor, supply chain, and cargo factors. “When they make the final calculation, the 15 percent global minimum tax is offset by the other incentives and these companies stay in these countries. Puerto Rico must join this trend. There are several bills that have been duly discussed with the Treasury, the companies, [and] the private sector…,” Cidre explained, referring to the global minimum tax legislation approved in the House but not in the Senate. “We hope [these bills] are approved at the beginning of next year. There is sufficiently robust legislation to be approved… We are asking the new administration, which is now in the majority, to address this issue. It is a life and death issue.”
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DEBT RESTRUCTURING
Oversight Board Urges Review of Ruling Favoring Bondholders Says First Circuit ‘Erred’ in Upholding Decision Granting Claim to Totality of Prepa Bond Debt
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BY JOSÉ ALVARADO VEGA | SPECIAL TO THE NEWS JOURNAL n the latest salvo in the ongoing court battle over the proposed amended debt settlement plan for the Puerto Rico Electric Power Authority (Prepa), Puerto Rico’s Financial Oversight and Management Board (FOMB) is again requesting the U.S. Court of Appeals for the First Circuit in Boston reconsider its ruling giving bondholders a right to make claims on all of the $8.5 billion in utility revenue bonds, instead of the $2.4 billion limit set by the federal judge in charge of the utility’s bankruptcy-like process. On November 13, the First Circuit court affirmed a ruling it issued in June that partially supported the allegation of a group of non-settling Prepa bondholders – which include Assured Guaranty Municipal Corp., GoldenTree Asset Management LP, Syncora Guarantee, and U.S. Bank National Association -- that they have claims for the face value of the utility revenue bonds – the principle plus matured interest – totaling $8.5 billion in asserted claims.
The ruling, moreover, allows bondholders to make claims for “net revenues wrongly diverted from debt service,” which the litigating bondholders allege Prepa has spent on “unreasonable Current Expenses,” thereby “starving” the reserve accounts and “slowing” debt payments to the bondholders. Still, the appellate court ruling states that that bondholders only have a right to current and future net revenues generated by Prepa, clarifying that they will not necessarily receive the full claim amount. The court left the calculation of the likely greater claim amount to U.S. District Judge Laura Taylor Swain, who oversees the utility’s Chapter 9-bankruptcy-like proceedings under Title III of the federal Puerto Rico Oversight, Management and Economic Stability Act (Promesa). The litigating bondholders had appealed a ruling made in March of last year by Judge Swain, who affirmed that the utility’s bondholders do not have a secure claim to the utility’s current and future revenue, and are only entitled to the value of funds in
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existing utility reserve accounts. As a result, the Title III judge reduced the bondholder claim limit amount in the oversight board’s proposed plan of adjustment (PAD) presented in December 2022 from $5.4 billion to $2.39 billion. The FOMB said in a press release issued November 27 that it had requested the First Circuit court to reconsider its decision, saying that while the ruling said the oversight board’s position was “reasonable” and “correct,” the court formulated a “new theory under which the bondholders would still benefit from the broader collateral security the appellate court had originally identified.” The oversight board stated that this justification for the appellate court’s June 12 ruling is “erroneous” and called on the court “to reconsider its new opinion and to correct it.” In order for bondholders to benefit from their collateral in the Prepa restructuring case, they “must not only have a security interest, but they must also have ‘perfected’ it,” the oversight board said in the statement, which defines “perfection” as “the type of public notice a creditor must provide the public of its rights in collateral.” In the Title III case, the collateral is Prepa’s net revenues defined as the money the utility receives less its current expenses, according to the entity created under Promesa to restructure Puerto Rico’s debt. “The Oversight Board believes the bondholders’ security interest in PREPA’s Net Revenues is a security interest in money and bank accounts and must be perfected by possession or control,” the oversight board explained in the statement. “The First Circuit’s second opinion concludes the Net Revenues are ‘general intangibles’ because the Net Revenues may sometimes exist in forms other than money or bank accounts. Security interests in general intangibles can be perfected by filing certain public notices, which the bondholders did,” the oversight board continued. “The dispute is about whether the Net Revenues are only money and bank accounts. The Oversight Board believes they are. The First Circuit and bondholders currently assert they are not.” The oversight board added that the First Court needs to reconsider its ruling to allow “a responsible debt restructuring that will end PREPA’s bankruptcy and leave PREPA with the critical resources to make the investments necessary to provide Puerto Rico with reliable electricity.” Many community and business leaders in Puerto Rico fear that the federal appellate court ruling, combined with a 35-year “legacy charge” in the proposed PAD to cover settled debt, could result in economically unsustainable rate hikes that could set back efforts to rebuild the aged and hurricane-damaged grid and convert electricity generation from mostly fossil fuel sources to fully renewable energy sources.
‘Failure not an option’
Judge Swain has urged all parties in the case, particularly the creditor holdouts, to support a sustainable plan that takes into account the fragility of the island’s electric grid. She has ruled against motions by nonsettling bondholders to lift the stay on Prepa debt payments and place the utility under a receivership, saying at one point during a hearing in July that “failure is not an option” for island residents who already pay high electricity rates and suffer from the “costly
failures of those charged with transforming the system and achieving discernible change.” After holding confirmation hearings on the proposed PAD in March, Judge Swain has not issued a ruling on the plan and has, instead, mandated a mediation process headed by two other federal judges to hash out conflicts between the oversight board, non-settling bondholder groups and the commonwealth government in order to reach an agreement on a confirmable plan and avoid adding several years of litigation to this process. Due to a petition made by the mediation judges last month, Judge Swain extended the termination date of mediation as well as the stay order “through and including” January 31 of next year. Sergio M. Marxuach, policy director for the Center for a New Economy (CNE), a San Juan-based think tank, told the News Journal that the island’s electricity customers will certainly be hit with a rate increase as a result of the debt talks, but a viable amount for this increase is still uncertain, considering a utility that has posted deficits and lost customers for the past 20 years. “There is a limit to how high you can increase electricity rates before people change their behavior and even stop paying their bills,” he said. “Businesses could go bankrupt and people continue to leave the island because not everyone has the money to put up a solar-energy system or buy a generator. And Swain is acknowledging this in her rulings. If the economy of Puerto Rico weakens, it makes it less likely the government could pay that debt.” Marxuach said that while the appellate court said bondholders have a right to name a receiver for the utility, he noted that the court clarified that the receiver “does not have superpowers.” “The receivership can only manage and ensure that money deposited in the sinking fund and money left over, if any, is applied to debt service. It cannot put its hand in other pockets,” he said. Still, Marxuach said it is urgent to successfully conclude debt talks given that even greater rate increases -- up to 26 percent for the average residential customer who consumes 425 kilowatt hours per month – to cover the accumulating amount of amortized unrestructured debt.
Judge Swain mandated a mediation process headed by two other federal judges to hash out conflicts between the oversight board, non-settling bondholder groups and the commonwealth government.
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Tis the season for chinchorreos... and then some
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BY JUAN HERNÁNDEZ | SPECIAL TO THE NEWS JOURNAL fter a tumultuous year of heated elections and debates, international conflicts, natural disasters and Darth Vader’s demise, we’re finally in the midst of Christmas… and there is plenty to do to “unwind” now that the worst of our worries are over. It has been said – and that has been socially and scientifically proven – that Puerto Rico has the longest Christmas anywhere in the world. And that is an irrevocable truth. While some may contend that Christmas celebrations start immediately after Thanksgiving (on Black Friday), the truth is that many cities and towns throughout the island hold their Encendido Navideño (Christmas Lighting events) several days before. These include artistic shows with local artists and bands, and even some early Santa Claus appearances… just to get the engines running. Now, if you are a newbie in Puerto Rico’s Christmas chinchorreo scene, do not fret because we’re ready to give you some pointers on the subject so you can make the most of this holiday season. Anyone who says chinchorreo is the equivalent to the American “bar hopping” would be wrong. Chinchorreo is more than just bar hopping… it’s going from one kiosk to another sampling not only drinks, but also all the culinary delicacies they have to offer… from bacalaítos to alcapurrias to pinchos and lechón asa’o. Let’s get ready to chinchorrear.
Humacao’s Patron Saint festivities
Dedicated to the Immaculate Conception of the Virgin Mary, Humacao’s fiestas patronales follow a somewhat “delayed” calendar this year. Originally celebrated on, and around December 8, this year the municipal government of Humacao has opted to celebrate its revelries from the 19th to the 22nd. We can only guess the change in schedule could be due to the ongoing saga of the November election, but we are happy there’s going to be a fiesta patronal despite the delay. Revelers attending to the extended weekend event will enjoy a veritable offering of Puerto Rico’s fried delicacies, from alcapurrias and bacalaítos to piononos and pinchos, among many others. They all will be but a kiosk away from each other. There will be live music every night from 7:00pm on, except on Sunday, when the stage goes live at 12:00 noon with salsa greats like Bobby Valentín and Toño Rosario showcasing their talents.
If you are some kind of early bird, you can opt for an early afternoon start and make some pit stops to sample our culinary delicacies, along with some trademark drinks, in the different chinchorros along the road before getting to the main event. After all, that’s what chinchorreo is all about. This would be no small feat, even for an experience chinchorrero.
Three Wise Men Promise in Camuy
We all grew up knowing who Caspar, Melchior and Balthazar are. Also known in religious lore as the Three Kings, these guys are powerful. So powerful they are that people pray to them to intercede in their favor of them to help them achieve something they might need. But of course, the Wise Men expect something in return. So, devote Christians promise them they will do some small sacrifice to repay their intercession. And here is where the Promesa de Reyes comes… more specifically a “wake,” since in Camuy the favor is repaid on January 5th, the Three Kings Day eve. In Camuy this means a no hold bars festival in praise of the Three Kings generosity that includes mass at the Saint Joseph’s Parish, and across the street, in the town’s plaza, a living Nativity scene and the always expected rosario canta’o (chanted rosary). If this is too religious for your taste, don’t fret about it, there’s a myriad of kiosks around the plaza and adjacent streets offering food and drinks for the pious, and the not so pious. Nevertheless, don’t be too quick to dismiss the rosary, because among the its chants it includes some of the best décimas (some of them improvised) from some of the best local troubadours weaved in as part of the rosary. A real musical treat. The events starts at 4:00 pm, January 5th, with the official welcoming protocol, followed by the mass in honor of the Three Kings and then the show in the town’s plaza.
Holy Innocents Day in Hatillo
On December 28, the people of Hatillo, a rural livestock town west of San Juan, commemorate the Holy Innocents Day, the day King Herod ordered the execution of the innocent, male children in Bethlehem after the birth of Jesus. The celebration, known as the Festival de Máscaras de Hatillo, starts early in the morning with several dozens of masked troupes sporting colorful ruffle costumes with wide-brimmed hats parading through the town’s barrios and communities on matching floats of different sizes. They
Chinchorreo is more than just bar hopping… it is going from one food kiosk to another sampling not only drinks, but also all the culinary delicacies they have to offer… from bacalaítos to alcapurrias to pinchos to lechón asa’o. Let’s get ready to chinchorrear.
all make pit stops at the homes of some families who offer the revelers Christmas food and drinks to keep them nourished during the day before heading to downtown Hatillo for the main parade. Originally, people in costumes represented King Herod’s soldiers coming to take away the town’s children, but taking into account the reluctance and distrust of people nowadays, the máscaras (Herod’s soldiers) have become pranksters targeting people standing along the parade’s route. Pranks include, but are not limited to messing girls’ hair, smearing shaving cream, and squirting a variety of liquids to unsuspecting bystanders. Artisans and food vendors will be offering their specialties in the town’s plaza. Activities around the plaza will start around noon on Saturday, December 28.
La Ruta del Lechón or roasted pork alley
While La Ruta del Lechón is something of a regular event all year long, Christmas offers an extra special reason to pack the car with family and friends, and mosey on along Cayey’s PR-184 (Roasted Pork Road) and go to lechonera after lechonera looking for the best lechón asa’o, morcillas, arroz con glandules and mofongo, among other delicacies of our Christmas table. Lechoneras are part of Puerto Rico’s culinary royalty. You won’t find any Michelin Stars among them, but that just shows how well we’ve kept their secret. Plan to stop at more than one of them because each is famous for some traditional entreés (morcillas, yuca al mojo, cuajitos, etc.) and of course, the Holy Grail of Puerto Rican cuisine… the ubiquitous lechón. Some of the best known ones are Lechonera Los Amigos, Doctor Lechón, Lechonera Los Pinos and El Rancho Original. But feel free to explore… you can’t go wrong at La Ruta del Lechón. One more thing, at lechoneras, food is ordered by the pound… so, come with a hearty appetite and bring a bunch of people with you. Enjoy!
La industria local a paso firme en el desarrollo económico sostenible de Puerto Rico Durante los últimos cuatro años, empresas locales e internacionales han demostrado un firme compromiso con Puerto Rico, impulsando su desarrollo económico y consolidando su presencia en la Isla. Este progreso ha sido posible gracias al liderazgo de un equipo puertorriqueño dedicado, que ha trabajado incansablemente para fomentar la innovación y generar empleos en el mercado local. Este esfuerzo conjunto ha permitido que Puerto Rico se mantenga como un destino atractivo y competitivo para la inversión.
Islandwide-PJ Rosaly Enterprises, LLC. César Castillo, LLC
Harris Paints Flexible & Integrated Technical Services, LLC.
Aiac International
BB Bedding INC.
Ortho-Tain Enterprises
(Avara)
Valero Marxuach Precast Solutions Puerto Rico Hospital Supply, INC.
Dulzura Borincana Pan Pepín, INC.
Print 1, LLC
Techno Plastics
Century Packaging (Carmela Foods)
Baxter
Goldpack Lanco
West Contract MFG, LLC
Stryker Terumo PR, LLC LIFT
Para conocer sobre los servicios que ofrece el Departamento de Desarrollo Económico y Comercio, visita www.desarrollo.pr.gov
Autorizado por la Oficina del Contralor Electoral OCE-SA-2024-13914
Established 1942