Junk-rated Guam may pay a price for Trump's border wall

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Guam risks losing $750 million in military construction funds to President Donald Trump’s proposal to divert military funds to pay for his border wall, according to its delegate in Congress.

Such a shift would be a credit negative for the junk-rated U.S. territory, Moody’s Investors Service said.

Moody's rates Guam Ba1, with a stable outlook.

“While all states and territories with significant military construction funding face a loss to finance the border wall, Guam is particularly exposed due to the significance of the military to its economy,” Moody’s analysts wrote.

Trump declared a national emergency over the border wall two weeks ago and threatened to divert $3.6 billion from the Department of Defense to pay for the $8 billion wall.

The House of Representatives voted 245-182 Tuesday to block Trump’s national emergency declaration, falling short of the two-thirds majority needed to override the president’s promised veto. The issue is now in the Senate.

House Speaker Nancy Pelosi circulated a list of about $16 billion in military construction spending projects that could be cut ahead of the House vote. Neither the Department of Defense nor the White House has said which specific projects could be targeted.

Michael San Nicolas, Guam’s non-voting delegate to the U.S. House of Representatives, said Feb. 20 in a statement that the loss of funding would equal more than a year’s worth of military construction funding and 10% of the U.S. commitment to realign forces to Guam.

The bulk of the funding at risk helps to pay for the $7 billion planned redeployment of 5,000 marines from Okinawa through 2025.

Diversion of the federal funds from Guam would further delay the planned redeployment, according to Moody's, which said the initiative has been subject to repeated delays from environmental reviews and limits to H-2B visas for foreign construction workers.

Guam’s military budget is the sixth-highest among the U.S. states and territories and the $289 million Guam will receive this fiscal year represents 4.94% of the territory’s gross domestic product, Moody’s wrote. That is significantly more than the 0.35% for Hawaii and 0.56% for Alaska, the two states with the highest ratio of military construction funding to GDP, according to the ratings agency.

"Indicating that a border wall is more emergent than force realignment and readiness in our region grossly understates the real threat of a perceived waning in American commitment to the Asia Pacific," San Nicolas said.

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