Puerto Rico's fiscal, economic and debt proposals will be reshaped by a wide array of discussions and negotiations over the coming weeks and months, observers say.
At the request of Puerto Rico Gov. Alejandro García Padilla, a government group released a report on Sept. 9 making extensive recommendations for changes to the island's fiscal and economic policies.
A few hours after it was released, the governor said "the plan is a roadmap - the beginning for negotiation." He called for an effort to reach a consensual deal with bondholders on restructuring their debt.
So far, bondholders aren't making any compromises.
"We have seen little evidence of a meaningful number of non-hedge fund general obligation or COFINA owners with even a passing interest in considering voluntary haircuts at present," Municipal Market Analytics wrote in its Weekly Outlook Monday, referring to bonds issued by the commonwealth and by the Puerto Rico Sales Tax Financing Corp.
The plans' measures may also have a hard time winning approval in the Puerto Rico legislature. When the governor's team presented them to members of his party in the legislature, the legislators were unenthusiastic, said a member of his party in the Puerto Rico Senate.
Some of the proposals make "no one happy" in Puerto Rico, particularly the labor reforms, the Senate source said. Among the proposals are cuts to the minimum wage for people under 25 and tightening rules on overtime pay.
"Some of the proposals have been received positively by most and others will require more extensive consideration and study," Lilliam Maldonado, spokeswoman for the Puerto Rico Representative Jesús Santa Rodriguez, said in a text.
Legislators and members of the public are discussing the proposals, said Rep. Luis Vega Ramos. The discussions are making clear what there is a consensus concerning and what things there are disagreements over. The legislature may change or discard some of the latter, he said.
Government Development Bank for Puerto Rico President Melba Acosta Febo is in New York City talking with investor representatives, determining their support for the plan, the Senate source said.
The legislators want Acosta Febo to assure them, based on her bondholder talks, that if the legislators pass these measures, the bondholders will accept a debt restructuring, the Senate source said.
The legislators know they are up for reelection in less than a year, making it harder to vote for some of the plan's proposals, the source said. If the Senators are to vote for something painful, they want to be sure they will get something good in return - a bondholder agreement to a restructuring, she said.
The governor hasn't yet drafted bills based on the Sept. 9 plan and these bills will be influenced by discussions with investors, the Senate source said. The governor is expected to deliver multiple bills on Oct. 1, she said. Vega Ramos said he expected the bills to be introduced over the course of several weeks.
Other Puerto Rico groups and players are conversing. The Puerto Rico government is having discussions with Puerto Rico's banks, a GDB source said. On Wednesday in Washington, D.C, García Padilla met with U.S. Federal Highway Authority Administrator Gregory Nadeau to line up federal transportation funding.
