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Este informe no está disponible en español. CARIBBEAN BUSINESS Fiscal crisis CARIBBEAN BUSINESS, in our January 20, 2005 issue, first said the government’s deficit would be $1 billion. We were wrong! By ELISABETH ROMAN & CARLOS MARQUEZ February 24, 2005 It looks like the Commonwealth’s deficit may reach $2 billion Growing deficits, possible downgrading of government’s credit rating, high public-sector employment, a pension plan near collapse, and subsidies to public corporations are placing tremendous pressures on the Commonwealth to implement government reform. Initially estimated by the Sila Calderón administration as a $550 million "structural deficit," the figure has been steadily increasing with the Office of Management & Budget (OMB) and the Government Development Bank (GDB) officially acknowledging the "structural deficit" could reach almost $1.4 billion. Sources close to the government, however, have informed CARIBBEAN BUSINESS the "structural deficit" may reach a record $2 billion, creating a fiscal crisis for the Commonwealth–one that could have an impact on the government’s bond ratings, services, agency operations, capital improvement projects, and almost all government spending, except salaries and payments on the debt obligations. On Jan. 20, CARIBBEAN BUSINESS first reported the government was running with a $1 billion deficit. Last week, after government officials publicly admitted the deficit would reach nearly $1.4 billion, Designated Treasury Secretary Juan Carlos Méndez described the Commonwealth’s fiscal situation as difficult and complicated. In addition, Ileana Fas Pacheco, director of the OMB identified the Department of Education and the Police Department among the government agencies facing serious fiscal problems. Fas Pacheco pointed out the government’s fiscal situation is also impacting in a significant manner the services provided by other agencies, including the Departments of Corrections, Family, and Health. Government officials aren’t alone in expressing their concern. The historic deficit is generating concern among Puerto Rico’s securities and investment sectors on the impact the deficit will have on the government’s bond ratings. High deficits and increased borrowing from the GDB to cover Commonwealth agencies’ expenditures have led Standard & Poor’s and Moody’s to downgrade the outlook on Commonwealth’s general obligation bonds and the GDB’s outlook from stable to negative. One investment broker told CARIBBEAN BUSINESS he had been receiving calls all last week from investors seeking information and advice on what to do with their government bond investments. The government’s fiscal situation could become even more precarious in the next fiscal year, since no sources of funds have been identified to cover operational expenses for important infrastructure projects such as the Tren Urbano (TU), the new Convention Center, and the Port of the Americas. GDB President William Lockwood Benet pointed out the "structural deficit" could change depending on the government’s revenues and control on spending. Measures to control the deficit, however, can’t be provisional or temporary since it involves ongoing and recurrent expenditures. Fiscal measures identified by OMB to address the budget problem include a 10% reduction in top level appointments (empleados de confianza); additional controls in the use of cellphones and travel expenses; limits on the use of official vehicles; and a freeze in new recruitment. These measures, however, are relatively small savings that aren’t sufficient to address the government’s current fiscal crisis. Nevertheless, OMB’s proposal to eliminate fiscal autonomy for agencies that are estimating a deficit this fiscal year is a first step in the right direction. OMB’s proposal to open a retirement window for public employees to reduce government employment isn’t seen as a solution to the problem. Although such a measure was applied between 1998 and 2000, the central government’s payroll increased by $500 million between 2002 and 2004, from $3.8 billion to $4.3 billion, according to OMB. The increase in government employees nullified any effect from those who left their jobs. In addition, the government’s pension program doesn’t have the funds to pay for those who are already retired, much less to take on thousands of new retirees. Puerto Rico’s structural deficit problems won’t be solved with fiscal or tax reform that is simply geared to address the current deficit. The real problems, such as governmental gigantism, the inefficiency of the administration of public resources, the absence of economic growth that would generate more tax revenue, the lack of equity and justice of the tax system, tax evasion, and others that have been publicly debated during the past years shouldn’t be left unattended. For decades, the Commonwealth government has created a new entity for each idea or proposal it came up with, assigning resources without identifying a permanent source for the necessary funds. This has led to higher government debts. Furthermore, each time agency employees demanded salary increases or threatened to walk out, the government ended up giving in to demands for higher salaries and benefits, often without identifying where the added funds would come from. These increases were often agreed to without any evaluation on the agency’s performance or the services provided. In a presentation to the Governor’s Special Commission on Fiscal Reform, the Puerto Rico Manufacturers Association (PRMA) stressed the size of a government must be kept at an optimum level for it to be beneficial to society and any additional participation of the government over that optimum level would be counterproductive to economic growth. Experts consider an optimum size anywhere between 17% and 30% of Gross Domestic Product (GDP). In Puerto Rico, government represents 48% of the island’s Gross Product (GP). The PRMA further recommends, among other things, an absolute halt in government recruitment; an end to salary increases that aren’t tied to productivity; a gradual elimination of subsidies to public corporations, as these should be self-sufficient; and that no legislation be enacted unless an independent analysis of its cost to the government and the economy is conducted. The disproportionate increase in the size of the government reduces economic growth, according to PRMA, and thus its revenue base. Therefore, the Commonwealth shouldn’t resort to an apparent short-term solution of replacing jobs lost in the private sector with government jobs. Over the past four years, jobs in the private sector declined by over 51,000 and those in the public sector increased by over 42,000. Currently, one out of three salaried employees in Puerto Rico works in the public sector. Where the funds are spent Currently, 41 cents out of every dollar that enters the Commonwealth’s general fund, which is $8.85 billion, is already committed to allocations to the University of Puerto Rico (UPR), the Judicial Branch, the Legislature, subsidies to Puerto Rico Aqueduct & Sewer Authority (Prasa), pension benefits, debt service payments including Prasa’s, and the health reform program. Any adjustment to these items would require a change in legislation. The remaining 59 cents is allotted for payroll, operational costs of government agencies, and subsidies to different sectors in the population, such as students, farmers, small businesses, and nonprofit institutions. The general fund is spent as follows: $3.62 billion or 41% is "committed" by legislation. This includes $183 million for the Legislature; $1.33 billion assigned through a formula system (percentage) to UPR, municipalities, and the Judicial branch; $47.8 million toward Prasa subsidies; $840 million for debt payments including Prasa’s debts; $239 million targeted to cover Commonwealth’s Pension Fund benefits, which the system is unable to pay; and $984 million for health reform. The remaining 59% or $5.23 billion of the "noncommitted" funds is spent on payroll, rents, and other expenses. The funds are distributed as follows: $3.88 billion toward payroll; $368.1 million to rent and payment to corporations; and $982 million to the "other" category, which includes materials, equipment, professional services, and new vehicles. The consolidated budget for fiscal 2005 is $24.65 billion. Funds to cover this budget are derived from different sources; the most important is the general fund, which contributes $8.85 billion or 36% of the total. This percentage has remained unchanged for the last 15 years. Contribution from the general fund to the consolidated budget was 33% in 1990, 35% in 1995, and 39% in 2000. Federal funds contributions to the Commonwealth’s consolidated budget amounted to $4.77 billion in fiscal 2005. During fiscal 2005, out of Puerto Rico’s consolidated budget of $24.65 billion, $17.86 billon or 72% is spent on operational expenses and $3.01 billion or 13% to service the debt. Only 15% of the consolidated budget goes toward badly needed capital improvement projects. A bond issue In September 2004, Moody’s revised its outlook for Puerto Rico’s general obligation bonds (GOs) from stable to negative. Puerto Rico’s credit rating outlooks reflect concern over the "structural deficit," the obligations of the Commonwealth’s pension plan, and the high levels of debt. S& P’s outlook on Puerto Rico’s GOs has been negative since April 2003. According to documents obtained from the GDB, Puerto Rico’s general obligation bonds have one of the lowest ratings compared to any state in the Union (see chart). The Commonwealth’s general obligation bonds are rated A- by Standard & Poor’s and Baa1 by Moody’s. The rating of GOs has an impact on the credit of all Commonwealth’s bond issues including, but not limited to, the Public Buildings Authority (PBA), Puerto Rico Electric Power Authority (Prepa), Highway Authority (HWA), and the GDB. As of September, Puerto Rico’s public debt amounted to $38 billion. The Commonwealth’s public corporations owed $17.26 billion and municipalities $1.98 billion. The government has an additional $3.53 billion that allegedly doesn’t impose a burden on the Puerto Rico Treasury, according to the Transition Committee’s final report to Gov. Aníbal Acevedo Vilá. In 2001, when Sila Calderón took office, the government’s debt was $23.8 billion. According to the Transition Committee’s report, during fiscal 2005, the GDB has issued $1.55 billion in bonds, of which $1.33 billion was new debt and $225 million for refinancing. As of December 2004, the constitutional margin for debt service available to the central government was 5.8%, which could technically allow the government to issue approximately an additional $3.4 billion in bonds on the "constitutional" part of the debt. In October 2001, S&P gave Puerto Rico a negative outlook to the Commonwealth’s "A" rating. The negative outlook was followed by a downgrade in the credit rating to "A-" in May 2002. This "A-" rating has been maintained since 2002, however, in April 2003, S&P downgraded the Commonwealth’s outlook from stable to negative, which has since remained. In Moody’s case, there was a positive outlook in April 1997, thanks to economic expansion and increased revenues in the general fund. From March 2000 to March 2001, Moody’s again gave the government a positive outlook. In April 2001, the outlook was downgraded from positive to stable and in September 2004 it slid into negative. The credit ratings are an essential factor in determining the cost and the availability of insurance for the bonds. It impacts the demand of investors for the bonds not insured at reasonable prices. Both factors determine the Commonwealth’s cost of borrowing money and the amount of debt service required. While an outlook isn’t necessarily a precursor to a rating change or a future Credit Watch action, a negative outlook does alert to the possibility of a rating being lowered. Reaction to the fiscal situation and the possibility of a credit downgrading and the impact on investors is varied among the securities industry. On one hand, some securities analysts believe the credit-rating agencies won’t move to downgrade Puerto Rico’s credit rating and speak highly of the governor’s financial team, especially of GDB’s president Lockwood. They insist the issue has been blown out of proportion by the media and point out this isn’t the first time the central government has borrowed heavily from GDB. Others are skeptical as to whether the new administration will be able to act fast enough to satisfy credit analysts, who are expected to visit the island in March. Industry sources believe a downgrade would have a direct impact on the value of the government’s bonds in an investor’s portfolio and therefore on the value of the investor’s assets. A reduction in the value of the assets held would also have a negative impact on the account’s credit margin. The most pessimistic in this group point to the possibility of a downgrading and a Credit Watch. "A credit downgrade would put Puerto Rico’s debt one notch above a ‘junk bond,’" said an investment broker in Hato Rey who requested not to be identified. Other industry analysts point to a quantitative negative impact of 4% to 5% in the value of the government’s bonds while some believe the psychological or emotional reaction could drive the prices down by 10% to 15%. Regardless of the optimistic or pessimistic views held by the investment and securities industry, Puerto Rico’s credit rating depends on government action and on convincing credit analysts the actions taken will be effective in resolving the fiscal crisis. Designated Treasury Secretary Méndez informed CARIBBEAN BUSINESS the credit analysts will be looking for specific actions from the government and simply informing them "we are analyzing the situation or conducting one more study won’t do the job." Commonwealth policies impact the GDB According to S&P’s, the negative outlook in relation to the GDB, which was issued in January, is attributed to the close ties between the GDB’s business and the Commonwealth government. To cover the deficit, the Commonwealth government has historically borrowed money from the GDB or depended on nonrecurrent sources of income. In the process, the GDB’s credit rating has been jeopardized, a fact that was proved in the recent negative outlook issued for the bank by Standard & Poor’s. As of June 30, 2004, almost 50% of GDB assets consisted of loans to government agencies and public corporations. During the past four years, the GDB has issued $26.57 billion in bonds, of which $17 billion was new debt. During fiscal 2004, the GDB had to loan the government $233 million to balance the budget and guarantee repayment of the Tax Revenue Anticipation Notes (Trans). The same situation occurred in 2003 when the GDB had to lend the government $250 million. As of June 30, 2004, the bank had $4.176 billion in loans and $4.597 billion in investments. The responsibility of helping the central government balance its budget has limited the GDB’s flexibility. During the budgetary process of fiscal 2005, the Treasury estimated an income of $8.309 billion to the General Fund to cover the central government’s expenditures. On the other hand, the OMB estimated spending would reach approximately $8.859 billion. Based on these estimates, the Legislature approved a budget, which assumed the Treasury would obtain the difference, $550 million, from the GDB. In December 2004, the GDB approved $550 million to cover the projected deficiency. The deficit, however, is now publicly acknowledged at nearly $1.4 billion. Puerto Rico’s public debt Puerto Rico’s public debt is rapidly approaching the $40 billion mark. As of September 30, 2004, the central government’s debt stood at $15.13 billion. The extraconstitutional portion stood at $7.716 billion, an increase of 48.59% in the past two years. This rate of growth is higher than the rate of growth of the island’s GP and the rate of growth of revenues to the general fund. This extraconstitutional debt represented 104% of the constitutional debt that stood at $7.4 billion. The constitutional debt has increased 38.58% from $5.348 billion to $7.413 during the past four years. This rate of growth is higher than the rate of growth of the island’s GP and the rate of growth of revenues to the general fund. Although constitutionally the Commonwealth could still issue approximately an additional $3.38 billion in debt, in practical terms the margin is substantially less unless a tax and fiscal reform is implemented that addresses the fiscal situation on a structurally permanent manner. Servicing the government’s high debt is also putting greater pressure on the budget and taxpayers. According to the GDB, debt service from the general fund (not including service of the government debt with GDB) was approximately $880 million in 2004. By 2008, the debt service from the general fund is projected to reach $1.3 billion. This amount doesn’t include the debt service of the Public Buildings Authority (PBA), which is guaranteed by the Commonwealth. PBA’s annual debt service is projected to increase from $118.4 million to $217.2 million by 2009. Pension plan near collapse The policy of increasing benefits for the Commonwealth government’s pension plan without increasing sources of revenues for the plan, not depositing employer contributions to early retirements, and not having a more sophisticated investment strategy has created a critical situation in the Commonwealth’s pension fund. Since 1998, pension payments and administrative expenses have exceeded the plan’s income. This situation generates a cash-flow deficiency of more than $50 million a year. To cover the annual deficits, the government’s pension plan has been selling assets. However, this hasn’t prevented the pension plan from entering into a critical state with credit rating agencies calling for immediate action to address the situation. As of June 30, 2003, the plan had an actuarial obligation of $11.8 billion but only had $1.95 billion in assets. "Unfunded liabilities" were $9.9 billion and some estimates put the figure at $11 billion in 2004. This represents a capitalization rate of less than 17%. The pension deficit has a negative impact on the government’s finances. The Transition Committee has warned the governor of the real possibility the system could collapse in the near future. Furthermore, if immediate action isn’t taken, the Commonwealth won’t be able to comply with its responsibility to its beneficiaries and will face a credit downgrading. The pension plan would also be unable to absorb any new retirees should the Acevedo Vilá administration open a window to retire public employees as a budget-cutting measure. The situation was exacerbated in January 2004 when the Legislature approved a 3% increase in pension payments during an election year. To cover short- and medium-term payments to beneficiaries, government was also forced to go to the private banking sector and is contemplating issuing $2 billion in Pension Obligations Bonds (POBs) as well as increasing government and public employees’ contributory levy by 10%. It is imperative to increase its liquidity and appropriately capitalize it. Tax reform alone isn’t enough Puerto Rico’s fiscal crisis and the possibility of the budget deficit reaching $2 billion can’t be resolved by tax reform or fiscal reform alone. The consolidation, elimination, and reduction of government agencies, public corporations, or authorities must also be instituted. These measures have been implemented in states on the mainland and have contributed to economic growth, better services, and more jobs (CB Feb. 17, 2005). The role of the private sector must increase in our economy. Private sector participation, for those who don’t like the word privatization, in traditional government functions must increase and a total rethinking of Puerto Rico’s economic model should take place starting with government reform now. There is a need for the government to consolidate programs and services. Redundancy in permitting and labor processes must be eliminated. Performance measures for agencies and services should be implemented, a full disclosure of performance should be instituted, and a reduction of government payroll must be implemented at once. "The people of Puerto Rico need to stop thinking of government agencies as their own companies and something that can’t be sold or eliminated. The problem with the government of Puerto Rico is new entities are always being added but none are ever eliminated," stated a local businessman. Puerto Rico requires a rethinking and reformulation of the historically paternalistic philosophy of the role of government in our society, including public corporations. We must face the question of whether the government is effectively providing services to its taxpayers. The lack of public safety and of quality public education, the dreadful conditions of our roads, the absence of alternatives to dispose of waste, and the lack of trust in public utilities, among others, seems to indicate otherwise. A comprehensive government reform must go hand-in-hand with the much-talked-about tax and fiscal reform. Puerto Rico can’t afford to waste any more time or money on an inefficient bureaucracy and costly services that strangle the island’s quality of life, credit, and economic development. Each new proposal or idea ends up as a new governmental unit with all of the costs this implies; each act of justice in public sector salaries becomes a multimillion-dollar expenditure of public funds that is never tied to a commitment to increase productivity or services offered to citizens. Over the past years, fiscal policy has been accompanied by legislation that has eroded the tax base and limited the capacity to collect resources for the treasury–in a recurring manner. It is necessary that there be a review of all subsidies traditionally granted by the government and of the approval of laws that may diminish the revenues to the general fund, given the situation currently facing Puerto Rico as the current tax system has reached a point of exhaustion and the increase in public spending isn’t growing in relation to government revenues. Public corporations: The other government What started as a valiant effort in the 1940s and ’50s with the creation of the "public corporations" system in Puerto Rico to modernize and provide basic services to the population, has evolved into a costly reality and, at times, an obstacle to a competitive economic development model for Puerto Rico. Mismanagement, politics, and using public corporations to provide employment for campaign supporters have transformed some of these public corporations into economic burdens that have to be subsidized by the taxpayers. Total government subsidies embedded in the budget are estimated between $1.5 billion and $2 billion. Some of the major recipients of government subsidies are the University of Puerto Rico, which received over $700 million last year; agricultural subsidies that add up to approximately $500 million; and the Metropolitan Bus Authority and ferry service operated by the Ports Authority, which also receive substantial subsidies. Furthermore, once it is fully operational, the Urban Train will need, according to some very optimistic estimates, at least $100 million a year; and it is almost certain the Convention Center will need subsidies. Public corporations were created precisely so they would operate as private firms, generating their own revenues so as not to be a burden on the Treasury. But some public corporations haven’t worked as expected, and the central government and Government Development Bank (GDB)have had to support the mostly inefficient corporations. In many ways, Puerto Rico residents have privatized many government services but are still required to pay for services no longer received from the government. We purchase bottled water and have cisterns in our homes, have our own generators, pay for private security services, send our children to private schools, and rely on private health services. Public corporation debt has reached $17.3 billion, an increase of $2.8 billion or 19.70% during the last two years. A major revision of the financial structure of the public corporation system, including its tariff system and subsidies structure, is imperative, particularly those responsible for the island’s infrastructure. Prasa The Puerto Rico Aqueduct & Sewer Authority (Prasa) is subsidized by the central government with over $200 million per year. While Prasa may not have increased its rates, taxpayers are certainly paying for the subsidies the water company receives. The Commonwealth government through the general fund is also responsible for the payment of accumulated debt by Prasa, reported to be $640 million, in addition to Prasa’s capital improvements program. In addition, Prasa’s principal debts include a credit line of $345 million, has uncovered liabilities of $160 million, and more than half of its budget is covered by legislative appropriations. Prasa’s operational deficit is estimated at $200 million for fiscal 2005 as a result of $392.8 million in revenues and $592.8 million in operational expenses. This doesn’t include the debt service payment, which is covered by the government of Puerto Rico and adds up to about $100 million. Payroll expenses represent 83% of Prasa’s revenues and 55% of its overall operational expenses. According to Prasa’s report to Gov. Aníbal Acevedo Vilá’s Transition Committee, the public corporation has a $190 million assignment from the Federal Rural Development Administration of which $104 million has been used and the remainder assigned to specific projects. Nevertheless, around 90% these funds must be repaid, and this is usually done through bond issues managed by the GDB. Prasa’s lack of long-term strategic planning for the management and use of water resources, combined with the lack of efficient and swift administrative processes and the incorporation of the use of technologies, has resulted in serious operational deficiencies that adversely impact the system of water generation and distribution. The Transition Committee recommended Prasa’s organizational structure be revised and adapted to modern times to meet the competitive needs of Puerto Rico. Public Buildings Authority The Commonwealth government is responsible for payment of more than $2.9 billion in the Public Buildings Authority’s (PBA) debt. The PBA’s annual debt service is estimated at $178 million in fiscal 2005 and is expected to reach $210 million by 2006. The PBA generates revenues from rent and maintenance payments of government agencies. In fiscal 2005, PBA had approximately 30 million square feet of rented space. But it has a twofold problem. First PBA charges rents below the prevailing market price, in direct competition with the private sector, and second, even under those favorable conditions their clients (Education, Police, Fire, and Corrections departments among others) don’t pay all the rent due. The total amount of rents that were due as of June 30, 2004, added up to approximately $100 million. Of the amount due, payment plans were established for $65 million. The difference represents debt accumulated by the Puerto Rico and Caribbean Cardiovascular Center of $35 million. In fiscal 2005, the situation is repeated in relation to the rental of new properties completed for the central government. During fiscal 2004-2005, billings for rents include $22 million for projects completed for the Department of Education, of which OMB has only budgeted $10 million. Prepa Currently, the dependence of the Puerto Rico Electric Power Authority (Prepa) on petroleum has been reduced to 68% through the diversification of the fuel sources used to generate power. But it is still high. This leads to one of the highest kilowatts-per-hour (kwh) rates in the world–$0.104 in Puerto Rico vs. $0.048 on the U.S. mainland and $0.06 in Singapore and Ireland. This has negative effects on the island’s competitiveness. Residential rates are also subsidized, which makes the industrial cost twice as high as the residential cost when compared with the average of OECD countries. Prepa expects to reduce its oil dependency from 68% to 50% by 2012–eight years from now–by developing natural gas capacity in some of its plants. Transportation Under the umbrella of the Department of Transportation & Public Works (DTOP), there are a series of public corporations which require rethinking. If the outlook is to be positive for the economic and social development of Puerto Rico, the internal and external transportation infrastructure needs to be updated and adequately maintained in order to maintain high competitiveness in the local, regional, and global economies. Therefore, DTOP requires a renewed focus as a government agency. For example, the Highway Authority (HWA) has an operational budget of $251.9 million, of which $100 million is allocated to payroll. It has a $5.6 billion debt in bonds issues, which carry a monthly debt service of $29 million. In addition, according to the Transition Committee report, it had a line of credit with the GDB of $70 million that was expected to have increased to $150 million by December 2004. The HWA was expected to acquire an additional $125 million line of credit from GDB to meet its needs until June 30, 2005, for a total of $275 million. Structural Deficit Fiscal 2005 July 1, 2004-June 30, 2005 A Breakdown of the Principal Components $550 million: GDB loan for fiscal 2005 approved by the Legislature in Law 183 $140 million: Withdrawal from IRA accounts, Capital Gains, and others $450 million: Additional excess in spending over revenues at current rate of spending $167 million: Payments pending from Hacienda to GDB $50.5 million: Payments pending from the Office of Management & Budget to the GDB $1,357.5 billion: Total Estimated Deficit Source: Government Development Bank Puerto Rico’s Public Debt In $ Billions Constitutional Debt General Obligation Debt: $6.773 Trans: -- Prasa*: $ 0.640 Total Constitutional Debt: $7.413 Extraconstitutional Debt Public Finance Corp.: $4.275 Housing Finance Authority: $0.114 GDB Loans to Agencies & Public Corporations: $1.171 Treasury Debt with GDB: $2.156 Total Extraconstitutional Debt $7.716 Total Central Government Debt: $15.129 Public Buildings Authority* (PBA) $ 2.922 Public Corporations Debt (Excluding PBA): $14.343 Total Public Corporations Debt: $17.265 Municipalities Debt: $ 1.983 Total Public Debt as of Sept. 30, 2004: $34.377 Additional debt that doesn’t burden the Treasury: $ 3.528 Grand Total: $37.905 *Debt Guaranteed by the Commonwealth Source: Transition Committee report to Gov. Aníbal Acevedo Vilá Puerto Rico General Obligation Bonds--Credit Ratings Credit Rating: Number of States-Issue Categories Moody’s Aaa: 7 Aa1: 11 Aa2: 10 Aa3: 14 A1: 2 A2: 0 A3: 1 Baa1: 1 (P.R. General Obligations Outlook: Negative) Standard & Poor’s AAA: 9 AA+: 7 AA: 18 AA-:10 A+: 1 A: 1 A-: 1 (P.R. General Obligations Outlook: Negative) BBB+: 0 Source: Government Development Bank for Puerto Rico Commonwealth of Puerto Rico Credit Ratings Standard & Poor’s Date: Rating / Outlook January 2005: A- / Negative September 2004: A- / Negative May 2004: A- / Negative April 2004: A- / Negative October 2003: A- / Negative September 2003: A- / Negative August 2003: A- / Negative April 2003: A- / Negative December 2002: A- / Stable September 2002: A- / Stable June 2002: A- / Stable July 2002: A- / Stable May 2002: A- / Stable October 2001: A / Negative May 2001: A / Stable June 2000: A / Stable March 2000: A / Stable September 1999: A / Stable November 1998: A / Stable April 1998: A / Stable June 1997: A / Stable Source: Goldman, Sachs & Co. Commonwealth of Puerto Rico Credit Ratings Moody’s Date: Rating / Outlook September 2004: Baa1 / Negative April 2004: Baa1 / Stable October 2003: Baa1 / Stable September 2003: Baa1 / Stable April 2003: Baa1 / Stable August 2002: Baa1 / Stable June 2002: Baa1 / Stable December 2001: Baa1 / Stable October 2001: Baa1 / Stable May 2001: Baa1 / Stable April 2001: Baa1 / Stable March 2001: Baa1 / Positive March 2000: Baa1 / Positive December 1999: Baa1 / Stable March 1999: Baa1 / Stable November 1998: Baa1 / Stable April 1998: Baa1 / Stable March 1998: Baa1 / Stable May 1997: Baa1 / Favorable April 1997: Baa1 / Positive Source: Goldman, Sachs & Co. Debt Service–General Fund In millions Year: Total 2001: $760.5 2002: $812.4 2003: $791.8 2004: $880.7 2005: $943.4 2006: $1,160 2007: $1,219 2008: $1,262 2009: $1,316 Source: Government Development Bank This Caribbean Business article appears courtesy of Casiano Communications. or
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