Puerto Rico News Digest For July 8, 2016

ICE SEIZES COUNTERFEIT GOODS IN OSJ

From ICE:

"Special agents with U.S. Immigration and Customs Enforcement's (ICE)
Homeland Security Investigations (HSI) seized $6.5 million in counterfeit
merchandise Wednesday in Old San Juan with assistance from U.S. Customs
and Border Protection (CBP) and the U.S. Postal Inspection Service...During
the operation, HSI special agents and partner law enforcement officers target-
ed 14 retailers of counterfeit goods infringing on the trademarks of Gucci, Mi-
chael Kors, Prada, Channel, Ray Ban, Coach, Dolce & Gabbana, Oakley, Nike,
Ray Ban and the National Basketball Association. They also executed five sear-
ch warrants. The total manufacturer's suggested retail value (MSRP) of the sei-
zed goods is approximately $6.5 million. First time offenders of violating intell-
ectual property laws were served with a notification of a violation of law. In the
case of reoffenders, HSI will present their cases for prosecution..."

SCIENTISTS OPPOSE LA PARGUERA BILL

From The San Juan Daily Star:

"Opposition to Senate Bill 1621, which would permit the permanence of summer 

houses illegally constructed on public land on the La Parguera shorefront in Lajas, 

is growing as more than 50 experts in oceanography, ecology, geology, planning 

and other disciplines related to natural and environmental science signed a letter 

directed to Gov. Alejandro García Padilla asking him to veto the bill that was pas-

sed by the Puerto Rico Legislature last week..."

MELBA ACOSTA RESIGNS AS GDB PRESIDENT

From Caribbean Business:

"On Thursday, La Fortaleza announced the resignation of Government Develop-

ment Bank (GDB) President & Chairwoman Melba Acosta, effective July 31. In 

her resignation letter dated July 6, she says it is time to refocus her professional 

career, after 12 years of public service, three of which took place under the Alej-

andro García Padilla administration...With Acosta’s exit, the GDB would have 

four of its seven director posts vacant. Although it didn’t publicly announce it,

La Fortaleza filled on May 17 two vacancies with the appointment of Rafael Vé-

lez Pérez and Carlos Bonilla Agosto..."

PRASA TO START SEEKING EXTERNAL FINANCING

From News Is My Business:

"Puerto Rico Aqueduct and Sewer Authority Executive Director Alberto Lázaro 

confirmed Thursday the agency is waiting for the governor to sign the law that 

will allow it to pursue external financing to begin talking to creditors next month. 

Once the PRASA Revitalization Act is signed, the public corporation will have 

the leverage it needs to approach potential creditors for some $900 million in new 

funding to cover infrastructure improvements, payments due to contractors and 

other expenses, Lázaro said, during the monthly luncheon sponsored by the Ass-

ociated General Contractors..."

PR Treasury Reports Revenues $76.2 Million Above Estimates

Press Release

Government Development Bank


PUERTO RICO TREASURY REPORTS GENERAL FUND NET REVENUES
TOTALED $1.28 BILLION IN APRIL, $76.2 MILLION ABOVE ESTIMATES

Sales and Use Tax totaled $207.9 million, $87.8 million above April 2015


(San Juan, Puerto Rico) – Treasury Secretary Juan Zaragoza Gómez reported that 
net revenues recorded by the General Fund in April 2016 totaled $1.28 billion, $76.2 
million above revised estimates, and $47.7 million below net revenues in April 2015.

Corporate income taxes were the main revenue driver in April with $409.2 million in 
collections, a year-over-year increase of $32.5 million, or 8.6%, representing 31.9% 
of total revenues for the month, and exceeding revised estimates by $69.7 million. 
A majority of corporate income tax revenues are collected in April, as most corpora-
tions’ returns, as well as the first estimated tax payments for the tax year, are due
in April.

Individual income taxes were another important revenue category with $302 million 
in collections, a $57.4 million year-over-year decrease. One of the reasons for this 
decrease is that collections in April 2015 included $29 million in non-recurring reve-
nues from special laws. April 2016 Sales and Use Tax (“SUT”) revenues totaled 
$207.9 million, $87.8 million above April 2015 receipts. The difference is the result 
of the increase in the state SUT rate to 10.5% from 6% and the 4% tax on designa-
ted business-to-business and professional services (known as B2B).

B2B collections totaled $12.6 million in April. SUT revenues were allocated as foll-
ows: $197.7 million to the General Fund; $9.9 million, or 0.5%, to the Municipal Ad-
ministration Fund; and $270,000 to the Film Industry Fund.

Excise tax categories registered both upward and downward year-over-year chan-
ges. Foreign excise taxes and motor vehicle excise taxes increased by $4.8 million 
and $4 million, respectively,while alcoholic beverages and cigarette excise taxes de-
creased by $1 million and $8.8 million, respectively.

Finally, in April the category known as “Other” registered a $130.8 million decrease. 
This difference is the result of revenues in April 2015 that were non-recurring this 
year. Act 44-2015 allowed the pre-payment of a special tax on certain transactions. 
These transactions included a pre-payment, at a reduced rate of 5%, of taxes on 
corporate dividends for future distributions of accrued benefits and profits. Reven-
ues from prepaid taxes on dividends, which are classified under the category of 
Other, were $111 million in April 2015.

Fiscal year-to-date (July-April) revenues totaled $7.54 billion, a year-over-year incre-
ase of $213.3 million, or 2.9%, $45.7 million above revised estimates, and $238.5
million below estimates included in the original FY 2016 budget. Treasury Secretary 
Zaragoza Gómez noted that based on revenue behavior up to April, estimates inclu-
ded in the revised $9.29 billion budget for FY 2016 are expected to be met.

GDB Creditors Agree To 53% 'Haircut'

Press Release

Government Development Bank


GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO
ANNOUNCES FRAMEWORK OF INDICATIVE TERMS FOR
RESTRUCTURING WITH GDB AD HOC GROUP OF CREDI-
TORS

Creditors Agree on 53% Haircut for Global Restructuring and Forbea-
rance From Exercising Remedies 

Announcement Follows Declaration of Moratorium by Governor on
Obligations of GDB 

GDB Will Pay Interest on May 1 


San Juan, P.R. – The Government Development Bank for Puerto Rico (“GDB”)
announced today that it has negotiated a framework of indicative terms for a
restructuring of GDB bonds with a group of bondholders (known as the “Ad
Hoc Group”) holding approximately $900 million of GDB’s outstanding notes
(the “Old Notes”). The framework includes an understanding with the Ad Hoc
 Group regarding key terms for a restructuring of a portion of GDB’s Old Notes
 held by the group and a path forward to a broader restructuring of all of GDB’s
Old Notes. The agreement on key terms will provide a framework for GDB and
 the Ad Hoc Group to continue negotiations over the coming weeks with a view
 to enter into an agreement in principle that would memorialize in full the terms
 and conditions of the proposed restructuring. As part of the understanding rea-
ched today, the Ad Hoc Group and GDB intend to negotiate related terms over
the next 30 days and forbear from pursuing legal action related to the May 1st
debt service payment during such negotiations.

 The agreed key terms contemplate a two-step restructuring of GDB’s obliga-
tions, in which all holders of the Old Notes (including the Ad Hoc Group) wo-
uld first exchange (an “Interim Exchange”) their current holdings for new notes
at GDB (the “Interim Notes”), to be followed by an exchange of such Interim
Notes as part of a future global restructuring of the Island’s debt that includes
 GDB’s debt (the “Global Restructuring”). As part of the agreed key economic
terms, creditors would agree to haircut of 43.75% of the face amount of their
 Old Notes in the first-step exchange. In addition, as part of the transaction,
 bondholders would agree to the proposed treatment for their notes, in a sec-
ond step exchange as part of a Global Restructuring, that would result in an
agreed haircut of 53% of the face amount of their Old Notes. The agreed fra-
mework of key economic and structural terms for the Interim Exchange and
treatment in the Global Restructuring is set forth more fully in Annex A here-
to. As noted in Annex A, many important terms of the transaction remain sub-
ject to further negotiation between the parties. In addition, the transaction wo-
uld be subject to several conditions, which would need to be met over the co-
ming months before the deal could proceed.

Importantly, the proposed terms of the Interim Exchange require 100% partici-
pation by all bondholders, including, in addition to the Ad Hoc Group, the state-
chartered credit unions in Puerto Rico (or “cooperativas”) and other large insti-
tutional groups on island. As a result, the proposed transaction is being designed
to take into account the varied interests of all its creditors, and GDB and the Co-
mmonwealth plan on continuing discussions with such groups over the coming
weeks to ensure that any agreement in principle reflects their concerns in a debt
restructuring. Similarly, as a comprehensive deal for all GDB stakeholders, the
transaction contemplates providing a path forward to depositors, including by
providing collateral for their deposits, as GDB works through its challenges.

Without federal restructuring legislation, including the tools to bind non-con-
senting creditors, the transaction would be highly unlikely to reach the requi-
red participation levels. In the absence of federal legislation, the GDB would
not be able to complete the deal as proposed, and the Commonwealth as a wh-
ole would not be able to move towards a comprehensive restructuring of the
island’s debt.

The announcement of this framework of indicative terms with the Ad Hoc Gro-
up follows the declaration of the Governor of the Commonwealth of Puerto Ri-
co of a moratorium on debt service obligations of GDB. Consistent with the te-
rms of the Governor’s executive order, GDB intends to pay interest on its bonds
due May 1.

“The agreement on key terms with the GDB Ad Hoc Group is the result of ma-
ny weeks of negotiations and discussions between us and the Ad Hoc Group. We
appreciate the good faith and patience they have shown throughout this process
the work both they and Commonwealth officials have put into ensuring that the
interests of all Commonwealth stakeholders are respected going forward. While
we have many steps to go before we reach a full agreement on a deal and that
deal can be consummated, this agreement represents a vital first step in the Co-
mmonwealth’s path to economic recovery,” said GDB President Melba Acosta
Febo.

“To be very clear, this is but one piece in a complicated process that will require
every Commonwealth creditor to participate. The time necessary to reach even an
agreement on key terms with 1/4 of a single issuer’s bondholders demonstrates
 that, in the absence of federal legislation that gives Puerto Rico the tools it needs,
 the island will be condemned to a quagmire of economic stagnation with no relief,
 for which both 3.5 million American citizens and our creditors will bear the con-
sequences.”

GDB Rejects Shutdown & Privatization Rumors

Press Release

Government Development Bank

April 1st, 2016


Today, Melba Acosta Febo, President of the Government Development Bank
for Puerto Rico ("GDB" or the “Bank”), issued the following statement in res-
ponse to several rumors recently reported in the media:

“The Government Development Bank became aware of rumors claiming that
a bill will be introduced today to shut down the Bank. This rumor is false – the
GDB will neither shut down nor be privatized.

This irresponsible rumor is damaging to the Bank as an institution, as well as
needlessly harmful to our employees and their families. Bank management has
met with employees and informed them that, due to the fragility of the Bank’s
liquidity, all available options are currently being reviewed. These options will
responsibly address the issues facing the Bank and will not involve the dismi-
ssal of public employees. As we have for weeks, GDB representatives continue
to engage with a considerable group of our creditors about the restructuring of
the GDB’s debt. As we have stated publicly, the Government is also considering
additional measures to address this situation, such as declaring a temporary mo-
ratorium on payments, and amending the GDB charter.

I, and representatives of the Puerto Rico Electric Power Authority (“PREPA”),
were recently in London attending meetings regarding the GDB’s and PREPA’s
soon-to-expire insurance policies. This was a long scheduled trip – though these
policies are active, we are in the process of negotiating their renewal. During the-
se meetings, I provided an overview on the Commonwealth’s finances, covering
the Krueger report, the Fiscal Adjustment Plan, the public offer made to bondhol-
ders and the status of the Commonwealth’s and PREPA’s debtrestructuring nego-
tiation processes.

As I have stated publicly on multiple occasions, including this week, it is impor-
tant that everyone in Puerto Rico understand that the GDB’s fiscal standing, as
well as the Commonwealth’s fiscal standing, is delicate due to the fiscal crisis we
are confronting. For this reason, the GDB’s Board of Directors and management
continue to urgently evaluate all available options to safeguard public finances.
We will continue to move forward on several initiatives simultaneously as no
final decisions have been made at this time.”

Puerto Rico News Digest for April 4, 2016

BOXER DE JESUS KILLED IN HATO REY

Boxer Alex 'El Pollo' De Jesus was murdered at approximately 5:46 AM on
Sunday on Belmonte Street, located in the San Jose neighborhood of Hato
Rey, as reported by Metro PR. Police came to the area after receiving calls
reporting gunshots in the area. When they arrived, they found De Jesus's bo-
dy, which showed several bullet wounds. The motive and perpetrators are so
far unknown. De Jesus was 33 years old and left prison in 2014 after serving
four years for a domestic violence conviction.

UNION PREZ ALLEGES GDB PRIVATIZATION

From The San Juan Daily Star:

"The president of the Independent Union of the Government Development
Bank of Puerto Rico, María Teresa Rodríguez, said Thursday that an orches-
trated agenda has existed since last year to privatize the bank with a “delivery
of accounts of the Government Development Bank to Banco Popular.” “The
Government Development Bank [GDB] is one of the most important public
corporations in the country and a motor of economic development on the is-
land,” Rodríguez said in a press release. “The GDB was always a profi table
and sustainable corporation. But the operational part of the bank has been
neglected to such a degree that it has fallen into a liquidity problem because
it has $6.5 billion in accounts receivable and lines of credit to agencies and
corporations as of December 31, 2015...”

SANDERS CAMPAIGN HAS FIRST PR MEETING

From Caribbean Business:

"The first meeting in Puerto Rico of campaign volunteers for Democratic
presidential hopeful Sen. Bernie Sanders was held Saturday night with the
presence of hundreds of supporters from all over the island. During a pre-
sentation led by Betsy Franceschini, regional director for Voto Latino Ber-
nie 2016, a video on Sanders’ campaign principles was played. “As a Bori-
cua, I am proud to return to the island for this campaign. We have been im-
migrants and have learned to fight to protect our rights. For Puerto Rico, San-
ders represents the struggle for a just economy, with the creation of jobs, rai-
sing the minimum wage, health care excellence and educational opportunities
for all,” Franceschini said. She said Sanders “has financed his campaign with
funds from ordinary people, not special interests. The average donation is $27
per donor. That shows who is Bernie...”

PR AGRICULTURE SECTOR A BRIGHT SPOT

From News Is My Business:

"Mired in recession and awaiting a fix for its huge debt crisis, Puerto Rico has
one bright spot in the local economy: Agriculture. With help from the govern-
ment, this sector is contributing new jobs, income, and agricultural products
that are boosting the island’s tenuous food security. Gross agricultural income
rose 24 percent from $739 million in Fiscal Year 2012 to $919 million in Fiscal
2014, the highest income ever reported, according to Secretary of Agriculture
Myrna Comas Pagan. In 2015, “we reached 8,000 new jobs in agriculture. That
sets a precedent,” she said..."

GDB: JANUARY REVENUES BELOW ESTIMATES

Press Release

Government Development Bank

February 19, 2016


PUERTO RICO TREASURY REPORTS GENERAL FUND NET REVENUES
TOTALED $670.8 MILLION IN JANUARY 2016, $28.7 MILLION BELOW
JANUARY 2015, $59.4 MILLION BELOW REVISED ESTIMATES AND
$162.4 MILLION BELOW ORIGINAL ESTIMATES

Sales and Use Tax collections totaled $247.2 million, a $105.1 million y-o-y
increase (San Juan, Puerto Rico) – Treasury Secretary Juan Zaragoza Gómez,
reported net revenues recorded by the General Fund in January 2016 totaled
$670.8 million, a $28.7 million decrease compared to January 2015. This di-
fference can mainly be attributed to $62.2 million of nonrecurring revenues
from January 2015 that were associated with Act 77-2014, which granted a
temporary period during which certain transactions, such as those involving
Individual Retirement Accounts (IRAs), retirement plans and other capital a-
ssets, could be prepaid at preferential rates. January revenues showed a $162.
4 million reduction compared to original budget estimates. The difference com-
pared to revised estimates is $59.4 million. The categories of individual inco-
me tax, non-resident withholdings and foreign corporations registered the most
significant changes. Individual income taxes registered a $57.1 million year-
over-year decrease. $35.2 million of this reduction can be attributed to non-re-
curring revenues from last year’s tax pre-payment alternatives.

In addition, employers’ withholdings were down by $11 million in January 2016,
causing monthly revenues to be below estimates. In contrast, corporate income
taxes registered an increase of $94.8 million. Revenues from non-resident with-
holdings, a category mainly associated with royalties from the use of manufact-
uring patents, were $102.7 million below January 2015 revenues and $16.4 mi-
llion below revised estimates. This decrease is due, in part, to the fact that a pay-
ment that was received in January last year, is expected to be received in March
this year. This category registers atypical monthly changes because it mainly de-
pends on corporate tax planning.

Foreign excise tax collections showed a $16.9 million decrease compared to revi-
sed estimates. This difference can mainly be attributed to decreased sales reported
by two corporations, one of which reported that it expects to recover part of its sales
in the coming months. January 2016 Sales and Use Tax (SUT) receipts totaled $247.
2 million, approximately $105.1 million above January 2015 receipts. This differen-
ce is the result of the increase in the state SUT rate to 10.5% from 6%, and the 4%
tax on designated business-to-business and professional services (known as B2B).
B2B collections were $11.4 million in January and $26.4 million since its imple-
mentation in October 2015. SUT revenues were allocated as follows: $7.6 million to
COFINA, which completed the remainder of the $696.3 million transfer to COFINA
for this fiscal year; $69.2 million, or 0.5%, to the Municipal Administration Fund;
$1.9 million to the Film Industry Fund; and $168.5 million to the General Fund.

Zaragoza Gómez also reported that fiscal year-to-date (July-January) SUT collec-
tions totaled approximately $1.36 billion, compared to $832.0 million in the same
period of FY 2015, representing a $525.9 million increase. Motor vehicle excise
taxes registered a decrease of less than $1 million. Even though revenues from the
total number of unitswere down, revenues from high-end motor vehicles were up.
Fiscal year-to-date revenues totaled approximately $4.57 billion, a year-over-year
increase of $111.6 million or 2.5%, $59.4 below revised estimates and $183.8 mi-
llion below estimates included in the original $9.8 billion budget for FY 2016.

Working Group Releases Restructuring Proposal

Press Release

Government Development Bank


THE WORKING GROUP FOR THE FISCAL AND ECONOMIC
RECOVERY OF PUERTO RICO RELEASES RESTRUCTURING
PROPOSAL

Comprehensive Voluntary Exchange Proposal Would Reduce the Common-
wealth’s Mandatorily Payable, Tax-Supported Debt from $49.2 Billion to
$26.5 Billion, Cap Annual Debt Payments at 15% of Government Revenues
and Provide Creditors the Opportunity to Recover the Principal Amount of
Their Investments by Making Them Partners in the Island’s Future Growth
San Juan, P.R. – Today, the Working Group for the Fiscal and Economic Re-
covery of Puerto Rico released details of the comprehensive voluntary exchan-
ge proposal presented to advisors to the Commonwealth’s creditors last week.
The proposal seeks to reduce the Commonwealth’s mandatorily payable tax-
supported debt and nearterm debt payments, providing the Island time to im-
plement the Fiscal and Economic Growth Plan (FEGP) and to stimulate real
economic growth. Together with the FEGP, the proposed debt restructuring, if
accepted by the Commonwealth’s creditors, will ensure the Commonwealth has
sufficient resources to provide essential services to all Puerto Rican residents,
pay back its suppliers and taxpayers, rebuild depleted cash resources and fund
its retirement systems.

With the Commonwealth facing financing gaps in both the  near and long term,
the Working Group developedthe FEGP, which includes a comprehensive set
of measures designed to put the Island back on a path to economic growth and
long-term sustainability. The implementation of the expense and revenue measu-
res in the FEGP – totaling approximately $20.6 billion in revenue increases and
$13.8 billion in expenditure reductions over the next ten years – are projected to
reduce the Commonwealth’s projected cumulative fiscal deficit for the next deca-
de to approximately $34.0 billion.

However, during the next ten years, the Commonwealth faces more than $33
billion of payments on its tax supported debt. The voluntary exchange offer is
intended to restructure those payments to allow the Commonwealth to catch up
withits stretched suppliers and taxpayers and implement the FEGP’s fiscal and
economic initiatives and, over the long term, make its tax-supported debt sustai-
nable. In addition, the Commonwealth is instituting a fiscal control board to pro-
vide necessary oversight and ensure the Commonwealth complies with the FEGP
and the terms of the exchange offer.

“Last June, we began to directly address the Commonwealth’s fiscal and econo-
mic crisis through the development of a comprehensive set of solutions to grow
the Island’s economy while protecting the health, welfare and safety of the people
of Puerto Rico,” said Victor A. Suarez, Secretary of State. “This proposal is a re-
flection of our commitment to work with our creditors on a sustainable solution
that does not place the burden on one stakeholder group alone. A crisis of this
magnitude must be addressed in concert, otherwise we risk our ability and the
opportunity to escape the spiral of a stagnating economy, endless deficits and in-
creasing debt.”

Specifically, the restructuring proposal contemplates that creditors will exchange
their existing securities for two new securities: a “Base Bond,” with a fixed rate
of interest and amortization schedule, and a “Growth Bond,” which is payable
only if the Commonwealth’s revenues exceed certain levels. The new securities
would also provide creditors with enhanced credit protections, such as a Common-
wealth Guarantee and statutory liens and pledges with respect to certain revenues.

Under this proposal, the $49.2 billion of tax-supported debt would be exchanged
into $26.5 billion of newly issued mandatorily payable Base Bonds and $22.7 bi-
llion of newly issued Growth Bonds. Interest payments on the Base Bonds would
begin in January 2018, scaling up to 5% per annum by FY 2021, when principal
payments would begin. The Growth Bonds would be payable only to the extent
the Commonwealth’s revenues exceed its current baseline projections as a result
of real economic growth on the Island. By sharing in the Island’s economic reco-
very, creditors would have the opportunity to recover the principal amount of
their investments. The first such payments, if any, would be made beginning in
the tenth year after the close of the exchange offer. In any given year in which the
Growth Bond would be payable, creditors would receive payment of up to 25%
of such revenues.

The proposal also seeks to lower the Commonwealth’s debt service-to-revenue
on tax-supported debt to approximately 15%, a level consistent with the debt li-
mit contemplated by the Constitution of Puerto Rico, from the current unsustai-
nable ratio of 36%. Although at a ratio of approximately 15% Puerto Rico would
still remain at levels exceeding the most heavily indebted of the U.S. states, debt
service on the Base Bonds has been structured to give the Commonwealth the
opportunity to further reduce that ratio as a result of economic growth and deve-
lop into a stronger credit over time. A successful exchange offer, along with the
implementation of the measures recommended in the FEGP, should improve the
Commonwealth’s credit-worthiness, and, if the Commonwealth’s economy is able
to grow in line with the growth assumed for the United States, investors will be
able to recover the full principal amount of their investments through payments
on the Growth Bonds.

The exchange offer is predicated upon a number of key assumptions, including
very high participation levels from the creditor groups as well as the U.S. Federal
Government maintaining at least its current percentage levels of programmatic su-
pport for the Commonwealth. If very high participation levels cannot be achieved
or the U.S. Fe-deral Government allows the level of programmatic support for Pu-
erto Rico to materially decline, then the terms of the exchange offer will have to be
revisited and creditor recoveries adjusted accordingly. The Commonwealth of Puer-
to Rico, the Government Development Bank and the Working Group acknowledge
and value the active participation of the Commonwealth’s creditors in the restruc-
turing process. Further, the Commonwealth recognizes the continuing contribution
of the cooperatives in the ongoing discussions regarding Puerto Rico’s Fiscal and
Economic Growth Plan. Those discussions have focused on the terms of the restruc-
turing and the key role the cooperatives play in promoting social and economic de-
velopment on the Island.

The proposal is available at http://www.bgfpr.com/.

Working Group Proposes Establishment of Puerto Rico Fiscal Oversight and Economic Recovery Board

Press Release

Government Development Bank for Puerto Rico

Independent, Non-Political Body Will Ensure Compliance with Fiscal 

and Economic Growth Plan

San Juan, P.R. – The Working Group for the Fiscal and Economic Reco-

very of Puerto Rico (the “Working Group”) today announced that Gover-

nor Alejandro Garcia Padilla has presented to the legislature the Puerto 

Rico Fiscal Responsibility and Economic Revitalization Act (the “Act”), 

which will establish the Puerto Rico Fiscal Oversight and Economic Re-

covery Board (the “Board”). The Act and the establishment of the Board 

will support Puerto Rico’s efforts to address its immediate fiscal crisis by 

seeking to restore public confidence in the Commonwealth, while also re-

maining incompliance with the Commonwealth’s constitution. Along with 

the Working Group, the Board will facilitate a return to long-term fiscal 

sustainability and economic growth and provide Puerto Rico’s creditors 

with assurance that conditions agreed to as part of any comprehensive debt 

restructuring agreement, as well as compliance with the Working Group’s

Fiscal and Economic Growth Plan (“FEGP”), will be monitored by an inde-

pendent, non-political body.

The Board will be comprised of five members appointed by the Governor 

and approved by the Senate. The members will select a chairperson from 

amongst themselves. The Board will have fiscal oversight authority over 

“Covered Entities,” which include: the Commonwealth; each individual 

department and agency of the Commonwealth; and each public corporation

or instrumentality, other than the Puerto Rico Electric Power Authority and 

the Puerto Rico Aqueduct and Sewer Authority, unless they are designated 

as a Covered Entity by the Governor. In order to respect their constitutiona-

lly protected independence, the judicial branch, the legislative branch, and

the Office of the Comptroller are not Covered Entities under the Act. The 

Government Ethics Office and the Office of the Special Independent Prose-

cutor are also not considered Covered Entities. The Act will require the 

Working Group to submit a proposed Commonwealth-wide, consolidated 

five‐year fiscal and economic growth plan to the Board for approval at the 

later of the end of the second quarter of 2016 or after all of the members of 

the Board shall have taken office. The Board will then be required to deter-

mine whether the Working Group’s plan complies with the objectives set 

forth in the Act, including:

* Implementing structural reforms with the goal of restoring economic 

growth and competitiveness in the Commonwealth

* Eliminating, over time, of the financing gaps and reducing of the debt 

burden of the Covered Entities to sustainable levels; and

* Improving institutional credibility across all government entities through 

improved budget formulation and execution, and data transparency.

If the Board concludes that the proposed fiscal and economic growth plan 

meets the objectives of the Act, the Working Group will submit the plan

to the Governor for review and approval. If the Board withholds approval,

it may provide recommendations for revisions to the proposal in order for

the plan to meet the objectives of the Act.

Further, under the Act, each entity must submit a proposed annual budget 

to the Board by no later than March 1 or such later date determined by the 

Board, in its sole discretion. The proposal must be accompanied by a report 

from the Office of Management and Budget identifying the individual mea-

sures of revenue increase and expense reductions included in the budget 

that conform to the approved Fiscal and Economic Growth Plan for that 

fiscal year. The Board shall have 30 days after the receipt of each budget 

to determine if the proposal complies with the Fiscal and Economic Gro-

wth Plan. The Board will be provided with information gathering authority 

in order to monitor each entity’s compliance with the Fiscal and Economic 

Growth Plan, and to approve annual budgets and monitor their compliance. 

The Act also imposes certain automatic expense control mechanisms and 

other measures to address non-compliance with approved budgets and with 

the Plan generally.

Finally, the Act amends certain provisions of the Organic Act of the Office

of Management and Budget and the Government Accounting Act for the 

purpose of, among other things, (a) implementing the requirement that the 

revenue estimates used to prepare the Commonwealth’s budget must be 

certified by an independent third-party selected by the Board, (b) providing

 that the Commonwealth’s budget shall identify certain appropriations, to be 

known as "Sequestered Appropriations,” representing 2.5% of the total app-

ropriations for operating expenses and special appropriations included in the

Commonwealth’s budget, which Sequestered Appropriations shall be relea-

sed or cancelled in accordance with the Act, and (c) implementing other mea-

sures aimed at ensuring sound fiscal and accounting practices. 

Puerto Rico News Digest For October 2, 2015

CARRAIZO LEVEL CONTINUES TO DROP

The Carraízo water reservoir's level dropped dramatically overnight once
again, leaving it less than a meter away from the reestablishment of water
rationing for households served by the lake. Carraízo dropped 11 centime-
ters, to settle at 37.93 meters at 5:00 AM today, according to AAA, Puerto
Rico's water utility. Once it reaches 37 meters, a 24-hour water rationing
program would have to be started again for Carolina and Trujillo Alto, as
well as parts of San Juan, Canóvanas and Gurabo. Copious rains a few
weeks ago had raised the water level enough that rationing could be called
off, but the last couple of weeks have seen little rain over the area, taking
the situation back to square one.

REPORT HIGHLIGHTS PERVASIVE CORRUPTION 

From The San Juan Daily Star:

"Corruption has become so widespread and commonplace that there are
thousands of people in Puerto Rico engaged in corrupt acts, according
to a Civil Rights Commission report. Corruption is closely related to
civil rights because it is anchored to a number of activities that affect
government coffers and services to the people, according to the report
titled “Human Rights and Corruption” that was entrusted to attorney
Víctor Rivera Hernández, former representative Víctor García San Ino-
cencio and the late former Police Superintendent Pedro Toledo, who died
several years ago. Since the study began in 2009, Puerto Rico has been
shaken by acts of corruption including the case of former Sen. Jorge de
Castro Font and revelations about schemes involving the private sector,
federal arrests of offi cials who use the U.S. mail to facilitate the entry
of weapons and drugs, the arrests of some 100 police offi cers for protec-
ting drug traffickers, the arrests of more than 500 residents in Lares for
committing insurance fraud, as well as allegations of corruption against
mayors, public officials and government contractors..."

SUMMIT IN ORLANDO TO ADDRESS PR CRISIS

From Caribbean Business:

"The Summit on Puerto Rican Affairs will hold its annual meeting in Or-
lando this year. The summit, which is slated for Oct. 14, is expected to
host guests from Florida, Puerto Rico, Washington D.C., Georgia, Cali-
fornia and Illinois at its workshops, as it has in past years. Bond Buyer re-
ported Thursday that retired Detroit bankruptcy Judge Steven Rhodes and
three U.S. House members will participate in the two-day meeting in Flo-
rida “to come up with some solutions to address Puerto Rico’s fiscal and
health care crises...”

ENERGY COMMISSION REJECTS RATE HIKE

From News Is My Business:

"The Puerto Rico Energy Commission issued a resolution Thursday deny-
ing a petition by the National Public Finance Guarantee Corp., which in-
sures $1.4 billion in Puerto Rico Electric Authority bonds, for a rate review
and establishment of a temporary rate increase of at least 4.2¢ per kilowatt
-hour. National, the successor in interest to MBIA Insurance Corporation,
filed the request on Sept. 17, asking for the PREC to also order PREPA to
respond to the petition within 14 days of service, and to complete the con-
solidated rate review proceeding within four months of the filing of Natio-
nal’s petition..."

GDB GOES TO COURT OVER LOCAL TAXES

From The New York Times:

"A new front opened in Puerto Rico’s debt battle as the island’s powerful
Government Development Bank went to court, seeking $400 million in
local property tax revenue it said was being illegally held by a local collec-
tion agency. The development bank said the money was crucial to its abi-
lity to make coming payments to bondholders. The agency that collects pro-
perty taxes on the island, the Municipal Revenue Collections Center, or
CRIM, appears to have the $400 million in hand. But its board decided late
in June not to release the money to the bank. The development bank, which
handles Puerto Rico’s borrowing and cash flows, said the move was illegal
and asked the Superior Court in San Juan to require the agency to turn over
the money. The legal documents were filed Wednesday night..."

GDB President's Statement On Default

August 3, 2015


STATEMENT FROM GOVERNMENT DEVELOPMENT BANK
PRESIDENT MELBA ACOSTA FEBO ON THE SERVICE OF
PUBLIC FINANCE CORPORATION (PFC) BONDS

San Juan, P.R. – Today, Government Development Bank for Puerto Rico
(“GDB”) President Melba Acosta Febo issued the following statement on
the service of Public Finance Corporation (PFC) bonds:

“Due to the lack of appropriated funds for this fiscal year the entirety of the
PFC payment was not made today. This was a decision that reflects the se-
rious concerns about the Commonwealth’s liquidity in combination with the
balance of obligations to our creditors and the equally important obligations
to the people of Puerto Rico to ensure the essential services they deserve
are maintained.

“PFC did make a partial payment of interest in respect of its outstanding
bonds.The partial payment was made from funds remaining from prior le-
gislative appropriations in respect of the outstanding promissory notes se-
curing the PFC bonds. In accordance with the terms of these bonds, which
stipulate that these obligations are payable solely from funds specifically
appropriated by the Legislature, PFC applied these funds—totaling appro-
ximately $628,000—to the August 1 payment.”

Puerto Rico News Digest For June 24, 2015

GDB CHAIR DAVID CHAFEY RESIGNS

From Caribbean Business:

"Government Development Bank (GDB) Chairman David Chafey Jr. has resigned 

from his post, effective June 30, Vice Chairwoman & President Melba Acosta con-

firmed Wednesday. His exit from the debt-ridden and cash-strapped government 

bank comes amid much discussion over the tough decisions it faces in the near fu-

ture as it maneuvers through the fiscal challenges affecting the commonwealth, par-

ticularly during fiscal year 2016, which begins July 1. Moreover, Senate Bill 1350, 

which aims to enhance oversight faculties and  immunity protections for GDB offi-

cials, secured legislative passage late Tuesday and now moves to the governor’s 

office for its enactment. The much-debated immunity language came amid reports 

that several GDB directors were threatening to leave the bank if they were not pro-

vided with the enhanced protections."

POLICE REPORT SMOOTH 'NOCHE DE SAN JUAN'

Puerto Rico Police have said that last night's traditional 'Noche De San Juan' festivi-

ties went relatively smoothly at beaches all over the island, and that no major inci-

dents were reported. There were no reported instances of drownings or violence, al-

though attendance at island beaches seemed to have been down compared to last 

year. Despite the fairly quiet night, Victor J. Vega Sterling (aka "Goliat"), one of 

Puerto Rico's most wanted criminals, was arrested at a Río Grande resort where he 

was celebrating Noche De San Juan. Sterling, who has been linked to a brutal San 

Juan drug gang, was wanted on murder and firearms charges. 

TREASURY 'READY' TO HANDLE LARGER IVU

From News Is My Business:

"The Puerto Rico Treasury Department is prepared to handle the change rate of the 

Sales and Use Tax to 11.5 percent, from the current 7 percent, when it goes into e-

ffect July 1, agency Secretary Juan Zaragoza said Tuesday.“At Treasury, we’re rea-

dy to work the applicability of the changes established by Act 72 that amended se-

veral sections of the Puerto Rico Internal Revenue Code of 2011. Monthly SUT fi-

ling and programming aspects in the Integrated Merchant Portal (known as PICO) 

have been reviewed,” he said.“I must emphasize that we will continue strengthe-

ning oversight efforts so that the level of SUT uptake continue to increase,” he 

said."

PREPA EXECUTIVE DIRECTOR RESIGNS

From ABC News: 

The executive director of Puerto Rico's heavily indebted public power company 

has stepped down. Juan Alicea Flores resigned Tuesday after spending two years 

overseeing the Electric Energy Authority.

Puerto Rico News Digest For June 17, 2015

ACTIVISTS READY FOR UN DECOLONIZATION HEARINGS 

From The San Juan Daily Star:

As a prelude to next week’s hearings of the United Nations Decolonization
Committee in New York to discuss Puerto Rico’s status, a demonstration to
free nationalist Oscar López Rivera was held for the second year in a row in
Condado. Some 2,000 independence supporters from several organizations
spoke out for the freedom of López Rivera and the independence of Puerto
Rico, significantly increasing attendance from the first such demonstration
last year. The annual discussion about the future statusof Puerto Rico will be
held Monday for the 33rd time. Another local action to call attention to the
June 22 deliberations was a letter written to UN Secretary General Ban Ki-
moon urging him to have the hearings broadcast throughout the world. The
letter was signed by José M. López Sierra of the organization Todos Unidos
Descolonizar, which has also printed T-shirts in English and Spanish to pu-
blicize the annual event.

SAN JUAN HOT DESTINATION FOR JULY 4

From Caribbean Business:

A travel agency that can be used online but can also be called to speak with
its agents, CheapOair, announced Wednesday the top 10 destinations  U.S.
mainland travelers are booking for the Independence Day holiday. The agen-
cy’s data show that airfare to these destinations is significantly lower than
the average airfare for all booked flights for the same weekend. Key findings
include that consumers are traveling mostly within the continental U.S.; San
Juan, Puerto Rico and Cancun, Mexico, were the only overseas spots making
it into the top 10.

GDB LIQUIDITY DOWN 24% IN MAY

From News Is My Business:

The Puerto Rico Government Development Bank released Monday its latest
liquidity report showing the agency had $777.8 million left as of May 31, re-
presenting a 24 percent drop from the $1.02 billion it had in April. The agency
attributed the decrease in net liquidity to the disbursement of $120 million thr-
ough the Puerto Rico Treasury Department, $250 million for the repayment of
Tax Revenue Anticipation Notes, and $95 million to pay debt service owed by
the Puerto Rico Electric Power Authority.

Puerto Rico News Digest For May 22, 2015

HIGLER'S FAMILY IN PR FOR HEARING

L: Laurens Higler. R: Gerardo de La Paz.

Relatives of Laurens Higler, the Dutch globetrotter and sailor who was
killed in a hit and run car accident in  March, are in Puerto Rico to attend
a court hearing for 49-year-old Gerardo De La Paz, the man accused of
hitting Higler with his car by the side of the road in Guayama and fleeing
the scene. Mother Rianne Higler stated "It is unforgivable that he didn't
stop the car, that he didn't call 911 and that he didn't help my son", in re-
gards to De La Paz, as reported yesterday by El Nuevo Dia. Laurens
Higler would have turned 27 years old on May 20.

At the hearing, De La Paz -- who is free but wearing an ankle monitor --
opted to go directly to trial for the charges of negligent homicide and vio-
lating the recently amended Article 5.07 of Transit Law 22. He was also
driving with an expired driver's license. The judge set the trial date for
June 26. De La Paz could face prison time, but there is  also the possibility
that he might only get a suspended sentence. After the hearing, De La Paz
agreed to meet the late Higler's family in private, but after the brief encoun-
ter, De La Paz hurried out of the building accompanied by his lawyers.

HOUSE APPROVES 11.5%  'IVU' TAX

From Caribbean Business:

After much debate and opposition, the House of Representatives app-
roved Thursday the tax bill that calls for the implementation of an
11.5% sales tax at cash registers, up from the current 7% paid under
the sales & use tax (IVU by its Spanish acronym), after introducing
several amendments on the floor. The final vote count was 26 in favor
and 24 against, including two Popular Democratic Party (PDP) legisla-
tors, Reps. Carlos Vargas and Angel Matos, and the New Progressive
Party minority delegation. It now moves to the Senate, where discussi-
on on the amended bill is expected to take place Friday, with the upper
chamber's session slated to begin at 10 a.m.

ACOSTA BLASTS MOODY'S GDB DOWNGRADE

From News Is My Business:

Government Development Bank President Melba Acosta came down
hard on Moody’s Investors Service’s decision to downgrade the Co-
mmonwealth’s credit rating deeper into junk status by saying the move
shows “ratings agencies are totally out of tune with what’s happening”
in Puerto Rico. Reading off an email she said she received earlier in the
day from a banker who expressed to her that markets were reacting fa-
vorably to the proposed increase in the sales and use tax — up to 11.5
percent from 7 percent approved Thursday by the House — and about
the budget, Acosta called Moody’s decision “a bit ironic.”

BUS OWNERS INDICTED FOR BID-RIGGING

From FBI:

A federal grand jury in San Juan, Puerto Rico, returned an indictment
against five individuals for participating in bid rigging and fraud cons-
piracies at an auction for public school bus transportation contracts in
Puerto Rico’s Caguas municipality, the Department of Justice announ-
ced today. A seven-count felony indictment was filed yesterday in U.S.
District Court of the District of Puerto Rico in San Juan against five bus
transportation company owners: Gavino Rivera-Herrera, Luciano Vega-
Martínez, Alfonso Gonzales-Nevarez, José L. Arroyo-Quiñones and
René Garay-Rodríguez.

Count one charges the bus owners with participating in a conspiracy
to rig bids and allocate the market for public school bus transportation
services in the Caguas municipality. The second count charges the bus
owners with conspiracy to commit mail fraud and counts three through
seven charge the bus owners with committing mail fraud. According to
the indictment, the defendants and others defrauded, and conspired to
defraud, the Puerto Rico Department of Education and the Caguas mu-
nicipality, among others, in order to fraudulently obtain contracts for
school bus transportation services.

PR ECONOMY CONTRACTS 1.9% IN 1ST QUARTER

From Fox News Latino:

The Puerto Rican economy contracted in the first quarter of this year
by 1.9 percent compared with the same period last year, the Government
Development Bank, or BGF, said Wednesday. Just in March, the Economic
Activity Index fell by 0.4 percent compared with the same month in 2014,
according to BGF figures, which has begun making this calculation inclu-
ding a seasonal adjustment to try and reduce the volatility associated with
different periods of the year. If that adjustment would not have been made,
the index would have shown a 1.5 percent decline compared to March
2014, and a 0.1 percent advance compared with the previous month. In
adjusted terms...[CONTINUE READING]

Puerto Rico News Digest For April 23, 2015

GOVERNMENT SHUTDOWN IN THREE MONTHS 

From Reuters:

Puerto Rico's top finance officials said the government of the U.S.
territory will likely shutdown in three months because of a looming
liquidity crisis and warned of a devastating impact on the island's
economy. In a letter to leading lawmakers, including Governor Ale-
jandro Padilla, the officials said a financing deal that could po-
tentially salvage the government's finances currently looked unlike-
ly to succeed. It warned of laying off government employees and re-
ducing public services."A government shutdown is very probable in
the next three months due to the absence of liquidity to operate,"
the officials said. "The likelihood of completing a market transac-
tion to finance the government's operations and keep the government
open is currently remote."

THOUSANDS WITHOUT MEDICATION DUE TO BUDGET

From Fox News Latino:

Thousands of Puerto Ricans with serious medical conditions enrolled in
the government-sponsored Mi Salud program are not receiving the medica-
tions they need because of the financial problems at state-owned insurer
ASES, which owes millions of dollars to providers. Lawmaker Jose Aponte,
a leader of the main opposition PNP party, told Efe that because ASES
owes money to the insurance companies that provide health-care services,
the companies, in turn, do not authorize payments to pharmacies for medi-
cations.

TAX REFORM BILL STILL LACKS VOTES

From The San Juan Daily Star:

The amended version of Tax Reform that has been filed in the island 

House of Representatives appears not to have the needed votes for 

approval for reasons rangingfrom the proposed 14 percent rate for the 

value-added tax to the payment mechanism to give municipalities their 

share of the tax. As of Tuesday, at least four legislators still opposed 

the measure. Majority Leader Carlos Hernández said at a news con-

ference held a day earlier that no vote count had been taken. Some 

lawmakers said they will not decide on their vote until they read and 

evaluate the whole bill with changes included to enable a better ana-

lysis. 

SEVEN MIGRANTS APPREHENDED IN AGUADILLA

From Latin Post:

U.S. Customs and Border Protection (CBP) apprehended seven Domini-

cans attempting to enter Puerto Rico illegally with a boat, according to 

a CBP press release. A local resident notified Puerto Rico Police about 

a boat approaching Bienvenidos beach in Aguadilla. Police contacted 

CBP reporting that a "yola," a powered makeshift  raft, had been spotted 

with an unknown number of passengers in the area. When CBP officials 

and police officers arrived at the scene they found a 20-foot yola powered 

by a 40 horsepower outboard motor. However, the passengers were not 

in sight. With the help of patrol aircraft, CBP and police found the seven 

immigrants in a near by area.

TROOPS FROM FORT BUCHANAN DEPLOYED TO M.E.

From Caribbean Business:

Approximately 21 soldiers assigned to the 271st Human Resources Company, 

U.S. Army Reserve-Puerto Rico, departed the island Wednesday on their way 

to a mobilization station in Texas before arriving to the Middle East. "I 

believe in all of you. We did an excellent job during our pre-mobilization 

training and I know we will accomplish our mission," said 1st Lt. Ayesha 

Jiménez, officer in charge of the detachment. The unit will manage the 

Theater Casualty Assistance Center, which oversees casualties across the 

Middle East.