Luis Fortuno, the Ex-Governor of Puerto Rico, was invited to speak in front of the Boston Municipal Analysts Forum yesterday(3/13). Here are the highlights:

  • PR’s economic outlook will remain grim for the near future. The gap in GDP growth between PR and the US is projected to grow from 2.7% to 5.5% by 2015 (US up about 3.5% vs PR down 2%)
  • Fixed budget  costs  (including debt service and pensions but excluding OPEB) will remain at a high 23% of expenditures for the next 10 years
  • Don’t take the Commonwealth’s reports on new job creation at face value. Stick with official BLS numbers. PR experienced a net loss of 25,000 in 2013. Reports of new jobs created or “committed for” don’t take into account job losses from other companies’ closing down.
  • Watch how the 2015 budget will be balanced. If balanced with more revenue measures, not good for the economy. Should go with more spending cuts
  • Replacing the SUT with a VAT will vastly improve tax collections
  • Energy costs are key to future economic growth: a 10% drop in energy costs may save $1 billion a year. PREPA’s the big problem. Should ultimately be out of the generation business, to promote competition, EPA compliance and conversion to natural gas. Should only be a transmission system in the end.
  • Commonwealth should seriously consider P3 alternatives and various asset divestitures: PREPA, PBA, PRASA, Port Authority are all good candidates for this. Also jail facilities and health care services.
  • Potential downstreaming of public services to the local level not a popular option at this time.Many of the 78 municipalities already very dependent on GDB.
  • Getting public corporations to be self-sufficient will be tough. Good constitutional protection for GO and COFINA debt. All other public corp debt don’t enjoy the same protection
  • Potential positive developments:(1) exemption from the Jones Act  by Congress would allow foreign vessels to carry natural gas to HI, PR & the US VI, with huge positive economic impact; and (2) current efforts to incentivize companies to repatriate earnings may help local economy if the repatriated funds are required to be deposited at local banks (not really clear how this will work).

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About Triet M. Nguyen

Triet Nguyen is a veteran of the fixed-income markets and a high yield/distressed municipal bond expert. Over his 32 year career, Triet has designed, marketed and managed every type of buy side investment products, from mutual funds (open and closed-end) to managed accounts and hedge funds. He is currently the managing partner of Axios Advisors LLC, an independent municipal research and investment advisory boutique specializing in high income strategies. Triet is the author of “Investing In The High Yield Municipal Market”, to be published in July 2012 by John Wiley/Bloomberg Press. He also moderates the Municipal Credit Research Forum on LinkedIn. His Twitter handle is @HighYieldPro. Before rejoining Axios (which he founded in 2002), Mr. Nguyen was a Senior Vice President at B.C. Ziegler, where he traded tax-exempt high yield and taxable municipal bonds (including Build America Bonds). From January 2004 to January 2008, he was a Managing Director of Saybrook Capital, LLC, managing one of the first ever municipal hedge funds dedicated to a credit strategy. As Director of Information Services at between 2000 and 2001, Triet contributed to the development of a pioneering online muni bond evaluation system. Prior to 2000, he was a Vice President/Portfolio Manager of the John Hancock Funds and a Senior Portfolio Manager of the Putnam Funds. Triet received a B.A. in Economics and an M.B.A. in Finance and Accounting from the University of Chicago.




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