As promised, the Governor proposed a balanced budget, displaying a degree of political courage worthy of commendation. Treasury Secretary Melba Acosta provided some overall perspective saying: “The recovery plan is similar to plans presented by Ireland when its credit was downgraded and which is now today investment grade. It’s about economic development and offering jobs to citizens”. Unfortunately, Ms. Acosta left out some important details. Ireland—as do most countries facing acute financial difficulties—-parlayed a commitment to fiscal austerity into an agreement (in this case with the European Central Bank) to restructure its debt and to secure a funding backstop. The great fear of horrible consequences from a debt restructuring do not appear to have befallen Ireland and most likely would not have Puerto Rico either. Instead, Ireland appears to be on its way to financial health with a more manageable debt load, while, regrettably, Puerto Rico continues to face the future with its $72 billion debt burden intact.
One can’t help but wonder whether a significant opportunity was lost for Puerto Rico.