Two U.S. Treasury Department staff members are in Puerto Rico this week to discuss fiscal and economic issues with local officials, a spokeswoman said.
The visit is part of the Obama administration’s effort to assist Puerto Rico’s government in employing existing federal resources to strengthen its economy, she said in response to questions about the Treasury’s involvement.
President Barack Obama created a team of experts to offer advice to Puerto Rico last month amid speculation that the U.S. would bail out the island.
“The interagency team will offer strategic advice to assist Puerto Rico in promoting its economic development and maximizing the impact of existing federal funds flowing to the island,” David Agnew, co-chair of the Obama’s Puerto Rico Task Force, wrote in a Nov. 21 blog post. “These efforts are not a federal intervention. Rather, these policy experts will share their expertise with the Puerto Rican officials.”
Puerto Rico’s fiscal health affects the broader $3.7 trillion municipal-bond market because more than three-quarters of U.S. muni mutual funds hold the island’s securities as the debt is tax-exempt nationwide.
Puerto Rico debt is having its worst year since at least 1999, as a shrinking economy strains the island’s finances. The territory and its agencies face $70 billion in public debt and a 14.7 percent unemployment rate, higher than any U.S. state.
All three major rating companies grade the island’s bonds one step above junk, with a negative outlook. Fitch Ratings last month threatened to cut the commonwealth to speculative grade by June 30 if Puerto Rico’s access to credit markets continues to be limited.
An index that measures Puerto Rico’s economy fell 5.4 percent in August from a year earlier, the steepest plunge since 2010, according to the commonwealth’s Government Development Bank, which works on the island’s capital-markets transactions.
Governor Alejandro Garcia Padilla’s administration did not have an immediate comment beyond what his chief of staff said on Nov. 20, Alix Anfang, a spokeswoman at Washington-based SKDKnickerbocker said in an e-mail.
“The Obama administration supports Governor García Padilla’s economic plan and is providing strategic advice to the Puerto Rican government as they would with any government,” Ingrid Vila, the governor’s chief of staff, said then. “This support provides additional expertise so that our team best maximizes the resources we have to improve the economy for all Puerto Rican families.”
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