Guam Governor Sells Trust to Puerto Rico Buyers: Five QuestionsBrian Chappatta
Guam Governor Eddie Calvo says he hopes that citizens of the Pacific island will re-elect him in November. If bondholders had a vote, he might win by a landslide.
The 52-year-old Republican’s initiatives spurred Standard & Poor’s to upgrade the U.S. territory’s general obligations last year to BB-, its highest rank since 2003. He plans to travel to San Francisco in August to explain to rating companies why they can trust his leadership of the island of 160,000 and its so-called GovGuam.
Calvo’s father was governor from 1979 to 1983 and the family in 1973 purchased Pepsi Cola Bottling Co. of Guam, where the current governor worked as an executive. His experience means he understands investor interests, he said. The island’s debt, which is tax-free nationwide, has gained 10 percent this year, the most among states and territories, Barclays Plc data show. In contrast, investors in Puerto Rico, with a similar tax advantage, have lost almost 7 percent this month, trimming their 2014 advance to 5.6 percent.
The following is from a phone interview:
Q: What lessons have you learned from the fiscal struggles of Puerto Rico?
A: Governor Luis Fortuno in Puerto Rico was moving in what I considered the right direction, but unfortunately things didn’t pan out for him in terms of re-election. What we’ve tried to do here in my office is be transparent.
To the government workers, I’ve been straight up with them, but I’ve also given them the promise that once we right this financial ship, we’ll make good on these commitments.
Q: What do you make of Puerto Rico’s restructuring law, which has led to rating cuts?
A: Puerto Rico may have some short-term gains, but there are going to be a lot of investors who are afraid of the prospects of investing in Puerto Rico. A concern I have is that there may be a spillover in Guam or the Virgin Islands or other territories. I consider that apples and oranges.
Guam cannot file bankruptcy and we will not. We need to ensure that there’s trust -- trust from our workers in GovGuam and our constituents, but also those folks that are buying our debt. As long as I’m governor, we want to ensure trust that our long-term investors can invest in Guam, get a favorable return on their investments, and know there wouldn’t be some sort of catastrophe that could take down their investment.
Q: Why should the people of Guam re-elect you?
A: We’ve been very strong in terms of focusing on financial management, we’ve been sure not to hinder our critical core services in health, safety and education and we made a commitment that when times were better, we would make good on our commitments to GovGuam and to all our citizenry. So far, we’ve done it, and we’ve done it without raising taxes.
We’ll see in four months. I’m hopeful that the people of Guam will give us the opportunity to continue on. We were in a dire situation and we had to make some tough decisions.
Q: Who did you look to as a model in passing a plan to halt government employee raises?
A: We go to the governors’ conferences, and I’ve had discussions with folks such as Wisconsin’s Scott Walker. He came in before me and went through a very difficult political situation.
The good news is after these two years we were able to restore the government workers’ pay. But we understand we still have a long way to go in terms of strengthening our fiscal position. So we’re very careful in the areas in which additional hiring is occurring.
Q: What other moves did you make to change the trajectory of the island’s economy?
A: We put in place a stabilization plan. That meant really doing a much better job in budget creation. There have been so many years where we had major problems in being over-optimistic on revenue projections. We did the opposite. We went to overly conservative when it came to revenue projection models.
The commitment of our administration is to always focus on your core strengths. We’re going to continue to focus on tourism, because we’re an American territory in the same time zone as Tokyo. We’re focused on the importance of global trade between the U.S. and the second- and third- largest economies, China and Japan, and the pivot strategically for the military forces.
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