The letter was issued as Garcia faces opposition from members of his party on a measure that would impose a 16 percent value-added tax that he says is needed to help generate more revenue. House of Representatives President Jaime Perello said a group of legislators had reached a tentative agreement to impose a 14 percent value-added tax, adding that he expected the House to vote on the measure soon. Chafey said the measure is a key tax reform component.
If passed, the measure would then go to the Senate. A message left for Senate President Eduardo Bhatia was not immediately returned.
Puerto Rico's government last shut down in May 2006 amid a budget shortfall resolved by an emergency loan. The two-week partial shutdown closed Puerto Rico's public schools and idled half of the central government's workforce. It also prompted Moody's Investors Service to cut the rating of the territory's general obligation bonds.
Puerto Rico Bank Warns of Imminent Government Shutdown
SAN JUAN, Puerto Rico — Apr 22, 2015, 8:17 PM ET
By DANICA COTO Associated Press
Puerto Rico's Government Development Bank warned Wednesday that it is very likely the U.S. territory's government could be forced to shut down in the next three months because of a lack of funds.
The bank made the warning in a letter made public a day after it was sent to Gov. Alejandro Garcia Padilla and the presidents of the island's Senate and House of Representatives.
"The island's financial state is extremely uncertain," the letter said. "A government shutdown would have a devastating impact on the economy, with salary and public service cuts, and a long and painful recovery."
Bank officials said in the letter that the government's fiscal problems will prevent it from selling more bonds in the capital market as planned, and they urged legislators to immediately implement measures to cut costs and balance the budget. The government had been preparing to issue more than $2 billion in bonds in the coming months in part to strengthen debt-ridden agencies.
Bank officials said the government needs to approve a five-year plan to help reduce a $73 billion public debt as well as approve sweeping changes to the island's troubled tax system.
Once the government does that and presents a balanced budget, then it can be in a better position to issue bonds, said David Chafey, president of the bank's board of directors.
"Time is passing, and it's passing quickly," he told The Associated Press. "We need to provide investors with some kind of comfort."
Economist Charles Blitzer, a former World Bank and IMF official, said he wasn't surprised by the bank's assessment, adding that U.S. investors overall have known that liquidity is very low.
"What's a surprise is typically one agency of the government doesn't write to the rest of the government in quite this way," he said in a phone interview. Con't.
Fitch Ratings has downgraded the Commonwealth of Puerto Rico's general obligation (GO) and related debt ratings to 'B' from 'BB-' and placed them on Rating Watch Negative. The complete list of affected credits is included at the end of this release.
Today's action on the GO rating results in a downgrade of the Puerto Rico Aqueduct and Sewer Authority (PRASA) senior lien revenue bonds to 'B' from 'B+' and maintained on Negative Watch. However, it does not affect Fitch's ratings on debt of the Puerto Rico Electric Power Authority (PREPA; rated 'CC', Watch Negative).
The downgrade and Negative Watch reflect elevated concerns regarding both the ability of the Commonwealth to execute a financing to bolster the liquidity cushion of the Government Development Bank (GDB), and thereby that of the Commonwealth, and the willingness to pay on the part of the legislature. These issues are clearly related, as Fitch believes that recent statements and actions by the legislature that would result in an abrogation of the Commonwealth's commitments to general government bondholders have increased the challenges to a successful Puerto Rico Infrastructure Finance Authority (PRIFA) financing and, at a minimum, are likely to result in an increase in already elevated borrowing costs.
Interesting read. Very long and in depth article.http://www.janney.com/File%20Library/Muni%20Sector%20Scorecard/PR-March-2015.pdf#481_42771896_18911_-1_1426772314051
Cohen barking about bonds again. Probably why we were off today
It will be most interesting to see the action around $15.25. After that is the gap to almost $18. Volumes are strong on every push up. Pretty soon the sellers will be gone and all that's left are buyers.
Just saw this written by Joe Williams today:
zulily, inc. (NASDAQ:ZU) witnessed a selling pressure and the shares last traded with a loss of -0.08 points or -0.56% at $13.4. Investors jumped in to buy the shares on weakness. The net money flow till latest update was calculated at $1.74 million with an inflow of $8.08 million in upticks and an outflow of $6.35 million in downticks. Using the data, the up/down ratio is found to be 1.27. This is very significant and implies that the smart money is buying the counter on dips. The share price has recorded -4.39% on a weekly basis.A block trade of $1.23 million in uptick and $0.13 million in downtick was also observed, resulting in an up/down ratio of 9.11. The net money flow of the block trade stood at a $1.09, signaling heavy buying.
Do some homework and read this:http://semiaccurate.com/2015/03/02/behind-fake-qualcomm-snapdragon-810-overheating-rumors/