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GDB Posts Record Annual Earnings Of $160 Million


May 9, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

Government Development Bank (GDB) President Juan Agosto Alicea will break another record on June 30, when the GDB posts record annual earnings of $160 million for fiscal year (FY) 2002, doubling the $80 million in earnings it had when Agosto Alicea took over the institution in 2001.

GDB’s earnings had been dwindling annually since 1995 when it had $150 million. The earnings, which reflect the soundness of Puerto Rico’s central bank’s finances, are due principally to last year’s $7.2 billion banner bond issuance. It exceeded FY 1998’s $5.2 billion by $2 billion, which held the previous GDB record.

FY 2001’s bond issuance took advantage of the market’s low interest rates to refinance existing debt and garner new money for the Commonwealth government and its agencies to initiate new public works and permanent improvements.

"GDB was in critical financial condition in January 2001, because it had given out loans to finance many projects which had no repayment source. Now, through the bond issuance, we have sold those loans and placed GDB in a very solid financial position," Agosto Alicea said.

Other measures that will help put central government finances in order is the 10% of GDB’s annual net earnings committed voluntarily by Agosto Alicea to the General Fund to help the central government’s budget and the $225 million annually that will be set aside from the General Fund for 30 years to pay off the government health card and the Puerto Rico Aqueduct & Sewer Authority (Prasa) deficit, among others.

Agosto Alicea is adamant that the central government budget submitted to the Commonwealth legislature is balanced. He explained that what is happening is that the Legislature has assumed a more aggressive position, questioning the estimates submitted by the Treasury Department.

"I trust that the statistics prepared by the Secretary of the Treasury, who is the person entrusted by the Constitution to do so, are based on the same sources of projected income estimates that have always been used and will prove to be correct," Agosto Alicea said, adding that the figures were reviewed many times by the Governor’s Financial Council in meetings presided by Gov. Sila Maria Calderon. "The legislature’s economists changed the projected estimates and created an artificial budget deficit." Agosto Alicea said.

Agosto Alicea said that now that the GDB is back on solid ground, his target is to use the bank’s resources and talent to modernize other government agencies. "I am following Jose Berrocal’s vision, who saw GDB not only as the government financial counselor but also as a modernizing agency," Agosto Alicea said referring to the late GDB president.

Although the Prasa transition from the present operator to Ondeo and setting up a strong board of directors to undertake all permanent improvements and oversee the Ondeo contract, will take up much of his time, Agosto Alicea is involved in reengineering several agencies, including Health, Education, and the Puerto Rico Energy & Power Authority (Prepa). "We have to make sure that Prepa does not turn into another Prasa and we must start now," Agosto Alicea said.

GDB will celebrate its 60th anniversary next Monday. It will be dedicated to Berrocal, who presided over GDB for only a year, during which time he also wrote a book about the first 50 years of the bank. The book will be handed out to guests at a celebration that evening at the Museum of Puerto Rico, across from GDB headquarters in Santurce.

This Caribbean Business article appears courtesy of Casiano Communications.
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