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GDB meets with credit-rating agencies

Puerto Rico’s new economic team meets with S&P and Moody’s


March 3, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

On Tuesday March 1, the new economic team in place for Gov. Aníbal Acevedo Vilá’s first term commenced a series of meetings with the credit rating teams of Standard & Poor’s (S&P) and Moody’s Investors Services to discuss the government’s fiscal situation and the risks of future rating changes for general obligation bonds (GO). S&P was the first to meet with the group; Moody’s is set to assist in a meeting scheduled for March 11.

William Lockwood, president of the Government Development Bank, stated that the meetings resulted from the invitations he extended to the agencies in an effort to start off the year with an open and honest discussion of Puerto Rico’s finances. Lockwood wanted to present to the agencies the strategic plans that the team has outlined for the upcoming fiscal year in hopes of improving the country’s financial situation.

In September 2004, Moody’s revised its outlook for Puerto Rico’s GOs from stable to negative. S&P’s outlook on GOs has been negative since April 2003. In general, these outlooks reflect worries surrounding Puerto Rico’s structural deficit and high levels of debt. CARIBBEAN BUSINESS recently reported that the structural deficit could reach $2 billion. This situation has many experts worried about a possible credit rating change, which would not only make borrowing money more expensive for the government but would also directly affect investors and the general improvement projects the island desperately needs.

According to some industry sources, the downgrading is inevitable, stating it would be difficult for a mere strategic plan to convince the agencies of the possibility of fast change and general improvement.

This Caribbean Business article appears courtesy of Casiano Communications.
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