Puerto Rico government credit downgraded again

On August 9, 2011, Primera Hora reported that Moody’s Investors Service downgraded the credit of Puerto Rico’s central government and all obligations guaranteed by the General Fund, with a “negative outlook.”

The decision could immediately affect two issues scheduled that week for $1,056 million: $300 million of public works included in Fortuño’s budget, and the Public Buildings Authority (AEP) issue for 21st Century Schools.

Moody’s cited deterioration of the retirement systems, economic weakness (recession since 2006), weak government finances and the historical pattern of financing deficits with debt, plus high unemployment, low labor participation and poverty.

Juan Carlos Batlle (GDB) minimized the impact: “only one notch”; attributed the adjustment to Retirement and said markets had expected it since the May alert, with no expected effect on access or cost of financing. Alejandro García Padilla (PPD) blamed “recessionary policies” and called for reassessing fiscal policies.

Credit downgrade ≠ default. Scheduled issues ≠ consummated disbursement. Cousin: #4 Sin Comillas (619) covers the next day of post-Moody’s issues.

Source: Primera Hora. https://www.primerahora.com/noticias/gobierno-politica/notas/degradado-otra-vez-el-credito-del-gobierno-de-pr/