Turning Bust to Boom : PROMESA and Puerto Rico's Public-Private Partnership Initiatives

If there is one thing that all stakeholders in Puerto Rico's fiscal crisis can agree on (and there are likely not many such things), it is that, without real economic growth, the Commonwealth of Puerto Rico will neither be able to repay its creditors nor offer its residents a viable, let alone prosperous, future. The Commonwealth's recently certified fiscal plan calls for sizable reductions in government expenditures, significant increases in overall revenue collections, the rightsizing of Puerto Rico's bloated government, labor reform, unprecedented adjustments to public pension systems and a litany of regulatory reform and other measures to facilitate new business formation. But when it comes to driving economic growth, particularly over the short term, the Commonwealth and the certified fiscal plan are relying heavily on the entry into a series of public-private partnership (PPP) transactions to jump-start the economy, contemplating approximately $5 billion of new investment over the next two years. Normally, investors and lenders to PPP projects avoid pursuing projects where the government's ability to provide financial, operational and logistical support is subject to considerable uncertainty. Additionally, any PPP project undertaken today in the Commonwealth will have to overcome real challenges when it comes to forecasting the projected use or need for a given PPP project in light of the overall macroeconomic uncertainties, particularly the possibility of further and accelerated population loss. Further, PPP sponsors and lenders may be rightfully concerned about the prospects of executing such transactions. Rather than speculate over the likelihood of that target being reached, this article focuses on how the tools provided by the Puerto Rican Oversight, Management and Economic Stability Act (PROMESA) can help mitigate some of these risks and even facilitate future PPP projects in Puerto Rico