Puerto Rico deserves credit for fiscal reforms -governor

SAN JUAN Tue Jan 28, 2014 4:57pm EST

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SAN JUAN Jan 28 (Reuters) - Puerto Rico finance officials trying to avoid junk bond ratings for the Caribbean island are emphasizing recent tax hikes, spending cuts and other fiscal reforms in meetings with U.S. credit agencies, Puerto Rico's governor said on Tuesday.

"We are showing that we have done more than what they expected to attend to the fiscal credit challenges the administration faced when we arrived," Gov. Alejandro Garcia Padilla said at a news conference.

Treasury Secretary Melba Acosta Febo and leaders of the Government Development Bank for Puerto Rico met for three days through Tuesday with analysts for Standard & Poor's, Moody's Investors Service and Fitch Ratings.

Puerto Rico initiated the New York briefings just hours after S&P on Friday became the third of the three agencies to put the island with $70 billion of municipal bonds outstanding on review for possible ratings cuts to non-investment grade.

The meetings also come as Puerto Rico readies for a bond sale increasingly seen as a test of the island's creditworthiness. All three agencies have said Puerto Rico needs to tap the muni market to keep its investment-grade rating.

Since taking office a year ago, Garcia Padilla has cut the government's projected annual budget deficit, overhauled and reduced spending for a government pension system, stepped up tax collections and moved to trim subsidies to government corporations.

Many of the reforms have won investor praise, but have failed to stem fears about the island's ability to pay its debts. Puerto Rico's bonds have been in a slump since September, with some carrying tax-free yields of 10 percent.

Referring to another of his reforms, a locally unpopular overhaul of the island's underfunded system of teacher pensions, the governor reiterated that a court move paralyzing implementation of the teachers reform was "very dangerous."

On Monday, the island's Supreme Court consolidated lawsuits filed against the proposed reform to expedite proceedings. The court appointed a special commissioner in the case to collect evidence, hold a hearing and submit a report on its findings by Feb. 7.

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