* New governor short on specifics about road to recovery
* Bond market anxiously awaits plans
SAN JUAN, Puerto Rico Jan 2 Puerto Rico's new
governor vowed on Wednesday to work "without rest" toward
economic recovery after a savage six-year recession, but he
failed to announce any specific measures to address problems,
including the U.S. territory's massive public pension
Alejandro Garcia Padilla, who ousted pro-business reformer
Luis Fortuno in a close election in November, spoke in his first
public address as governor after a swearing-in ceremony outside
the Caribbean island's seaside capitol building.
"It's time to move from worrying to action," the new leader
said in a speech that highlighted issues he faces, including
"high unemployment and a high level of public debt."
He stopped short of mapping any new strategies, however,
after pledging to put forth a plan this month to ease investors'
and credit analysts' concerns.
"The recovery is a path you have to walk step by step but
without rest. You can't resolve things overnight. Some things
will be resolved more quickly than others," Garcia Padilla said.
The $3.7 trillion U.S. municipal bond market has been
anxiously awaiting plans by Garcia Padilla to deal with
challenges resembling Greece's since he defeated Fortuno, whose
backing of economic austerity measures hurt him at the polls.
The 41-year-old governor, catapulted into office through a
coalition that extended beyond his pro-commonwealth Popular
Democratic Party, referred repeatedly to the importance of
"solidarity" among all Puerto Ricans to help overcome the
problems confronting the island.
Puerto Rico's widely held bonds are currently rated just a
notch or two above junk status, and Garcia Padilla also alluded
to the possibility of an "unprecedented" credit rating
Ratings agencies and investors have been calling for Puerto
Rico to take further action on its government pension systems,
which have a total unfunded liability of $37.3 billion, and also
to return to a complete structurally balanced budget by fiscal
year 2014, which starts July 1, 2013. The main Government
Employees Retirement System fund has an unfunded liability of
Following the election, Moody's Investors Service lowered
the credit rating of the government's general obligation bond
two notches, to Baa3 from Baa1, with a continuing negative
While it recognized advances on the part of the government
in controlling spending and taking steps to improve the economy,
Moody's expressed concern over the ability of the government to
control costs and reform the retirement system in the near
future, given continuing weak economic growth estimates.
Standard & Poor's Ratings Services said there was a
one-in-three chance of downgrading the commonwealth's credit
over the next several months. S&P rates Puerto Rico's GO bonds
BBB with a negative rating. Fitch Ratings rates them BBB-plus.
The 10-year spread on Puerto Rico bonds over triple-A muni
bonds was 290 basis points last Friday, up from a yearly average
of 233.5 basis points.
U.S. institutional investors, who hold much of Puerto Rico's
$52 billion of high-yielding, tax-supported debt, often
applauded Fortuno's reforms - including 30,000 or more
government layoffs and spending cuts - as the best way to
stimulate the island's economy and safeguard their bond
Karen Krop, senior director at Fitch Ratings, said the
ultimate test of success of future policy will be whether or not
Puerto Rico's economy grows, a difficult task given the current
deficit and high debt.
"The recession was longer and deeper in Puerto Rico than in
the U.S. and they came a long way," Krop told Reuters.
"But now what kind of proposal they can do within their
budget and their debt to boost the economy and where the growth
is coming from is still not clear."