2000 and Beyond
The 21st century brought a renewed emphasis on responsible fiscal management to GDB. GDB management made it a top priority to strengthen the Bank’s foundations through sound financial practices and policies. During the second semester 2001, the Bank instituted a debt-restructuring plan that freed capital to invest in liquid assets. By the end of the year, the value of the Bank’s liquid assets had risen to $2.8 billion.
In another move to improve the Bank’s finances, the GDB set the wheels in motion for the approval of legislation to refinance $2.4 billion in debt over periods of 5, 10, 20 and 30 years and to restrict the practice of incurring in “extra-constitutional” debt without adequate sources of repayment and prior legislative approval.
These measures restored the Bank’s credibility in the financial markets. As a result, during fiscal year 2002 the Bank was able to structure and sell a record $8.3 billion in public financing. This move produced $6.3 billion in new money for infrastructure development, and provided the refinancing of $2.0 billion in existing debt at interest rates that, in some cases, had not been seen since the seventies, thus generating savings of $87 million.
During 2001, GDB revamped its investment and treasury operations to assure liquidity and enable to Bank to fully comply with its financial obligations to depositors and borrowers. As of December 2001, the GDB Treasury Area had successfully captured deposits from public agencies and private companies that produced a 24% increase in deposits, from $2,515 million in December 2000 to $3,125 in December 2001.
The Bank moved quickly to bring out an $800 million issue in Tax Revenue Anticipation Notes (TRANS) in October 2001 to cover General Fund obligations. It was the first time that such a large TRANS had been successfully brought to market so early in the fiscal year.
As part of the modernization drive, the island’s municipalities are being encouraged to monitor their financial requirements through the GDB website and to file their loan applications by e-mail or fax. Consequently, the financing for municipal public works projects, which used to take months to process, can now be approved in a matter of days or weeks.
With the objective of making government services more responsive to the needs of the people, the GDB has promoted re-engineering processes in several agencies. The Puerto Rico Housing Finance Corporation, a GDB subsidiary, was merged with the Puerto Rico Housing Bank in February 2002 to centralize responsibility for the financing of both single family and multi-family projects within one entity. The new Puerto Rico Housing Financing Authority has the Secretary of Housing as the chairperson of its Board of Directors to guarantee that it works in cue with the Department’s policies. Still, as a GDB subsidiary, the Authority has the fiscal strength and flexibility to set up tailored-made financial structures for each particular program managed by the agency.
In line with their efforts to promote sound financial practices, on May 13, 2002 the GDB announced the creation of the José M. Berrocal Institute for Economics and Finance. Berrocal, who passed away in October of 2000 at the age of 43, served as the Bank’s president from 1991 to 1992 and helped define its role as a “facilitator of change and an agent for modernization.” The new institute will offer training on the theory and practice of public finances and economic development to university students and new government employees.
At the Bank, we are also working hand in hand with other government agencies and private companies to negotiate favorable terms and conditions of important projects that will continue to foster the economic development of our country. Among these are the Port of the Americas, new hotel rehabilitation projects such as La Concha and the Condado Vanderbilt in the Condado area, the new $415.7 million state-of-the-art Convention Center, and the Governor’s $1 billion Special Communities Program.