DevTech Project Spotlight: Puerto Rico Macro Fiscal Policy Program

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Puerto Rico is currently facing one of the worst financial crises in its history with more than $123 billion in debt and pension obligations. With financial reporting being a core requirement of PROMESA (the Puerto Rico Oversight, Management and Economic Stability Act enacted by the US Government that established an Oversight Board), action by the Commonwealth needed to be taken. In order to improve the transparency and accountability of the Commonwealth’s debt restricting activities, the Puerto Rico Fiscal Agency and Financial Advisory Authority (FAFAA) created the Puerto Rico Macro-Fiscal Project.

In September 2016, the FAFAA awarded DevTech the project. Since the project start and continuing today, the DevTech Team has worked on a number of task orders. These include developing economic growth projections for the Oversight Board based on the fiscal plan and the budget, providing legal and policy analysis support for the Commonwealth as necessary, and developing tools such as macroeconomic indicators, financial reporting templates, and creditworthiness assessments of the Puerto Rico Power Authority (PREPA) and the Puerto Rico Aqueduct and Sewer Authority (PRASA). DevTech continues to work closely with the FAFAA to create a macro-fiscal framework and other key economic indicators that illustrate the country’s economic context. Recent milestones include:

  • The establishment of a baseline upon which the Commonwealth can build financial projections. Our experts assisted with the design and delivery of a benchmarking analysis that allows for evaluation the Commonwealth’s revenue collections and expenditures relative to the 50 states.
  • Through comprehensive Macro-fiscal modeling, the DevTech team has generated baseline projections for the Commonwealth’s first Fiscal Plan in 2017 as well as projections for the New Fiscal Plan in 2018 following the strike of Hurricane Maria. The modeling has allowed the Commonwealth to identify and evaluate potential measures that it can pursue to achieve sound fiscal management and economic sustainability.
  • The design of a high frequency macroeconomic “scorecard” that is included in the Government’s reporting package. This technical assistance helps provide increased financial transparency, reporting, and accountability.
  • The development of indicator tables that demonstrate the Commonwealth’s fiscal situation across multiple levels of government. These models were augmented to fit the economic environment of Puerto Rico and provide a valuable resource to help the Commonwealth detail the transfers from the federal government and the resulting improvement of the fiscal position as well as deficit concepts.
  • Creation of fan chart-based economic forecasts for the U.S. Treasury and the PROMESA Federal Oversight Management Board in 2016 on behalf of Puerto Rico, for discussing a Federal crisis response. This work benefited from DevTech principals’ research on stochastic forecasting frameworks that reflect innovative approaches relative to the contemporaneous forecasts of institutions.
  • Critical reviews of the creditworthiness of the water and electricity companies of Puerto Rico (PRASA and PREPA), both of which hold their own debt and have entered into their own parallel restructuring program. DevTech conducted a comprehensive review of these utilities, which involved understanding their internal deficiencies, such as inadequate public prices for their services or insufficient investment as well as the system of inter-governmental relations.

DevTech has proven expertise modernizing government systems and assisting with the creation of more transparent and efficient financial and fiscal policies. Our assistance to local and national governments has included the creation of market intelligence and competitiveness units to foster small and medium enterprise (SME) participation in international markets, as well as supporting foreign ministries of finance to improve and modernize tax policy and administration. Our analytical capability also informs several economic and social databases that supply essential information to governments and development professionals worldwide. This extensive expertise has allowed us to help ease Puerto Rico’s crisis by contributing to the development of the fiscal plan and assessment of measures that it may potentially pursue to alleviate the crisis. To learn more about this project and DevTech’s capabilities, please visit the page for this project.

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