As a native son of Puerto Rico and someone deeply rooted here, I watched in horror over the past decade as our once vibrant island has fallen into economic disarray. I have seen the toll that Puerto Rico’s fiscal issues have taken on my relatives and friends, including those who needed to move to the mainland due to dire financial conditions. Even after a period of public service, my own financial security has been threatened as I now had to come out of retirement and go back to work in order to support myself and my family.
Like many Puerto Ricans, I spent a lifetime investing portions of my income and savings to lay the groundwork for a secure and stable retirement. I ultimately made the decision to invest in several Puerto Rico bonds through a local investment company. A significant portion of my portfolio consists of senior bonds issued by the Puerto Rico Sales Tax Financing Corp. (COFINA) which has not yet interrupted payments as most of my other Puerto Rico bond holdings have.
At the time I invested in COFINA bonds, I was confident in my status as a senior, secured holder of the highest-rated debt issued by Puerto Rico. COFINA is based on a portion of Puerto Rico’s sales and use tax (SUT) that never is deposited in the general fund.
For those who are not familiar with Puerto Rican debt issuances, COFINA bonds were originally created as economic relief bonds during our 2006 fiscal emergency. When I invested in these bonds, they were seen as an extremely conservative and reliable investment because of their connection to Puerto Rico’s newly created SUT and alignment to the broader interests of Puerto Rican commerce. Because of this security, COFINA seniors represent the most widely held on-island bond.
Unfortunately, years ago when I invested in these COFINA bonds, I did not foresee today’s economic situation. With Puerto Rico’s public debt now clocking in at more than $70 billion (not counting pension liabilities) and no immediate solution for our economic crisis in sight, the value of my bonds has declined significantly.
Today, I am not receiving the returns on many other bonds I had counted on. As the situation worsens, I am also seeing countless other retirees and their families being forced to lower their standards of living in order to get by. This has often meant sacrificing their children’s educations, their medical coverage or the house their family had owned for generations. With all this in mind, I have realized the importance of my original decision to conservatively invest in COFINA bonds as they still continue to provide income.
Even after the passage of PROMESA earlier this year, little has changed in our situation. Bondholders are unable to get the returns they were promised and, today – instead of finding common ground with other creditors – some unsecured GO bondholders continue to fight against the claims of COFINA bondholders, despite the constitutionally protected property rights we have.
Each day the crisis is impacting more and more Puerto Rican small investors, many of whom had planned to use their investment income to support themselves in retirement. Because of this, I hope that our government and the Oversight Board can work together with all creditors to help the island achieve economic stability, while also ensuring COFINA bondholders – like myself – are fairly compensated.
I urge creditors to immediately move forward to initiate the negotiations that Title VI of PROMESA envisions and that we so desperately need. It is in the best interests of small investors across the island that creditors come to an agreement sooner rather than later so that we can avoid the drawn-out federal court proceedings, which would ultimately cause individual investors such as myself to suffer most of all.
José (Pepín) Rodriguez is an investor and former pro-bono public executive of the Puerto Rican government who holds COFINA bonds.
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