Puerto Rico Oversight Board Sees Projected Surplus Plummeting

(Bloomberg) -- A member of Puerto Rico’s federal oversight board said it’s drastically reducing its forecast for the government’s budget surplus over the next three decades after lawmakers balked at labor-law changes the overseers want to encourage investment in the bankrupt territory.

Ana Matosantos, a member of the eight-member board installed by U.S. lawmakers, said the body now expects a $14 billion cumulative primary surplus over 30 years, as opposed to a previous projection for a $39 billion surplus. Speaking to the press in San Juan Friday, she said that figure was included in a new fiscal plan the board was re-certifying.

She said that Puerto Rico would run annual deficits after the burst of federal assistance related to Hurricane Irma and Maria runs out.

The board has pushed hard for a series of reforms, including the repeal of a law that made it difficult to fire workers and was seen as discouraging businesses from hiring and investing on the island. The board had been promised the change in a deal with Governor Ricardo Rossello, but the local legislature pushed back.

Saturday is the deadline for a new deal, and failure to reach one could mean a new court battle between the commonwealth and the federal board established by Congress to oversee its turnaround. The deep cut in the surplus projection isn’t likely to please creditors, who are locked in their own conflict with Puerto Rico and its representatives over how much of the island’s $74 billion of debt it can afford to repay.

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