By Francisco Rodriguez-Castro (frc@birlingcapital.com), President & CEO of Birling Capital Advisors LLC
This week the U.S. economy added 227,000 jobs in January, 52,000 more than the market consensus of 175,000 new jobs. This growth was not enough to avert an increase in unemployment to 4.8% from the previous rate of 4.7% as more people began looking for work. As expected the Fed policy committee voted unanimously to keep the federal fund rates in a range of 0.50% to 0.75%, Fed Chair Yellen stated that “measures of consumer and business sentiment have improved of late, but business investment remains “soft”.
Moving on to Trumpconomics, this was an active week for President Trump who continued with his plans to realign the USA towards his “America First” pledge and the list of actions that are being undertaken is large and varied. President Trump held a meeting on NAFTA in the White House, on February 2, 2017, and focusing on either revamp or create a new NAFTA with an additional F as in FAIR. The President claims that NAFTA has been unfair to the American Workers and a catastrophe for US corporations. Another highly expected gathering was between CEO’s of a major corporation and the President to discuss the border-adjustability tax, this measure is being evaluated with a Pro’s and Con’s scenario. Those CEO’S that talked to the media mentioned that the President wanted monthly meetings with CEO’s and that all major issues were discussed with the administration. Although this may be the topic of discussion this week, the real end game is the Tax Reform that the President promised as part of his campaign. The item that continues to capture the worldwide news was the travel ban on six Islamic countries that created havoc for Airlines and thousands of travelers worldwide. With large protests happening in most of the 50 states and in other parts of the world, the economic, social and political effect of these actions
The item that continues to capture the worldwide news was the travel ban on six Islamic countries that created havoc for Airlines and thousands of travelers worldwide. With large protests happening in most of the 50 states and in other parts of the world, the economic, social and political effect of these actions are only beginning to be assessed. However, the big news is that even with all headwinds that the President is facing the U.S. market closed higher on Friday, and the Dow returned above the 20,000 level in a rally that lifted most major indexes into positive territory for the week. The move higher followed news that President Donald Trump had taken steps to roll back financial industry regulations, including the Dodd-Frank Act.
Moving on to Puerto Rico, the Fiscal Agent and Financial Advisory Authority “FAFAA” is drafting a New Fiscal Plan to meet the standards of the Puerto Rico fiscal oversight & management board (FOMB) and as part of their efforts, it was announced by Governor Rossello that several new initiatives undertaken would generate $118 million in annual savings. This step in the right direction combined with long-term structural reforms, cost savings, agency eliminations and the enactment of an aggressive Public Private Partnership plan could allow the Government to meet its debt obligations. At the same time, its is crucial to define and stipulate which services constitutes “essential services” and how to best deliver them.
On February 1st, 2017 the Government announced, that the following issuers satisfied their interest obligations on their debt, including Puerto Rico Sales Tax Financing Corporation (COFINA), the Puerto Rico Industrial Development Company (PRIDCO), the Puerto Rico Aqueduct and Sewer Authority (PRASA), the Municipal Finance Authority (MFA), the Employee Retirement System (ERS), and the Puerto Rico Highways and Transportation Authority (HTA). As we have seen in all the news media the Puerto Rico GO bondholders are contesting the validity of the payments to COFINA. GO bondholder group uses the constitutional priority guarantee, while COFINA Bondholders maintain that they are considered a legally separate revenue stream, external to the Commonwealth’s income statement. One thing is for sure Puerto Rico must unite to fix its fiscal situation with a Once and Done approach.
About Birling Capital Advisors LLC
Birling Capital is corporate advisory & consulting firm that offers broad corporate finance & advisory services focused on the needs of institutional, government, corporate, middle-market companies, family corporations and their owners, which are our focus markets.
Our firm combines our senior leaders’ more than two decades of advisory, consulting and transactional experience in corporate, healthcare, retail, education, insurance, P3’s, banking and government markets with industry-focused financial operations and strategy professionals, enabling us to effectively advise our clients through their most critical corporate finance transactions.
Prior to founding Birling Capital, our firm’s principal worked for over twenty-five years in corporate, consumer, investment banking and government areas developing a unique set of skills to suit our focus markets. Sharing a deep rooted passion for providing quality advice to our clients that will help them to build enduring businesses and to accomplish their most critical strategic objectives.
P.O. BOX 10817 San Juan, PR 00922 787-247-2500 787-645-8430 frc@birlingcapital.com
www.birlingcapital.com
