Juan Carlos Batlle, managing director of Santander Securities Corp. will succeed Carlos Garcia as president of the Government Development Bank for Puerto Rico, effective March 2.
In addition, GDB executive vice president for finance, Fernando Batlle — brother to incoming GDB president Juan Carlos Batlle — will leave the bank and return to the private sector.
Jose Otero-Freiria, deputy chief of staff for public policy for Gov. Luis Fortuño, will replace Fernando Batlle in the position.
Both Garcia and Fernando Batlle will remain at the bank until March 30 to ensure a smooth transition.
Garcia during the next few weeks will continue as chairman of GDB’s board while Fernando Batlle serves as special adviser to Garcia.
“Let there be no doubt that Puerto Rico was saved from sure bankruptcy; the homes, the IRA accounts and the jobs of tens of thousands of Puerto Ricans were saved; our credit restored to its best rating in 35 years, as was restored the confidence of all Puerto Ricans — who can now look to the future with hope — thanks to the ingenuity, vision, discipline, honesty, leadership and moral courage of Carlos Garcia,” Fortuño said in a statement.
Before taking office in January 2009, Fortuño selected Garcia to head the GDB. The understanding at that time was that Garcia, a former president of Banco Santander of Puerto Rico, would stay for two years,
The GDB accesses the capital markets for the commonwealth and serves as its fiscal adviser.
The bank’s president tends to have the ear of the governor, providing key economic, budget and fiscal advice.
The governor also praised Fernando Batlle, who has been crafting Puerto Rico’s debt transactions, managing its debt portfolio and overseeing day-to-day operations of the GDB.
“What we have accomplished in a little more than two years would not have been possible had it not been for Fernando Batlle,” Fortuño said. “He is the consummate banker.”
Under Garcia’s leadership, the GDB has helped the administration maintain Puerto Rico’s investment-grade ratings. The administration has also reduced Puerto Rico’s $3 billion structural deficit and officials expect to end such shortfalls by fiscal 2013.
Garcia last month said a “small amount” of one-time revenues might be included in the fiscal 2012 budget. That fiscal year begins July 1.
Garcia’s resignation follows a tax-reform bill that Fortuño signed into law last month.
The initiative was a high priority for the administration. The tax reform law will cut the average personal tax rate by 50% by 2016. Corporate tax rates for the largest businesses will drop to 25% in 2014 from 41%.
While Garcia, the GDB, and other administration officials helped to steer Puerto Rico out of fiscal instability, the commonwealth has its challenges.
It has been in a recession since 2006 and officials project the island’s gross national product to be a modest 0.4% this year. Puerto Rico’s unemployment rate in December was 15.7%.
The governor plans to file in late winter or early spring a pension reform bill to address the island’s $17 billion unfunded pension liability.
The retirement system has a funding ratio of 9.8%. Moody’s Investors Service in August assigned a negative outlook to Puerto Rico due to its high pension obligation.
Juan Carlos Batlle will also assist with Fortuño’s fiscal 2012 budget proposal. The governor is set to release that plan in early April.
Also on the horizon is the GDB’s annual credit conference on April 7 and April 8 in San Juan.
Standard & Poor’s rates Puerto Rico’s more than $9 billion of general obligation debt BBB-minus with a positive outlook. Fitch Ratings rates the credit BBB-plus with a stable outlook. Moody’s assigns an A3 rating with a negative outlook.
