By The Star Staff
Economic Development Bank (EDB) President Luis Alemañy González rejected a comment made by the commonwealth Comptroller’s Office on Wednesday that the EDB is in a financial crisis, arguing that after undergoing a debt restructuring, the entity ended calendar year 2023 with $133 million in capital.
While the comptroller’s report, which was reviewed by the STAR, said its audit covered the period from July 1, 2018 to July 31, 2023, Alemañy González noted that the periods reviewed by the Comptroller’s Office with respect to the EDB’s financial statements were from years 2018 to 2022.
“During these periods, indeed, the EDB had an excess of expenses over accumulated income of $14.1 million. However, to correct this situation, the EDB entered a debt restructuring process at the end of 2022, which concluded in 2023, and was approved by the Financial Oversight [and Management] Board, which combined a more efficient expense management and an improvement in the commercial client portfolio, resulting in positive capital of $133 million at the end of calendar year 2023,” the EDB president said in a statement.
Likewise, as part of the EDB’s sustainability and strategic planning process, “we submitted a proposal to the United States Federal Treasury (under funds from the American Rescue Plan Act) which was approved,” Alemañy González said. “The EDB was selected in Puerto Rico to administer the $109 million allocated to the island for the financing program with the participation of local commercial banks, support for collateral deficiencies, and risk capital. This allocation from the Treasury will further allow the EDB to continue its positioning as a commercial institution aimed at providing support with alternative access to capital, with an interest rate starting at 4%, for new entrepreneurs and other existing businesses in the process of expansion.”
The EDB is a government-owned corporation that provides loans and funds to businesses whose economic activities have the effect of replacing imports in Puerto Rico.
The comptroller noted that the EDB had accumulated deficits from 2018 to 2022 as reflected in the audited financial statements. For that period, the EDB had $145.7 million in revenues and $159 million in expenditures, a capital transfer of $866,671, and a net change of $14.1 million.
“The notes to the financial statements indicate that the EDB faces significant risks and uncertainties,” the report says. “Currently, it has insufficient financial resources to meet its obligations.”
The EDB began monetizing most of its loan portfolio in 2017. Those sales provided temporary liquidity relief, but reduced the loan portfolio, endangering the bank’s operational viability.
The report recommended that the governor and the Legislature “ensure that the Board of Directors continues the plan established to address the fiscal and operational situation of the EDB.”
“The comptroller advised the president of the EDB to develop strategies to avoid net losses in its operations and maintain control of its expenses,” the document says.