SAN JUAN, PR/WASHINGTON, DC (BBN-PR) — Donald J. Trump’s harnessing of CEO intervention, the US military and exploiting the White House bully pulpit to resurrect of Puerto Rico to its former glory following the devastation by Hurricane Maria will undoubtedly be one of the the high points of his presidential legacy.

[President Donald J. Trump arrival on Air Force One filmed by Capitol Intelligence using CI Glass at Muniz National Air Guard Base in Puerto Rico. President Trump and First Lady Melania was met by Puerto Rico Governor Ricardo Rossello and  wife. October 3, 2017]

To many in Puerto Rico — Hurricane Maria is a blessing in disguise as the enclave was facing an even more devastating slow death under USD 70bn of unsustainable debt to Wall Street banks and asset managers.

President Trump effectively talked down Puerto Rico bond prices from about 60 cents on the dollar pre-Hurricane Maria to about 30-35 cents following a choreographed impromptu interview with Fox News anchor and Puerto Rican native, Geraldo Rivera during during his visit on October 3, 2017 .  The USD 9bn in bond debt owed by PREPA will be zeroed out as Hurricane Maria wiped out the utility.

While Puerto Rico won the highest level support from President Trump and his cabinet,  Puerto Rico felt deeply betrayed by US Senator Marco Rubio (R-Fla) and US House Ways and Means Committee Chairman Kevin Brady (R-TX) as parts of the recently passed US tax reform bill treats Puerto Rico as a foreign jurisdiction.

[Puerto Rico Congresswoman Jenniffer Gonzalez-Colon speaks to Capitol Intelligence (BBN-PR) using Glass on Puerto Rico outlook months after Hurricane Maria abroad JetBlue Airways flight from Washington DC (DCA) to San Juan (SJU) on December 24, 2017]

Puerto Rico’s elected representative to Congress, Republican Jenniffer Gonzalez-Colon, said she is more than confident that she will be able to replace the negative elements in the tax bil, such as the highly controversial 12.5% tax rate on licenses and patents and at the same time make Puerto Rico the most attractive US jurisdiction infrastructure investment and repatriated US corporate profits.

The Republican compromise that brought the 12.5% tax and Puerto Rico’s unwelcome status as a foreign jurisdiction can be used by Congresswoman Gonzalez-Colon and Governor Rossello leverage President Trump to make Puerto Rico an off-shore banking and insurance center to rival Panama and Bermuda.

Major CEOs such as Pfizer, Inc (NYSE: PFE) CEO Ian C. Read can do more than any Federal or local government official by keeping their factories open and ensuring that infrastructure investment Is not squandered by politicians and unsavory mainland business interests.

For many Puerto Ricans, Pfizer Inc is a bellwether of the success or failure of the island’s leadership to keep and attract manufacturing jobs.

[Pfizer Inc. Chairman and CEO Ian C. Read speaks to Capitol Intelligence/CI Africa using CI Glass on outlook for the African pharmaceutical markets at National Press Club of Washington, DC. March 23, 2017]

Elizabeth Plaza, the founder and Chairwoman of Dorado, Puerto Rico-based Pharma-Bio Serv, said in an interview with Capitol Intelligence that restarting Puerto Rico’s pharmaceutical industry is also a crisis for mainland United States as Pfizer and others provide critical lifesaving drugs and this urgent issue has been raised by US Food and Drug Administration (FDA) Commissioner Scott Gottlieb. MD.

FDA Commissioner Gottlieb issued an official statement noting that Puerto Rico-based pharmaceutical manufacturers produce 10% of all drugs consumer in the United States and that the FDA is closely monitoring some 40 pharmaceutical and biological drugs produced produced in the PR “could have substantial impact on the public health.” Gottlieb had visited Puerto Rico a week beforehand.

Ian Read’s upbringing in Rhodesia (Zimbabwe) and international experience makes him the ideal CEO to work alongside FDA Commissioner Gottlieb to ensure that PR pharmaceutical supply chain is not left left uninterrupted.

The abolition of Puerto Rico’s special tax status under Section 936 under President Bill Clinton and the North American Free Trade Agreement (NAFTA) and Central American Free Trade Agreement (CAFTA) trade agreements allowed big Pharma CEOs such as Ian C. Read to shift production to foreign tax friendly geographies such as Ireland or Mexico notwithstanding a superior Puerto Rican work force.

The abolition of the Section 936 — which allowed for US and foreign corporations to avoid paying burdensome US worldwide corporate tax – also dramatically shifted the balance of power in Puerto Rico from local business owners and Fortune 500 CEOs to corrupt and inept local politicians on the lines of former Puerto Rico governor and DC lobbyist Luis Fortuno.

[Pharma-Bio Serve Founder and Chairwoman Elizabeth Plaza speaks to Capitol Intelligence/BBN using CI Glass following panel on Hurricane Maria at Center for Strategic and International Studies in Washington, DC. October 5, 2017]
The reinstatement of Section 936 can will find unusual and surprising support with Trump cabinet members such as US Treasury Secretary Steven Mnuchin, US Commerce Secretary Wilbur Ross and Housing and Urban Development Secretary Dr. Ben Carson, MD.

During an interview at Washington, DC The Hill newspaper, Dr. Ben Carson said he is taking a battle axe to any red tape to any obstacle that can hinder relief efforts to the victims of Hurricane Maria.

Sources close to Dr. Carson said the cabinet secretary will not hesitate to directly call the heads of major financial institutions such as JP Morgan CEO Jamie Dimon or Travelers Group CEO Alan Schnitzer if he believes “the institutions are dragging their feet in anyway or practicing a form of redlining in servicing Puerto Rico claims or services.”

However, Puerto Rico is facing an uphill battle to convince Congress to fully reinstate Section 936 as Hurricane Irma in Florida and Hurricane Harvey in Texas has either distracted or weakened support in the Florida and Texas delegations for a comprehensive review of Puerto Rico’s tax status, a chief lobbyist for a major US global consumer company said.

Answering a question from Capitol Intelligence during an Conversations With The Chair event hosted by Real Clear Politics, US House Ways and Means Chairman Kevin Brady (R-TX) said his committee is working on including some form of new tax regime for Puerto Rico as part of the Trump administration’s tax reform bill.

Brady also said that he is working closely with Puerto Rico’s Resident Commissioner , the Republican non-voting Congresswoman Jenniffer Gonzalez Colon  and member of the Republican House Conference Committee headed by Speaker of the House, Paul Ryan (R-WI).

[Financial Oversight and Management Board for Puerto Chairman Jose Carrion III speaks to Capitol Intelligence/BBN using CI Glass on the privatization of Puerto Rico Electric Power Authority (PREPA) and the cancellation of PREPA bond following American Enterprise Institute (AEI) panel on Puerto Rico after Hurricane Maria on November 6, 2017]

The White House and Congressional efforts on Puerto Rico can also replace the largely unpopular Puerto Rico Oversight, Management and Stability Act (PROMESA) oversight board consisting of largely unknown lawyers, consultants and businessmen.

The role of PROMESA oversight board, the Financial Oversight and Management Board for Puerto Rico, is now under serious debate after the board failed to block an unknown energy outfit, WhiteFish Energy Holdings LLC in landlocked Montana, from being awarded a no-bid contract, subsequently cancelled, to repair Puerto Rico’s devastated electricity grid.  The repair of Puerto Rico’s power grid has been handed off to the very capable hands of the US Army Corps of Engineers.

In an interview with Capitol Intelligence at a panel Puerto Rico after Hurricane Maria held at the American Enterprise Institute, Financial Oversight and Management Board Chairman Jose Carrion III said the oversight board is struggling to name a emergency manager to PREPA.

Hurricane Maria should really be named Hurricane PREPA as the Category 4-5 hurricane seemed to target Puerto Rico’s horribly inefficient and basically third world utility, said President of Puerto Rico Manufacturers, Rodrigo Masses Artze.

With PREPA’s Wall Street bond holders wiped out, President Trump and Puerto Rico’s pro-privatization Governor Ricardo Rossello can now have Chicago-based Exelon Corporation (NYSE: EXC) and Rome-based ENEL join forces to build the best-in-its-class utility in Puerto Rico operating natural gas plants along with cost efficient wind power and solar energy.

[Puerto Rico Governor Ricardo Rossello speaks to Capitol Intelligence/BBN-PR using CI Glass on the privatization of Puerto Rico Electric Power Authority (PREPA) during National Governors Association Winter meeting in Washington, DC. February 24, 2018]

In an interview with Capitol Intelligence/BBN-PR during the National Governors Association Winter Meeting, Puerto Rico Governor Ricardo Rossello said he expects to send legislation for the privatization of PREPA sometime next week.

During the interview, Governor Rossello welcomed interest for PREPA both from US players such as Exelon and European energy groups such as Rome’s ENEL and Milan’s a2a.

Rossello said the naming of the financial and legal advisers for the PREPA sale will be done in collaboration with Financial Oversight and Management Board Chairman Jose Carrion III.

Exelon CEO Chris Crane already has experience taking over badly managed locally owned utilities such as Washington, DC’s PEPCO while Italy’s state-owned ENEL is best in its class in operating utilities in difficult foreign markets (Russia, Chile) and at the same time is owner of America’s largest renewable company, Enel Americas (NYSE:ENIA.)

[Exelon President and Chief Executive Officer Christopher M. Crane speaks with Capitol Intelligence using CI Glass about Entergy, STEM schools and ENEL at the Baltimore Washington Corridor Chamber Annual Meeting at BWI Marriott, May 11, 2016]

The current independent power producer working with PREPA — the secretive Arlington, Virginia-based AES Corporation (NYSE: AES) — will ultimately be excluded from the estimated USD 5bn-USD 9bn privatization on US national security grounds due to the company’s controlling mainland Chinese shareholders such as the Chinese Investment Corporation (CIC).

Terna Group, the listed Italian government controlled power grid operator, is also interested in potentially looking at working on Puerto Rico’s power grid destroyed by Hurricane Maria, Terna CEO Luigi Ferraris said in an interview with Capitol Intelligence/BBN in Milan.

Ferraris said the company has managed turnkey projects in Brazil, Uruguay and Peru and is interested in pursuing similar opportunities in the United States.

[Terna Group CEO Luigi Ferraris speaks to Capitol Intelligence/BBN-PR using CI Glass following Terna analysts meeting on entering Puerto Rico and other markets in the United States. Milan, Italy. March 22, 2018]

However, Terna CEO Luigi Ferraris said that the company with 2017 revenues of EUR 2.25 bln, is not interested in entering any new markets via acquisition.

Italian listed utility a2a (BIT: A2A) that provides power generation, transmission and distribution to Milan and Brescia would be interested taking of PREPA activities in Puerto Rico if they were to receive a request for proposals (RFP) from Puerto Rico Governor Ricardo Rossello, a2s Head of International Business and Development Oreste Bramanti told Capitol Intelligence in a telephone interview.

Barceloneta, Spain-based Gas Natural Fenosa already operates a 540 megawatt combined cycle plant and a LNG regasification plant through its controlling stake in Puerto Rico’s EcoElectrica at Peñuelas, Puerto Rico.

A2A is the undisputed benchmark for successful privatization of municipal or public assets in the world. The City of Milan had privatized then AEM Milan, the city utility through a 1998 initial public offering of a 49% stake with deeply discounted shares offered to Milan residents.

The share offering was greatly oversubscribed and could serve as model for a likely debt to equity deal for PREPA, European M&A and distressed banking sources told Capitol Intelligence.

[a2a CEO Valerio Camerano speaks with Capitol Intelligence/CI MENA using CI Glass at Smart City news conference with Alphabet Inc (NYSE:GOOG) unit Google in Brescia, Italy. March 21, 2016]

As the Speaker of House of Representatives of Puerto Rico, Congresswoman Gonzalez-Colon passed a public-private partnership law that still serves as a model for the rest of United States and for the President Trump’s proposed USD 1trln domestic infrastructure investment fund.

Puerto Rico is already serving as example for President Trump proposed USD 1.5 trln infrastructure fund as the United States only fully privatized airport, San Juan’s Luis Munez International Airport operated by Mexico’s Grupo Aeroportuario del Sureste (ASUR) is working at near full capacity.

The recovery of Puerto Rico, unlike New Orleans after Katrina or the disgrace of Haiti, will serve as a model for the United States and the world thanks to defacto takeover of the disaster relief efforts by the US military and the truly heroic efforts by the citizens of Puerto Ricans.

US Armed Service members including the US Army Corps of Engineers, commanded by US Army North Lt. General Jeffery S. Buchanan, are effectively filling the vacuum derived from Federal Emergency Management Agency (FEMA) inexperience in dealing with a non-mainland disaster and typical grandstanding by The American Red Cross (as opposed to effective and on the ground relief provided by the Salvation Army).

[Hollywood Legend and Civil Rights icon Rita Moreno filmed by Capitol Intelligence/BBN using CI Glass speaking with USAF Reservist Nestride Yumga following interview by The Carlyle Group Co-Founder David Rubenstein at Kennedy Center, April 29, 2017.]

“This is a walk in the park for all of us as we have worked in Afghanistan and Iraq,” said a USAF major. “The people in Puerto Rico know exactly needs to be done and how to do it right.”

By PK Semler in San Juan and Barceloneta Puerto Rico; Washington, DC and Milan, Italy. Editing by Ted Knutson.

For more information please call +1-202-549-3399 or email pks@capitolintelgroup.com

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