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• Case | HBS Case Collection | November 2018 (Revised October 2019)

  Rebuilding Puerto Rico

  Laura Alfaro, Laura Phillips Sawyer and Haviland Sheldahl-Thomason

  On September 20, 2017, Hurricane Maria swept over Puerto Rico, devastating the island’s infrastructure and agriculture. The natural disaster was layered atop years of mounting financial distress. Before the hurricane, Puerto Rico had accumulated $74 billion in debt and beginning in 2014, the island had withheld debt payments despite the commonwealth’s constitutional guarantee of its general obligation bonds. In turn, the island found itself effectively excluded from capital markets while simultaneously unable to declare bankruptcy in US courts due to its status as a territory. In 2016, the US Congress had intervened, passing the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa), which established an eight-member Oversight Board to manage the island’s fiscal planning and restructure its debts and other fiscal obligations under bankruptcy-like proceedings. Many stakeholders felt hopeful that the Oversight Board could help Governor Ricardo Rosselló enact reforms that would improve public services, eliminate government waste, re-establish creditworthiness, and ultimately, foster economic growth. But, many questions still remained: Was Promesa and the Oversight Board the best method to assist the island in fiscal recovery? Was the Board’s fiscal plan an acceptable approach? Would the island be able to regain access to capital markets and attract investments without allocating funds for its creditors in the near future?

  Keywords: Natural Disasters; Financial Crisis; Infrastructure; Borrowing and Debt; Economy; Strategic Planning; Governing Rules, Regulations, and Reforms; Puerto Rico;

  Citation:

  Alfaro, Laura, Laura Phillips Sawyer, and Haviland Sheldahl-Thomason. "Rebuilding Puerto Rico." Harvard Business School Case 719-018, November 2018. (Revised October 2019.)  View Details

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• Case | HBS Case Collection | October 2018 (Revised October 2019)

  Poland at a Crossroads

  Laura Alfaro, Christian Ketels, Haviland Sheldahl-Thomason, Sarah Jeong and Marcin Piatkowski

  Citation:

  Alfaro, Laura, Christian Ketels, Haviland Sheldahl-Thomason, Sarah Jeong, and Marcin Piatkowski. "Poland at a Crossroads." Harvard Business School Case 319-065, October 2018. (Revised October 2019.)  View Details

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• Case | HBS Case Collection | July 2005 (Revised October 2019)

  The U.S. Current Account Deficit

  Laura Alfaro, Rafael Di Tella, Ingrid Vogel, Renee Kim, Sarah Jeong, Matthew Johnson, Jonathan Schlefer, Laura Alfaro, Rafael Di Tella, Ingrid Vogel, Renee Kim, Sarah Jeong, Matthew Johnson and Jonathan Schlefer

  Investors and policymakers throughout the world were confronted with the risk of painful economic consequences arising from the large U.S. current account deficit. In 2007, the U.S. current account deficit was $731 billion, equivalent to 5.3% of GDP. The implications of the deficit were debated with intensity. At one extreme, it was argued that large deficits would eventually resolve themselves smoothly, even if they persisted for many more years. Former Federal Reserve Chairman Alan Greenspan was among those expecting a "benign resolution to the U.S. current account imbalance." Other analysts, such as economists at the World Bank, believed the large deficits raised the risk of a sharp and disorderly fall of the dollar and that necessary macroeconomic adjustment could be painful, for the United States as well as for the rest of the world. The Financial Times asked: "How long will foreigners be prepared to make such generous 'gifts' to the US?" In this environment, Berkshire Hathaway, run by legendary investor Warren Buffett, postulated that current account imbalances would lead to "some chaotic markets in which currency adjustments play a part" and announced to shareholders a plan to increase investment in overseas companies to protect against this risk. It remained to be seen what the short- and long-term implications of the current account deficit would ultimately yield.

  Keywords: Macroeconomics; Borrowing and Debt; Currency; Foreign Direct Investment; Business and Government Relations; United States;

  Citation:

  Alfaro, Laura, Rafael Di Tella, Ingrid Vogel, Renee Kim, Sarah Jeong, Matthew Johnson, and Jonathan Schlefer. "The U.S. Current Account Deficit." Harvard Business School Case 706-002, July 2005. (Revised October 2019.)  View Details

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