The doubts suggest that Gov. Alejandro García Padilla’s strategy to persuade bondholders and other investors to voluntarily help the island restructure the debt — and take losses on their investments as a result — is a long shot.
One credit analyst, Ryan Brady of Morgan Stanley, said it appeared that the planners had greatly overstated Puerto Rico’s financial needs over the next five years. As a result, he said in a private presentation to clients, Puerto Rico was hoping to get $14 billion in concessions from its creditors, when in fact it might need as little as $5.7 billion.
And Sergio M. Marxuach, public policy director for the Center for a New Economy, a research institute in San Juan, P.R., said on Wednesday that the five-year plan appeared to be “tilted toward austerity rather than growth,” which could undermine its key goal of reviving the island’s economy.
Mr. Marxuach also questioned whether the Puerto Rican government could carry out the plan, because it relies on an independent control board to enforce politically unpalatable austerity measures. Mr. Marxuach said it was not clear how the board would function.
The Puerto Rican legislature is expected to take up the issue of a control board in the next two weeks, but lawmakers have said other elements of the five-year plan will not be considered until January.
Barbara Morgan, a spokeswoman for Puerto Rico’s Government Development Bank, which arranges the island’s borrowing and liquidity needs, said the bank did not have access to the data underlying the Morgan Stanley assessment. But in an email, she said, “This analysis appears, at best, sloppy and, worse, a disservice to the 3.5 million American citizens of Puerto Rico.”
She added, “It’s incredibly unfortunate that something of such quality was used to inform an investment bank’s clients or the public at large.”
Puerto Rico’s governor warned in June that its debt was “unpayable,” and the only hope was to reduce scheduled payments for a few years while reforming the island’s deeply depressed economy. He assigned a team of government finance specialists to develop a plan, which was released to the public last week.
The planners projected the total cost of providing government services on the island for the next five years, and found that it would be about $28 billion more than the resources available. They then devised a number of austerity measures and tax changes, which they said could whittle the projected five-year shortfall down to $14 billion.
Over the same period, they said, the Puerto Rican government is scheduled to pay about $18 billion to a large group of creditors. The plan calls for withholding about $14 billion of those payments and using the money to fill the gap.
In a slide show that accompanied a client briefing last week, Mr. Brady discussed the assumptions that led the planners to those numbers, saying that a different set of assumptions could produce a much smaller shortfall, just $5.7 billion.
Mr. Brady’s slides suggested that Puerto Rico’s planners had excluded the effects of certain tax changes in arriving at a five-year shortfall of $14 billion. For example, the working group accounted for a sharp increase in sales taxes on the island in a way that increased the five-year shortfall by $5.3 billion, Mr. Brady concluded.
Mr. Brady declined to comment on his presentation, a copy of which was reviewed by The New York Times. Disclaimers at the end of the report said it was a “sales and trading commentary,” prepared for institutional clients considering derivatives transactions with the bank. It said it did not necessarily reflect the opinions of Morgan Stanley’s research department.
At the Center for a New Economy, Mr. Marxuach said that he had turned to research on other debt crises by Carmen M. Reinhart and other economists. Their work showed that “kick the can” strategies that pushed debt payments farther into the future did not provide enough change in countries with very protracted sovereign debt crises, he said, adding, “You still have people unwilling to invest in your country because of the huge debt cloud over it.”
In those cases, something more powerful was needed, such as the “Brady bonds” that ultimately resolved a decade-long debt crisis in the 1980s, which engulfed much of Latin America, and parts of Africa and Eastern Europe. That program was named after Nicholas F. Brady, the Treasury secretary who served under Presidents Ronald Reagan and George H. W. Bush. They allowed existing debt owed by Latin American countries to be converted into new bonds that were backed by a special type of United States Treasury bond, which the debtors could buy and pledge as collateral.
Mr. Marxuach said he was closely watching a second report, on Puerto Rico’s available cash, which was issued on the same day as the five-year debt-adjustment plan but has received much less attention. It showed that Puerto Rico’s treasury would exhaust its cash in November, despite taking “extraordinary measures” to conserve cash whenever possible.
In addition, the island’s development bank is expected to exhaust all of its cash at the end of December. That will coincide with a large payment due on the island’s general obligation bonds in early January. Those bonds were sold with an explicit constitutional guarantee, and Mr. Marxuach said that not making the payment on time, from the investor’s perspective, would be “a declaration of war.”
“If you don’t pay, you’re losing any chance of negotiations with the bondholders,” he said.
On the other hand, if Puerto Rico runs out of cash in December, it might have to shut down the government for a time. It did so once before, during a fiscal crisis in 2006, causing an outcry.
“Are you really going to send government workers home in the middle of the Christmas season, without a paycheck? Are you really going to default on January 1?” Mr. Marxuach asked. “Those are really tough decisions, but those are the kind of decisions we may have to make.”
Governor García Padilla may have signaled the answer to that question in a recent speech that was televised in Puerto Rico. He said that if Puerto Rico’s creditors would not negotiate concessions, he would have to execute the five-year plan without them.
A version of this article appears in print on September 17, 2015, on page B5 of the New York edition with the headline: Puerto Rico’s Debt Rescue Plan Is Being Called Into Question. Order Reprints| Today's Paper|Subscribe
Puerto Rico’s Debt Rescue Plan Called Into Question
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