HARDtalk on the Road in Puerto Rico HARDtalk

concluded with the traditional haka performed by players. Thank you for

watching BBC News. That is all for me.

Will come to this special edition of HARDtalk on the road from Puerto

Rico. The Caribbean island which belongs to the United States and

which is currently drowning in debt -- welcome. Just 3.5" people live

here but they have managed to run up a public debt of $70 billion.

Without an emergency financial rescue, Puerto Rico is going bust

and that will send shockwaves all the way to Wall Street -- 3.5

million. San Juan Puerto Rico has miles of palm trees and year-round

sunshine -- miles of beach, palm trees and year-round sunshine. To

the new arrival, it is the classic Caribbean cocktail. But for Puerto

Ricans life has turned sour. Their island is on the road to economic

ruin. Driving around the streets of San Juan, frankly it feels pretty

much like driving around Florida. This place is incredibly

Americanized. But the statistics, they don't lie. Unemployment is more

than twice as high in Puerto Rico and Darfur poverty rates come out

well, this place is more than twice as poor as the poorest state in the

US -- and as for. Puerto Rico is US sovereign territory, it has been for

more than a century. But unlike Hawaii, for example, Puerto Rico is

not a state in the union. It governs itself. For most Americans, the

island has never been more than a one-day stop on a Caribbean cruise.

This is the rhetoric of tourists don't see, demonstrators taking to

the streets in defence of basic public services threatened by a

Greek style debt crisis. Nine years of recession, a collapse in outside

investment and a government borrowing way beyond its means have

taken Puerto Rico to the edge of financial ruin. The island's

government has a massive pile of public debt and the creditors,

including America's biggest pension funds and hedge funds want their

money back. I represent and I advise different groups of investors that

hold Puerto Rico paper and some of the maybe hedge funds, many of them

are companies that have been committed to Puerto Rico for 30-40

years and have held bonds for many decades. Here's the thing, your

Puerto Rican and have worked in the periphery can government. I wonder

if it sits comfortably and easily with you to be pushing for repayment

of these debts when the governor of Puerto Rico says, frankly, the debt

mountain is so high that the debts are unpayable in his words. He is

wrong and I was wrong before I represented anybody -- he was

wrong. I don't think the way you resolve this financial crisis is to

be slapping in the face the people who have helped Puerto Rico finance

it's developed over the years. And the same people that you are going

to try to attract in the future to continue investing in Puerto Rico.

We can make adjustments, but to do that you have to have a good-faith

negotiation on both sides of the table. Do you bring good faith of

the table? Yes we do. I don't negotiate. But you represent those

who do, and what we hear is that they are driving a very hard

bargain, a bargain that the Puerto Rican government he authorities here

cannot meet. For example, they are demanding new taxes and even greater

cuts to pensions. They want things which are going to hurt the ordinary

people of this island. We are in the crisis because the governor Puerto

Rico wants to spend more than Puerto Rico can afford to spend. The

development bank which manages the finances here has less than 1

billion US dollars in cash reserves. Those cash reserves could be

finished by the end of this year. This place could be going bust. If

there is mismanagement, yes, money could be over but if there is not

mismanagement, if you solely spend on things that are essential, you

would not have the mismanagement. Do you think are Rico will go bust?

Puerto Rico has no reason to go bust -- Puerto Rico. You are asking me a

very logical question regarding people who have made a logical

progress. There is no need for us to go bust and there are roadmaps to

resolving the crisis and no having to go bust. -- not having to.

Protesters from the teacher's Union vent their anger on the steps of the

island's Parliament. They are furious about government plans to

reform the education system. Well, they are in good voice but there are

not many of them. Maybe that is the problem here in Puerto Rico. People

are losing any hope that they can actually get out of the mess that

they are in. Schools are being closed, pensions cut and according

to the teachers, education is being privatized and the government is

desperate to save cash. Our students don't have money to pay a private

school. A don't have money to pay for lunch at school. School should

be for everybody. And it should be public and that is why we are here,

we are defending our students and our communities. They are closing

schools. You have to pay for many things when we privatize schools and

that is not fair. Our Constitution says public school should be

public. Inside Puerto Rico's public building, a woman testifying is the

guardian of the island's public finances, the boss of the government

development bank. She is, but she is in the eye of the financial storm --

she is calm. The Puerto Rican government is very close to running

out of money. If we have taken emergency measures, we would have

already been out of money -- if we hadn't. For example, we have taken

certain measures, such as delaying payments to lenders, not paying tax

refund that we owe to our citizens, and so forth. So you are reneging on

your debts already? Yes. One of the debts was not paid. It was due in

July-August and we didn't pay it. So if I may say so, you are teetering

on the brink of a serious default? Right now we have two major bonds

that are due in December and January, very large amounts. This

represents almost 700 million US dollars? Exactly. And you don't have

the money to pay? We have been taking measures that are actually

hurting our economy to make sure we keep the government running. But

will you be able to pay those repayments in December and January,

yes or no? We are taking measures to try to be able to pay. One of them

has to do with the financing. You don't sound very confident. Because

you can plant, but for example, you cannot make sure that the revenues

are going to come as estimated or budgeted. You could have a shortfall

in revenues like we have for the month of October. There is risk

involved. And what you going to do to ensure that pensions get paid,

essential services are financed, that people's healthcare needs are

met? You may run out of liquid cash? Yeah. We commissioned a study from

IMF economists and it came back that our debt is not sustainable. With

the amount of growth that we have... That is the problem, it is

not that we have too much debt, it is that we have no growth in our

economy and too much debt. I have just spoken to Mr McClintock, the

lobbyist, who is being paid by the creditors to sit in on negotiations

and he says you and the governor are crying wolf. You are claiming the

debts are higher than they really are, that you have run out of money,

and he says you simply doing it to avoid paying what is due. That is

completely wrong. I mean, that is not true. This is the debt we have.

We have analysis and studies. We cannot hide the debt. It is public.

There are reports issued by the bank on the amount of debt. But the

creditors are not in a good mood. Look at what they said in the

summer, when the president said the debts are unpayable. The creditors

said, how dare he say that, he is sending a signal before negotiations

that he's not going to pay? That is the problem Puerto Rico has. We are

different from the United States, we do not have chapter nine which is a

bankruptcy protection law, the same law at Detroit used recently to

restructure itself. We don't have that. Would've the creditors say,

forget about it, I want my money back? We have to take a decision

whether to pay the debt or provide basic services to Puerto Rican

citizens. If we have to choose, we're going to provide basic

services. By Christmas, Puerto Rico could be bust? Again, we have

measures in place... But that is the truth? We have planned measures,

again there is risk in the implementation of these measures, to

move forward, but definitely if we move forward by December -January,

we have a huge cash wall facing us in June. If it is not in December,

it will be in June. On the streets of San Juan, there is not exactly an

air of panic. But within weeks, basic state provisions from pensions

to power to garbage collection could be under threat. Many of the best

and the brightest simply want to get out. This man is a respected

consultant Doctor. He hasn't told his hundreds of patients yet, but he

has decided to head to Florida. As US citizens, it is a choice that is

open to every Puerto Rican. When you have kids, and you are thinking

about the chances that they may have when they grow up, you find out that

this island at the present time is not a good choice. So basically, you

want to offer your kids a better future. So in order to offer that,

you have to take a big step. But you have a good job, you are a

successful doctor, you have all of these patients, these records here,

you have hundreds of patients. What is the problem? Right here on the

island we have a big issue with medical companies. They have an

change the payment since the last 15 years. So seeing a patient today in

the surgery, how much do you get paid? 15-20 bucks. So you're saying

you really can't make a good income in the system here in Puerto Rico?

Yes. That has the main situation here. And your wife is also a

doctor? Yes. So you are exactly the sort of people, smart, educated,

motivated people, that this island needs to keep your. And yet you are

going. Do you feel bad about that? Sometimes I do feel that -- here.

Because you do feel kind of... I mean, you are leaving people that

you love on the island and sometimes you think that you have to help

them, do something for them. But when you don't have support from the

government, what else can you do? You have to provide for your family.

So that is a tough decision. Have you got job offers already? Yes. How

much do the deed can earn in the United States, roughly? Roughly,

maybe you can make 50% more than you can make on the island. When you go

to Florida, take the wife, the kids, do you think you'll ever come home,

back to Puerto Rico? I don't think I'm going to come back ever. I can

come back for vacations, short stay, but not to live again. I don't think

so. The situation on the island, I don't think it is going to change.

So basically, we're leaving forever.

For previous generations of poor Puerto Rican 's immigration was a

way out. Now whole communities are heading to the exit. This place is

80 kilometres away from San Juan. It used to be a thriving commercial

centre propped up by the thriving sugarcane industry. The sugarcane

has gone and so has many of the towns businesses. 5000 residents

have moved out in the last five years. Puerto Rico's total

population is down 10% in a decade. The Jefferson high school in the

centre of town was opened in 1909, now only weeds flourish in the

playground. There is something uniquely depressing about a derelict

school with an overgrown playground. These towns are losing their young

people. The average age here has risen dramatically. It feels like

the lifeblood is draining away. We found this family enjoying Sunday

lunch in the centre. This man is a postman and his wife is a nurse.

They want to stay but they are not sure they will.

How can Puerto Rico rebuild its economic foundations? Well, in San

Juan they are trying to attract mega rich American entrepreneurs by

exploiting a clause in the US tax code which gives huge tax breaks to

multimillionaires prepared to relocate to the island. We're

actually in the of San Juan right now. This is one businessman who has

moved his family here. He is running the biggest development project in

all of Puerto Rico posting a speculative debt on the island's

ability to repair its broken economy. One thing I do know is that

the only way that Puerto Rico heals itself is to attract outside

capital. Without that, the engine does not run. You have to have money

and the three wins will areas where capital resides in Puerto Rico is

real estate, bank stocks and bonds. All three of those took an enormous

hit. Without outside capital, this place will not be able to

resurrect. In what you say to those Puerto Rico to see you as a

vulture? Picking away at the corpse of the Puerto Rico economy. I say

that these assets were available to everyone in Puerto Rico for a long

time before we came and acquired them. We did not acquire them to be

a quick con artist and flip them. We decided to add value to them and we

ended up in point thousands of people as a result. The assets that

we have acquired are primarily for Puerto Rico and is, we're not

looking to attract outsiders, we are looking to solve issues internally.

You sound passionate, and you also sounds kind of angry that you are

being characterised by some on this island is a guy who has come in to

take advantage of their problems. That is a very small minority of

people and if I come across as angry, I shouldn't, because I have

been, I think welcomes to a degree, to a place and that has been very

gratifying. They have seen that our investments have translated into

real work that has translated into a thoughtful investment approach that

takes into consideration neighbourhoods. That is meaningful.

Puerto Rico is an economy and a culture caught between two MacWorld.

-- two worlds. For a decade the government spends beyond its means.

They hoped that the federal government in Washington would help

if things got messy. Well, they did. And our politicians in Washington

and Puerto Rico are fighting over who should pay the price. $18

billion worth of the debt was issued by the central government and it is

guaranteed by our Constitution. This is a society of law and order and of

course we have to pay that. Then you have debt issued by public

corporations, government owned entities, the water and sewer

authority of Puerto Rican and I'm saying with respect to those, we

should restrict those debts. And I am the one who introduced... And if

the creditors don't agree, would you say to them, tough you are going to

lose money if you like it or not? You have to be smart about it. Just

answer the question because this is important to the people who put

money into Puerto Rico. I've got to say that you are going to lose your

money? You sit down with the creditors and you try to renegotiate

the structure. You are right. When push comes to shove it could get to

that. There is a difference between saying that I am not paying, and

sitting down and tried to renegotiate a new deal. So a

generation of politicians were living be on its means? Yes. You and

your party have failed the people of this country for a generation. Why

are you in this mess then? No. It is shared responsibility. What portion

of response ability are you willing to take? I will take it on behalf of

the people of Puerto Rico because they collect their officials in

government and the officials need to come to the table. I want to hear

what responsibility you want to take. To the extent that the

government was financing in the markets and operating, and that is

not a good practice. There is shared response ability because we had to

ask why were we in that boat? And we were in that boat because the

federal government has not been treating Puerto Rico fairly. Dude

you can get away with -- do you think you can get away with lining

the federal government? Both. They also own part of this problem. It is

not as simple as saying the leaders of Puerto Rico have been

incompetent. That is not right. Because, we do owe and we share out

of the responsibility to an extent that there was overspending input

Rico. I agree. We have too put our fiscal house in order. At the same

time we have been losing billions of dollars and we are American citizens

because of the treatment we get from the federal government. And that

affects our economy and the fiscal health of our economy. And you

believe that the treatment of that is full statehood Puerto Rico to be

a state just like Florida. That would be a permanent solution to the

lack of democracy the Puerto Rico has, and on the other hand, the lack

of federal treatment of Puerto Rico. The bottom line is that

whatever you want Washington to do to help you, they are not going to

do it. They better. Why? We are American citizens and people are

leaving Puerto Rico in droves. We are losing 60,000 people a year.

What if people in Washington don't care about that? They should care

because this could be an embarrassment to them. It has become

an embarrassment. It is 10pm in a working-class neighbourhood of San

Juan. We just got here and a TV news is still full of the economic

miseries of this place but we seem to have found a party. Let us take a

look. Never mind the debt or the economic crisis, in San Juan the

beat goes on. It is tempting for Puerto Rico and's to ignore the mess

they are in. When the music stops they are going to be left with an

almighty hangover. It could take years for the pain to leave them.