:00:00. > :00:00.concluded with the traditional haka performed by players. Thank you for
:00:00. > :00:23.watching BBC News. That is all for me.
:00:24. > :00:29.Will come to this special edition of HARDtalk on the road from Puerto
:00:30. > :00:33.Rico. The Caribbean island which belongs to the United States and
:00:34. > :00:37.which is currently drowning in debt -- welcome. Just 3.5" people live
:00:38. > :00:43.here but they have managed to run up a public debt of $70 billion.
:00:44. > :00:49.Without an emergency financial rescue, Puerto Rico is going bust
:00:50. > :01:08.and that will send shockwaves all the way to Wall Street -- 3.5
:01:09. > :01:20.million. San Juan Puerto Rico has miles of palm trees and year-round
:01:21. > :01:23.sunshine -- miles of beach, palm trees and year-round sunshine. To
:01:24. > :01:33.the new arrival, it is the classic Caribbean cocktail. But for Puerto
:01:34. > :01:38.Ricans life has turned sour. Their island is on the road to economic
:01:39. > :01:44.ruin. Driving around the streets of San Juan, frankly it feels pretty
:01:45. > :01:48.much like driving around Florida. This place is incredibly
:01:49. > :01:55.Americanized. But the statistics, they don't lie. Unemployment is more
:01:56. > :02:00.than twice as high in Puerto Rico and Darfur poverty rates come out
:02:01. > :02:07.well, this place is more than twice as poor as the poorest state in the
:02:08. > :02:14.US -- and as for. Puerto Rico is US sovereign territory, it has been for
:02:15. > :02:19.more than a century. But unlike Hawaii, for example, Puerto Rico is
:02:20. > :02:22.not a state in the union. It governs itself. For most Americans, the
:02:23. > :02:36.island has never been more than a one-day stop on a Caribbean cruise.
:02:37. > :02:40.This is the rhetoric of tourists don't see, demonstrators taking to
:02:41. > :02:44.the streets in defence of basic public services threatened by a
:02:45. > :02:50.Greek style debt crisis. Nine years of recession, a collapse in outside
:02:51. > :02:53.investment and a government borrowing way beyond its means have
:02:54. > :03:01.taken Puerto Rico to the edge of financial ruin. The island's
:03:02. > :03:05.government has a massive pile of public debt and the creditors,
:03:06. > :03:12.including America's biggest pension funds and hedge funds want their
:03:13. > :03:18.money back. I represent and I advise different groups of investors that
:03:19. > :03:22.hold Puerto Rico paper and some of the maybe hedge funds, many of them
:03:23. > :03:26.are companies that have been committed to Puerto Rico for 30-40
:03:27. > :03:31.years and have held bonds for many decades. Here's the thing, your
:03:32. > :03:33.Puerto Rican and have worked in the periphery can government. I wonder
:03:34. > :03:38.if it sits comfortably and easily with you to be pushing for repayment
:03:39. > :03:43.of these debts when the governor of Puerto Rico says, frankly, the debt
:03:44. > :03:48.mountain is so high that the debts are unpayable in his words. He is
:03:49. > :03:54.wrong and I was wrong before I represented anybody -- he was
:03:55. > :03:57.wrong. I don't think the way you resolve this financial crisis is to
:03:58. > :04:03.be slapping in the face the people who have helped Puerto Rico finance
:04:04. > :04:07.it's developed over the years. And the same people that you are going
:04:08. > :04:11.to try to attract in the future to continue investing in Puerto Rico.
:04:12. > :04:14.We can make adjustments, but to do that you have to have a good-faith
:04:15. > :04:22.negotiation on both sides of the table. Do you bring good faith of
:04:23. > :04:27.the table? Yes we do. I don't negotiate. But you represent those
:04:28. > :04:31.who do, and what we hear is that they are driving a very hard
:04:32. > :04:36.bargain, a bargain that the Puerto Rican government he authorities here
:04:37. > :04:40.cannot meet. For example, they are demanding new taxes and even greater
:04:41. > :04:44.cuts to pensions. They want things which are going to hurt the ordinary
:04:45. > :04:47.people of this island. We are in the crisis because the governor Puerto
:04:48. > :04:52.Rico wants to spend more than Puerto Rico can afford to spend. The
:04:53. > :04:57.development bank which manages the finances here has less than 1
:04:58. > :04:59.billion US dollars in cash reserves. Those cash reserves could be
:05:00. > :05:05.finished by the end of this year. This place could be going bust. If
:05:06. > :05:10.there is mismanagement, yes, money could be over but if there is not
:05:11. > :05:15.mismanagement, if you solely spend on things that are essential, you
:05:16. > :05:21.would not have the mismanagement. Do you think are Rico will go bust?
:05:22. > :05:26.Puerto Rico has no reason to go bust -- Puerto Rico. You are asking me a
:05:27. > :05:33.very logical question regarding people who have made a logical
:05:34. > :05:37.progress. There is no need for us to go bust and there are roadmaps to
:05:38. > :05:48.resolving the crisis and no having to go bust. -- not having to.
:05:49. > :05:54.Protesters from the teacher's Union vent their anger on the steps of the
:05:55. > :06:00.island's Parliament. They are furious about government plans to
:06:01. > :06:05.reform the education system. Well, they are in good voice but there are
:06:06. > :06:09.not many of them. Maybe that is the problem here in Puerto Rico. People
:06:10. > :06:16.are losing any hope that they can actually get out of the mess that
:06:17. > :06:23.they are in. Schools are being closed, pensions cut and according
:06:24. > :06:28.to the teachers, education is being privatized and the government is
:06:29. > :06:34.desperate to save cash. Our students don't have money to pay a private
:06:35. > :06:40.school. A don't have money to pay for lunch at school. School should
:06:41. > :06:44.be for everybody. And it should be public and that is why we are here,
:06:45. > :06:48.we are defending our students and our communities. They are closing
:06:49. > :06:52.schools. You have to pay for many things when we privatize schools and
:06:53. > :06:58.that is not fair. Our Constitution says public school should be
:06:59. > :07:02.public. Inside Puerto Rico's public building, a woman testifying is the
:07:03. > :07:07.guardian of the island's public finances, the boss of the government
:07:08. > :07:14.development bank. She is, but she is in the eye of the financial storm --
:07:15. > :07:18.she is calm. The Puerto Rican government is very close to running
:07:19. > :07:22.out of money. If we have taken emergency measures, we would have
:07:23. > :07:28.already been out of money -- if we hadn't. For example, we have taken
:07:29. > :07:36.certain measures, such as delaying payments to lenders, not paying tax
:07:37. > :07:44.refund that we owe to our citizens, and so forth. So you are reneging on
:07:45. > :07:50.your debts already? Yes. One of the debts was not paid. It was due in
:07:51. > :07:56.July-August and we didn't pay it. So if I may say so, you are teetering
:07:57. > :07:59.on the brink of a serious default? Right now we have two major bonds
:08:00. > :08:05.that are due in December and January, very large amounts. This
:08:06. > :08:11.represents almost 700 million US dollars? Exactly. And you don't have
:08:12. > :08:17.the money to pay? We have been taking measures that are actually
:08:18. > :08:21.hurting our economy to make sure we keep the government running. But
:08:22. > :08:26.will you be able to pay those repayments in December and January,
:08:27. > :08:32.yes or no? We are taking measures to try to be able to pay. One of them
:08:33. > :08:38.has to do with the financing. You don't sound very confident. Because
:08:39. > :08:41.you can plant, but for example, you cannot make sure that the revenues
:08:42. > :08:44.are going to come as estimated or budgeted. You could have a shortfall
:08:45. > :08:48.in revenues like we have for the month of October. There is risk
:08:49. > :08:54.involved. And what you going to do to ensure that pensions get paid,
:08:55. > :08:59.essential services are financed, that people's healthcare needs are
:09:00. > :09:08.met? You may run out of liquid cash? Yeah. We commissioned a study from
:09:09. > :09:10.IMF economists and it came back that our debt is not sustainable. With
:09:11. > :09:14.the amount of growth that we have... That is the problem, it is
:09:15. > :09:19.not that we have too much debt, it is that we have no growth in our
:09:20. > :09:24.economy and too much debt. I have just spoken to Mr McClintock, the
:09:25. > :09:27.lobbyist, who is being paid by the creditors to sit in on negotiations
:09:28. > :09:32.and he says you and the governor are crying wolf. You are claiming the
:09:33. > :09:37.debts are higher than they really are, that you have run out of money,
:09:38. > :09:41.and he says you simply doing it to avoid paying what is due. That is
:09:42. > :09:48.completely wrong. I mean, that is not true. This is the debt we have.
:09:49. > :09:53.We have analysis and studies. We cannot hide the debt. It is public.
:09:54. > :09:56.There are reports issued by the bank on the amount of debt. But the
:09:57. > :10:02.creditors are not in a good mood. Look at what they said in the
:10:03. > :10:06.summer, when the president said the debts are unpayable. The creditors
:10:07. > :10:10.said, how dare he say that, he is sending a signal before negotiations
:10:11. > :10:14.that he's not going to pay? That is the problem Puerto Rico has. We are
:10:15. > :10:18.different from the United States, we do not have chapter nine which is a
:10:19. > :10:22.bankruptcy protection law, the same law at Detroit used recently to
:10:23. > :10:27.restructure itself. We don't have that. Would've the creditors say,
:10:28. > :10:30.forget about it, I want my money back? We have to take a decision
:10:31. > :10:34.whether to pay the debt or provide basic services to Puerto Rican
:10:35. > :10:37.citizens. If we have to choose, we're going to provide basic
:10:38. > :10:45.services. By Christmas, Puerto Rico could be bust? Again, we have
:10:46. > :10:50.measures in place... But that is the truth? We have planned measures,
:10:51. > :10:54.again there is risk in the implementation of these measures, to
:10:55. > :10:58.move forward, but definitely if we move forward by December -January,
:10:59. > :11:07.we have a huge cash wall facing us in June. If it is not in December,
:11:08. > :11:14.it will be in June. On the streets of San Juan, there is not exactly an
:11:15. > :11:17.air of panic. But within weeks, basic state provisions from pensions
:11:18. > :11:23.to power to garbage collection could be under threat. Many of the best
:11:24. > :11:31.and the brightest simply want to get out. This man is a respected
:11:32. > :11:37.consultant Doctor. He hasn't told his hundreds of patients yet, but he
:11:38. > :11:42.has decided to head to Florida. As US citizens, it is a choice that is
:11:43. > :11:46.open to every Puerto Rican. When you have kids, and you are thinking
:11:47. > :11:51.about the chances that they may have when they grow up, you find out that
:11:52. > :11:57.this island at the present time is not a good choice. So basically, you
:11:58. > :12:04.want to offer your kids a better future. So in order to offer that,
:12:05. > :12:08.you have to take a big step. But you have a good job, you are a
:12:09. > :12:11.successful doctor, you have all of these patients, these records here,
:12:12. > :12:16.you have hundreds of patients. What is the problem? Right here on the
:12:17. > :12:22.island we have a big issue with medical companies. They have an
:12:23. > :12:28.change the payment since the last 15 years. So seeing a patient today in
:12:29. > :12:33.the surgery, how much do you get paid? 15-20 bucks. So you're saying
:12:34. > :12:38.you really can't make a good income in the system here in Puerto Rico?
:12:39. > :12:44.Yes. That has the main situation here. And your wife is also a
:12:45. > :12:48.doctor? Yes. So you are exactly the sort of people, smart, educated,
:12:49. > :12:54.motivated people, that this island needs to keep your. And yet you are
:12:55. > :13:01.going. Do you feel bad about that? Sometimes I do feel that -- here.
:13:02. > :13:08.Because you do feel kind of... I mean, you are leaving people that
:13:09. > :13:12.you love on the island and sometimes you think that you have to help
:13:13. > :13:16.them, do something for them. But when you don't have support from the
:13:17. > :13:20.government, what else can you do? You have to provide for your family.
:13:21. > :13:25.So that is a tough decision. Have you got job offers already? Yes. How
:13:26. > :13:31.much do the deed can earn in the United States, roughly? Roughly,
:13:32. > :13:36.maybe you can make 50% more than you can make on the island. When you go
:13:37. > :13:42.to Florida, take the wife, the kids, do you think you'll ever come home,
:13:43. > :13:49.back to Puerto Rico? I don't think I'm going to come back ever. I can
:13:50. > :13:54.come back for vacations, short stay, but not to live again. I don't think
:13:55. > :13:57.so. The situation on the island, I don't think it is going to change.
:13:58. > :14:08.So basically, we're leaving forever.
:14:09. > :14:19.For previous generations of poor Puerto Rican 's immigration was a
:14:20. > :14:27.way out. Now whole communities are heading to the exit. This place is
:14:28. > :14:33.80 kilometres away from San Juan. It used to be a thriving commercial
:14:34. > :14:38.centre propped up by the thriving sugarcane industry. The sugarcane
:14:39. > :14:44.has gone and so has many of the towns businesses. 5000 residents
:14:45. > :14:55.have moved out in the last five years. Puerto Rico's total
:14:56. > :15:01.population is down 10% in a decade. The Jefferson high school in the
:15:02. > :15:09.centre of town was opened in 1909, now only weeds flourish in the
:15:10. > :15:14.playground. There is something uniquely depressing about a derelict
:15:15. > :15:22.school with an overgrown playground. These towns are losing their young
:15:23. > :15:28.people. The average age here has risen dramatically. It feels like
:15:29. > :15:34.the lifeblood is draining away. We found this family enjoying Sunday
:15:35. > :15:38.lunch in the centre. This man is a postman and his wife is a nurse.
:15:39. > :16:13.They want to stay but they are not sure they will.
:16:14. > :16:23.How can Puerto Rico rebuild its economic foundations? Well, in San
:16:24. > :16:27.Juan they are trying to attract mega rich American entrepreneurs by
:16:28. > :16:31.exploiting a clause in the US tax code which gives huge tax breaks to
:16:32. > :16:37.multimillionaires prepared to relocate to the island. We're
:16:38. > :16:42.actually in the of San Juan right now. This is one businessman who has
:16:43. > :16:48.moved his family here. He is running the biggest development project in
:16:49. > :16:50.all of Puerto Rico posting a speculative debt on the island's
:16:51. > :16:56.ability to repair its broken economy. One thing I do know is that
:16:57. > :17:01.the only way that Puerto Rico heals itself is to attract outside
:17:02. > :17:07.capital. Without that, the engine does not run. You have to have money
:17:08. > :17:11.and the three wins will areas where capital resides in Puerto Rico is
:17:12. > :17:16.real estate, bank stocks and bonds. All three of those took an enormous
:17:17. > :17:20.hit. Without outside capital, this place will not be able to
:17:21. > :17:24.resurrect. In what you say to those Puerto Rico to see you as a
:17:25. > :17:33.vulture? Picking away at the corpse of the Puerto Rico economy. I say
:17:34. > :17:36.that these assets were available to everyone in Puerto Rico for a long
:17:37. > :17:41.time before we came and acquired them. We did not acquire them to be
:17:42. > :17:46.a quick con artist and flip them. We decided to add value to them and we
:17:47. > :17:51.ended up in point thousands of people as a result. The assets that
:17:52. > :17:55.we have acquired are primarily for Puerto Rico and is, we're not
:17:56. > :18:00.looking to attract outsiders, we are looking to solve issues internally.
:18:01. > :18:05.You sound passionate, and you also sounds kind of angry that you are
:18:06. > :18:13.being characterised by some on this island is a guy who has come in to
:18:14. > :18:16.take advantage of their problems. That is a very small minority of
:18:17. > :18:23.people and if I come across as angry, I shouldn't, because I have
:18:24. > :18:28.been, I think welcomes to a degree, to a place and that has been very
:18:29. > :18:33.gratifying. They have seen that our investments have translated into
:18:34. > :18:36.real work that has translated into a thoughtful investment approach that
:18:37. > :18:48.takes into consideration neighbourhoods. That is meaningful.
:18:49. > :19:03.Puerto Rico is an economy and a culture caught between two MacWorld.
:19:04. > :19:06.-- two worlds. For a decade the government spends beyond its means.
:19:07. > :19:12.They hoped that the federal government in Washington would help
:19:13. > :19:15.if things got messy. Well, they did. And our politicians in Washington
:19:16. > :19:22.and Puerto Rico are fighting over who should pay the price. $18
:19:23. > :19:26.billion worth of the debt was issued by the central government and it is
:19:27. > :19:30.guaranteed by our Constitution. This is a society of law and order and of
:19:31. > :19:35.course we have to pay that. Then you have debt issued by public
:19:36. > :19:41.corporations, government owned entities, the water and sewer
:19:42. > :19:46.authority of Puerto Rican and I'm saying with respect to those, we
:19:47. > :19:52.should restrict those debts. And I am the one who introduced... And if
:19:53. > :19:59.the creditors don't agree, would you say to them, tough you are going to
:20:00. > :20:03.lose money if you like it or not? You have to be smart about it. Just
:20:04. > :20:07.answer the question because this is important to the people who put
:20:08. > :20:10.money into Puerto Rico. I've got to say that you are going to lose your
:20:11. > :20:15.money? You sit down with the creditors and you try to renegotiate
:20:16. > :20:20.the structure. You are right. When push comes to shove it could get to
:20:21. > :20:24.that. There is a difference between saying that I am not paying, and
:20:25. > :20:29.sitting down and tried to renegotiate a new deal. So a
:20:30. > :20:37.generation of politicians were living be on its means? Yes. You and
:20:38. > :20:43.your party have failed the people of this country for a generation. Why
:20:44. > :20:50.are you in this mess then? No. It is shared responsibility. What portion
:20:51. > :20:57.of response ability are you willing to take? I will take it on behalf of
:20:58. > :21:00.the people of Puerto Rico because they collect their officials in
:21:01. > :21:06.government and the officials need to come to the table. I want to hear
:21:07. > :21:09.what responsibility you want to take. To the extent that the
:21:10. > :21:15.government was financing in the markets and operating, and that is
:21:16. > :21:21.not a good practice. There is shared response ability because we had to
:21:22. > :21:26.ask why were we in that boat? And we were in that boat because the
:21:27. > :21:35.federal government has not been treating Puerto Rico fairly. Dude
:21:36. > :21:44.you can get away with -- do you think you can get away with lining
:21:45. > :21:47.the federal government? Both. They also own part of this problem. It is
:21:48. > :21:51.not as simple as saying the leaders of Puerto Rico have been
:21:52. > :21:58.incompetent. That is not right. Because, we do owe and we share out
:21:59. > :22:03.of the responsibility to an extent that there was overspending input
:22:04. > :22:08.Rico. I agree. We have too put our fiscal house in order. At the same
:22:09. > :22:12.time we have been losing billions of dollars and we are American citizens
:22:13. > :22:15.because of the treatment we get from the federal government. And that
:22:16. > :22:20.affects our economy and the fiscal health of our economy. And you
:22:21. > :22:29.believe that the treatment of that is full statehood Puerto Rico to be
:22:30. > :22:32.a state just like Florida. That would be a permanent solution to the
:22:33. > :22:36.lack of democracy the Puerto Rico has, and on the other hand, the lack
:22:37. > :22:41.of federal treatment of Puerto Rico. The bottom line is that
:22:42. > :22:53.whatever you want Washington to do to help you, they are not going to
:22:54. > :22:56.do it. They better. Why? We are American citizens and people are
:22:57. > :23:04.leaving Puerto Rico in droves. We are losing 60,000 people a year.
:23:05. > :23:08.What if people in Washington don't care about that? They should care
:23:09. > :23:19.because this could be an embarrassment to them. It has become
:23:20. > :23:23.an embarrassment. It is 10pm in a working-class neighbourhood of San
:23:24. > :23:28.Juan. We just got here and a TV news is still full of the economic
:23:29. > :23:39.miseries of this place but we seem to have found a party. Let us take a
:23:40. > :23:47.look. Never mind the debt or the economic crisis, in San Juan the
:23:48. > :23:54.beat goes on. It is tempting for Puerto Rico and's to ignore the mess
:23:55. > :23:58.they are in. When the music stops they are going to be left with an
:23:59. > :24:20.almighty hangover. It could take years for the pain to leave them.