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tv   Fault Lines  Al Jazeera  October 20, 2015 2:30am-3:01am EDT

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>> we've arrived in puerto rico, a us island territory, more than $70 billion in debt. residents are american citizens, but the poverty rate here is 3 times the national average. now, with the economy facing collapse, record numbers are using their american passports to get out. >> i have never been away from home, like this is the first time for a long time.
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>> why did he choose to go? >> he wanted to go. his choice. >> so, the family is incredibly sad, the son is going away for the very first time, he's 21-year old. he's got a job in orlando, florida, and he thought it was a better opportunity. he's taking a flight right now. >> yeah, i mean all my friends are leaving. a lot of people i know, that i talk to, yeah i'm leaving soon, and maybe might not come back. so, they're like yeah i want to do that too, 'cause it will be a better like life there, and i don't know, you know the economy... it's like, it'll be better over there. >> does it make you sad to leave puerto rico? >> it does. this is my home,
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my family, my friends. >> more puerto ricans are leaving now than at any time since the 1950s. as this historic exodus unfolds, fault lines came to find out what the future holds for the island they've left behind. >> we have a good country here >> yeah, it's a beautiful place. >> as puerto rico's crisis deepens, the government is slashing public spending. one of the sectors that's been hardest hit - education. >> yes, in the past two years, the government has shut down 135 schools. >> mercedes martinez is president of the teachers' federation.
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they've been trying to fight the school closures, but the government is now planning hundreds more. >> well, it's definitely a response from the government, and an attack towards the working class and the-- >> an attack on the working class? >> yes, definitely. there-- >> why on the working class? i mean, are the schools in areas where-- >> yes. all of the schools--that have been shut down have been in areas of impoverished communities. >> we're on our way to the jose melendez ayala school, which was closed just before the school year began. but the community has refused to leave until the secretary of education pays them a visit. >> so this is the school? >> yeah, this is the school. >> so this is mainly parents? >> these are parents, teachers, that are waiting for us to get here. >> when police arrived to clear the school out, the community made a stand.
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they've been camped outside for three months, welding the front gates shut so no-one can get in. they still hold the keys to the back entrance, with help from a neighboring church. mayra tapia taught here for decades. >> so this was your classroom. we can go inside? it's still open. her old classroom is on the other side of this door. >> this is the first time you've been up here since it closed? >> yes. >> must be a big change for you?
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>> have you seen inside since then? >> i'm just waiting. >> the school's former students here have been relocated to bigger schools further away. but each day after class, many return to this one, including one of mayra's former students, tanisha. >> yeah, everything's here, everyone knows each other. it's all so familiar like. >> so now, you've been part of this campaign. >> the fight keeps on, and they
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go on and still here... >> 91 days. >> yeah, 91 days, it's a lot. >> the puerto rican education system has been targeted before. in 2008, teachers led an island-wide strike. three years later, university students clashed with police over fee hikes. manuel natal was a leader of those protests -- and is now the youngest member of congress.
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he has opposed a plan released by the governor designed to repay creditors on wall street. the plan calls for even more cuts to public education. >> every day we're being told, "no, you know what? there is no alternative. are we gonna increase taxes on the poor? i'm sorry. there is no alternative. we're gonna reduce-- spending on-- on education. sorry, there is no alternative. we're gonna limit the services of our public transportation. sorry, there is no alternative. and they're trying to force us into one course of action. and some of us are challenging that. we're presenting alternatives. and when we present alternatives, it's no, i'm sorry, that can't be done. >> a decade of economic hardship, and the prospect of more cuts, has left many puerto ricans with no other option but to leave. >> i think most puerto ricans have already made so many sacrifices in order to survive--
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within this crisis, that at this point-- everyone has-- has literally gone to-- to the bare minimum. we have faced in the last couple of years-- a massive exodus, particularly of the youngest and most productive citizens here in puerto rico. i hate to using the word "leaving" because no one is deciding to leave. everyone is being pushed out of the island, and there's not an option of staying. >> catch more "faultlines" episodes on demand or at >> where we are standing right now will be the panama canal. >> this will be flooded. >> we have upgraded for bigger ships. >> now we go for weeks without water. >> techknow's team of experts show you how the miracles of science... >> this is what innovation looks like. >> can affect and surprise us.
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>> not everyone is fleeing puerto rico's economic collapse. as many puerto ricans are pushed out, a new group is arriving. struggling to pay its debts and revive the economy, puerto rico is trying to attract wall street investors by offering some of the lowest tax rates in the world. as a result, investors like nick prouty are moving in. >> you know, we have 600 or 700 people who've moved to puerto have great wealth that has-- that has been attracted to puerto rico. the island is already among the most unequal economies in the united states - now there's an influx of extreme wealth. >> these-- this-- this is the
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ritz reserve, the only six star hotel-- in-- in puerto rico. i think one of the few. >> it's a six star hotel? wow. >> yeah. super-luxe i guess. these are all fixed-- $10 million houses all along here. >> so it's this bizarre contrast of puerto rico at the moment of very intense economic dislocation, and yet at the same time the influx of some very significantly wealthy investors. and that can certainly lead to all sorts of resentment. >> prouty relocated his private equity firm from connecticut 2 years ago. today, he's flying us to his most recent purchase -- a marina on the island's east coast. >> coming up on puerto del ray right in front of us. >> this is your investment? yes, this is the largest marina in the caribbean. this was initially a nine-figure investment.
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>> prouty says investors like him are creating jobs and stimulating the economy. >> hola, todo bien? >> he's keen for more investors to follow his lead. >> and once you do the research, it becomes such a compelling business case. you couple that with a government that's bending over backwards to attract capital and bring people back to the island, both the puerto rican diaspora, that have moved away, as well as people who would've not necessarily moved here, were it not for the incentives. and you couple all that together and you've got something that's really interesting and really compelling. let's go down and grab a drink. >> the government has developed an ad campaign for what they call, some of the most favorable tax conditions in the world. >> i think what investors need to realize, and its pretty amazing, is how puerto rico has worked to create a special combination of factors, that make it unique.
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its incentives, yes, but its lifestyle, its government support, it's the talent of the people. it's a true business forward community and you can't beat that. >> this little video is geared towards promoting some of the legislation that the puerto rican government adopted not long ago, it's called law 20 and 22. >> we met up with rafael bernabe, a former candidate for governor with the working people's party. >> it's basically a tax-free environment. they are telling them, "you-- you're paying taxes in the united states. you are contributing to the public funds in the united states. well, move to puerto rico. you don't have to pay. >> he says the strategy is starving the island of much needed revenue -- leading the economy further into debt. >> 4% corporate tax rates. 100% exemption on all dividends and interest income. 100% exemption on all capital gains. >> so as i tell you -
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>> that's a pretty good deal. >> yeah, that's a pretty good deal, yeah. that's a pretty good deal, and it is a good deal for them. there's no question. the question is whether it's a good deal for puerto rico, and does it generate any economic development? >> the incentives have attracted some of wall street's wealthiest. >> this is our main lobby bar it's called vanderbuilt court this is fahad ghaffar, a partner at paulson & co., a hedge fund that has purchased this 5-star hotel, and several others. >> and that's our other hotel, la concha. there's a beautiful restaurant right on the beach. there's a big ocean, right over there. >> that's yours too? >> yeah. >> wow. >> and if you go through this gate, you walk right through the park and you end up at a humongous beach, which is in front of la concha, but there's a set up over there for vanderbilt guests and their butler, and they have
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their butler service right on the beach. >> they have a butler service on the beach? >> yeah, on the beach. >> that's our spa, 6k square feet. 5k square foot gym. it's got the only hammam in all of puerto rico. >> oh, really? >> so this is the tower? >> this is the suite tower. correct. >> wow, great view! >> so here you can get a great perspective of the whole property. that's the infinity pool in the corner. and then we have some other development lots down the street over there. >> you're buying up a lot of this property. (laugh) >> well, we found some good opportunities at depressed prices. >> back at the marina, we asked nick prouty how his plans fit with the economic recovery. >> for those that say, you-- you know, this type of development isn't what the country needs,
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it's not gonna help, you know - >> it's a thousand jobs. it's a thousand jobs up and down the value chain. it's too easy just to say, okay, well, look at this group coming in with their bentleys and living in their gated communities. it's too easy. it's too easy a story to tell. there is an element of truth to that, no denying that. but, that group eventually will begin to make investments in puerto rico. and those investments will spark the economic recovery. >> the rationale behind that is that-- u.s. or-- external investments in puerto rico will generate employment, will generate economic growth, will generate, in an indirect way, government revenue. that policy has ceased functioning, very evidently. it's not generating employment. it's not generating economic growth. it's not generating higher government revenue. what you have now is an economy which creates a tremendous amount of profits. about $35 billion a year that leave the island in profits.
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>> this is nick prouty, the first time he wanted to meet john paulson, even though they are from new jersey and never met. >> here in the office of puerto rico's secretary of economic development, pictures of wall street investors line the walls. >> we are attracting successful, proven billionaires-- on the top 100 list of investors in the united states and probably in the top 200 investors of the world. >> this is one of the most unequal places in the entire united states. the gap between rich and poor is wider here than it is anywhere else. >> that's-- that's true-- >> bringing in hedge fund billionaires and having, you know, five-star, six-star hotels opening up for those investors to come in and stay while they look for places, properties to buy so that they can take advantage of those tax incentive laws, i mean, isn't that going to just simply exacerbate the
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inequality that already exists and is such a problem here? >> but the reality is that each one of these people that have moved under law 20 and 22 have created three, four jobs, are using our engineers, are using our architects, are using our publicity companies, are buying the properties, are going to our restaurants, are using helicopter services. the pilots are very happy. are using catering for the jets, are creating economic activity that are giving jobs to people, are giving work, and it's something that you had zero. and you have nothing to lose. they are adding up. the fact that some people want to criticize is because they are born that way. they are born losers. they have never been able to succeed. >> maybe a millionaire will move
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to puerto rico, maybe he will employ 10-15 people to tend to his very big mansion, maybe he will spend some money in restaurants, generate a few jobs that way, but that is not going to bring the puerto rican economy out of its crisis. >> welcome to al jazeera america. more reporters, more stories, more perspective. >> from our award-winning news teams across america and beyond. >> we've got global news covered.
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>> last year's crisis at the >> last year's crisis at the
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>> puerto rico's diaspora in the us is 5 million strong and growing every day. but those who've left are well placed to have an impact on the island's future. >> these puerto rican activists have arrived on the doorstep of a manhattan-based hedge fund, blue mountain capital. hedge funds often invest in debt-ridden economies, buying up bonds at low prices, and looking to flip them for quick profits. and puerto rico is their latest target. the strategy has earned them a reputation among critics as so-called "vulture funds."
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>> a group of hedge funds that own puerto rican debt hired claudio loser to find ways for puerto rico to solve its debt crisis. among the former imf economist's recommendations - even more cuts to education.
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>> but it shows the expenditure and school enrollment, how it has declined, school enrollment and how education expenditure has increased enormously. we have been very careful to say that we believe that this is a decision that has to be taken by the authorities of the island. education is too important to be played with and be cut in a irrational or discretional fashion. >> but your co-author briefed reporters that puerto rico is massively overspending on education. >> i mean, that was the message, that came out from the report. >> this is true. people-- i mean, this is for the government to decide. >> that they're massively overspending? >> if you look at the expenditure in education, it is high. >> and do you also need to close schools? i mean, the government has closed around a hundred
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already this year so far. is that something that you think is helpful? >> i don't want to get too much into this. i'm not an expert on education. what is essential is that they were living beyond their means. i mean, this is something that happens to us. of course it's difficult for anybody to cut. it's difficult to live within one's means. >> the report argues that with these cuts, puerto rico should be able to repay its wall street creditors. >> i mean, they have profit motives like most of us do in this society. >> well, they're hedge funds. >> they're hedge funds-- well, they-- you-- you want to-- >> i mean, do they have any other motivations, other than profit? >> i answer culturally with a question. should they have another motivation as a business proposition?
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>> what do you think? >> i don't think so. >> the puerto rican governor's office criticized the hedge fund report as "an extreme form of austerity." but a similar government plan for public education is already in motion. it's a plan that's left tanisha, and her mother jackie camped out in front of their school. >> i used to have this art teacher, it was very special, because i drawed, and he showed me how to draw, and that's when i started, and very important for me. >> that started at the school? >> yeah, that started there that's when i realized it, i can draw and maybe i can do better things and do better stuff. >> can you understand why they would need to take these kinds of measures?
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>> our school represents that mistake for the whole country, and the people who see it and realize that it wasn't a good decision. >> do you ever get congressmen or politicians coming here and seeing the situation? >> government officials have refused to visit the encampment. >> we are making a change, trying to make a change, and we were there, and everyone united, it was very good. maybe we didn't make it but we tried, and that's what counts, and we tried a lot, and did a lot of stuff to open it,
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but they didn't came. >> still, after 130 days, the families remained outside their school, calling for it to be reopened. >> these people have decided that today they will be arrested. >> i know that i'm being surveilled. >> people are not getting the care that they need. >> this is a crime against humanity. >> hands up... >> don't shoot. >> hands up... >> don't shoot. >> what do we want? >> justice. >> when do we want it? >> now. >> explosions going on... we're not quite sure - >> is that an i.e.d.? >> "faultlines". al jazeera america's award-winning investigative series. monday, 10:00 eastern. on al jazeera america.
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canada's liberal party led by justin truu sweeps to victory ending nine years of conservative rule. hello from doha, i'm kamal santa maria. , thousands leave their homes, and separatefor decades, together only a few hours. south koreans are all