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Puerto Rican economic disaster leaves residents struggling

For years, the Puerto Rican economy has been in decline, and the U.S. territory is now on the brink of disaster, with $72 billion of overall debt and an unemployment rate twice that of the mainland. As the island’s government is forced to suspend funding for vital services, hundreds of Puerto Ricans are leaving every day, while those who remain struggle to stay afloat. Jeffrey Brown reports.

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  • JUDY WOODRUFF:

    Now, to the escalating debt crisis in Puerto Rico. The U.S. territory has for some years been in a prolonged financial descent and earlier this week, its government missed a significant loan payment.

    Jeffrey Brown filed our report, from the island's capital city.

    (BEGIN VIDEOTAPE)

  • JEFFREY BROWN:

    The sights and sounds of old San Juan leading back to the 16th century. This morning, locals and tourists enjoyed the charm of the Caribbean island.

    But last night, about an hour away, we heard of another Puerto Rico. Coral Jimenez lives with her 11-year-old son Felix who suffers severe disabilities. Several months ago, the fiscal crisis that now plagues this island territory trick ltd down to her son.

  • CORAL JIMENEZ:

    The people that provide therapy for my son were not getting paid so we stopped getting the services for more than a month. He couldn't get his physical therapy, occupational therapy, speech therapy, psychological therapy, he stopped getting them.

  • JEFFREY BROWN:

    Coral says caring for her son has taken a village of friends and family. But now, that village itself needs help.

  • CORAL JIMENEZ:

    For a son like my Felix, I required therapy, I required his father to help me economically. My mom has to help me, but the economy has been affecting his father's business. He's doing the best he can, but he's warning me things are not going the way they used to be.

    Some friends of mine, they used to helped me a lot, they have to move to the States, so I don't count on those friends anymore.

  • JEFFREY BROWN:

    Around San Juan, we heard other stories from victims of a slow-moving economic crisis that's battered government coffers and sacked personal savings. The unemployment rate is here is double that of the mainland U.S.

  • MAN (through interpreter):

    My kids are grown up now. One is in university and I also have grandchildren. They are suffering, too, because I can't help them the way I normally would have.

  • JEFFREY BROWN:

    One response, Puerto Ricans are leaving in record numbers, some 230 a day. According to a recent study, Puerto Rico lost testimony 2 percent of its population in 2014 and the flight continues.

    Enrique Cuervas runs a bodega in San Juan.

  • ENRIQUE CUERVAS (through interpreter):

    My sister in law moved to the U.S. she was struggling as a nurse in Puerto Rico. Now she lives in Florida and she's doubled her salary. They pay her $29 an hour. She was making $9 here.

  • DOMINGO CRUZ, San Jose Children’s Hospital:

    Health professionals are leaving the island. You see an empty ward right now. I have to between frozen positions and layoffs, I had about one-fifth, about 100 positions that I have either frozen or laid off employees.

  • JEFFREY BROWN:

    One hard-hit sector, health care. Domingo Cruz, head of San Jorge Children's Hospital in San Juan, has had to make difficult choices as people slide into poverty, can't pay their bills and the government rolls back its support.

  • DOMINGO CRUZ:

    No business can stay open if you cut 40 percent of your business. If Congress doesn't assign resources to the Medicaid program, the whole healthcare system on the island will collapse.

  • JEFFREY BROWN:

    Collapse?

  • DOMINGO CRUZ:

    It will collapse. Eventually, there will not be enough healthcare professionals to take care of the 3.5 million U.S. citizens in Puerto Rico.

  • JEFFREY BROWN:

    The question of the moment is whether Puerto Rico itself can stay in business. Some of the problems have gone on for more than a decade, but this week came the latest twist, as the government will default on a scheduled debt payment.

    Sergio Marxuach of the Center for a New Economy, an independent Puerto Rican-based think tank, says Puerto Rico failed time and again to adjust to economic realities.

    SERGIO MARXUACH, The Center for a New Economy: The two big problems are the economic slow down and the debt crisis. Puerto Rico has been contracting since 2006, that's when the tax break for U.S. companies doing business in Puerto Rico expired. Congress phased it out starting in 1996 over ten years.

  • JEFFREY BROWN:

    And companies left and jobs left —

  • SERGIO MARXUACH:

    Companies left and jobs left and the government had to increase the debt to keep the economy going.

  • JEFFREY BROWN:

    Today, that overall debt stands at an astounding $72 billion. And on Monday, the government said it would not pay a piece of it, a $422 million payment owed by it government development bank.

  • GOV. ALEJANDRO GARCIA PADILLA, Puerto Rico:

    I haven't been able to afford one then you have the other.

  • JEFFREY BROWN:

    Puerto Rico's Governor Alejandro Garcia Padilla says he had to make a choice between paying off creditors and providing basic services.

  • GOV. ALEJANDRO GARCIA PADILLA:

    I do not have the moneys. It's not that I do not want to pay. It's I just don't have the money. It's automatic.

    If today I have to pay to supply fuel to police cars, I will not pay the supplier of the medicines to the medical center.

  • JEFFREY BROWN:

    It's that — you have to pick one or the other, you feel?

  • GOV. ALEJANDRO GARCIA PADILLA:

    Every day.

  • JEFFREY BROWN:

    The governor blames what he calls vulture hedge funds blocking Puerto Rico's request to restructure its debt and sees racial discrimination and ads now airing in the U.S.

  • AD:

    Stop the Washington bailout of Puerto Rico.

  • GOV. ALEJANDRO GARCIA PADILLA:

    Why are they using actors, trying to represent that they are Puerto Ricans? Why are they say we're asking for a bailout, one that's not true? It's just because we are not a state? It's just because we're not a republic? It's just because we are Puerto Rican?

  • JEFFREY BROWN:

    The governor wants help from Washington and key figures from Treasury Secretary Jack Lew to House Speaker Paul Ryan are looking for possible solutions including new legislation that would allow Puerto Rico to file for a kind of municipal bankruptcy, as Detroit did.

    For the moment, though, there's a political stalemate. If it lasts, Governor Garcia Padilla has warned, a bailout by U.S. taxpayers is inevitable.

    SOFIA STOLBERGER, Piloto 151: We are optimistic entrepreneurship is the way forward.

  • JEFFREY BROWN:

    But for some, the picture is much brighter, filled with opportunity. Piloto 151 is small business aiming for a giant breakthrough. It's part tech incubate around meet-up place, offering office space and training to would be entrepreneurs.

    Sofia Stolberg is the co-founder.

  • SOFIA STOLBERG:

    When there is economic pain, there is economic opportunity. We truly believe entrepreneurship and high-growth entrepreneurship is what's going to help us out of this fiscal crisis we're currently in.

  • JEFFREY BROWN:

    How does that do that?

  • SOFIA STOLBERG:

    It will eventually get to a critical mass where we'll be able to have at least one big home run that we'll be able to change the economic landscape forever.

  • JEFFREY BROWN:

    It's a lot to hope for and maybe years away.

    The territory as a whole faces its next test when a huge debt payment of $2 billion comes due on July 1st.

    But Coral Jimenez is focused on daily struggles. She wants to remain in her homeland with her son and is trying to hold out faith.

  • CORAL JIMENEZ:

    I'm not like some other people that think the government is against us and the department of education is against us and trying to take away our services. I think people are trying. People of the government, they're trying. But whatever they're doing is not working.

    It's not fair my son gets affected. Hundreds of kids get affected because of decisions somebody else is making, and I don't think for a second that they're doing it with a bad intention, but it's affecting the population.

  • JEFFREY BROWN:

    Affecting this island of more than 3 million, one family at a time. From San Juan, Puerto Rico, I'm Jeffrey Brown for the "PBS NewsHour".

    (END VIDEOTAPE)

  • JUDY WOODRUFF:

    And in a second report next week, Jeff will look at how the mosquito-borne Zika virus threatens Puerto Rico, and what the territory is doing to fight back.

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