uses scenes with sounds, to make movies more enjoyable for all, including the deaf and the blind. thanks for watching aljazeera america. i'm del walters in new york, and "inside story" is next. >> struggle against jobs s and high crime and soaring debt it is time times for puerto rico. can the island get back on track economically. it's the "inside story." >> hello. i'm ray suarez and many of the

citizens on the mainland don't know that the people of puerto rico are u.s. citizens. the american flag fly i long side the star and stripes. the colony fell into uncle sam's lap after the war with spain and the u.s. never thought much about what to do with puerto rico or the puerto ricoians after the war was over. it brought change legally, economically, culturely and puerto rico obtained self-government and high level cases are judged in federal courts, the people are citizens from birth served in the military in large numbers in every war, and yet don't get to choose the president or have a vote in congress or pay federal

income tax. it has taken a backseat to the crisis front and center and puerto rico is in trouble and many that can are leaving. it has been nearly five years since making the leap of her life from puerto rico to virginia. >> i was a graphic design professional on the island. i had an apartment. my family close by and clients and so forth. >> today she owns a flooring company with her husband. she says a drying up economy left them no choice but to leave. >> we could see criminality was rising and the buildings were run down. >> one of the thousands educated puerto ricoians that left the island for work. >> in a lot of the businesses in the main avenues a lot of homes for sale.

these are like in very nice neighborhoods and stay for sale for a long time and you see the grass growing and the trees and all of a sudden it is like the property is abandoned and this is it, either i move or i'm going to lose what i have here. >> for aech -- each of the for sale signs, junk stat us. that is the debt equal to more than 90% of the island's gross domestic product and the per capita income $15,000 and unemployment is 15%, double that of the u.s. mainland. >> the more inequalities and the poorer the country. if we don't stop the circle we

are racing to the bottom. >> puerto rico's government is testing a list of measures to climb out, tax increases and rebalancing the pensions and new bonds to help pay the bills. >> we cannot continue financing, ob rate as we did in the last ten years or more. >> in washington, puerto rico delegate to the house of representatives is pushing for assistance. >> the latest initiative i have is i wrote the president, the task force, the white house task for for puerto rico and encouraging the president to full inclusion of puerto ricoian tax credit program when the president makes his next budget petition to congress. >> as shops board up and schools are crumbling, the crime and corruption is escalating.

in 2011, a thousand people killed. the highest number in puerto rico's recent history. carlo losing his daughter to a stray bullet. >> the police are doing nothing and we have no fate in the justice department. they recry created the crime scene and never came back. >> the island strong struggled the poverty. draining the livelihoods in what seemed like overnight. >> what i know is a lot of professionals are leaving. it is not necessarily the person that you know is starting out and they don't have an education, these are people that are prepared, they have higher education, and maybe we should start over.

>> since leaving, the population has declined by over 2%, a huge hit for a commonwealth of 3.7 million people. >> you get used to certain things and a life style and all of a sudden you are like lose r losing this, okay, so you change, you don't have that life style and then to a point how far do i really have to go before i say okay i have to reinvent myself and start something new. >> the question of state hood for puerto rico was again put on the congressional table, but with deteriorating conditions at home, educated population on the move and no financial solutions in sight the challenges for the island remain enormous. >> the way forward is not clear. how did puerto rico get into this situation and how is it

going to get out. for a look inside of puerto rico, from the islanisland, for secretary of state and policy advisor, from health health professor charles of the institute of puerto ricoian and latino studies at the university of connecticut and here in washington, justin, executive director of the national puerto rico chamber of commerce. kenneth, we are starting with you, this is not something that happened overnight. what's been going the island that deepened the economic crisis there? >> well, for over 60 years we have been getting special treatment and when you have special tax treatments from the government and wiped away in a minute you are not able to develop sustainable growth with special treatment.

you need permanent policies in place and temporary special treatments trigger economic spurts, but not economic growth. puerto rico needs economic growth. since the constitutional approved in 1952 no change in the economic gap. we are a third of the national economy then. we are still a third. we have to try something different. the people of puerto rico said they no longer consented to be governed under the present relationship and 70% of those choose state hood and equality. it is time for equality. right now the first thing that has to happen is that the government has to get everybody together and with two constraints what the

constitution says and what the people said and come up with ideas and solutions that are compatible with the constitution and not violating the people's mandate of november 2012. >> kenneth is a member of the party that supports the state hood for puerto rico. professor, we are going to you, he talked about trer taxing status, i'm wondering if a word a more mobil capital made it easier to invest in and then take things out of puerto rico when things changed. when driving on the highway you saw signs that american pharmaceuticals and computer companies and manufacturers were investing in manufacturing in puerto rico and then whenning things changed it is easy to

pluck up the facilities and plant them some where else. >> sure. but part of this, part of the historical conflict is why for example section 936, why was it closed and eliminate the subsidies and that was generating the income on the island and creating a situation where the state hood is the alternative to bail out the island and another question to be asked if how is it contributing to investing in or in the global markets. those doors are closed currently. and not sure that the state hood is going to open those doors. >> justin, we got long view historical answers from the other two guests, but if you

look at the short term trends, there are empty hotels, the government laid off 10% of the entire work force, the public work force of the island, there are houses that are boarded up, shops are closed and there's no demand for them ever to open, these are short term signs of something that's really pretty dire, isn't it? >> absolutely. there is a tremendous structural problem in puerto rico. and described a dependent rate and disapatching from that in which you depend on the help the economy grow. puerto rico has to do whatever it want abouts and right now short term they have a huge amount of debt because of funding the welfare programs and healthcare and all types of incentives to get the industry

to the island. employment is falling. gone up 2 percentage points. can you imagine if that happened in the united states? there are certainly a lot of economic incentives that we would or puerto rico could do to stem it, but a lot holding it back and pressures from the investors and s&p and the credit ratings giving them a shot in the arm and giving them that downgrade and hard tore borrow the money and fund the spending that puerto rico has. so they have a spending problem, a debt problem, and economic activity is falling and as mentioned before that brain drain and the people are leaving the island, the professionals and the young people meant to supplement the economy and pay for the programs that are in

place on the island and they are leaving the island. >> we talk about the problems and how they got into them and how

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primetime news. >> i'm john seigenthaler in new york. >> stories that impact the world, affect the nation and touch your life. >> it's like a brawl here in the waters around monterey. >> only on al jazeera america. >> welcome back to "inside story." on this edition of the program, we are talking about the rippling impact of the deep economic problems in puerto rico. it is growing under the weight of $70 billion in debt, unemployment 15%, nearly twice the national average. is the uz the guarantee of the debt and if it cannot meet the payments, is washington the guarantor or the lender of the last resort? >> no, actually, at the end of the day it is up to us to resume the responsibility over our debts because you might have a

quick fix from washington, but that doesn't guarantee you have long term responsibility to the bonder holders. so we have to cut spending dramatically, and we have to spur economic growth. and i will give you one idea that i haven't found a formula yet to provide this idea. the people here on this program today are all puerto ricoians and puerto ricoians on the mainland are 5 million strong. if we get them to decide to buy a revacation or a retirement home in puerto rico every year and over five years able to inject $12 billion in new money into the real estate economy and helps to stabilize the real estate market and there you would start, it would stop all the loss of equity that we are having in the real estate market.

that is one of maybe a hundred good ideas that none of the political parties should have any problems with to implement to help strengthen the economy and through economic growth, spurred by puerto rico, that we are able to improve the economy. >> professor, you and i are closer to retirement than justin is and looking for inward investment sound like a good idea to you? >> assuming you can afford investment and assuming we can generate enough individuals to invest in the island n. addition to that, the other problem is that the federal funding the gaped in puerto rico and without the opportunities to invest in puerto rico, perhaps opening doors to global investments, i'm not sure we are going to see the growth we need to see. i should say also that part of

the debate is status is reinterpreting in a way to re-open the doors and bring the investments to puerto rico. >> i want to talk about the affect of the debate on the puerto ricoian economy in the last segment of the program, right now, justin, the problem is under ut liezization of capital. you have empty fak fridays and golf courses and hotels and low labor force rate, 40% of the puerto ricoians are economically active and more people need to be doing stuff. >> absolutely, 40% is two-thirds of the record low of the u.s. it doesn't account for the informal sector and that is 20,

25 percent. so a lot of people insent vised not to go to the government and pay the taxes. they have to have incentives . there were some and they were overturned, grants and business programs to help educate people and encourage them to become entrepreneurs and some the capital there and the entrepreneurs incentives are not there. foreign corporations have the incentives. so unfair advantage for those on the island. >> professor, also an economic

dimension to the social reality of people being educated at the public expense in the higher education system of puerto rico and going on to create wealth on the american main laoned instead of puerto rico. >> well, i think part of what we need to consider, just to address that issue from a different perspective, a lot of the federal funding that is used to finance public growth through the government as part of the public private cooperation initiatives is locked into practices and corruption and the numbers and the initiatives that close the door on the average puerto ricoian and pushing the people to the informal economy and other problems, sometimes, doing business in puerto rico is complicat complicated. that is part of the culture that dominated the politics for the past hundred years on the isla

island. >> we are taking a short break and talk about the status of the long running debate interacts with politics and economics. this is "inside story." >> al jazeera's investigative unit has tonight's exclusive report. >> stories that have impact... that make a difference... that open your world... >> this is what we do... >> america tonight weeknights 9et / 6pt only on al jazeera america

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>> welcome back to "inside story." i'm ray suarez and the american economy is slowly rebounding since the recession in 2008. but it is choppy and could remain that. a report is showing that the consumer confidence dipped slightly in february. puerto rico is not recovering as well as the rest of the country. we are looking at the multitude of the problems holding puerto rico back. still with us, kenneth, former secretary of state and professor charles, of the institute of puerto ricoian and latino

studies at the university of connecticut and from washington, justin, director of the national puerto rico chamber of commerce. kenneth, the three main political parties are known for the future status of the island and if we were spending more time on the island and listening to the political debates much difference in their view of the economic future, do they have a different philosophy of running the island's government and public services so that voters might choose not only between state hood independence and higher employment policies, lower borrowing policies, the nuts and bolts of actually running a place, is there a difference when it comes to the parties when it comes to those

questions.>> yes, there are differences. but you point at something that is really a tragedy, puerto rico is the only place in the world where people do not align themselves politically based on is socio economic. you have the moderates and liberals in all of the parties and that is caused by the fact that we have a political status problem to resolve and president obama in the march 2011 white house report on puerto rico's political status he theyed that puerto rico's economic problems are not fully resolved until we deal with the political status problem. justin, you question is economic development, that is what you are about and working on, do you agree with kenneth that the uncertain future of puerto rico's status makes economic

development harder, or are there really realities on the ground and no matter what their status is it makes economic difficult right now? >> i normally wouldn't touch the economic status, but economics are important. it is equality portion as well. it started with puerto ricoians on the front line in afghanistan and seeing them serve on the front lines to the greater extent then some op the mainland and not able to vote for the commander and chief. that is a tragedy. i'm not, as far as economically speaking, puerto rico were to become a state, i would be capacity of the state. is a huge percentage of

welfare recipients in puerto rico and how much of the federal taxes they would have to pay. there are studies showing that hawaii and alaska benefitted greatly from becoming a state. so there are compelling arguments both ways. with that, i will leave it. >> professor, does the attempt to pull puerto rico out of the economic decline really end up into twineed in a challenging way with the questions of future status? >> well, let me clarify, because i think two points need to be clarified before answering the question, first to the differences in terms of the partisan economic approaches and what we have seen

is the approach is a trickle down economic approach and increase push for private public partnerships in the commonwealth party at the local level. so push to the public strength of the institutions. i don't disagree with the former secretary of state, but the problem is that state hood is impossibility for puerto rico. i can't imagine any republican congress that is going to allow a new state to bring in 7 representatives that are basically in line with the democratic party. so state hood i don't even see in the future. then the question is what are the longer term opportunities for puerto rico given the impossibility of state hood and what we are stuck with a model that depends on federal

funding to build the local economy and in that sense, it is demonstrated that the measures have failed, the best way to go is strengthening the public institutions to generate income and implement a merit system and anticorruption system that addresses that. the way forward is realizing the current status is maybe modified slightly, but we have to set up the opportunities given the relationship between puerto rico and the united states. >> this is a huge challenge and we are going to solve the problems in the confines of this program but thank you for being with us. that brings us to the end of this edition of "inside story." from washington, i'm ray suarez.

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