Found a work-around (https://github.com/pypa/setuptools/issues/937)

Install pip from python not packages and then setuptools from pip.

python -m pip install -U pip
pip install -U pip setuptools

When using the new pip its located in /usr/local/bin/pip

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https://bugs.launchpad.net/bugs/1658844

Title:
  most recent version does not install /usr/local/lib/python2.7/dist-
  packages/pkg_resources/extern and /_vendor

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