Island Workshop

Two lines will meet and cross on a graph in Puerto Rico this week, and thereby touch off a great celebration. The crossed lines mean that, for the first time in history, manufacturing has edged ahead of farming as Puerto Rico's major source of income.

To hammer home the point, no fewer than 20 new factories are to be officially opened. Heading the list is a $2,000,000 General Electric plant to make circuit breakers; other factories will produce such goods as coils, rubber buckets, screen wire, photolithography, saber saws, frozen foods, billfolds, brassieres. The openings will bring to 400 the total of plants drawn to Puerto Rico by its famed Operation Bootstrap.

Puerto Rico's self-help plan is a smashing success, there for any eye to see. San Juan's big, handsome new airport at Isla Verde, built for $15 million, makes most mainland terminals look shabby. An impressive low-cost housing program in San Juan has built 20,000 units. Private building has kept pace. Television antennas forest the roofs of the dwindling slums, and Governor Luis MunOz Marin this week inaugurates an island-wide TV hookup. Wide boulevards and superhighways stretch out from the capital.

Two 300-room hotels are going up near San Juan to help the 300-room, 99%-occupied Caribe Hilton handle the expected $75 million-a-year tourist traffic. Laurance Rockefeller is putting $1,000,-ooo into a 72-room luxury hotel with an 18-hole golf course designed by famed Golf Architect Robert Trent Jones. And all over the island are the new factories.

They are well-lighted, pastel-tinted and smog-free (there is no heavy industry), and their signs cry out familiar brand names: Remington Rand, Sylvania, Paper-Mate, U.S. Rubber, Textron, Maidenform, A.S. Beck, Carborundum, Van Raalte, Bostitch, Sunbeam.

Up from Desperation. But not just any eye can measure the whole force of Puerto Rico's tug at its bootstrap. The full change dates from the '303, when the economy revolved around the apathetic peasant sugar-cane cutter, and when industry--even rum-making--hardly existed. In 1940, Puerto Rico resolved that it was going to transform itself. Industrialization became a major goal. As a starter, the government bought out mossback electric companies, built dams, strung transmission lines, and thus provided the electricity that powers today's boom. But the most astute stroke was the 1942 creation of a government corporation, now called the Economic Development Authority, with a charter to industrialize the island.

At first the corporation built and ran plants, e.g., a wartime rum-bottle factory, a cement plant. But some strikes that followed showed the vulnerability of government in the double role of industrial labor's friend and employer. The lesson grew clear that the way to industrialize was to attract U.S. capital. In 1948 Operation Bootstrap, based on that principle, got under way.

Double Profits. Any serious U.S. businessman who wants to start a factory or a branch plant in Puerto Rico gets kingly treatment from Bootstrap. Under Administrator Teodoro ("Ted") Moscoso, a briefcase-toting man in horn-rimmed spectacles who flouts Latin tradition by working 70 hours a week, EDA can offer mouth-watering inducements. It will provide the businessman with labor from its big files of workers, trained in everything from pastry-baking to power-sewing by one of the world's largest vocational schools. It will build a plant and rent it to him. Moving to Puerto Rico will free him from U.S. income taxes. And as the biggest come-on of all, Puerto Rico will exempt him from all corporate taxes for ten years if the industry he starts is a new one for the island and not a "run away" from the mainland. His personal income from dividends, moreover, can be exempt from taxes for seven years in the first 15.

Failure is not impossible; 107 firms established under Bootstrap have gone broke for assorted reasons. But the successes are notable. A plastics manufacturer who started in 1953 with a $15,000 investment cleared $200,000 last year alone; a 1952 investment of $675,000 netted $2,800,000 in 1955. The average return on capital before taxes is double that of U.S. companies.

Free State. Under Governor MunOz Marin, Puerto Rico's political innovations have kept pace with the economy. MunOz is uniquely fitted for island leadership. The son of a famed Puerto Rican statesman, he grew up in Washington, lived for a while as a Greenwich Village poet and intellectual, then returned to Puerto Rico. By hinterlands campaigning for "Bread, Land and Liberty," he developed a powerful backing among the peasant farmhands, and in 1940 became a Senator and an influential leader. In 1948 he became Puerto Rico's first elected governor (and was re-elected in 1952 for a term that expires in 1956).

When in 1950 Congress offered to let Puerto Rico write its own constitution, MunOz helped draft it and happily saw it approved, 375,000 to 83,000. The constitution makes Puerto Rico self-governing in local affairs, gives it a relationship to the U.S. defined in the official Spanish term as Estado Libre Asociado (Free Associated State); the official translation is Commonwealth. Congress' laws, notably the draft, apply to Puerto Rico, but because the island has no vote in Con gress it is spared the income tax.

Overpopulation. Puerto Rico's industrial revolution has wrought the expectable statistical wonders. Per-capita national income went from $122 in 1940 to $434 in 1954, v. 1954's $201 in the neighboring Dominican Republic, $538 in West Germany. $1,845 on the U.S. mainland. As a market for the continental U.S., the island, buying $584 million worth of goods last year, outranks all foreign countries except Canada, Mexico, the United Kingdom and Japan.

In thus making more goods available, Bootstrap has tackled one approach to Puerto Rico's basic problem: overpopulation. More than 2,300,000 cram the island, 670 to the square mile. From the approach of providing work, Bootstrap has been barely a holding operation. It has created 33,000 industrial jobs, and perhaps even more resulting service jobs. But a runaway birth rate combined with a death rate lower than the mainland's--plus a parade of labor from the increasingly efficient farms--pours 20,000 workers a year into the market. In the short run, only by heavy emigration to the mainland and the Army's draft has Puerto Rico been able to keep unemployment from rising despite Bootstrap. In the long run, Bootstrap's higher living standards may help importantly; statistics show that the birth rate drops with every increase in family income and education.

Transformation. The pull of Bootstrap has transformed Puerto Rican life; the dejection of the past is lost in new pride. A case in point is Salinas, on the south coast, once a drowsy and impoverished sugar town. In 1952 Paper-Mate opened a ballpoint-pen plant there, hired 400 workers, three-fourths of them women who had never worked before, and began to sprinkle a payroll of $1,250,000 a year over the town. As almost the first result, a jewelry store opened to sell the gold watches Puerto Ricans admire. A market soon developed for used cars, furniture, refrigerators.

Now in Salinas, to work for Paper-Mate is to be somebody. After work, in a tableau like a scene from Carmen, the girl penmakers, dressed in factory-provided blue smocks, parade their status through the streets. Drawing a sharp contrast with the old way, sheepish cane cutters often perform the unmanly chore of bringing lunchboxes to their working wives at the plant.

A transformation as speedy and effective as Puerto Rico's has worthwhile les sons for all Latin America, and for all underdeveloped countries with industrial ambitions. The lesson is not being lost; the story of Puerto Rico is better known among development-minded people abroad than it is among Americans. For this week's festivities, 323 foreign students and technicians are on hand, the latest of more than 3,000 who have come in the last five years from such distant places as the Fiji Islands, Pakistan, Iceland, Israel, Ethiopia and Nepal.

They come specifically to learn Puerto Rico's pragmatic techniques of letting private enterprise develop an area while a democratically elected government supplies aid and incentives. Luis MunOz Marin thinks that they also see "the U.S. at its undogmatic best: the helping hand guided by the undoctrinaire spirit, so forgetful of its bigness that it fully reveals its greatness."

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