Lessons From Operation Bootstrap
Cordero-Guzman, Hector R.
In the 1950s, Puerto Rico tied its development strategy to market-oriented reforms and to the U.S. economy. The mixed results of the experience may offer some clues to what Mexico can look forward...
...workers are likely to be minor and would take a long time to manifest themselves...
...5. See Annette Fuentes, "Bad Table Manners: Latinos and NAFTA," Dialogo No...
...In addition, modem port facilities and an extensive highway complex that accommodates over a million vehicles reflects Puerto Rico's infrastructural modernity...
...capital into Puerto Rico seems to have brought more rather than less unemployment, and more rather than less emigration...
...capital, and the consequent subjugation of island interests brought about by Bootstrap-generated progress...
...As a consequence, Puerto Rico faces an uphill battle in its efforts to build a self-reliant national economy...
...By the mid-1980s, this lack of selfreliance meant that 85% of Puerto Rico's production was for export while 45% of food consumption was imported from the mainland United States...
...pharmaceuticals doing business in Puerto Rico obtained more than $3 billion 5 in Section 936 tax credits...
...Bootstrap was the precedent-setting forerunner of the principal U.S...
...Federal Tax code, s relatively untaxed the ed by Puerto Rican subU.S...
...economic presence in Puerto Rico as a benediction rather than a problematic aspect of the island's development...
...3 (1976), pp...
...These sectors have not been wellserved by the penetration of Puerto Rico's economy by U.S...
...This movement now competes on fairly even terms with pro-commonwealth forces...
...Puerto Rico was granted commonwealth status in 1952 to provide a semblance of decolonization for the Bootstrap design of "associated development...
...This difference is not lost on members of the Puerto Rican labor movement, local environmentalists, and industry leaders in labor-intensive, import-sensitive sectors...
...Hence, diverse Puerto Rican interests came together to orchestrate a largely successful defense of Section 936 when this tax haven was threatened by President Clinton's deficit-reduction program...
...The current pro-statehood offensive is based on the argument that the solution to Puerto Rico's socioeconomic crisis resides in the island's further absorption into the U.S...
...economy-from the standpoint of Puerto Rico's future development...
...firms...
...2 and 4(1992...
...Even with subsequent reversals and some stagnation during the 1980s, this pace of economic expansion looks very good when compared with the record of the rest of the Caribbean and Latin America...
...A large part of statehood's popular appeal derives from the argument that under this formula the unemployed and the poor will never lose their welfare benefits on the island, nor their capacity to relocate to the mainVol XXVII, No 3 NOV/DEC 1993 9ANALYSIS / PUERTO RIco land whenever economic conditions deteriorate...
...The agreement will place Puerto Rico, other Caribbean states and Mexico in direct competition with one another, especially in labor-intensive sectors like apparel, footwear, and electronics assembly...
...2. National Council of La Raza, Poverty Project Newsletter, Vol...
...midable m( look forward to in a NAFTA-dom- The model is a showcase of devel- ment, and t inated future...
...In their minds, Puerto Rico could-with permission from the U.S...
...3 Bootstrap's proponents blame this "over-pricing," not the export-oriented development plan, for the island workforce's high unemployment rates, long duration of unemployment, and marginal and unstable connections to formal employment...
...ny stockholders...
...Puerto Rico had economic-growth rates averaging 6% in the 1950s, 5% in the 1960s, and 4% in the 1970s...
...10021...
...4 By the mid1980s, this lack of self-reliance meant that 85% of Puerto Rico's production was for export while 45% of food consumption was imported from the continental United States...
...133-176...
...Puerto Rico's on-going reform pack- The Puerto Rican development lack of trad age has proved neither a cure-all model was launched after World island and for the economic ills facing the War II under the name Operation of population island, nor an unmitigated attack Bootstrap-or, in Puerto Rico, 936 of the on social well-being...
...economic and "social support" apparatus...
...In other A squatter settlement in Punta Diamante (top) and a middle-class communiwords, the govern- ty in Punta Alegre (bottom) in Ponce, Puerto Rico...
...statehood for Puerto Rico has emerged...
...indicators of progress Puerto Rico's close relationship with the ates...
...Many of NAFTA's original promoters have also moderated their positions...
...The article is based on a talk by Frank Bonilla to the Southwest Voter Research Institute Conference for Latino Leaders, held in Chicago on June 13, 1992...
...1. See Frank Bonilla and Ricardo Campos, "A Wealth of Poor: Puerto Ricans in the New Economic Order," Daedalus, Vol...
...4. See the U.S...
...These ons have created a foragnet for U.S...
...0 This article was written in coordination with the rest of the members of the research group of the Northeast Puerto Rican/Latino Roundtable on NAFTA...
...Treasury-become a source of financing NAFTA-spawned investment opportunities...
...hemispheric economic initiaisland and States...
...penetration of U.S...
...and Emilio Pantojas-Garcia, Development Strategies as Ideology: Puerto Rico's Export-Led Industrialization Experience (Boulder, Colorado: Lynne Rienner Publishers, 1990...
...66-108...
...2 (1981), pp...
...Even before Operation Bootstrap, there was a significant U.S...
...Both principal political campsthe independence movement is now a distant third in all publicopinion polls-see the massive U.S...
...The evidence commonly cited by Bootstrap's supporters is familiar, but nonetheless bears highlighting...
...companies...
...We thank Emilio Pantojas-Garcia for his helpful comments and suggestions...
...Labor's efforts to secure greater social equity and to improve the wages and benefits of Puerto Rican workers are continually met with stiff resistance from the business community...
...This translates into $70,000 for each job created in Puerto Rico...
...In the 1950s, Puerto Rico underwent the same kind of economic restructuring that Mexico is undergoing now, z tying its develop- 2 ment strategy to E market-oriented reforms and to the A Puerto Rican drugstore in the 1940s...
...The mixed results of the experience may offer some clues to what Mexico can look forward to in a NAFTA-dominated future...
...The mixed industrialization through the estab- sidiaries of results of the experience may offer lishment of export-oriented, U.S.- four conditi some clues to what Mexico can owned manufacturing operations...
...investriggered the sustained of people between the the mainland United estors in Puerto Rico :ral key advantages...
...2 The prolonged and privileged flow of U.S...
...openness to foreign investment and the free movement of consumer goods, capital, and labor power...
...4, Nos...
...Vol XXVII, No 3 NOV/DEC 19937 Vol XXVII, No 3 NOV/DEC 1993 7ANALYSIS / PUERTO RICO Second, they operate in sectors All these (mainly pharmaceuticals and are tied to electronics) where research and economic development expenditures- United St partly subsidized by the federal 1980s, Pu and commonwealth govern- highest i ments--translate into relatively imports fr high prices for consumers, and served as h hefty profit margins for compa- total U.S...
...7 (June, 1993...
...companies and banks...
...This means that native capital formation has been thwarted by the Puerto Rico faces an uphill battle to build a self-reliant national economy...
...This article was written in coordination with the research group of the Northeast Puerto Rican/Latino Roundtable on NAFTA...
...All these advan- economic d tages are multiplied by very low ence sugg tax rates both in Puerto Rico costs of tI and for parent companies in the mainland...
...It promoted the island's profits earned real costs to most...
...Third, Puerto Latin Am Rico offers companies a mod- world's fif ern subsidized infrastructure goods to t that reduces their costs of pro- States...
...and Health and Migration Taskforce, Center for Puerto Rican Studies, Labor Migration Under Capitalism: The Puerto Rican Experience (New York: Monthly Review Press, 1979...
...Another troubling feature of Puerto Rican development is the island's inappropriately high level of dependence on the U.S...
...presence in the Puerto Rican economy...
...They now recognize the limitations inherent in the agreement's design, and urge Puerto Rican policymakers to support the treaty because its effects on Puerto Rican and other U.S...
...Federal transfers-such as Aid to Dependent Children and food stamps-make up a growing portion of their income...
...Congress pass NAFTA...
...In 1990, about 60% of the population on the island and 40% of the Puerto Rican population on the mainland lived in or near poverty...
...and Pantojas-Garcia, Development Strategies...
...3, No...
...Most families in Puerto Rico have seen their incomes and wages stagnate over the last 20 years...
...inve enjoy seve First, they b cheap and tives launched over the past three decades: the Alliance for Progress of the Kennedy years, the establishment of Mexico's maquiladoras during the 1970s and 1980s, the Caribbean Basin Initiative and the enterprise-zone proposals of the Reagan Administration, and now NAFTA, which is clearly part of more ambitious designs for further hemispheric integration...
...businesses...
...Bootstrap's pillars were low wages, the te barriers between the the mainland, a policy mn control, and Section U.S...
...In some years, the level of transfers has surpassed the profits generated on the island by U.S...
...olitical developments on the island-necessarily quite different from developments in sovereignty-conscious Mexicohave to be understood within this economic context...
...This will force governments to provide yet more attractive conditions to the absentee owners of capital-basically lower wages, and fewer labor and environmental regulations...
...It is generally recognized that, if anything, NAFTA is likely to exacerbate Puerto Rico's unemployment problem...
...Reflecting this dependence, the gap between the gross national product (GNP) and the gross domestic product (GDP) has increased steadily over the last two decades...
...enefit from a relatively skilled labor force...
...North American companies effectively monopolize banking, transport, tourism and high-tech manufacturing...
...transnationals have also made steady incursions into the growing service sector of the economy...
...These growth rates have given Puerto Rico the second highest per-capita income in Latin America, impressive for a tiny Caribbean island with limited resources and a population of only four million...
...Many feel the only realistic alternative for the present is to go along with the agreement, try to carve out a beneficial niche or two, and hope to reshape its design at some future date...
...For further information on the Roundtable, contact Carmen Moreno, Institute for Puerto Rican Policy, 286 Fifth Ave., 3rd floor, New York, N.Y...
...The literacy rate is above 90%, and life expectancy is on a par with that of the most advanced nations...
...93-109 (June, 1993...
...The plan has Manos a la Obra (Let's Get to which leave brought benefits to some, and very Work...
...Indeed, the promises that the treaty now holds out to Mexican workers-when seen through the lens of the Puerto Rican experience-take on a different cast...
...1 Bu duction, thus further increasing between ec their profits...
...Agricultural wage-workers, by contrast, represent a minuscule proportion of the labor force...
...Mainstream economic theory, in fact, provides a veneer of legitimacy to this resistance...
...ment gives about $2.67 in credits to the pharmaceutical industry per dollar paid out in wages...
...They no longer encourage any expectation that genuine breakthroughs against joblessness and poverty are in the offing...
...Well into the erto Rico boasted the ndex of per-capita om the United States, [ost to about a third of direct investment in erica, and was the 'th largest exporter of he mainland United t there is a difference economic progress and Ievelopment-a differested by the human his progress, both in Puerto Rico and for the Puerto Rican population on the mainland...
...110, No...
...Latinos, there is an uneasiness about NAFTA, frequently accompanied by an element of fatalisma fatalism that sees the structural and political forces behind the agreement as overwhelming...
...Recent calculations by the U.S...
...These harsh labor-market conditions persist despite massive emigration (nearly half the potential workforce of Puerto Rican descent is on the mainland) and despite explicit policies of population control (by the late 1970s one third of Puerto Rican women of child-bearing age had been sterilized...
...Among many Puerto Ricans and U.S...
...opment strategies based on an circulation Hector R. Cordero-Guzman is a researcher at the Center for Puerto Rican Studies/CUNY...
...Over recent decades, however, a powerful movement advocating U.S...
...Ricardo Campos and Frank Bonilla, "Industrialization and Migration: Some Effects on the Puerto Rican Working Class," Latin American Perspectives, Vol...
...3. See Carlos E. Santiago, Labor in the Puerto Rican Economy (New York: Praeger, 1992...
...Despite the full application of federal minimumwage standards on the island, average wages there remain at about the same relative distance from average mainland wages as they did in 1973, and real personal income per capita is the same per8 NACL4 REPORT ON THE AMERICAS 8 NACLA REPORT ON THE AMERICASANALYSIS / PUERTO Rico centage of the mainland figure as it was at the start of Operation Bootstrap, some 40 years ago...
...The island's industrial/occupational profile--except for a somewhat bloated public sector-has a decidedly modem cast as well, with high-tech manufacturing, financial services, and trade and commerce the dominant economic activities...
...The other members are Frank Bonilla (Inter- University Program for Latino Research), Angelo Falcon (Institute for Puerto Rican Policy), Hector Figueroa (Amalgamated Clothing and Textile Workers' Union), Maria Figueroa (New School for Social Research) and Palmiro Rios (New School for Social Research...
...The battle will be even more uphill should the U.S...
...Some economists, for example, argue that relative to international market conditions-and despite 20 years of stagnation-Puerto Rican working hands are over-priced...
...Despite the new enthusiasms for free markets, free trade, incentives to capital, deregulation and privatization, NAFTA supporters cannot claim to have any well-founded proof of the capacity of capital-in combination with compliant states-to nurture and develop the human resources at its disposal...
...When Pue- rto Ricans participate in debates over the North American Free Trade Agreement (NAFTA), they do so with a feeling that they have been there before...
...Commonwealth supporters argue that a "perfected commonwealth" would give Puerto Rico even more freedom to court foreign capital and sell its labor power at rates below those currently sanctioned by federal overseers...
...General Accounting Office (GAO), for example, indicate that in 1987, U.S...
...5 Some government officials, and a number of activists and business people, see the treaty as an opportunity to develop Puerto Rico as a regional "financial center," as long as Section 936 continues to generate extraordinary profits for U.S...
...General Accounting Office, "Puerto Rico and the Section 936 Tax Credit," Report No...
Vol. 27 • November 1993 • No. 3
