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need to assist agricultural productivity with more efficient equipment and techniques. Because of the increased competition from foreign sources, the cost of ocean transportation will play an increasingly significant role on northbound agricultural products if these products are to remain competitive in U.S. markets.

5. Tourism 59

Puerto Rico tourism continues to develop. In 1969, the rate of growth of 13.3 percent represented one of the economy's highest rates of growth. The number of visitors reached approximately 1 million persons in 1969 and expenditures totaled $229 million. Approximately one-half of the visitors stayed in hotels.co

To provide the Island's huge influx of hotel guests with so much of the foods and items consumed, hotel businessmen have had to import a great deal of supplies from U.S. North Atlantic and South Atlantic sources. Consequently, the Island's tourism has had a direct effect not only on capital inflows, but also on the movement of cargo by ocean carriers. This traffic depends on frequent and efficient common ocean carrier services from U.S. Atlantic ports.

tion is important not only to the Island's industrialization program but also to the large quantities of foodstuffs which are imported from the U.S. mainland to feed the people of Puerto Rico. (The effect of ocean transportation on the movement of foodstuffs is discussed in ch. V.) In many cases the containership services and rate levels have set the pattern of doing business in Puerto Rico, particularly with respect to wholesale and retail operations which do not maintain large inventories, in part due to the lack of adequate warehousing facilities on the Island (ch. VI). The frequency and regularity of containership sailings have made it possible for these industries to operate on lowinventory levels and reduce inventory costs and even to forego some capital investment in storage facilities. The importance of carrier service to the economic development of Puerto Rico, therefore, is evident.

The importance of the Island's U.S. mainland traffic (valued at $2.8 billion in 1968) to the carriers is equally manifest. This traffic, is important to carriers because it has enabled the carriers to make necessary capital investments for development of modern and efficient containership services. Growth in this traffic over the past 18 years has been impressive. Furthermore, it is expected to rise to $5.64 billion by 1975 (Chart II-3, p. 11). The substance of this section is primarily concerned with the general flow of traffic between the mainland and Puerto Rico as well as the demand for shipping services in this trade. (Ch. VI includes a discussion of the actual magnitude of traffic moved by common carriers across the piers or berths located at San Juan, Ponce, and Mayagüez.)

C. TRAFFIC FLOW OF PUERTO RICO

1. General

a

2. Analysis of Total Traffic Moving Be

tween the U.S. Mainland and Puerto Rico

The importance of ocean carriers to Puerto Rico's industrial program and growing economy is clear. For instance, with the large increase in Puerto Rico's tourist trade, certain containership operators61 have kept pace with the growth by adding more specialized refrigerated or insulated trailers. Ocean carriers move 99 percent of Puerto Rico's external trade and link the common market existing between the U.S. mainland and Puerto Rico. With the branch plant of a U.S. mainland company in Puerto Rico only 4 days away from New York by containership, the supply of semimanufactured and raw materials important to the operations of this plant is greatly facilitated by the highly competitive services of domestic offshore containerships. Ocean transporta

a. Commonwealth's Trade With the U.S. Main.

land

As a result of Puerto Rico's economic transformation from a basically one-crop economy to an industrialized society, the volume of trade between the mainland and Puerto Rico increased markedly between 1950 and 1968. Moreover, the accompanying industrial integration of the Island's economy into the mainland market has not only strengthened the economic ties existing between these areas but also greatly increased the Island's gross product and per capita incomes. Chart II-3, p. 11, demonstrates that while Puerto Rico's mainland traf. fic climbed by 435 percent, from $528 million in 1950 to $2,827 million in 1968,62 the Commonwealth's gross national product rose approximately 395 percent, from $755 million in 1950 to $3.74 billion in 1968, and per capita income increased by 305 percent, from $279 in 1950 to $1,129 per person in 1968. Thus Puerto Rico's industrial program and traffic flow have greatly facilitated the economic development of Puerto Rico.

68 Puerto Rico Planning Board, 1969 Economic Report to the Governor, op. cit., pp. 15-26.

80 The projected growth in the number of total rooms is from about 8,000 in 1967 to approximately 32.000 in 1980.

61 In this study, the term containership operators or containerships compre. hends both lift-on/lift-off and roll-on/roll-off operations unless otherwise noted.

In addition to the spectacular growth in Puerto Rico's traffic with the U.S. mainland and economy, Chart II3 also reveals another significant relationship between

the Island's imports and exports. In 1967, the Commonwealth had a large trade deficit (i.e. approximately $313 million) because it purchased more from the U.S. mainland than it sold in this market. This trade deficit resulted not from a decline in exports to the Mainland 63 but mainly from the large increase in imports, which have risen about 471 percent over the past 18 years as a result of Puerto Rico's industrialization and greater incomes.64 These increases in imports and growth in traffic have been crucial to the freight revenues earned by most carriers in this trade.

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Sources: (a) Puerto Rico Planning Board, External Trade Statistics, Various Years, Tables 3 and 6 (San Juan: Bureau of Economic and Social Analysis, “n.d."), various pages; and (b) Appendix A, Table 3.

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The dominant position of the U.S. mainland in Puerto Rico's external trade is evident in a survey of the Island's trade. Table II-6 following presents a comparison of domestic and foreign cargo movements for the 18-year period 1950 to 1968. Throughout this 18year period, Puerto Rico's traffic with the U.S. mainland varied from about 83 percent to 89 percent of the total, averaging approximately 85 percent. During this period, the Island's economy purchased an average of 85 percent of all of its imports from the U.S. mainland and sold 94 percent of its exports to the U.S. mainland (app. A, table 3). In 1968, the U.S. mainland traffic with Puerto Rico amounted to $2.83 billion, or 83 percent of the Island's total trade. Of this, $1.57

billion was southbound traffic largely from North Atlantic points of origin. This was about six times as much as the total traffic imported from the mainland in 1947 when "Operation Bootstrap" was in its infancy. In contrast, Puerto Rico's 1968 imports from all European, Caribbean (except Virgin Islands), South American, and other foreign countries amounted to $385 million, or 20 percent of the total imports; imports from the Virgin Islands amounted to $14 million, or 0.7 percent of the total imports. The dominant position of the Commonwealth's trade with the U.S. mainland is also demonstrated by table 11–7 which shows that Puerto Rico is the fourth largest overseas market

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82 Purchases of mainland products increased by 394 percent, from $318 million in 1950 to $1.57 billion in 1968, while sales to the mainland rose by 798 percent, from $210 million in 1950 to $1,256 million in 1968. It appears that the more rapid increase in traffic from Puerto Rico to the mainland and the higher value of finished goods moving northbound have had the effect of bringing the dollar value of this two way traffic more nearly into balance.

03 On the contrary, during this period, exports ot the U.S. mainland increased approximately 498 percent (app. A, table 3).

64 In 1967, Puerto Rico had to import short and long term capital amount. ing to $629.9 million in order to cover its balance of payments deficit in the current account (Source: Puerto Rico Planning Board, 1967 Economic Report to the Governor, op. cit., p. 62).

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and electric lighting and wiring equipment, rose to $96 million in 1968; shipments of the footwear industry including dress shoes, sandals, athletic shoes, mocassins, and baby shoes, reached $68 million in 1968, of which some 50 percent were leather shoes. These exports of finished products in turn induced considerable southbound movements of supporting cargoes to these light industry plants. Heavy industries also contributed sig. nificantly to traffic movements in this trade. For example, the chemical industry imported considerable quantities of commodities related to the production of fertilizers, paints, drugs and medicines, and industrial organic and inorganic chemicals, and its exports climbed to some $100 million in 1968. The bulk of these shipments were chemical and pharmaceutical products. In addition, the metal products and machinery industry induced increased traffic movements in metal cans, cutlery, metal doors, and sheet metal workings.

The second important factor which has affected the external trade of Puerto Rico is the growth of population, which more than doubled between 1910 and 1968. This growth in population intensified the demand for U.S. mainland produced consumer goods and the car. rier services required to transport these goods. Chart II-2, p. 8, illustrates the large rise in the population in Puerto Rico between 1940 and 1968. It population den. sity is not only one of the highest in the world but is continually rising. It is not surprising, therefore, that to provide this constantly increasing population with its diet, clothing, and other consumer needs, a great deal of southbound traffic was generated. This traffic necessarily increased carrier services in this trade.65

Source: U.S. Department of Commerce, Bureau of Census.

c. Trends in Industry, Population and Traffic

b. Impact of Industry and Population on Traffic

There are two basic factors, each of equal importance, which have combined to stimulate Puerto Rico's external trade with the U.S. mainland. The first factor is that since “Operation Bootstrap" commenced, new industries attracted to Puerto Rico have made an impressive contribution in expanding Puerto Rico's external trade with the U.S. mainland. The industrial growth of Puerto Rico has been primarily supported by imports of U.S.-produced semimanufactured commodities, raw materials, capital goods, and exports of the finished product to U.S. markets, the bulk of which have been shipped by regulated common carrier service. A survey of the Island's exports to the mainland reveals the significant impact with Puerto Rico's industrialization has had on traffic movements (chart II-3).

Puerto Rico's light industries have produced the largest exports to the Mainland. Shipments of apparel, including women's foundation garments, women's and children's underwear, men's dress shirts, and nightwear, rose to some $269 million in 1966 and the exports of the textile industry, including knitted fabrics, carpets and rugs, elastic braid, and thread, totaled $74 million in 1966. Shipments to the Mainland of light industry electrical products, including electronic components

Projected growth in industry and population will soon stimulate an even greater flow of traffic between the U.S. mainland and Puerto Rico. These trends indicate that the volume of traffic should double by 1975 and triple by 1985. This tremendous growth in traffic will, of course, increase the market for shipping services and new transport technology in this trade (ch. VI section B.2).

(1) Trends in Industry.--Table II-8 below shows projections in Puerto Rico's industry and the effect on employment and traffic.

85 Since the San Juan metropolitan area has experienced the greatest population increase over the past 28 years, it appears that future traffic and carrier services will concentrate in this port. (Ch. VI discusses the high concentration of containerized traffic through the port of San Juan.)

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ternal trade with the U.S. mainland is expected to double from $2.83 billion in 1968 to $5.64 billion in 1975. This dramatic increase in traffic will quite naturally have a substantial effect on the demand for car. rier services, terminal facilities, and more efficient ways of distributing traffic in this trade (ch. VI, section B.2).

The growth and development of Puerto Rican industries will also influence the nature of traffic movements in the future. As previously indicated, Puerto Rico aims to accelerate economic development during the next 6 or 7 years by promoting more than $1.2 billion of new investment. This investment will stimulate new growth in the production of alumina processing, steel, tires, pharmaceutical products, shoes, and many other products. Growth in the petrochemical industry will induce a greater shipment in plastic products and var. ious derivatives of this industry. And perhaps the most important change will come from the change from labor-intensive to capital-intensive production. Table II-9 shows the relative structure of Puerto Rico's manufacturing for 1950 to 1965 and projected to 1975.

Table II-9 shows that by 1975 the number of industries engaged in capital-intensive production should comprise one-half of Puerto Rico's total manufacturing structure. According to the Commonwealth's general plan for economic development, a large heavy industry manufacturing complex, based principally on metals, machinery, industry, chemicals and derivatives, petroleum products, and other manufactures will emerge. The chemical industry in particular will enjoy a substantial growth and increase in shipments of various products. The growth rate of the food industries, beverage industry, and tobacco industry and their percentage of the Island's total manufacturing production and

66

This table shows that the number of EDA-sponsored plants will increase from 1,684 in 1968 to 2,000 plants in 1975. (Income from manufacturing will almost triple during this period, and the average hourly wage rates of manufacturing industries will rise from $1.57 per hour in 1968 68 to $2.16 per hour in 1975.) This increase in plants is expected to create an additional 63,000 jobs and reduce unemployment by 30,700. In addition, gross product is expected to climb from $3.74 billion in 1968 67 to $8.02 billion in 1975. More importantly, the Island's per capita income will increase by 64 percent, from $1,129 in 1968 68 to $1,852 in 1975. Chart II-3 illustrates the projected figures in gross product, per capita income, and the Island's trade with the U.S. mainland. During this period, the Island's ex

69

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TABLE Il-9
Relative Structure of Manufacturers, 1950–65 ’and Projected to 1975

1

MANUFACTURERS

Total

Food
Apparel and textiles
Furniture, and products of rock, paper, and leather
Chemical products, metals, machinery, petroleum,

and other

1950

1960

1965

1975

100.0

100.0

100.0

100.0

52.5
20.8
14.7

27.6
22.4
16.6

26.9
20.5
20.1

15.0 15.0 20.0

12.0

33.4

32.5

50.0

1 The figures listed represent the percentage each industry comprises of total manufacturing in terms of dollars.

Source: Puerto Rico Planning Board, Plan General de Desarrollo, 1965–1975, op. cit, p. 40.

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