Prostusta for future Develomental Ratas: (1) Alumim Products: A is now considering an industry based on alumina. This industry will import alumine which will be processed into alumiram for the manufacture of various alumima producte including alumimamvare, extrusions, sheets, etc.; (2) Plastic Pollete EDA is also considering the establishment of an industry to produce plastic pellets. Plastic producers use these pellets for producing plastic articles. This industry is eminent and production should be underway in approximately two to four years; (3) Textileg Production of man-made fabrics, including nylon, should commence in Puerto Rico in approximately 1975. The petrochemical industry expects to produce these nan-made fabrics, some of which will be exported to U.S. markete; and (4) Bubber Thread: EDA is also considering an industry that will import rubber thread for the production of tires. These tires will satisfy some domestic demand and will also be exported to mainland markets. Sources: (a) Commonwealth of Puerto Rico, Porta Authority, letter of March 12, 1968 to Mr. Leroy F. Fuller, Bureau of Domestic Rigulation, FMC. (b) Commonwealth of Puerto Rico, Economic Development Adminsitration, letter of July 18, 1968 to Mr. Paul Gonzales, Chief, Branch of Trade Studies and Special Projects, PMC, (e) Commonwealth of Puerto Rico, Boonomic Development Administration, letter of October 30, 1968 to Mr. Paul Gonzales, Chief, Branch of Trade Studies and Special Projects, PMC. (This letter also includes discussion concerning the reasons why the Commonwealth's list of important intermediate goods is essential to the economy of Puerto Rico).

"On the consumer goods imported, food products are of primary importance. It is a fact that the local needs for many foodstuffs like beans, beef, cooked meats, lard, pork, flour, potatoes, margarine, and canned products are entirely or almost entirely satisfied by outside producers, principally from the United States. It is imperative that the cost of food products be maintained as low as possible since about one-third of the disposable income of Puerto Rican families is expended on these commodities. If we were to measure this consumption pattern for low-income families the ratio will likely approach 66 percent. A lower freight rate will undoubtedly contribute toward lower prices for food products."

Shoes

"The local shoe industry is an important job-generating sector of our economy. Its high labor intensiveness and its ability to locate in areas of scarce economic development are highly desired attributes. Since most of the raw materials used are imported and the final product is exported to the United States it is evident that only through large scale production at reasonably low costs could this industry survive and grow in such an increasingly competed market. Lower freight rates, both on raw materials and finished goods will, undoubtedly, help. It is worthwhile to mention that the lower tariff rates established through the Kennedy Round for the introduction of foreign rubber footwear into the United States will diminish the competitive advantages of the shoes manufactured in Puerto Rico for shipment to the United States."

Clothing

"Clothing, as in the case of food products, is a top priority consumption item. Imports into Puerto Rico are astonishing. The bulk of our production is shipped to the United States. Although the actual freight rates for raw materials or finished

1 Commonwealth of Puerto Rico, Economic Development Administration (EDA), letter of Oct. 30, 1968 to Paul Gonzalez, Chief, Branch of Trade Studies and Special Projects, Bureau of Domestic Regulation, Federal Maritime Commission.

textile products is not considered an obstacle for the industry's growth, reduced rates will propitiate a more accelerated expansion of our industry, since this will strengthen its competitive position through lower production and shipping costs. The reduced tariff rates agreed upon through the Kennedy Round for certain textile articles could be considered as a negative factor for the local industry's development. This reasoning could also be extended to all other products which benefited from tariff reductions and are produced locally for shipment to the mainland market."

Electrical Appliances

"The local demand for electrical appliances is extensive and ever growing. Local consumption is largely satisfied from outside sources since our production is quite negligible. Transportation costs are considerably high on the finished products. Although a lower freight rate on imported raw materials may only help to promote local manufacturing of some small appliances it is conceded that reduced freights will represent considerable savings for the ultimate consumer. Lower priced appliances would induce greater sales. This in turn, will represent cargo volume for the steamship companies and hence lower unit costs and greater profits. This reasoning could also be extended to any product whose demand will widen as a result of reduced selling prices."

Carpets and Rugs

"Presently the local production of carpets and rugs is almost entirely exported to the United States. A big expansion of this industry is foreseen in the near future when synthetic fibers such as nylon and rayon are produced locally, presumably by 1971. It is evident that the local market will not be sufficiently ample to absorb the great volume of production expected in the coming years. It follows that in order to make our local industry competitive in the U.S. market, principally with respect to synthetic fiber rugs, cost reduction will be imperative. Lower freight rates would help attain this purpose."

INTERMEDIATE GOODS

"Many prominent locally established industries like those of textiles, paper, metal, and leather depend almost exclusively on imported raw materials for their survival and expansion. Other prospective industries must also rely on intermediate raw materials, produced locally through the processing of imported basic feedstock. It is also conceded that the success of these industries will be linked to their degree of penetration into the mainland market because the bulk of the finished goods produced must be

shipped to that market. As competition tightens, the needs for reduced costs augments. A two way reduction in freight costson imported raw materials and on finished goods shipped-will propitiate a faster and uninterrupted growth of these industries with the consequent employment creation. Some of the most important intermediate goods for our economy are briefly discussed below:""

Processed Natural or Synthetic Rubber

"The processing of natural crude rubber in Puerto Rico will facilitate the creation of a huge industrial complex which will produce a wide variety of consumer and industrial rubber-based products, among them automotive tires. It is estimated that this project alone (automotive tires) will generate some 2,500 direct jobs. A reasonable freight rate on crude rubber and its accompanying processing agents will surely work toward the economic viability of this project."

"By the other side, the future production in Puerto Rico of synthetic rubbers, such as propylene, styrene, PVC and butadiene which are derivations of petrochemical operations, will propitiate the establishment of a large industrial complex manufacturing countless consumer products like tires, bottles, houses, tubes, conduits, and housewares. The local market can only absorb part of this production. This means that a good amount of this output must be sold in the markets abroad. Naturally, our products must be able to compete with those produced in the United States and other countries which sell in U.S. markets. Lower freight rates will help us in this direction."

Phthalic Anhydride

"This product, derived from the petrochemical process, is the raw material for the production of alkyd resins. Alkyd resins are the basis for countless plastic products like floor tiles, film and sheeting, paper and wire coatings, tape and electric conduits. The reasonings brought forth on the preceding product in support of lower freight rates are equally applicable to this one. The local production of phthalic anhydride has just begun with the establishment of Puerto Rico Chemicals, a Division of Hooker Chemical Co. CORCO will also be producing it soon." Carbon Black

"The local availability of this product at a reasonable cost will smooth the way toward the realization of the proposed tire manufacturing project. This product (carbon black) is mainly used as a filler in tire manufacturing. As mentioned earlier, the tire manufacturing project would generate some 2,500 direct industrial jobs. Many other industries will require the use of this product, thus creating additional job opportunities."

Urea

"Urea is a chemically derived product used principally in fertilizers (as a nitrogen source) and in animal feed (as a protein source). The local demand for this product is now being

1 EDA letter of Oct. 30, 1968, op. cit., various pages.

supplied from the United States. The production of urea is one of the proposed projects of PPG (Pittsburgh Plate Glass)." 1

"There is no doubt that if the cost of this product is reduced, through decreased freight rates or in any other way, our economy will derive great benefits. Lower fertilizer prices will be translated into increased fertilizer use which will propitiate more agricultural production. The same reasonings may be applied to a price decrease in animal feed. Even if lower prices would not stimulate consumption, which is quite improbable, they will represent some cost savings to the farmer. This will represent a good step toward agricultural rehabilitation."

Cotton Yarn

"At present the cotton yarn needs of the local industry are being satisfied by outside producers. There are good possibili. ties of producing cotton yarn in Puerto Rico in the near future, but in the meantime the product must be imported. Since this material represents the crux of our large and expanding textile products industry it is indisputable that continued supply at reasonable cost is of utmost importance. If freight costs could be reduced, our producers would be in a better position to meet the increased competition in the textile products market and hence assure the undisturbed development of an industry which now provides some 42,000 direct jobs or about one-third of the existing industrial jobs in Puerto Rico."

Hides

"The local leather products industry, excluding shoes, depends on imported hides, raw or cured. This raw material must be imported since the local supply is, and will probably continue to be negligible. The growth of our leather consuming industries, especially those of shoes and small leather goods will depend, to a considerable degree, on the continued raw material supply from outside sources at a reasonable cost. Lower freight rates would represent a step in this direction."

Boxboard

"The local paper box industry obtains most of its raw materials from the United States. This is an indispensable industry for our economy. Although investigations on bagasse utilization as a boxboard source are well advanced, it is evident that we will rely on outside suppliers for a considerable time. Freight reductions on boxes, cartons and other paper products imported would be highly beneficial since imports are ever growing."

Petroleum Refining Catalysts

"The growth of our petrochemical industry will call for an enormous supply of catalystic agents. Since most of them have to be imported the freight cost factor acquires prominence. Obviously the supply of these agents at the lowest possible price will represent another positive factor for the continued expansion of our newly born, promising industry."1

1 Projections on 1970 and 1975 traffic were prepared by the Federal Maritime Commission by means of formal statistical methodology and historical observation.
2 The 1958-59 traffic figures are movements of Pan Atlantic Steamship Corporation. This carrier changed its name to Sea-Land in April, 1960. Thus 1960-67 figures represent Sea-Land traffic.
3 Tonnage figures include some shipments from South Atlantic and West Coast porta. These figures are predominantly North Atlantic traffic, largely southbound.
(1.0. Sea-Land's West Coast and South Atlantic shipments each generally amounted to some 8-10 percent of the total shown above.)

4 The 1958-64 traffic figures represent movements of Waterman Steamship Corporation of Puerto Rico. This carrier left the trade in June 1965, but in name only. Gulf of Puerto Rico is basically the same company.
5 Although some 25 percent of Aloon's traffic was originated in the North Atlantic, the carrier's traffic figures have been included in the Oulf trade because Alcos's traffic was predominantly Gulf cargo.
Sea-Land entered the West Coast trade on April 14, 1961, and Waterman Steamship Company discontinued this service April 13, 1961. Sea-Land's mall West Coast traffic is included in its North Atlantic
shipments as noted in footnote 3.

7

Traffic for first seven months of 1963 (70,354 tons) was projected to 12 months (120,606 tons).