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

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 significantly 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 carrier 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 density 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

c. Trends in Industry, Population and Traffic

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.

65 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.)

Sources: (a) Puerto Rico EDA, Selected Social and Economic Indices of Puerto Rico (San Juan: EDA, "n.d."), pp. 1-3; and (b) Letter of Juan Lopez-Mangual Puerto Rico EDA, September 19, 1969, op. cit., p. 9.

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 66 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

66 Letter of Juan Lopez-Mangual Puerto Rico EDA, September 19, 1969, op. cit., p. 9.

07 Ibid.

68 Ibid.

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 carrier 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 tråffic 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 various 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.69 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

60 Puerto Rico Planning Board Plan General de Desarrollo, 1965-75, op. cit. pp. 34-40.

TABLE 11-9

1

traffic flow will decline from 29 percent in 1965 to 15 percent in 1975. The same will occur with respect to the apparel and textile industry, which continue to lose their relative importance in Puerto Rico's manufacturing output. It is anticipated that in 1975, these industries will produce an output of 15 percent of the total compared to some 21 percent in 1965. The production of furniture and wood products, paper, leather, cement, and other rock products will remain relatively stable to comprise some 20 percent of manufacturing in 1975, but the quantity of related traffic should increase with growth in manufacturing.

These future trends in Puerto Rico's heavy industries' petrochemical and economic development, therefore, should greatly increase the relative volume of trade in capital goods, including metal products, machinery and manufacturers, compared to semifinished fabrics, yarns, and other textiles. At these growth rates, the gross output of manufacturing can be expected to grow from $934 million in 1968 to approximately $2.35 billion in 1975. Industrial output by that year, should comprise some 32 percent or more of Puerto Rico's total Gross National Product. Thus Puerto Rico's rate of progress in manufacturing will certainly influence traffic movements and create a more favorable market for common carrier services.

In addition, new construction, which will almost double by 1975 (from $690.3 million in 1968 to $1,177 million by 1975), will also influence future traffic movements in this trade. This growth will in part be due to the construction of new hotels by U.S. mainland businesses to accommodate Puerto Rico's tourist trade. Tourist activity has had a substantial effect on the economy. The southbound foodstuffs destined for tourists staying at hotels and guest houses as well as southbound building material used in the construction of hotels will continue to increase over the next decade. Moreover, private housing construction will increase from 17,400 units in 1968 to 21,700 units in 1975.

(2) Trends in Population.-Projected growth in population and income will stimulate the flow of foodstuffs and consumer goods to complement the flow of semimanufactured and raw material goods. The population of Puerto Rico, which is expected to climb approximately 51 percent during the next two decades, from 2,739,000 in 1968 to 4,135,000 persons by 1986 (chart II-2, p. 8), together with the rise in per capita income to $1,852 by 1975, will generate an even greater flow and variety of consumer traffic between the U.S. mainland and Puerto Rico.

3. Analysis of Dry Cargo Moving by Ocean Transportation Between U.S. and Puerto Rico

a. General

Chart II-4 shows that in 1966 Puerto Rico's total external dry cargo trade moving to and from the Island by all forms of ocean transportation totaled approximately 5.38 million short tons, 3.40 million of which moved between Puerto Rico and the U.S. mainland." 70 In contrast, commercial air freight traffic between the U.S. mainland and Puerto Rico, totaling 48,000 tons in 1966, was relatively insignificant.

The 3.40 million tons of dry cargo moving between the Mainland and Puerto Rico represents a gain of 29 percent over the 2.64 million tons of 8 years earlier. This increase is especially significant since shipments of bulk sugar to mainland ports declined considerably over the 8-year period. For example, northbound traffic dropped by 9 percent, from 1.18 million tons in 1958 to 1.08 million tons in 1966. This decrease was linked mainly to a more than 14 percent drop in sugar exports during this period. The decline in sugar exports is attributed to several factors. From 1958 to 1966, the chronic drought in Puerto Rico, combined with decreasing activity in agriculture, led to the Island's large decline in sugar exports to the U.S. mainland. At the same time, Puerto Rico's sugar refineries and distillery industry began to absorb an increasing amount of the bulk sugar output."1

Consequently, the 29 percent increase in traffic between the Mainland and Puerto Rico was due to a substantial rise in southbound traffic. This traffic, largely consisting of southbound semimanufactured and raw material goods for Puerto Rico's growing industries, increased slightly more than 50 percent, from 1.46 million tons in 1958 to 2.32 million tons in 1966.

b. Traffic Flow by Region

Each of the four U.S. mainland regions serving Puerto Rico is unique in terms of traffic flow. These regions are: the North Atlantic region, extending from Eastport, Maine to Cape Hatteras, N.C.; the South At

70 The specific figures are shown in app. A, table 4. The remaining 2 million tons of dry cargo consisted mainly of foreign traffic moving to and from European, Asian, and Caribbean ports. In 1967, traffic rose to 5.91 million tons.

71 Much of the sugar that previously would have been shipped in raw form is now shipped in a lighter refined state or distilled into rum. While total northbound sugar tonnage declined between 1958 and 1966, refined sugar shipments actually increased.