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a. Population of Puerto Rico

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The population of Puerto Rico has grown considerably over the years, creating severe unemployment pressures. Population more than doubled between 1910 and 1968 increasing from 1.2 million in 1910 to 2.7 million people in 1968.10 Chart II-2 (app. A, table 2) illustrates the rise in population in San Juan, Mayagüez, and Ponce between 1940 and 1968. The 1967 density of this small Island of 3,400 square miles was 806 persons per square mile (this density will climb to 1,220 by 1986). In contrast, the United States, ex. cluding Alaska, population density of about 67 persons per square mile is about 8 percent that of Puerto Rico. The population of the United States would have to increase 11 times to equal Puerto Rico's current population density of 806 persons to the square mile. Chart II-2, p. 10, shows that, of the major areas of Puerto Rico, the San Juan metropolitan area has experienced the greatest population increase over the past 28 years."

This population increased from 342,900 in 1940 to approximately 797,000 persons in 1968.12 In 1968, therefore, almost 29 percent of the Island's population lived in the San Juan metropolitan area, compared to only 18 percent in 1940.13 The total population in the San Juan region including the metropolitan area comprised some 65 percent of the total population of Puerto Rico. On the other hand, the population in the Ponce region increased only slightly during the past 18 years,

, from some 428,000 in 1950 to only 497,000 in 1968.14 The 1968 population of this region amounted to only 19 percent of the total population of the Island, and the population in the city of Ponce amounted to 162,500

representing an increase of 35,690 persons during the past 18 years (app. A, table 2). Except for the small city of Yauco, the second largest community in the region of Ponce which incorporates some 32,000 persons, the population in other cities in this region ranges from 11,000 to 35,000 persons. The population of the Mayagüez region, which comprises 15 percent of the total population of Puerto Rico, increased from 382,281 in 1950, to 423,100 in 1968.15 However, the population of the city of Mayagüez increased only from 87,000 in 1950 to 97,700 in 1968 (app. A, table 2). Most of the other municipalities in this region have 7,400 to 56,600 persons.

Thus, approximately 65 percent of the population of Puerto Rico has concentrated into the region of San Juan, particularly the San Juan metropolitan area, creating imbalances in the Island's distribution of population. Moreover, as population has increased in the San Juan region, the urban density has expanded while the rural density has declined, largely due to the movement of labor from farms to higher paying jobs in industry, which also concentrated in the San Juan metropolitan area.

Chart II–2 also illustrates the population trends in San Juan, Ponce, and Mayagüez projected to 1986. This chart shows that the population of Puerto Rico will reach some 4.14 million persons by 1986, a gain of 51 percent over the population existing in 1968 16. The largest increase of population, 829,710, will occur in the San Juan metropolitan area. This growth in population should increase both the amount of traffic moving southbound, particularly to the port of San Juan, and the Island's demand for shipping services. During the next 20 years, the largest growth is expected in the San Juan metropolitan communities of Carolina, Bay. amón, Guaynabo, and San Juan proper.

b. Employment In Puerto Rico

As a result of the rising population, the Island's labor force climbed from 602,000 in 1940 17 to some 797,000 in 1968. Table II-1 below shows, however, that employment has not increased sufficiently to overcome the severe problem of unemployment.

10 Population increased by 140,000 persons during the 1950's and increased by another 355,000 during the 7.year period after 1960. One of the principal reasons for the lower growth of the 1950's was that a larger number of young people of child-bearing age seeking employment left Puerto Rico each year, causing a reduction in the population increase.

11 Economically, the San Juan metropolitan area is the major trading center of the Commonwealth. It is the center of population, economic activity, transportation services, and the largest center in terms of industry, tourism, and retail marketing. Many governmental, municipal, and cultural activities are centered in the Old San Juan sector. The port of San Juan is contiguous with three of the four metropolitan sectors : (1) the central sector including San Juan and Santurce; (2) the southern sector including Río Piedras, Guaynabo, Trujillo Alto; and (3) the western sector including Bayamón, Cataño, and Toa Baja. The port's facilities are centrally located and readily support the population of these developing metropolitan areas.

1a Puerto Rico Planning Board, Income by Regions, Puerto Rico 1940, 1950, 1960-65 (San Juan: Junta De Planification, "n.d."), p. 3; and letter of Juan Lopez Mangual Puerto Rico, Economic Development Administration, to Paul Gonzalez, Chief, Branch of Trade Studies and Special Projects, FMC, September 19, 1969.

13 Wilbur Smith and Associates, Padilla and Gracia, San Juan Metropolitan Area, Transportation Study Transportation Plan (Hato Rey, Puerto Rico June, 1967) p. 5.

14 Puerto Rico Planning Board Income by Regions, op cit., pp. 15-19.

15 Ibid.

16 Wilbur Smith and Associates, Interim Report of Needs and Finances for the Commonwealth Highway System Puerto Rico (Columbia, S.C.: June 1967), p. 3-3.

17 John T. Rigby, Direct Exhibits of the Commonwealth of Puerto Rico, U.S.-Caribbean-South America Investigation Civil Aeronautics Board Docket No. 12895, Exhibit CPR.-11 Revised (Washington : Arnold Fortas, and Porter, Jan. 25, 1965), Part I p. 11.

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Source: Puerto Rico Department of Labor, Bureau of Labor Statistics (1940-60); and Puerto Rico Planning Board, Economic Report to the Governor, various pages.

In 1940, unemployment amounted to some 15 percent. As a result of the Island's industrialization, however, unemployment declined to 12 percent in 1968. Nevertheless, the rate of unemployment is serious and constitutes one of the major problems confronting the Island's economy. Despite the many new factories emerging under Puerto Rico's industrialization program, the rate of unemployment has been consistently more than double that of the U.S. mainland. Table II-2 below shows the 1950-68 differentials between unemployment in Puerto Rico and the U.S. mainland.

As in the case of the imbalances existing in the geographical distribution of Puerto Rico's population, unemployment also is unevenly balanced geographically. In 1968, unemployment in Ponce was as high as 14.4 percent while unemployment was only 11.4 percent in Caguas and 9.4 percent in San Juan.18

In recognition of these severe imbalances, the Commonwealth has been making efforts to decentralize the

Island's industry from the San Juan region, where 75 percent of employment was concentrated in 1960, by means of more liberal tax exemption periods for companies located in these economically depressed zones (i.e. mainly to municipalities along the central moun. tain range).

According to the Commonwealth of Puerto Rico, Economic Development Administration, today an additional 60,000 jobs (representing 8 percent of the labor

8 force) would have to be created to bring unemploy. ment down to the level existing in the United States, or some 4 percent. By 1970, however, with growth in population, some 133,000 new jobs would have to be created to produce a 4 percent unemployment level. The Commonwealth to do this must attract more than $1.2 billion in new investment over the next 6 to 7 years, mainly from U.S. private investors. This new plan for expansion stresses heavy industry such as petro-chemical plants, electric power, steel ship repair, tire manufacturing, and alumina processing. The expansion may generate some 30,000 new jobs 20 each


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10 New York Times, May 14, 1968, p. 63.

20 lbid.





Sources: (a) Puerto Rico Planning Board, 1968 Economic Report to the Governor (San Juan: Junta De Planification, Puerto Rico, “n.d."), p. A-21; Puerto Rico EDA, Overall Economic Development Plan (OEDP), op. cit., p. 73; (b) New York Times, May 14, 1968, p. 72, and (c) U.S. Department of Labor, Area Trends in Employment and Unemployment MayJune, 1967.

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The 1963 median family income in many Puerto Rican communities, however, was less than $600 which is $1.64 per day on which to feed, clothe, and house a family of five persons. (The average Puerto Rican family size is about five persons compared to 3.65 in the U.S. mainland.) The disparity in income is even more serious when one considers that often Puerto Rican incomes are reduced, approximately 12 percent, by the lower purchasing power of the dollar in Puerto Rico. This disparity is a result of various factors including excise taxes, marketing practices, costs of exporting from the U.S. mainland, and other inflationary

c. Family and Per Capita Income

Although Puerto Rico's 1969 per capita income of $1,230 ranks among the highest of the Caribbean and less-developed world, including Venezuela, Argentina, Brazil, Mexico, India, and Thailand, income levels are still low when compared to the more industrialized economies.

(1) Family Income.—Table II-3 below shows that slightly more than four out of every 10 Puerto Rican families subsist on annual incomes of less than $2,000 (compared to only 10.6 percent in the U.S. mainland) which is serious when one observes that the United States Appalachian "poverty line" is a minimum family income level of at least $3,000.


(2) Per Capita Income.As in the case of family income, per capita income of Puerto Rico, which rose from $266 in 1940 to some $1,230 in 1969, also is unevenly distributed. Table II-4 shows that per capita income is about three times higher in the San Juan metropolitan area than in the rest of the San Juan region and some two times as high as in the Ponce and Mayagüez regions.

21 The expansion is expected to generale about 40,000 new jobs each year, or approximately 400,000 by 1979, according to the Commonwealth of Puerto Rico EDA letter of Sept. 19, 1969 to P. Gonzalez, Chiel, Branch of Trade Studies and Special Projects, Bureau of Domestic Regulation, FMC.

Family Income—1963



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Source: Puerto Rico Department of Labor, Bureau of Labor Statistics, 1966.

TABLE 11-4
Per Capita Income by Regions, 1940–65
(In dollars)


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22 The effect of ocean freight rites on cost of living in Puerto Rico is analyzed in chapter V.



1.9 $6,249


1965 2

1950-60 1960-65



67 63 53 50 46

34 46

5 16 20

! In constant dollars, 1954=100. • Estimated.

Source: Puerto Rico EDA, Overall Economic Development Plan for Commonwealth of Puerto Rico, op. cit., p. 120.

3. Industry and Capital

Although the Island is a Commonwealth and located more than 1,000 miles from principal U.S. mainland ports and sources of supply, it is still an integral part of the economic system of the United States. Federal laws, with few exceptions, are applicable in Puerto Rico as well as within any state of the union; and social, economic, and legal ties which closely bind the Island to the mainland serve to give Puerto Ricans a taste and desire to achieve industrialization and a higher standard of living. Because few goods are produced locally, it means that ocean transportation is primarily required to transport many goods to the Island. Not only is almost 40 percent of locally consumed food imported from the mainland (ch. V) but 60 percent of the Island's furniture and almost 25 percent of the clothing.

The most significant factor which makes the Island's ocean transportation system unique is the industrialization program, commonly referred to as "Operation Boot- . strap”. The purpose of this program is to industrialize Puerto Rico by attracting industry and capital. The relation between the program and ocean transportation, in terms of traffic flow, is clear. Puerto Rico's industrial development under the program is discussed in the following pages. First, however, it is deemed advisable to describe the economic environment prevailing in Puerto Rico prior to 1940 in order to illustrate the substantial progress which has occurred over the past 28 years.

100 persons ever reaching the sixth grade; and, life expectancy at birth was only 46 years. By 1940, therefore, Puerto Rico was in the throes of widespread un. employment and poverty with a mass of unemployed, ill-housed, poorly clothed, ill fed, and uneducated people.

One of Puerto Rico's greatest problems at that time was an almost total lack of natural resources, this inhibited industrial development. There were no known mineral deposits of commercial significance, no fuels except sugarcane waste, limited forest and forest prod. ucts, and a very limited commercial fishing potential.24 And, as in the case of many underdeveloped Latin countries, Puerto Rico was basically a one-crop econ. omy; sugar dominated. The sugar industry provided one-quarter of the employment and almost two-thirds of the export earnings 25 while sugar-related companies including refineries and distilleries accounted for approximately 20 percent of the total industrial employ. ment in 1940. Needlework, largely performed at home, constituted another important industrial activity, comprising about 60 percent of all manufacturing employ. ment 26 and 17 percent of exports; and tobacco prod. ucts provided 6 percent of manufacturing employment.

These economic conditions which depressed spending income and the capital formation upon which economic development depend, provided only a limited economic base to support the growing population. In this economic setting, Puerto Rico's future outlook was dismal and pointed toward greater unemployment and poverty.

Although the groundwork for economic progress had already been established prior to 1940, that year can be looked upon as the virtual start of Puerto Rico's transformation from a backward agricultural society to a diversified industrial-agricultural economy. In 1940, Puerto Rico initiated a plan for industrialization because manufacturing appeared to offer the best opportunity for employment and increasing income. At first, the Commonwealth established several govern. mental agencies, including the Puerto Rican Industrial Co. (PRIDCO), the Puerto Rican Planning Board, and the Government Development Bank for Puerto Rico, to assist in industrializing the Island. These agencies initially invested in five plants. However, 5 years after the program's inception, Puerto Rico realized that these

a. Economy Prior to Operation Bootstrap

In 1898, when the American troops arrived on the Island, the population was only 950,000 persons. This population multiplied under improved medical services to 1.87 million by 1940, creating a population density of 546 persons per square mile with a significant portion of the people crowded into city slums or rural land which they did not own. Economic activity could not meet the expanding demand of this increase in population so that 15 percent of the labor force (90,000 persons) was unemployed; 23 the gross product was only $225 million; low productivity kept wages depressed; and per capita income was barely $266. As a result, personal incomes were approximately 20 percent of the U.S. average; with only 32 out of every

24 Ibid., pp. 26-27.

25 The sugar industry, however, was of a highly seasonal nature with employment assured only 5 months of the year.

23 The Needlework industry largely employed female labor.

21 U.S. Congress, House, Puerto Rico, A Survey of Historical, Economic and Political Affairs, 1959, 86th Cong., 1st Sess., 1959, p. 27.

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