(5 of 9)
The beginnings, nonetheless, were undeniably socialist. A Land Authority began to enforce an old law limiting corporate sugar holdings to 500 acres, broke up the big mainland-owned companies, formed collective-like "proportional profit" cane plantations. A TVA-style Water Resources Authority took over power production from several private power companies, and began wide-scale irrigation as well. Using $10.7 million in treasury funds, Fomento built or took over factories to make cement, glass and cardboard (for rum bottles and cases), shoes, tile.
The experience in the factories was distressingly clear proof that the government would have to raise an unthinkable $1 billion or $2 billion to build enough plants to industrialize the island. Without ado, Muñoz & Co. sold the government-owned plants to get capital for what Moscoso calls the "incentive and promotional approach," aimed at giving a "multiplier effect" to the government's investment. Instead of "permitting" (in the word of many a nationalist demagogue) the entry of outside capital, Puerto Rico resolved to dragoon or inveigle it.
60% Profits. The tools devised and marshaled for the jobs were 1) tax exemption, 2) unabashed encouragement toward high profits even when based, as at first, on low wages, 3) patient coddling of the fearful and uninformed investor with every kind of assistance. U.S. Federal income taxes do not apply in Puerto Rico, and any new business not provably running away from U.S. taxes or unions was freed from the island income tax for ten years. Profits could and did run to 60% of sales; Fomento Chief Moscoso says: "We found this not too high a price to pay for our accelerated rate of development."
Fomento even hired expert U.S. economists to sit down with prospects, show them how high returns might run. It offered them ready-built plants at low rent, loans from the Fomento bank, cheap power from the efficient Water Resources Board, accurate statistics. Nor did Fomento wait for investors to come. Ted Moscoso can often be seen in Fomento's plush offices in the new Tishman Building on Manhattan's Fifth Avenue, striding down a corridor on his way for some "belly-to-belly selling" of a businessman interested in setting up a manufacturing plant in Puerto Rico. "We have learned," he says, "that the U.S. businessmen we deal with today are as different from the plantation and sugar-mill colonials as we ourselves are from malaria-ridden serfs."
U.S. manufacturers, big and small, poured in, chiefly to make products—pens, radios, brassieres, baby shoes—that needed a good deal of hand work and could be transported cheaply. Hastening to the island came Paper-Mate, General Electric, Maidenform, B.V.D., Consolidated Cigar, Weston, Union Carbide, Parke, Davis & Co., Remington Rand, Bostitch and others (see map). Last week the 667th factory—a cutlery plant in Gurabo —went into production. For the catalytic $40 million in loans, plant construction and promotion, Fomento got the island $275 million in investment, 80,000 new jobs. Like the moving needles on the instrument board of a climbing plane, all the economic indicators rose. 1940 1957
Gross Product $287 mill. $1.2 bill.
Av. Family Income $660 $2,400
Business Profits $ 99 mill. $367 mill.