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The Calderón Plan For The Economy

by Lance Oliver

December 15, 2000
Copyright © 2000 THE PUERTO RICO HERALD. All Rights Reserved.

Having failed to match the roaring pace of the U.S. economy in recent years, Puerto Rico now faces a slowdown as the United States enters a period of slower economic activity. This will be one of the key issues the new administration of Sila Calderón will have to face. What is the plan?

With a few gratuitous and obligatory swipes at the Rosselló administration’s record, Calderón’s plan outlines a blueprint for economic development with three bases: Operation Technological Development, emphasizing high-tech industries; Re-starting the Engines of Manufacturing, to increase activity in that sector; and Regionalization of Economic Development.

It’s not surprising that this is a mix of looking forward and looking backwards, of trying to move ahead while not leaving too many behind. It is, after all, an essentially political document, though its focus is on the economy. As a governor-elect, rather than an economist free to work the world of theory, Calderón must keep her plans within the bounds of what will be broadly accepted.

The Calderón plan begins by noting, correctly and ominously, that after decades in which Puerto Rico’s economic growth exceeded that of the United States and thereby worked to close the wealth gap, the situation is now reversed, with Puerto Rico falling further behind. Creating "The New Economy" in Puerto Rico is her response.

Among the proposals that are part of Operation Technological Development:

    • Tax incentives for high-tech industries.
    • Creation of business incubators in cooperation with universities.
    • Encourage technology transfer and protection for innovators and inventors.
    • Co-finance with the universities a network of research and development centers.

Then there is the section titled Re-starting the Engines of Manufacturing, which looks backward and aims at restoring Section 936-like federal tax credits.

The third leg, Regionalization of Economic Development, seeks to create clusters of activity around the island to spread development beyond the metropolitan area.

All of this has been proposed in one form or another by the current administration, except for the focus on federal tax credits. But the challenge is a difficult one because there is so much more to the success of an economy than the government’s plan for running it. The culture is an overriding influence and the motivation and preparation of the business leadership class is a key element.

It’s common to hear optimistic planners in Puerto Rico to mention Singapore as an example of a small, densely populated, natural resource-poor country that has managed phenomenal growth and rapidly advanced the wealth of its people. (These mentions were far more frequent prior to the Asian currency problems of 1998, but they still occur, and there is even a mention of Singapore in Calderón’s plan.)

Such a comparison, however, is worse than the old apples and oranges cliché.

Remember the case several years ago of the U.S. boy living in Singapore who was sentenced to a public caning for spray-painting graffiti? The uproar it caused in the United States was nothing compared to what would happen in Puerto Rico if a youth were to be sentenced to such a physically severe punishment.

Few Puerto Ricans could comfortably live in the regimentation of Singapore and most Singaporeans would probably feel adrift and uneasy in the relatively free-flow chaos of daily live in Puerto Rico. Those two cultures cannot be separated from the different courses of their economies. An economy is not something a people can change like a shirt. It is an integral part of their identity.

The Calderón plan recognizes that and tries to cling to enough of the old and familiar to keep people comfortable with the changes to come. It is part fearless march into the new global economy and part nostalgic yearning for the old days when federal tax incentives and a growing manufacturing sector were held to be the engines that drove the island’s economic growth rate beyond that of the United States.

That balance is probably necessary in order to win support from the public, including workers who naturally fear the seismic shifts that are part of today’s economy, and the manufacturing segment which still carries considerable clout and wants to retain the glory of its past rather than fade in importance as the real "New Economy" rises.

Success will be based, however, on moving Puerto Rico’s economy, businesses and work force forward into the future, not by yearning for the good old days of the 1960s when manufacturing growth fueled rapid advances in wealth.

If the Popular Democratic Party wants to look to its past for guidance, it must look at Luis Muñoz Marín’s administration’s radical decision to shift Puerto Rico’s economy from agriculture to manufacturing and repeat it, this time from a manufacturing economy to knowledge-based and service economy. Repeating the successes of the past is based on applying the lessons learned then to the realities of today, not trying to go back to the past itself.

Lance Oliver writes The Puerto Rico Report weekly for The Puerto Rico Herald. He can be reached by email at:

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