Operation Bootstrap
Operation Bootstrap is the name given to a series of projects which transformed the economy of Puerto Rico into an industrial and developed one. The federal government of the United States together with what is known today as the Puerto Rico Industrial Development Company set forth a series of ambitious economical projects that evolved Puerto Rico into an industrial high-income territory compared to the region. Bootstrap is still considered the economic model of Puerto Rico as the island has still not been able to evolve into a knowledge economy.
History
The island's traditional economy was based around sugarcane plantations; of the 516,730 jobs on the island in 1940, almost half of them were agriculture-based, with 124,076 of these based on sugar-cane farms. However, Esteban Bird described in detail the misgivings of the sugarcane industry and the monoculture economy in general. By the middle of the twentieth century it remained one of the poorest in the Caribbean. After possession of the island was transferred to the United States in 1898 after the Spanish-American War, it remained mostly neglected. Conditions in Puerto Rico worsened during the world wars, after years of neglect. Pressure grew in the U.S. to address the worsening situation, influenced by journalists like John Gunther who described the island in 1941 as such:"I saw, in short, misery, disease, squalor, filth. It would be lamentable enough to see this anywhere...to see it on American territory...is a paralyzing jolt to anyone who believes in American standards of progress and civilization."
In May 1947, the Puerto Rican legislature passed the Industrial Incentives Act eliminating all corporate taxes, to encourage U.S. investment in industry. The initiative granted private and foreign investment a ten year period of exemption from taxes on many of the expenses for businesses involved in the industrial economy. These exemptions included:
- "license fees, excises, or other municipal taxes levied by any ordinance of any municipality,"
- "property devoted to industrial development,
- "income tax on income from industrial development," and more.
“1) industrialization by invitation: the inducement of American corporations to relocate in Puerto Rico in exchange for lucrative tax benefits;
a cheap labor pool, educated in the English language and under a U.S. imposed curriculum;
proposed emigration of over a third of the island’s population, a security measure to insure the plan’s viability.”
The US government in Puerto Rico enticed US companies by providing labor at costs below those on the mainland, access to US markets without import duties, and profits that could transfer to the mainland free from federal taxation. The Administration of Economic Development invited investment of external capital, importing the raw materials, and exporting the finished products to the mainland. To entice participation, tax exemptions and differential rental rates were offered for industrial facilities. As a result, Puerto Rico's economy shifted labor from agriculture to manufacturing and tourism. The manufacturing sector has shifted from the original labor-intensive industries, such as the manufacturing of food, tobacco, leather, and apparel products, to more capital-intensive industries, such as pharmaceuticals, chemicals, machinery, and electronics. Through this project, a rural agricultural society was transformed into an industrial working class.
Although initially touted as an economic miracle, by the 1960s, Operation Bootstrap was increasingly hampered by a growing unemployment problem. As living standards and wages in Puerto Rico rose, manpower-intensive industries faced competition from outside the United States. It also faced criticism from civil rights groups and the Catholic Church, who perceived the government promoting birth control, and engaging in non-consensual surgical sterilization. American industrialists influenced by eugenicists policies were concerned with "overpopulation" and a perceived lack of self-control on the part of the working class Puerto Ricans.
As of 2005 the continental United States remains Puerto Rico's major trading partner, received 86% of Puerto Rico's exports and providing 69% of its imports.
Effects
Increased living standards
Those able to secure a stable job as a result of Operation Bootstrap received higher wages than before, in fact, "The average real weekly salary in manufacturing increased from $18 for men and $12 for women in 1953 to $44 and $37 respectively in 1963." The increase in industrialization and manufacturing saw positive effects in other places, as new electric grids were built, new roads were paved in major cities, and major housing development was underway. As a result, life expectancy in Puerto Rico jumped almost 23 years.Shift in job market
Manufacturing jobs also led to a shift in the job market as it pertains to gender. In 1940, women represented half of the total population of Puerto Rico, but represented less than 25% of the labor force. Women in Operation Bootstrap were targeted as an important labor force, especially for the garment and apparel industry, which represented a share of the manufacturing market.In January 2024, the State of Puerto Rico relaxed its remote work requirements with Act 52-2022, which exempts foreign employers with no connection to Puerto Rico from withholding income tax for employees working remotely in Puerto Rico, provided certain conditions are met.