Operation Bootstrap

Operation Bootstrap was a development plan implemented in the U.S. territory of Puerto Rico in the 1950s. Concerned about the growing independence movement, in 1942, the government established the Puerto Rican Development Corporation (Fomento Industrial y Económico). The idea of transforming the island into an industrial center emerged as part of the government programs of Luis Muñoz Marín to lessen the problems of poverty, unemployment, and underemployment of workers. However, that idea was turned into a program by Teodoro Moscoso. Operation Bootstrap (Operación Manos a la Obra) presented a new economic model different from the previous agro-export model. The main objective of Operation Bootstrap was to promote economic growth by attracting U.S. industries. To do so, the program offered appealing tax exemptions, cheap labor, and low-cost infrastructure for outside investors interested in establishing their manufacturing on the island. For instance, the program offered no tariffs on trade between the United States and Puerto Rico.

One of the strongest criticisms of the implementation of Operation Bootstrap is that the agricultural sector was overlooked and no resources were allocated to advance the technology used in producing various agricultural goods. It has been argued that the economic growth experienced in the Caribbean island from 1950 to 1970 was more a consequence of the transformation from an agricultural to an industrial economy than a result of the integration of Puerto Ricans to the workforce. As a consequence of the decline of the agricultural sector, many employment opportunities were lost. The industrial sector was dramatically growing, but the number of jobs generated was not enough to compensate for those lost in agriculture. This has led to a chronic history of unemployment and underemployment.

The program experienced many changes over time. For instance, extending the U.S. minimum wage to [Page 1001]Puerto Rico increased the cost of labor. More important, Section 936, which offered tax reductions to U.S. industries, was eliminated. The full effects of the elimination of Section 936 are still unclear; however, numerous industries have left the island because of rising production costs. In fact, Mayaguez is among the U.S. metropolitan areas with the highest loss of employment in 2000. Furthermore, economic affairs in the government do not seem very encouraging. Because of the tax exemptions and other benefits granted to attract foreign investment, the government did not develop a tax-based economy. To support the construction and maintenance of the existing infrastructure and public services, the government went heavily into debt. This pattern of economic insolvency and the need to increment jobs in the public sector as a response to the constant decline in industrial jobs presents another problem generated by Operation Bootstrap. As of 1975, the public sector was the main employer in the island.

Evidence of the ineffectiveness of this program and a key indicator of the lack of economic resilience among Puerto Rico's population is the personal savings rate of island residents. Since 1940, the personal savings rate of island residents has reached zero only twice, while remaining most of the time in the negative digits. It is more striking to see how after 3 decades of the implementation of Operation Bootstrap, in 1985, the personal savings rate fell lower than ever. Although it seemed to be recovering in the 1990s, it started falling again and continues its negative pattern. One of the goals of Operation Bootstrap was to increase the amount of jobs and economic integration, but the persistent poverty, heavy reliance on federal nutrition assistance, unemployment, and the fact that the government employs the largest segment of the labor force testify to the problems of this development strategy.

...