Economic Study Volume I Report to the President United States Department of Commerce Preface The Economic Study of Puerto Rico originated in a meeting on March 2, 1977, between President Jimmy Carter and Governor Carlos Romero-Barcelo of the Commonwealth of Puerto Rico. In considering the economic situation of Puerto Rico, President Carter suggested in the meeting, and Governor Romero agreed, that a group of executive branch officials from appropriate departments be formed to carry out a Federal study of the economic problems facing Puerto Rico. President Carter subsequently asked Secretary of Commerce Juanita M. Kreps to oversee the Federal Study Group and coordinate its work. While retaining the responsibility for overall guidance of the Study, the Secretary assigned policy management to Jerry J. Jasinowski, the Assistant Secretary of Commerce for Policy. Mr. Jasinowski convened Assistant Secretary-level representatives of the departments to be involved on March 24, 1977, to take up the beginning work of the project, and the representatives formed the Interagency Study Group (ISG). A Federal Study Director was named to prepare the design of the Study, set out a schedule of work, and manage the operations of an interagency working group. The ISG met on several occasions in the spring of 1977 to decide on the focus and bounds of the Study, its approach and topic coverage, and the responsibilities of individual agencies. From the outset, the ISG felt that it was most important for the Study to avoid political questions. In accordance with this decision, the Study does not examine the economic implications of a change in Puerto Rico's political status. Nor does it reach any issues or contain any analysis which concerns a change in Puerto Rico's political status directly. The ISG agreed that the effort should be confined to economic problems, with an emphasis on the impact of Federal programs on these problems. Furthermore, the primary view of the ISG was that the Study should be thoroughly comprehensive in its review and analysis of the Puerto Rican economy. These decisions were taken in the spirit that the prevailing analysis should recognize fully the broad spectrum of interests of residents of Puerto Rico. The ISG also felt that the setting of priorities and policies for continued economic progress is the prerogative of Puerto Rican residents. This view logically precluded the development from the problems analysis of a set of recommendations or priorities which would constitute, in some sense, an economic plan or projection for the future of the island. The purpose intended for the Study by the ISG is that it serve as a basic source of information and perspective for policy development by Puerto Rico over the next several years. In place of recommendations, the ISG considered it appropriate that the Study propose a series of economic policy options and approaches which Puerto Rican policymakers could draw upon in line with priorities established for the economy. The options introduced throughout the Study involve broad choices with respect to basic policy thrust, as well as detailed programmatic changes. Federal Government options are also included, but these are necessarily confined to possibilities permitted under prevailing Federal legislation. With respect, however, to some programs of the Department of Health, Education, and Welfare, there are mentioned legislative proposals which have been under consideration in the executive or legislative branches in recent years. To maintain effective coverage and manageability, the ISG preferred to organize the Study principally on a sectoral basis. In this way participating executive branch agencies could bring to bear their expertise on areas that generally corresponded to their formal responsibilities and at the same time cover major problem areas delineated for the Study. After setting this course of action, the ISG arranged a meeting with Puerto Rican Government officals to go over the general lines of the approach to be used in the Study and the Study's limits and content. The meeting was held in Washington on May 17, 1977. The Puerto Rican Government group was headed by Mr. Miguel Rivera-Rios, President of the Puerto Rico Planning Board. The group agreed to the ISG general plans and offered to prepare background materials to help get the Study underway. Under the coordination of Mr. Rivera-Rios, a Puerto Rican counterpart committee to the ISG soon thereafter completed a detailed agenda of Puerto Rico's problems. The agenda provided a valuable basis of departure for the Federal agencies involved in the Study. On June 24, 1977, following agreement within the ISG as to the final design and content of the Study, work was begun. In the remainder of 1977 extensive field work and research were undertaken by the ISG agencies. After the initial phases of the project were underway, Deputy Assistant Secretary of Commerce S. Stanley Katz and the Study Director met with Cabinet-level officials of the Puerto Rican Government in San Juan on November 18, 1977. A review of the Study's approach, limits, content, and organization was made for the Puerto Rican officials and a progress report on work to date was presented. Detailed outlines of all parts of the Study were tabled and requests were made to the Puerto Rican Government for special data that were needed for the planned analysis. Preliminary drafts of the sections of the Study were finished by the ISG agencies in early 1978. The Department of Commerce reviewed them and made appropriate suggestions for changes to produce a complete and well coordinated final product. In order to facilitate the process of coordination, a series of ISG meetings was held in the spring of 1978. The ISG examined Study results, including the findings of the overall economic assesssment produced by the Office of the Chief Economist for the Department of Commerce. The ISG agreed on the major problems and issues revealed in the analysis of the aggregate economy and on the options set out in the Study. Following this series of meetings, steps were taken among ISG agencies to assure the final interagency coordination of all aspects of the Study. Drafts of the assigned Study sections were completed by the agencies in the fall of 1978 and a draft of the complete Study was provided to the Puerto Rican Government for review on October 30, 1978. The Puerto Rican Government conducted an examination of the Study and made the final results of its review available on March 20, 1979. The review produced suggestions, clarifications, and data refinements which the ISG felt contributed materially to the accuracy, soundness, and clarity of the Study. Deputy Assistant Secretary of Commerce Frederick T. Knickerbocker and the Study Director led a delegation of ISG representatives to San Juan and held meetings in the Puerto Rico Planning Board during the first week of May 1979, with Mr. Rivera-Rios and other Puerto Rican policy officials to discuss the review findings and lay the ground for the final revisions of the Study. In accordance with the mutual understandings reached in the meetings, the ISG agencies undertook the last alterations and additions necessary to ready the Study for publication. While the Study was carefully coordinated with the Puerto Rican Government throughout its preparation, all views in the Study are ultimately those of the ISG. During preparation of the Study the Puerto Rico Planning Board and other agencies of the Puerto Rican Government extended invaluable assistance to representatives of the Federal Government. ISG teams visited Puerto Rico for their fieldwork and all their efforts were supported by provision of access to key Puerto Rican Government officials and to the extensive data resources of the Government. Puerto Rican technical level personnel were very helpful in furnishing statistical material and numbers of essential data compilations were specially produced by them for the Study. Much of the analysis was also facilitated by the views and interpretations offered by Puerto Rican observers throughout the private sector. Many businessmen, consultants, university teachers, and former Puerto Rican Government officials freely gave their time. The Puerto Rican economy has been subject to a great deal of examination and analysis over the years, and the large, valuable body of literature available has been widely consulted by ISG agencies. Previous inquiries, however, were generally concerned with particular aspects of the economy and none appear to have been produced with the dimensions of this Study. The extensive Federal resources employed and the approach taken in this effort have made possible a study of the most comprehensive scope yet undertaken. William B. Pounds |