History and Archaeology / Operation Bootstrap (1947)
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Rice fields in the west valley in Puerto Rico
The 1947 industrial program known as Operación "Manos a la Obra," or Operation Bootstrap, marked the beginning of a new stage of industrial planning based on external capital and tax exemptions. The origin of the program was the Ley de Incentivos Industriales (Industrial Incentives Act), passed that same year, based on exemption from the federal taxes that already existed in Puerto Rico under Article 9 of the Jones ActJones Act: Legislation approved in 1917 by president Woodrow Wilson, granting United States citizenship to Puerto Ricans. It also provided for the executive, legislative, and judicial branches, created a bicameral legislature, and granted civil rights to citizens.. In addition, Section 931 of the US Internal Revenue Code had already provided for exemption from federal taxes for corporations operating in US territories, such as Puerto Rico, until the time they repatriated their earnings to the States.

Puerto Rico entered into a period of rapid industrialization and strong economic growth. This period of prosperity lasted for two decades, but it had adverse consequences. The changes produced by the dizzying pace of modernizationmodernization: Historical and social process through which societies adopt new technologies in all orders of daily life and discard traditional ways and methods. also provoked unfavorable social effects, such as a drop in the size of the labor force, a decline in agriculture, and a rising wave of immigrationimmigration: Population movement consisting of the arrival of people to a country or region other than their homeland in order to establish themselves there.. The prosperity came to an end in the mid 1970s, and since then Puerto Rico has not been able to return to the strong economic growth it experienced in that period. This is a subject that is still pertinent today since our economy is still based on the principles established under Operation Bootstrap.

The background of Operation Bootstrap

The economic policy of the 1940s was for there to be "una industrialización criolla" (criollo or locally-based industrialization). The industrial plan of the period reflected the influence of the New Deal in the United States in its high degree of governmental intervention in the economy. That led to the creation of local enterprises to foster local production through a strategy of import substitution. The industrial plan of the 1940s was also to be seen in the agrarian reform that sought to break the control of the great agricultural corporations over the agriculture of Puerto Rico and put the land into the hands of local people. In general, the objectives of the plan reflected the populist policies of the Popular Democratic Party (PDP), then in power, since they emphasized growth and efficiency as well as social justice.

However, the implementation of Operation Bootstrap in 1947 produced a dramatic change in industrial strategy, from populist criollo industrialization to "laissez faire" capitalism, with an emphasis on investment from abroad. One important reason that explains the change in the economic policy was the end of World War II and its negative impact on the local economy. After growing sharply at rate of 17% annually from 1940 to 1945, Puerto Rico's per capita income dropped in the postwar period. Per capita income fell from $270 in 1945 to $256 in 1948. An important factor in explaining the economic contraction was that the government could not continue to finance its populist policies. After the war, as the US liquor industry recovered, the government budget was affected due to the decrease in sales of Puerto Rican rum on the mainland. The tariffs on sales of rum on the mainland were an important part of the Puerto Rico budget.

Another reason for the change in direction of the industrial program was that the strategy of promoting criollo industrialization through the creation of state enterprises in the cement, bottling, brick and shoe industries was not successful, particularly when faced with the competition from US imports after the end of the war. The war had created an opportunity for these enterprises at a time when the normal flow of supplies from US competitors had been interrupted.

Other experts, such as James Dietz, hold a different view. Dietz argues that the reasons were more political than economic and were based on the fact that the PDP was under political pressure to sell such enterprises to avoid the uncomfortable position of being an employer and also supporting the new, private capital program. Given the large profits of the cement company, these enterprises were lucrative. Another political reason that could explain the change was that, in the United States, the populism of President Franklin D. Roosevelt was then looked upon with suspicion due to the Cold WarCold War: The period between 1945 (the end of the Second World War) and 1990 (the fall of the USSR) characterized by a deterioration in diplomatic and trade relations between the western countries headed by the United States and the eastern European and central Asian countries led by the USSR. Although it was not a formally declared war, the tensions between East and West determined the course of history during those years. with the Soviet Union. The change in Puerto Rico's industrial policy could also be explained as a result of the opportunity that arose after the war: large amounts of capital had been accumulated in the US, and those funds were seeking attractive opportunities for investment. The government of Puerto Rico seized the opportunity and offered an attractive place to invest.

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Version: 06102003 Rev. 1
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