President Reagan's three-year-old program to spur U.S. investments in Caribbean nations and their exports through the Caribbean Basin Initiative has received considerable flak.
While lauding the CBI's goal of ensuring stability in a region vital to U.S. security, its critics say it is too slow and plain unrealistic.This isn't the case in Puerto Rico, where we are taking concrete action to assist in its success.
What initiative is Puerto Rico undertaking to help the President's Caribbean program succeed? I like to call our initiative Bootstrap 2. Puerto Rico's original Operation Bootstrap is the 35-year-old, successful industrialization program that attracted billions of dollars of mainland and foreign investments to the island.
Bootstrap 2 simply adopts the twin-plant concept pioneered along the U.S. border with Mexico. There a Mexican production facility, using intensive labor, ships goods to its nearby U.S. counterpart for final assembly and testing.
Certainly the ocean carriers in the trade such as my line, Navieras de Puerto Rico, have a vested interest in increasing the volume of goods moving
from the Caribbean to ports in the United States.
A successful CBI would also increase Puerto Rico's exports to our Caribbean neighbors, which already totals $619 million annually, as well as the truly mammoth $17 billion U.S.-Puerto Rico trade. And, Puerto Rico's annual exports of $1.9 billion in products to Latin America illustrates its position as the Caribbean's business and technological hub.
For ocean carriers to support the CBI also makes good business sense simply because the U.S.-Puerto Rico trade is somewhat unbalanced. Southbound movement of cargo from the United States to San Juan is much heavier than the northbound movement. To generate more northbound cargo volume, Navieras is always willing to negotiate reasonable freight rates with companies that make meaningful contributions to the island economy.
As more manufacturers establish plants in CBI-designated countries, the volume of northbound shipments should increase significantly. It's as simple as that.
The twin-plant idea is already working. In a recent speech before the Organization of American States, Gov. Rafael Hernandez Colon reported that his administration's twin-plant efforts over the last six months produced $21 million in new investments with a potential of 1,900 additional jobs in CBI countries.
Among the 24 companies preparing to establish twin plants in Caribbean nations are SmithKline Beckman Corp., Schering Corp., each of which is preparing projects in Grenada; and Merck, Sharp & Dohme Corp. and Pfizer Corp., which will soon make new investments in Costa Rica.
Further, Chase Manhattan Bank approved a $5 million loan for Westinghouse Electric Corp. to build a twin plant in the Dominican Republic.
There are many more projects planned as well: St. Crispin Shoe Co. is establishing a $3.2 million twin plant in the Dominican Republic; Johnson & Johnson will produce surgical caps in Grenada; a Canadian company, Bel- Tronic Ltd., which produces radar detectors and microwave receiving dishes in Puerto Rico, is coupling its operation there with its Barbados facility.
Bringing Puerto Rico's twin-plant concept under the CBI to life is Alfred J. Roach, chairman of TII Industries Inc. of Copiague, N.Y. Mr. Roach also served on the president's CBI private sector planning committee.
TII Industries, facing low-cost competition from the Far East for its line of telecommunications surge protectors, opened a plant in Haiti to complement its facilities in Puerto Rico and on Long Island. According to Mr. Roach, the cost savings in Haiti helped close the gap against Asian competition. Labor in Malaysia, for example, is as low as 15 cents an hour.
The result: TII Industries projects an increase in sales to $40 million by 1987 from $31.4 million in 1985. It seems that everybody wins: Haiti gains 375 badly needed new jobs while the Puerto Rican operation grows by nearly 50 percent and now stands at 470 employees.
Of course, we're hoping that this pattern will repeat itself over and over again, resulting in a sharp increase in northbound cargo volume.
As the single largest shipping line operating out of Puerto Rico, Navieras provides 12 weekly roll-on, roll-off and containership sailings between San Juan and five ports in the U.S. mainland with intermodal connections as far away as California. Navieras also provides biweekly service to Boca Chica, Dominican Republic; and St. Thomas and St. Croix in the Virgin Islands; as well as weekly service to Puerto Plata, Dominican Republic; and to Haiti.
As a further indication of our commitment to a successful CBI, Navieras recently launched a new high-speed weekly roll on service to Port of Spain, Trinidad.
Should the new tax reform bill now before Congress pass, hundreds of millions of dollars, representing the profits of U.S. affiliates in Puerto Rico under Section 936 of the Internal Revenue Code, may become available for low-interest loans to finance new twin-plant projects.
That's why we in Puerto Rico are bullish about President Reagan's Caribbean Basin Initiative.