chandise imports alone amounted to $807 million. Exports which have been increasing at the annual rate of 9.5 percent reached $503 million in goods and another $240 million in the form of services. The Commonwealth government and the banking system have maintained in their investment portfolios about $150 million of Federal securities during the last 7 years. Holdings of such securities by individuals and Puerto Rican business corporations are not known but are probably significant. Despite the economic expansion, employment has not risen but the quality of jobs improved when measured in terms of earnings and job security. The gains in productivity per worker have been even greater than the gains in production. Since 1950 employment in the fields of agriculture, home needlework and domestic services declined by 120,000. However, unemployment diminished because of the high level of migration, increased school enrollment for persons of labor force age and the higher family income enabling homeworkers and older workers to withdraw from the labor force. If these forces had not been operating unemployment would have been much higher. Because the disappearance of jobs will continue in certain sectors of the economy, particularly agriculture, despite increased production, it will probably not be until the early 1970's that relatively full employment will be reached provided migration to the mainland continues at approximately the current level. We estimate that approximately 80,000 jobs now in existence will disappear before 1975. In addition to replacing these it will be necessary to find about 200,000 more jobs resulting from the growth in the labor force due to the aging of the population and not to an increase in population. To bring unemployment down to 5 percent of the labor force another 40,000 jobs must be developed to make a total of about 320,000 jobs in 15 years. The expansion contemplated for manufacturing and agriculture must be based upon building up the export market to the mainland since the local market, while it will expand by reason of rising incomes, will still be too small to provide for efficient size production units for many commodities. It is estimated that the rate of gross fixed investment in private business or in the quasi-public corporations will have to increase from the present rate of $236 million per year to about $730 million per year by 1975. Until 1965 the share which must be derived from outside of the Puerto Rican economy is expected to continue to be at about 50 percent of the total. However, after that year the savings in the form of depreciation, undistributed profits, and personal savings should materially reduce the demands for outside capital. A key element in the government's responsibility will be in the field of education, preparing human resources for the task ahead. Steps are being taken to retain students in school over a longer period of time, to expand adult education programs, and to improve the teaching staff. It is expected that operational expenditures for education by the government will have to increase from $66 million per year to about $125 million by 1975. Present public assistance payments per case are quite low-amounting to about one-fourth of the payment per case in Mississippi. Industrial and agricultural development programs and general admin istrative and protection programs may be expected to increase from about $81 million per year to $230 million. The total operating budget, excluding debt service, will probably increase from about $192 million to about $528 million in 1975. With regard to the capital budget, one of the prime tasks ahead is that of building an adequate highway system. At the present time motor vehicle registration is about 156,000 cars. By 1975, as a result of the increased income levels, total vehicle registration should be in the neighborhood of 400,000 cars and trucks. It has been estimated that approximately 6,500 additional kilometers of roadway will have to be constructed. This will require $800 million of capital outlays excluding expenditures for maintenance. Because of the substandard housing conditions and growing aspirations it is believed that overall housing requirements will be more than 300,000 dwelling units in order to raise the level of housing to the minimum requirements. It is believed that 180,000 will be built by the private sector, leaving some 120,000 to be accomplished either through public housing, self-help housing or with the aid of more liberalized credit. It is believed that the Commonwealth government alone will require expenditures approaching $10 million per year instead of the present level of $4.7 million budgeted for 1960. Should there be any reduction in the Federal public housing program, the burden on the Commonwealth government will be correspondingly greater. Capital outlays for education must be tripled from the present rate of $3 million per year to about $10 million in order to provide 9,600 regular classrooms. Other capital programs for such items as port development, factory buildings, and agricultural development are expected to rise considerably during the next 15 years. These large capital improvement programs cannot be entirely handled within the present current revenue structure. It is believed that it will be necessary for the Commonwealth government to borrow at least a part of the funds which would be required for the capital expenditure program. An analysis of the increase in borrowing required and the debt service involved indicates that the debt service will not exceed, even at the point of peak debt, more than 6 or 7 percent of the operating budget. The strong upward growth in the economy is expected to continue so that revenues excluding grants-inaid and borrowed funds are expected to rise from nearly $200 million to over $550 million in 1975, thus indicating the ease with which the debt service of not more than $35 to $40 million per year could be handled. It is clear that substantial progress has been made in the economic, social and physical development of the island since the creation of the Commonwealth in 1952. The rate of economic progress has been gratifying despite a serious adjustment which was required as the result of the reduction in Federal purchases after 1953. What is more important is that a solid base for future growth has been laid through the expansion of industrial capacity of a diversified nature. Adjustments in agriculture are taking place which will yield a considerably higher income per worker. Public service facilities needed to support this growth and provide a better standard of living for the people have been expanded very rapidly since 1952. The fruits of economic development have been passed to the people of Puerto Rico through higher wages and steadier employment, through the free education, better medical service, improved housing, and recreation facilities. During the last few years an upsurge in cultural activities in music and art also occurred, attesting to the new outlook of the Puerto Rican society. Thank you. (The table attached follows:) COMMONWEALTH OF PUERTO RICO, OFFICE OF THE GOVERNOR, Puerto Rico: Selected indexes of social and economic progress, fiscal years 1939-40, 1948-49, 1954-55, 1955-56, 1956-57, 1957-58, and 1958-59 Puerto Rico: Selected indexes of social and economic progress, fiscal years 1939-40, 1948–49, 1954–55, 1955–56, 1956-57, 1957-58, and 1958-59—Con. 1 Includes construction, transportation and communication, finance, insurance and real estate services and net factor income received from abroad. Data not available. Figures for April 1940. A promoted plant received some kind of assistance from EDA and/or PRIDCO during its establish. ment while an assisted plant received it subsequently. Figure as of Apr. 1, 1940. Preliminary. 1 Figures for fiscal year 1949 correspond to an average estimate for period 1949-51; figures for fiscal years 1955, 1956, 1957, 1958, and 1959, correspond to life expectancy for calendar year 1955. Figures for calendar years 1940, 1949, 1955, 1956, 1957, 1958, and 1959. • Revised. Includes private and public schools, vocational groups, literacy program, special courses for adults, and schools of college level. Does not include English teaching to emigrants, with an enrollment of 5,714 for 1954-55. The University of Puerto Rico includes the enrollment of the University of Puerto Rico at Rio Piedras School of Medicine, College of Agriculture and extramural courses. 12 Data for 1950. Source: Puerto Rico Planning Board, Bureau of Economics and Statistics, Division of Statistics, Economic Indexes Section. Mr. O'BRIEN. Thank you very much, Mr. Oliveras. You say that exports last year reached $503 million in goods and another $240 million in the form of services. What kind of services would they be? Mr. OLIVERAS. Services include people serving outside of Puerto Rico, outside insurance services, and other types of services connected with transportation and merchandise. Mr. O'BRIEN. You mentioned that your rate of gross fixed investment in private business or in the quasi-public corporations would have to increase from the present rate of $236 million a year to about $730 million by 1975. It is my understanding that these tax incentives you have usually continue for 10 years. Is that correct? Mr. OLIVERAS. That is true, Mr. Chairman. Mr. O'BRIEN. And we are getting near the end of a decade with some of them, I would assume. Has there been any indication to you that some of those corporations which have come here because of the tax incentives or inducements are planning to leave at the end of the 49511-60- -7 10 years, liquidate their business, say "I have made my pile and off we go"? Or is there an indication that they plan to continue, if not in their present method, in some new way? Mr. OLIVERAS. As you know, Mr. Chairman, the tax exemption is only significant if profits are made. The major part of the exemption goes for income taxes. So the Industrial Development Co. study conducted 3 or 4 years ago shows that over 90 percent of the factories operating in Puerto Rico under the industrial development program are making profits before taxes as high as counterpart industries in the United States. That shows that even without tax exemption they would be making better in Puerto Rico than in the United States. Therefore, our guess is that after the end of the tax exemption most of them will continue operating in Puerto Rico. Mr. O'BRIEN. Then you did recognize that problem and did make a study, and you believe everything is going to be all right. Mr. OLIVERAS. Exactly that, Mr. Chairman. Mr. O'BRIEN. Mr. Aspinall? Mr. ASPINALL. Mr. Chairman, I have no questions. I wish to thank Dr. Oliveras for a very fine statement. Mr. O'BRIEN. Mr. Wharton? Mr. WHARTON. Doctor, on page 7, I notice your figure in the total operating budget projected is $528 million in 1975 compared to $192 million at the present time. I was wondering if this committeesometimes we are in difficulty with inflation of the value of the dollar, and so forth. Did you take that into consideration in any way! Mr. OLIVERAS. We took that into consideration, but, Mr. Wharton, you have to have in mind that we haven't inflation in Puerto Rico independent from whatever inflation there may be in the United States. We have a common market. There is no possibility-no matter how much we plow into industry or devote to government expendituresthere could be an inflation independent of any inflation in the United States. There is no such thing. Mr. WHARTON. It is a hard thing to guess, of course. You are more or less placing that on the present dollar? Mr. OLIVERAS. That is right. Mr. WHARTON. I notice on the net income getting away from the high figures here from 1949 to 1959 you have increased the per capita income from $272 to $492 on the table. Mr. OLIVERAS. Yes. Mr. WHARTON. That is in the neighborhood of not quite double; a very fine showing. Mr. OLIVERAS. That is right. Mr. WHARTON. I take it that is about the best showing the country has made. Mr. OLIVERAS. That is exactly the situation. We think we have been growing and our economy has been growing at the rate comparable to that in the countries behind the Iron Curtain. Outside of those countries, I know of no one who has a better record than we have been able to make under the Commonwealth. Mr. WHARTON. In other words, you have an optimistic setup here as far as the future is concerned? Mr. OLIVERAS. We are looking toward the future with a brighter view than before. We think we may be able, if the government con |