Puerto Rican Commonwealth Status: What Does It Mean?

It is a state in the generic sense of the word associated with the United States on the basis of common citizenship, common defense, common currency and the common market. Basically that is what the Commonwealth of Puerto Rico is. It is a new development in the political system of the United States. There is no doubt about the fact that on the Commonwealth status we have not achieved the fullness of American citizenship. No group of people, no society is suffering until it has a right to participate in the decisions of the highest body which governs it. That is why American citizens from Puerto Rico want Puerto Rico to become a state of the Union because that is the only way that the colonial vestiges which still exist in Puerto Rico can be eliminated.

We believe that independence is the logical solution to the status problem of Puerto Rico. We think we have a natural right to independence and we think also that independence is the modern solution to the problem of sovereignty. Puerto Rico is a colony of the United States. Puerto Rican Commonwealth status. What does it mean? This question is of utmost importance and urgency to the inhabitants of Puerto Rico, yet in the States and the United States Congress, few people know or care about Commonwealth status. You have just heard three different Puerto Rican points of view on Commonwealth status. The first voice was that of Governor Muno Smarine who was interviewed under palm and mango trees in the backyard of his weekend home at Trujillo Alto, Puerto Rico. The second was Luis Ferre, candidate for governor,

the Republican Statehood Party. The third voice was Gilberto Concepción de Gracia, president of the Puerto Rican Independence Party and candidate for governor. In order to explore the status issue, WGBH FM in Boston sent reporter producer Carolyn Isbert to Puerto Rico for five weeks. All the voices you will hear during this program were recorded in Puerto Rico this summer. One of the basic issues in the Puerto Rican status controversy is that the compact between the United States and Puerto Rico is not clearly defined. How do the Puerto Rican feel about this? The compact is the essence of Commonwealth. Without a compact, there is no Commonwealth status. Without a compact, Puerto Rico would clearly be a colony, simply because it would be under the unilateral jurisdiction of Congress. This whole issue now, the question that Puerto Rico is asking, are we or are we not a colony,

the world's down to, is there or is there not a compact? If there is a compact, we are not a colony. If there is no compact, then we are a colony. That was Alexander Maldonado, special news editor, the San Juan star. Mr. Maldonado writes about the status issue three or four times every week and his coverage is considered by Manei to be the best in Puerto Rico. According to Governor Munoz, this is what Puerto Rico basically needs. It needs for the whole problem of political status to be gone into by a high grade, high level commission. Attempts are underway by Congress to make inquiries into the situation. The congressional hearings, which were held May 16th and 17th, were called to look at a bill sent to Congress by Governor Munoz to resolve Puerto Rico's political status.

The hearings were quite dramatic and they had, I think, a very great impact in Puerto Rico. Some congressmen, particularly from the Republican Party, assumed a very tough and even insulting attitude towards the Governor Munoz and I believe that there was some resentment felt by the Puerto Rican leaders present at the hearing and hearing Puerto Rico at this treatment that the Governor and others that appeared at the hearing received. Specifically, Representative John Saylor, a Republican from Pennsylvania, and to a lesser degree, Representative John Keele, I believe he's from Iowa, Republican from Iowa. I was present at the hearings. I

was covering it for the San Juan Star and it was evident to me that both Representative Saylor and Keele were not really interested in seeing what Munoz was after, what the Governor was after, or even trying to understand what Puerto Rico's status problem was all about. They just seemed to be more interested in ridiculing the Governor, perhaps for political reasons, and making shambles of this very serious problem of Puerto Rico wanting to resolve its status problem. At one point, Representative Saylor told the Governor that Puerto Rico is a colony of the United States and I think the Governor reacted very strongly against that and all of us that were there didn't like it either. Why did Governor Munoz come to the hearings and what was he after?

The Governor was defending a bill which is in Congress now which would do two things if to prove as it is written now. One, to recognize the fact that Puerto Rico is no longer a colony of the United States. This would be done by Congress recognizing that Commonwealth is a legitimate non-colonial status based on a compact which is truly bilateral, namely that Congress cannot amend change tamper with the terms of the compact unilaterally. It can only do so with the consent of the Puerto Rican people. What has happened since May? On October 7th, the United States House of Representatives passed House Bill number 5945. This bill struck out all of the parts which recognized the non-colonial status of the Commonwealth compact derived from a bilateral agreement

and mutual consent. However, it did provide for the establishment of a seven-man commission to study the issue and report its findings to Congress next year. Presently this bill is under consideration in the Senate. Carolyn Isber continues questioning Mr. Maldonado. What is the compact? The compact is simply an agreement. It's an agreement between the people of Puerto Rico and Congress to be associated with each other as two sovereign countries, two sovereign people. Under the terms of the compact, for instance, as we all know, Puerto Rico retained its American citizenship. There are common defense and common monetary system, same post office, but Puerto Rico retains a great deal of self-government much more than the states of the Union. In 1952, Congress passed a law, a law 600, which said that

it entered into a compact with Puerto Rico. Part of the problem now is that Congress used the words in the nature of a compact and not just compact. So some people alleged, and also, a good deal of the anti-US propaganda alleges, that Congress did not enter into a compact, that Congress in 1952 did not mean to give up its sovereignty, its jurisdiction, in the lateral jurisdiction, over Puerto Rico. Once Congress passed that law 600, it had to be approved by the people of Puerto Rico and did not take effect until the people of Puerto Rico approved it, which is, in my opinion, the way a compact has to work. If Congress had passed the law unilaterally, without requiring the approval of the people of Puerto Rico,

then we can allege that no compact exists, but that was not the case. Mrs. Brethen asked Governor Munoz about United States colonialism. I think there are some appearances of colonialism onto the present to commonwealth, and there may be some characteristics of it that could be called vestiges of colonialism. The doubt that is so often expressed sincerely by many people as a propaganda effort by communists in Latin America, the very few communists in Puerto Rico, as you know, the doubt that is expressed, that the relationship between Puerto Rico and United States is really based on a compact, that it is really based on a bilateral compact that cannot be abrogated,

accepting by mutual consent, the doubt that is expressed so often about this. Certainly gives a very anguishing sense to many Puerto Ricans. So that appearance of colonialism should be eliminated. It can be eliminated by a clear-cut statement that this by Congress, that the relationship between United States and Puerto Rico are not based on a master and servant basis, that they are based on a compact, that the idea of compact be still more clearly expressed than it was expressed in the legislation of 1952 when the commonwealth was created, and that the bilateral nature, the mutual consent nature, all that compact

placed in such a clear light that it cannot be challenged by anybody, and that will remove this anguisher that now weighs on the pride and sense of political dignity of the Puerto Ricans people, and that at the same time it is used as a propaganda weapon against the United States in Latin America and in other parts of the world. Mr. Castro, he del Castro mentions it at least once a week through his radio programs in Cuba directly or through some of his henchmen. Alexander Maldonado continues. He is trying to not only show the people of Puerto Rico but to show the world, and the only way of doing this is having Congress clarify or state an unequivicable terms that yes, it did give up its sovereignty over Puerto Rico in 1952, or if Congress is not willing to say that it did that in 1952, let

it say it today, let it say it in 1963, we do give up our sovereignty over Puerto Rico, and Puerto Rico is a commonwealth working under a bilateral compact. Do you think that Governor Munoz was hurt politically by the bad reception he received in Congress? I think he was hurt very badly. To begin with, his own pride and the governor is a proud person, not pride in the bad sense, but pride of his achievement as a statement and as a leader, but also he was hurt politically in Puerto Rico because most of us here have always had the impression that the governor could get pretty much what he wanted from the United States. We have seen since 1961 a very close relationship between the governor and President Kennedy, and as you know, the president gave the governor a special dinner

at the White House, and the governor came to visit Puerto Rico in 1961. So this spectacle of Munoz going there, not getting what he wants, and being given this rather ship-shot treatment, as if he were a team-story union leader appearing before a congressional committee and not a governor and a statesman. Certainly, I think, hurt him quite a bit. Who gave him the ship-shot treatment a committee, or who was investigating the bill? What was happening to the bill at the time? As I said, mostly responsible for that were representatives sailor and keel, but in addition to this treatment, it was very evident to me, and I think also to the governor, that this committee did not really understand and does not understand Puerto Rico's status problem.

This is the subcommittee on insular territorial affairs. This is the one body in Congress that deals directly with Puerto Rican affairs. So if these members of Congress do not know what's happening in Puerto Rico, one, two, if they really don't care, or they pay not to care, and three, if they don't have the sense of importance and urgency, if they don't share that with the people of Puerto Rico, then I think it's a pretty pessimistic situation. As of today, I don't think that Commonwealth status and what the governor is after is in good shape. The governor, who will continue meeting with members of Congress, was kinder in his remarks. I wouldn't say I was rudely treated. We have better manners in Puerto Rico than some

of the members had, but other of the members had very good manners in the committee too. But I've seen some very good people treated very roughly in congressional hearings. One governor Munoz turned his attention to a discussion of the history of the Commonwealth and his interpretation of the present status situation. Puerto Rico came under the jurisdiction of the United States as a result of the Spanish American war. Puerto Rico was never made and incorporated territory of the United States. Therefore, the Constitution of the United States does not have to run in Puerto Rico. Some parts of it do run, but not exprop your vigorous, I would say, not because of its own nature. Of course, the Constitution of the United States runs in Puerto Rico to protect the civil rights, the individual rights of citizens, because Puerto Ricans are citizens of the United

States, freedom of speech, freedom of the press, and all the other basic individual rights. But it does not run in Puerto Rico in the sense of requiring, quote, the rule of taxation to be uniform throughout the United States, unquote, so that Puerto Rico has an autonomous fiscal system. The Puerto Ricans pay high taxes, but they pay them into the Puerto Rican treasury. And the Puerto Rican government by the different appropriation acts of the Puerto Rican legislature uses the money derived from this high taxes for dealing with the very great and difficult economic problems of Puerto Rico for building the road system that Puerto Rico needs. A lot of it has been built, but a lot more needs to be built for developing the

school system of Puerto Rico, both in quantity and in quality. We have made great progress in this, but not nearly as much progress as we need. In health also, we have made great progress. But then again, here again, not nearly as much as we want to make. For all this, we need a high tax system in Puerto Rico, and we do have a high tax system. The Puerto Rican taxes himself a lot. But this tax money does not go into the federal treasury of the United States. If it did, then Puerto Rico's school system would be in shambles. Puerto Rico's road system would not have developed in the way it has developed. The whole economic development of Puerto Rico would have been considerably slower. The wages would be very low.

Income in general would be very, very low. That is the basic economic difference is the fiscal autonomy of Puerto Rico. But I want to point out again, we do not use our fiscal autonomy, not to tax ourselves. We do tax ourselves very highly, but we use that money for our own needs. If we couldn't use them for our own needs, very bad things would have developed in the lives of the Puerto Rican people. It is the feeling of all sides, statehood, Commonwealth, and independence, that vestiges of United States colonialism remain in Puerto Rico. Each group, of course, seeks to solve the problem in a different way. Here is Governor Munoz on this issue. Now as to what you could call not only appearances of colonialism, but vestiges of colonialism, I would mention two, one, the prohibition that Puerto Rico labors under as to refining its sugar.

We are only allowed to refine around 10% of our sugar quota. This is an old mercantilist colonial idea. That is a vestige of colonialism in the relationship between the United States and Puerto Rico. I would mention another, and that is the application of the coast-wise shipping laws to Puerto Rico, which have the practical result of making the cost of living substantially higher than it would otherwise be in Puerto Rico. Since Puerto Rico is an island and we must import about half of the food that we consume. Since it is an island that is being rapidly industrialized and we must import most of the raw materials for our industry and then we must export a large proportion of the finished product of our industry so that everything happens by ships coming in and ships going

out and the coast-wise shipping laws and their application to Puerto Rico. They make us use American bottoms and we have no objection to that, but the ships used in the coast-wise trade of the United States have no subsidy while the ships used in the international trade of the United States do have subsidy so that they can compete with emerging Marines of other countries. Now there is no coast-wise trade worthy of mention in the United States excepting between Puerto Rico and the United States and between Hawaii and Alaska and the United States. Through Puerto Rico, Hawaii and Alaska are suffering together from this situation. This would perhaps mean that there is a little trace of colonialism also regarding Hawaii

and Alaska at least in this economic sense. He's Bertol Concepción de Gracia, president of the Puerto Rico Independence Party and the candidate for governor of Puerto Rico, considers that without a doubt Puerto Rico is a colony. Puerto Rico is a colony of the United States because the government structure here is set up by virtue of a law passed by Congress called the Jones Act. This law was approved in 1917 and then it was amended by law 600 in 1950. By virtue of that law, Puerto Rico was given more self-internal government by eliminating some clauses of the Jones Act, but the fundamental provisions of the Jones Act, they remained

and they were put in a law called the law 600 and that law 600, the first provision of the law, says that Puerto Rico belongs to the United States. Section 9 says that Congress has the power to lay its late for Puerto Rico in every matter that is not locally inapplicable and Section 58 incorporates fundamental provisions of the Foracaract of 1900, those relating to customs and to navigation laws, immigration and so forth. And by virtue of that political and economic structure, the United States maintain complete

jurisdiction over all fundamental matters affecting the people of Puerto Rico, such as conscription laws, the power to declare war and to make peace, air navigation, maritime transportation, television, radio, laborations law, minimum wage laws, bankruptcy, they hold the federal court in Puerto Rico, they have the unilateral power to expropriate lands in Puerto Rico and they have taken away 142,000 of our best lands, two municipalities, the municipality of Culebra and the municipality of Vieques, out of 28,000 acres in Vieques,

the navy took 23,000 acres of land and there are 76 municipalities in Puerto Rico. So because of all these and other reasons of which I cannot refer now because of lack of time, Puerto Rico is a colony of the United States, it's a territorial possession. The independence movement seeks to solve the status situation through pressures on the United Nations and world public opinion, it is not seek independence through the ballot. Juan Marie Bras, Secretary General of the Independence Movement, considers that independence is a question of right and wrong, not necessarily a question of majority opinion. Puerto Rico is a nation very well distinguished from the United States, it's a Latin American nation and the United States is not conceived as a multinational state comprising within

itself different nations, the United States is a nation in itself that does not aspire to integrate into it a well-defined nation as Puerto Rico. Puerto Rico is a case very different from Hawaii where there was no Hawaiian nationality when the statehood was granted to that territory and very different from Alaska and all the rest of the territories that were incorporated at states of the Union. Luis Ferre, gubernatorial candidate for the Republican Statehood Party, disagrees with Juan Marie Bras. The culture of the new territory can vary to some extent with the general culture of the United States, that was the case with Hawaii, Hawaii had a culture which was at the background of Japanese, of Chinese, of Malayans and yet they became American citizens and they are

all part of the United States, that is a natural outgrowth of the American system because after all the federal system was developed on the principle of diversity within unity. That is why the states of the Union have maintained the states' rights because they wanted to have the diversity of the different areas conserved, protected. We of course have a Spanish tongue and we have other traditions. But the United States is a tremendous kaleidoscope, the people from Boston are certainly not the same as the people from Texas or the people from California or the people from Minnesota. You have traditions which go back to the Germans in Minnesota, you have traditions which go back to the English in Boston, you have traditions which go back, well I don't know to Hawaii in Texas, there are a lot of things in Texas that are mixed. But anyhow there are a lot of different things Louisiana has a different cultural background

but that doesn't prevent all these groups from working together for the common good of the nation. The common end which is what the United States exists for, what it was created for, for a new concept of humanity, a concept that all men are equal and that they have the right to equal opportunity in life. That the sovereign is the people and that the government is the servant of the people. That was the concept for which the United States was founded by the fathers. That is the concept which we put our Ricans believe in and that is why we feel comfortable as American citizens that we are of Spanish extraction because like all other Americans who come from English extraction or from French or from German or from Polish or from Italian, we all believe in what the United States stands for. Governor Munoz replies to Mr. Ferre, yes but all the national groups were cooked in the same melting pot on the same stove, where the Rico is on a different stove in a different

pot, therefore Puerto Rico has a Latin American culture. Nevertheless, the governor does not want independence. Carolyn Isber asked him, Governor, what made you change your mind from wanting independence for Puerto Rico to commonwealth? We had, in the years between 1930 and 1935 and 36, the colonial government in Puerto Rico was pretty bad. It wasn't bad in the sense of great suppression, of personal liberty, although there was some of that, but it was bad in the sense of its complete obliviousness to the great poverty and misery of the mass of our people. And everybody, not everybody, but many Puerto Ricans were for independence because of this.

And also we had not taken into account the economic factors, but only the political factors. As we went deeper and deeper into the problem, we realized that there was a contradiction between what would happen politically under independence and what would happen economically under independence. And since our people were suffering, as I said, tremendous poverty. At the time, the realization became clearer in our understanding that independence would increase the sufferings from poverty instead of alleviating them.

Then we began to seek a way out of colonialism because we were deeply, as we are, today against colonialism in any form. But we found that there was no way out of colonialism through independence, in the specific case of Puerto Rico. And there was, as a matter of fact, not a way out from colonialism through statehood, membership in the federal union as a state in the specific case of Puerto Rico. We had to seek a way out of colonialism. And that is how, gradually, the effort, the creative effort to develop a new form of association, a new form of political freedom that would free us from any taint of colonialism.

And at the same time, it would not be independent, which was an applicable to Puerto Rico or a statehood that was also an applicable to Puerto Rico, led us to what became this new political creation, the Commonwealth, the form of association, with the United States. Luis Ferre disagrees with the governor about Commonwealth status. To ask Commonwealth is simply a transitory status, which leads either to statehood or to independence, because it is not a final status as statehood is under the American constitution. The governor of Puerto Rico, of course, has been trying to invent a new type of status under the American constitution. But that kind of status would have to be accepted by the states of the union as an innovation in the present relationship of states, of one with the other. And it would require a constitutional amendment.

I doubt very much whether the American people whose experiment in freedom is a federated experiment. An experiment, which they have developed for the last 188 years, will now care to alter that experiment, to incorporate into it something which is completely alien to the federated principle. I think it will be much easier to Puerto Rico to become a state of the union, as it deserves, and I see this, it should be supposed to be, being as we are American citizens, then to have the constitution amended to establish a system of union, which is completely different from that of the other states of the union, particularly if the Commonwealth status, which the governor has defined, is to be a privileged status. In other words, the people of Puerto Rico are to enjoy certain advantages, which no other state of the union would enjoy, and of course, they would not have certain rights, which

other states enjoy. But the privileges are such that, in the long run, they will become, rather, a nuisance to the other states of the union, and I don't think that the other states will be agreeable to a permanent condition of that nature. There are many who don't believe that the United States Congress would grant statehood to Puerto Rico, even if the people of Puerto Rico voted for it. Walter Lippmann, in an article on the status issue, published on June 18th, said, It is hard to imagine what consideration would induce the Congress to give such political power inside the United States to what is, in fact, a foreign people speaking of foreign language and living under different social institutions. All that the agitation for statehood is likely to accomplish is to generate a disappointment. For one thing, Puerto Rico would be entitled to two senators and six representatives, which would give it more voting power in the House of Representatives than 23 existing states. It would outvote to pick at random such states as Arizona, Arkansas, Colorado, Kansas, Maine,

and New Hampshire. It would have as many votes as Connecticut, Oklahoma, and South Carolina. Now that we have discussed some of the political and cultural aspects of Commonwealth statehood and independence, let's turn to the all-important economic implications of the state's problem. Fernando Nios believes that Puerto Rico should begin contributing money to the general expenses of the U.S. government. Now Puerto Rico, as we said before, has an autonomous fiscal system. It pays no taxes into the federal treasury. I repeat, if we had to do that, we would have been sunk long ago, and our great development program could never have even gotten started. And if at any time now we had to pay such taxes, the whole program would collapse. However, we feel that Puerto Rico has made enough progress so that we can begin making

a contribution not as taxes, because the idea of taxation without representation should not be resuscitated. But because the compact could contain an agreement on a formula for Puerto Rico to make payments into the federal treasury for the common expense of the union, on the basis of a formula that would not destroy the chance of Puerto Rico to continue developing its economic system and improving the standard of life, of living of our people. Some such formula as a percentage of the annual growth of the economy of Puerto Rico to be contributed to Congress. This can, in a number of years, be a pretty great amount of money. But on the basis of such a formula, never could those payments stop the economic growth

of Puerto Rico, because by the nature of the formula, the payments would be a part of the economic growth of Puerto Rico. Hubert Barton, economic counsel to the Puerto Rican House of Representatives, has studied the economic advantages and disadvantages of the status problem for many years. Here he comments on the economic advantages of Commonwealth status. The principle economic elements in the compact are free movement of people, goods and money between Puerto Rico and the United States. The return of most federal taxes collected on Puerto Rican products, the fact that the federal income tax and both personal and corporate do not apply in Puerto Rico.

Another with the fact that most other laws, most other federal laws, do apply in Puerto Rico. What this means is that social security laws, grants in aid for roads and hospitals, and other federal legislation of a similar nature, do apply bringing in to Puerto Rico, the federal grants in aid and the transfer payments, such as veterans' payments, that are received by the states. These elements in the federal relationship are all basically favorable to Puerto Rico. However, the Commonwealth compact is not completely favorable to Puerto Rico, according

to Mr. Barton, there are three other laws that are not favorable. The cabitage or coastline shipping laws require that goods moving between Puerto Rico and the United States move in higher cost U.S. flag vessels. The federal minimum wage laws also apply in Puerto Rico. The effect of these laws is to move up wages in covered industry faster than is economically desirable and much faster than wages have been able to be increased in agriculture and other industries not covered by the federal legislation. There is also, in the Federal Sugar Act, a restriction on the amount of refined sugar

that can be sold in the United States. In effect, we feel now only about a tenth of our quota with refined sugar the rest moving in raw form. It should be noted, however, that these economic disadvantages inherent in the compact also apply to Hawaii and Alaska, even though, of course, the restriction on sugar is not relevant for Alaska. Juan Maribras, Secretary-General of the Independence Movement, says of United States Puerto Rico and economic relations, the economy of Puerto Rico has been so much tied up to the American economy forced by the political circumstances that the transformation of that economy to one of a free nation will necessary bring a lot of problems.

Those are problems that we are obliged to afford and they have solution but they need the talent of the Puerto Rican people put together to solve them. They are not unsolvable problem and we are confident on the capabilities of the people of Puerto Rico to make that transformation as swift as possible. Dr. Antonio J. Gonzales, Economic Advisor to the Puerto Rican Independence Party, agrees with Mr. Bra. No country is ever prepared for independence in terms of economics and I think that no country shall wait for the time to be ready for independence because of the conditions of economic development.

This is true with the Afro-Asia nations, they have not waited for them to improve their economic condition before conquering independence. But apart from that, it is my belief, my sincere belief and honest belief, that the people of Puerto Rico is ready for independence economically in the sense that here is a people that is hard worker people. We have the means to improve our economic conditions. We could establish better international economic relationships with other nations. We could benefit from our special position in the Caribbean area and I think that the whole economic picture will better off under independence than it is now. Do you think that in the interim between independence, when you just become independent, that there will be a recession of any sort before you rise again? Well, there will always be some sort of economic disadjustment, but this will be very temporary

and this will be due mostly to the possibility that some of the direct federal aids that we receive will be discontinued. But I don't think that would be of that sort of disadjustment that will create a deseclibria for a long time. This will be very temporary on my opinion. In the meantime, while we will re-adjust our economy to the economy of free nation, especially as soon as we begin establishing new economic relationships with other countries of the world. Now would you continue further elaborate on how you think your program would improve upon the government program or how you think independence, I believe you mentioned the economy would improve quicker than under commonwealth. Is this what you said? For instance, right now the Puerto Rican people has been converted into a consumer society

and we are first, by our colonial status, to buy all our goods in the American market. You have to understand that the American market is not the cheapest one in the world and it is my opinion in a few of the items that have checked that we will improve our economy just by being able to establish some economic treatises with other nations for buying goods and other things we need in the island, which could be bought more cheaper in other nations than from the American market. Let me quote, for instance, the automobile industry. We are one of the greatest consumers of automobiles because this is a country which everybody is used to travel by automobile.

We are important automobiles from Europe and also from the United States. The European cars happen to be less expensive than the American car, but it is now more expenses on account that we have to pay a tariff on European automobiles that are in this tariff, as you understand, is imposed by the American government to protect the United States automobile industry. Since we can never develop an automobile industry, it would be to the benefit of the Puerto Rican people not to have a tariff on such an important item. We saw a tariff since the tariff is not needed because we don't have an automobile industry to defend or to protect the automobile's price will be cut down and we will guess more than 20%. And this was checking the figures that will give us an economy of more than 20 million

dollars every year, just automobiles. Now Hilbert Barton presents his views on the economic effects of independence. In my opinion, the effect of independence would not be severe on Puerto Rico. There would be, presumably, the conditions of independence like those made for the Philippines in 1946 would provide for a gradual rise in tariffs on both sides. This would reduce the shock of transition. The loss of free trade eventually would be a serious matter, but it would not be a great immediate shock.

The principal immediate shock would be from loss of federal grants in aid and the transfer payments to veterans. Presumably even some of these could be continued if it were mutually agreed in the terms under which Puerto Rico should receive independence. Nevertheless, these federal grants to Puerto Rico are now running in the neighborhood of $69 million a year and transfer payments about $51 million a year. This is a sizable sum which it is unlikely would be matched by the scale of foreign aid grants that Puerto Rico might receive as an independent republic. Luis Ferre, gubernatorial candidate for the Republican Statehood Party, considers

statehood would be beneficial for Puerto Rico. There is no fear that the taxation will affect business in Puerto Rico. Quite to the country, we feel that it will greatly stimulate investment in Puerto Rico. Tax exemption, which some companies enjoy today in Puerto Rico, we don't enjoy tax exemption in our most important companies, is nothing but a stopgap solution. It is not a good sound economic solution. If you have a business which has to leave because its tax exempt then it is not a good business. You have a business that leaves paying taxes then you have a sound business. Puerto Rico should be able to attract those businesses which are sound within the Puerto Rico economy. There are many and they are coming to Puerto Rico. Tax exemption will not mean anything to them except an additional advantage. Take for example an oil refinery in Puerto Rico, one of the oil refineries in Puerto

Rico, which is a fairly large company with an investment of about $60 million. Well that company is making a profit today of $12 million, which is a 20% return on the investment. Now naturally if that corporation were to pay federal income tax it would pay 50%, which would still leave the company $6 million of profit. Well certainly that is a good profit on $60 million which is a 10%. And the same thing would happen with a lot of other companies. Now you must understand that even though the Puerto Ricans corporations will pay federal income tax and individuals, it will not make such a big change in Puerto Rico because we are today paying local taxes, which are just as high as the federal taxes. Our personal income tax in Puerto Rico is just as high as the federal income tax. So we are not in Puerto Rico enjoying a tax free society. We are paying high taxes which of course are held by the government of Puerto Rico for their use in Puerto Rico.

And corporations don't pay 52%, they pay up to 33% to be exact on the average. So the change will only be from 33% to 52%. But we must also indicate that the people of Puerto Rico are not receiving all the benefits from the federal treasury that they would be entitled to as a state of the union. So the way we would pay federal taxes, at the same time we would get in return from the federal treasury a certain number of advantages which you do not get today which would great decompensate these additional taxes. This has been proven by a very fine study which was made by Professor Arthur Burns who is the Dean of the Graduate College of the Washington University in Washington DC. He made a complete study of this situation and was able to prove that if Puerto Rico became a state of the union, in 1959 it would have lost approximately $18 million in the

exchange between federal taxes and return advantages. But by 1962, because of the increase in the economy of Puerto Rico, instead of having a loss, Puerto Rico actually would have gained about $6 million by becoming a state of the union. Now the governor of Puerto Rico has been maintaining and arguing that according to a report of the Bureau of the Budget which was put out in 1958 or 2009, Puerto Rico would lose $180 million in federal taxes if it became a state of the union. We had this report analyzed and studied carefully by Professor Arthur Burns who is one of the authorities in Washington on state and federal government fiscal relations. He came to the conclusion and so made a report that this was not supposed to be a report to show the cost of statehood but simply a report on exchange of funds and that Puerto

Rico rather than lose $180 million would only lose $18 million as I have already said. Now this report was submitted to the Bureau of the Budget to the Comptroller General of the United States and the Bureau of the Budget accepted in writing and we have the letter that it is true that his report was not to be construed as a cost of statehood report and that any information to her effect was wrong and was an incorrect interpretation. The word Barton strongly disagrees with Mr. Ferre, according to Mr. Barton, in the case of statehood it is clear that the immediate and the long run effects on the economy would be very severe. The last official estimate of the effect of statehood on the net movement of federal funds was for the year 1958.

This was done by the US Bureau of the Budget in the course in a statement for the House for a Relations Committee. The loss to Puerto Rico estimated by the Bureau of the Budget for 1958 was $188 million. This figure amounts to approximately half the entire Commonwealth budget and it would be would have a very serious effect on all kinds of government activity. What else would change in government expenditures? This is a serious consideration Mr. Barton feels that in general payments for relief purposes would be sharply increased leaving a much reduced amount available for the critical

programs of education and health that means so much for Puerto Rico's future. But perhaps even more serious than these is the loss in the income to the economy which would result from Puerto Rico's inability to continue to grant exemption to manufacturing and other enterprises from federal corporate income taxes. Puerto Rico's economic development has come about largely in the industrial sector and about 90% of the increment in Puerto Rico's industry has come from U.S. companies investing in Puerto Rican manufacturing subsidiaries.

These companies would not come to Puerto Rico and establish new factories here without this grant of tax exemption. Repeated inquiries have been made from the company officials themselves and this is very clear that very few plants would come without this special inducement. By removing this inducement Puerto Rico's ability to grow would be stopped and without growth in its industrial sector a land and resource poor island could not possibly advance. Mr. Ferre makes these comments on the source of the strength of the statehood party.

Well we believe of course in private initiative we don't believe in paternalism from the government. In other words we don't think in a free society it can't be maintained free if the government gives everything away. I think that the individual is the one that should really create things, work and help to solve the problems of the community and the government should do those things that cannot be made by the individual. That's our philosophy, that's how we have lived. Now we believe of course in social protection we don't believe in minimum wages, we believe in social security, we feel that those are really part of our democratic and republican tradition. It's very important to have this principle of security which is in our decaration of independence and in our constitution. In other words we believe that men are free and that they have the right to live liberty and the pursuit of freedom. Now to have the pursuit of freedom and to have life and liberty you must have certain

guarantees in your life of a minimum which are what we have with social security but that is only a flaw. We feel that the creative spirit of the individual should be left to the individual citizen, the creative force and that by having the individual do it instead of the government a lot more will be created and then there will be much more to distribute in higher wages and in greater facilities which are given by the government such as public education, public health and public services as roads and so on. So the great difference between us and the democrats here in Puerto Rico and the present party is that the governor of Puerto Rico wants to do everything for the citizen. As a matter of fact today we have one third of our population receiving free food which we think is rather unfortunate I think that they should have work and better wages and they should pay for their things and have the government give away.