Citation
Regional development and water resource management

Material Information

Title:
Regional development and water resource management implications of a changing agricultural sector on Puerto Rico's south coast
Creator:
Morris, Gregory L
Publication Date:
Language:
English
Physical Description:
ix, 250 leaves : ill. ; 28 cm.

Subjects

Subjects / Keywords:
Agriculture ( jstor )
Crops ( jstor )
Economic models ( jstor )
Financial investments ( jstor )
Groundwater ( jstor )
Irrigation ( jstor )
Irrigation management ( jstor )
Irrigation water ( jstor )
Water management ( jstor )
Water resources ( jstor )
Agriculture -- Puerto Rico ( lcsh )
Dissertations, Academic -- Environmental Engineering Sciences -- UF
Environmental Engineering Sciences thesis Ph. D
Irrigation -- Puerto Rico ( lcsh )
Water resources development ( lcsh )
Genre:
bibliography ( marcgt )
non-fiction ( marcgt )

Notes

Thesis:
Thesis--University of Florida.
Bibliography:
Bibliography: leaves 225-238.
General Note:
Typescript.
General Note:
Vita.
Statement of Responsibility:
by Gregory Lee Morris.

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Source Institution:
University of Florida
Holding Location:
University of Florida
Rights Management:
Copyright [name of dissertation author]. Permission granted to the University of Florida to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
Resource Identifier:
023032821 ( ALEPH )
05656227 ( OCLC )
AAK3754 ( NOTIS )
AA00004911_00001 ( sobekcm )

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Full Text











REGIONAL DEVELOPMENT AND WATER RESOURCE MANAGEMENT:
IMPLICATIONS OF A CHANGING AGRICULTURAL SECTOR
ON PUERTO RICO'S SOUTH COAST








BY

GREGORY LEE MORRIS


A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF DOCTOR OF PHILOSOPHY





UNIVERSITY OF FLORIDA


1979




REGIONAL DEVELOPMENT AND WATER RESOURCE MANAGEMENT:
IMPLICATIONS OF A CHANGING AGRICULTURAL SECTOR
ON PUERTO RICOS SOUTH COAST
BY
GREGORY LEE MORRIS
A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR TH
DEGREE OF DOCTOR OF PHILOSOPHY
UNIVERSITY OF FI
.ORI DA
1979
rn


TSjv
ACKNOWLEDGMENTS
The assistance of the members of my committee is gratefully
acknowledged. In particular, I wish to acknowledge the patient and
encouraging assistance I have received from my chairman, Dr. Kylstra,
and my long-standing inspirational debt to Dr. Odum. I also appre
ciate the understanding demonstrated by my committee in accepting my
five years of commuting between Gainesville and Puerto Rico as I at
tempted to balance job responsibilities and income against research
requirements and expenses.
I owe a great personal debt to Douglas Pool. He was
responsible for introducing me to Puerto Rico, and has served as a
reliable and helpful friend. He also single-handedly ran a
difficult agricultural venture during my unexpectedly long absence
from the island while bringing this research to its conclusion.
There are many individuals on the island, too numerous to
name, who have offered readily of themselves and provided personal
insights into the social, cultural and political aspects of Puerto
Rico. These include many friends at the Department of Natural Re
sources in San Juan, the Tirado family, Janet Weiss, Hugh Thorne, and
my dedicated friend and companion, Miriam Rabn.
From my family in Sarasota I have received financial aid
and friendly advice and support at the most timely moments. In
i i


Gainesville, my sister has provided three years of accommodations,
airport limousine service, and good humor.
Finally, I am fortunate to have the very professional typing
services of Sofia Kohli ("Superfish"). Her experience and ability
facilitated the preparation of the final document immeasurably.


TABLE OF CONTENTS
Page
ACKNOWLEDGMENTS ii
ABSTRACT vii
CHAPTER I: INTRODUCTION AND OVERVIEW . I
Problem Statement 1
Methods of Regional Analysis 3
Input-Output 3
Neoclassical Growth Models 5
Simulation Models 8
Previous Resource Studies in Puerto Rico ... 10
Study Methodology 12
Regional Development Model 12
Resource Management Model 13
Report Organization 14
CHAPTER II: STUDY AREA DESCRIPTION 16
Location 16
Physical Setting 19
Geology 19
Vegetation and Land Use 19
Climate and Hydrology 21
Socioeconomic Setting 33
History 33
Socioeconomic Objectives 37
Socioeconomic Conditions 38
Institutional Framework 43
CHAPTER III: REGIONAL MODEL . 48
Population Sub-Model 52
General Equations 52
Fertility 55
Mortality 61
Migration 63
Economic Sub-Model 74
General Equations 74
Productive Capital 75
IV


TABLE OF CONTENTSContinued
Page
Production Relationships 95
Economic Dependence 112
Population and Economic Linkage 116
Employment 117
Labor Force 117
Unemployment and Migration 119
Model Calibration 120
Regional Model Simulation Results 122
CHAPTER IV: WATER MANAGEMENT MODEL 131
Supply Curve for Water 132
General Considerations 132
Supply Curve Construction 133
Demand Curve for Water 140
General Considerations 140
Municipal Water 142
Industrial Water 145
Recreation and Natural Systems 150
Agricultural Water Demand 151
Existing Conditions 151
Water Demand in the Sugar Industry .... 153
Water Demand by Non-Sugar Crops 166
Aggregate Irrigation Demand 169
Changing Pattern of Irrigation Demand . 175
Water Management Model 178
Safe Yield Criteria 179
Water and Salt Budget 179
Model Assumptions and Equations 183
Water Resource Scenarios 192
Model Results 194
CHAPTER V: DISCUSSION 197
Development Objectives 197
Alternative Development Patterns 201
Feasibility of Development Alternatives 201
Alternative Development Patterns in
Agriculture 204
Resource Implications of Agricultural
Change 207
Management Changes 207
Institutional Needs and Constraints . 209
A Proposal for Resolving the
Institutional Problem 212
v


TABLE OF CONTENTS--Continued
Page
CHAPTER VI: SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS 217
Summary and Conclusions 217
Overview 217
Regional Growth 218
Resource Management 220
Recommendations 223
Entrepreneurship 223
Agriculture 223
Water Management 224
REFERENCES 225
APPENDIX A: CAPITAL STOCK ESTIMATE FOR PUERTO RICO 239
APPENDIX B: REGIONAL MODEL EQUATIONS 244
BIOGRAPHICAL SKETCH 249
vi


Abstract of Dissertation Presented to the Graduate Council
of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Doctor of Philosophy
REGIONAL DEVELOPMENT AND WATER RESOURCE MANAGEMENT:
IMPLICATIONS OF A CHANGING AGRICULTURAL SECTOR
ON PUERTO RICO'S SOUTH COAST
By
Gregory Lee Morris
March 1979
Chairman: Chester D. Kylstra
Major Department: Environmental Engineering Sciences
As provided by the Water Resources Council's "Principles and
Standards," resource management in the United States is conducted
with the objective of providing for increases in income and maintenance
of environmental quality. However, these criteria inadequately express
development goals in Puerto Rico, where a development policy aimed
principally at providing increases in income and industrialization
through capital importation and increases in transfer payments have
served to greatly increase the island's level of economic dependency.
Over 25 percent of all income on the island was derived from unilateral
federal transfers by 1977. The savings rate in the island's private
sector has decreased and is now negative, with income increases being
used to support higher levels of debt rather than increases in produc
tive investment.
A simulation model is constructed based on theoretical rela
tionships to examine these development patterns. It is shown that
continuation of existing development patterns may provide long-run
VI i


increases in income and employment, but that this may be accompanied by
even higher levels of dependency. Under these conditions public
sector resource decisions based on income and employment will only
perpetuate these undesirable patterns.
These patterns can be broken only through the promotion of
local investment and entrepreneurial activity. A prime sector for
the promotion of entrepreneurship is the island's backwards agricultural
sector, which stands in stark contrast to the modern industrial sector.
Most of Puerto Rico's mechanizable lands, and nearly all irrigated
lands on the semi-arid south coast, are planted in sugarcane on govern
ment operated farms. The government sugar industry suffers losses of
approximately $500 per acre per year. In response to these losses,
and in the interest of promoting agricultural modernization, government
policy has recently been implemented to lease government sugar lands
to private growers for the production of non-sugar crops.
Hydrologic and irrigation conditions on the south coast are
described, showing that a significant portion of the economic problems
in the sugar industry may be attributed to archaic irrigation practices.
Private farms are expected to be characterized by increasing irrigation
efficiency, which could increase the rate of consumptive use and
decrease recharge from irrigation percolation, creating an unfavorable
water balance in the already heavily drafted south coastal aquifer.
The conversion from sugarcane to diverse seasonal crops will also
create the potential for economically efficient transfers among private
farms.
vi i i


Existing water management institutions in Puerto Rico are
poorly adapted to accommodate these changes in irrigation management.
The primary problem lies in the lack of accountability which the
resource manager has toward the resource user. An institutional
framework is synthesized in this research which is aimed at improving
this accountability through creation of a local water management insti
tution which will be capable of providing for long-term as well as
seasonal transfers among users in response to changing crop patterns
and economic demand.
IX


CHAPTER I
INTRODUCTION AND OVERVIEW
Problem Statement
Regional growth creates changes in patterns of natural
resource utilization. By understanding these changes and their
implications, management policies may be implemented to increase the
value of resources to society. This value to society is determined
by the contribution which a particular resource use makes to patterns
of regional development which are themselves perceived to be desirable.
Thus, regional development and resource management policies are
intimately linked to one another. Changing development policies and
patterns of growth can foster changes in resource allocation. This
in turn, can create the need for revised resource management policies
and institutions. Conversely, the development policy itself must be
formulated within the constraints imposed by the region's resource
base.
The relationship between changing regional development
strategy and water resource management in Puerto Rico is examined.
Following three decades of intensive development effort, Puerto Rico
in the 1970s has high levels of unemployment and has become increas
ingly dependent on growth in transfer payments from the federal
government, which now equal 26 percent of the island GNP. A majority
1


2
of business earnings are now remitted to non-residents, reinforcing
the island's dependence on capital imports. Some of the changes in
development policies needed to deal with the conditions will also
require changes in patterns of resource use and management policies.
A regional development model for Puerto Rico is constructed
and simulated to examine growth patterns under current and alternative
development strategies over the period 1947-2020. It is asked
whether the strategy of industrialization, emphasizing heavy reliance
on capital imports and transfer payments, can generate patterns of
development which are consistent with the island's long-run goals,
i.e., to reduce unemployment, increase income levels, and increase the
island's economic self-reliance.
Changes in regional development patterns may modify patterns
of resource use. This relationship between a changed regional
development strategy and water resource management is explored for
Puerto Rico's semi-arid south coast. Models of water resource use are
constructed and used to suggest some of the water management implica-
i
tions of new development policy, focusing on the potential effects of
changing irrigation management accompanying the shift from unprofit
able sugarcane production on government-managed plantations to the
profitable production of non-sugar crops on numerous smaller private
farms.
The hydrologic changes are assessed from supply and demand
conditions and a water management model. The water management model
is run over a period of 25 years to define those changes in ground


3
water withdrawal, consumptive use in agriculture, and artificial
recharge which could create an unfavorable water or salt balance.
These results are used to suggest institutional changes which are
needed to accommodate these changing water management conditions.
Methods of Regional Analysis
A variety of quantitative analytical models may be utilized
to examine regional growth patterns and potential, including export
base, cumulative causation, industry structure analysis, shift share
analysis, etc. However, many of these models have serious theoretical
or operational weaknesses and cannot be used to directly address the
specific relationship of resource infrastructure to the regional
growth process. Three types of models which have been used to
evaluate the role of resources in regional growth are discussed:
input-output, neoclassical growth models, and simulation modeling.
Input-Output
The input-output (1-0) framework is a matrix of the linkages
among the sectors of the existing economic system. Utilizing an 1-0
model an analyst can examine the response of all sectors of the
economy to any initial changes which it is desired to test. In its
static form the technologic structure of the system is held constant.
The conversion of a static 1-0 model to a dynamic framework requires
not only the conversion of the model's internal structure, but also
requires that the exogenous sectors change. Richardson (1973) has
suggested that a separate model might be constructed to generate the


4
changes in exogenous variables over time which would be required for
the dynamic operation of an 1-0 model. When used as a dynamic tool
the analyst makes judgmental estimates of the changes in the
coefficients which may occur over time, plus the effect of changing
technology and substitutions on both the input and the output sides.
Changes in industrial mix and other "add-ons" are required to make
this static model perform in a dynamic framework.
Input-output techniques were used by Kelso et al. (1973) to
study the effects of a declining water resource base on the Arizona
economy. These declines are being caused by withdrawals from desert
aquifers in excess of recharge rates, resulting in declining ground
water availability. In its dynamic form the structure of this 1-0
model was altered in accordance with a variety of different growth
scenarios to show the possible effects of water shortage on the economy
over a 50-year period.
Serious impediments to the implementation of an 1-0 model are
the lack of readily quantifiable available data and the amount of
time and expense involved in data collection. Puerto Rico has
detailed information on inter-regional trade, a serious data deficiency
in most regions, and has had several 1-0 models constructed over the
past 15 years. However, in these models the agricultural sector is
aggregated and the role of irrigated agriculture is thereby masked.
There is also considerable uncertainty as to the stability of the
pattern of 1-0 linkages in Puerto Rico's economy over the long run.
Other general weaknesses of the 1-0 model include the assumption of


5
linear relationships throughout and the essentially ad-hoc procedures
which are necessary to convert it to a dynamic framework.
Neoclassical Growth Models
Lewis et al. (1973) emphasized the general inadequacy of the
regional growth models formulated to date, and underscored the need
to gain an improved understanding of regional growth processes as a
prerequisite to being able to predict the effect of water resource
investment (or any other investment) on a region's economy. They
proposed that an adequate regional model should explicitly consider
the sources of regional growth and interactions among those growth-
promoting factors, with particular emphasis on those factors which
are amenable to policy manipulation. Inasmuch as no general type of
analytical framework exists which can adequately account for the
variation among structures and growth processes in different regions,
it was stressed that each regional model would require separate syn
thesis.
Lewis et al. (1973) proposed that regional economic charac
teristics could be described using a neoclassical production function
model of the type
Q = f(K,R,L,T)
where
Q = output,
K = capital,


6
R = resources, including land,
L = labor, and
T = technological advance.
This relationship may be solved for the marginal products of each input
factor:
3Q. 3Q_. 3Q. 3£.
3K 9R 3L 3T
or it may be rewritten in the growth accounting form:
q = ak + 3r + eii + t
where
a = Ak; and t = AQk
L Q
AQ1 = output increase from technological advance
The elasticities of production for K, R and L, respectively, are a,
3, and e. These elasticities represent the percentage change in output
corresponding to a percentage change in the respective input factor,
e.g.,
30 K
a ~ 3K Q
Under the assumption of perfectly competitive factor and
product markets and full utilization of resources (i.e., full employ
ment), it can be shown that the marginal revenue product of each factor


7
is equal to its marginal product times the product price. As summar
ized by Denison (1974, p. 51) in his growth accounting study:
If a small percentage increase in the number of units of
all of the factors would increase output of the sector
by x percent, then a percentage increase of the same
amount in the number of units of only one factor would
increase output by x times the share of that factor
in total earnings in the sector.
Richardson (1973), however, has opposed using the neoclassical
approach in regional growth analysis, noting that several of the
theoretical assumptions made in computing the elasticities of factor
inputs are unrealistic at the regional level. Perhaps the most
serious defect is the assumption of full employment. Departures from
full employment among regions are generally an issue of central concern
in regional analysis, but these departures are not consistent with
the neoclassical assumption that factor inputs be fully utilized.
This is particularly important in Puerto Rico where the unemployment
rate has never registered less than 10 percent. An additional problem
in the neoclassical models is the difficulty with which uncertainty
can be admitted, and the explicit consideration of uncertainty is a
central issue in Puerto Rico.
Finally, the neoclassical approach assumes a world of perfect
competition, along with its correspondingly perfect information flows,
marginal adjustment of production, and relatively easy entry to and
exit from production. These assumptions are far from realistic in
Puerto Rico, particularly in the island's irrigated agricultural
sector. To date, this sector has been operated as a government


8
monopoly which has been so unresponsive to prices that it continues
producing sugarcane, even though the income earned barely covers
50 percent of the production cost. The entry to production of non
sugar crops is proving to be extremely difficult due to innumerable
institutional and physical problems such as government policy, credit
availability, land tenure, lack of local experience in non-sugar
crops, etc.
Simulation Models
Simulation techniques may be utilized to incorporate a variety
of relationships within a single model. These relationships are
expressed as a system of equations (often nonlinear) obtained through
the application of other analytical techniques such as regression
analysis, etc. These relationships may be combined in the simulation
model to create a system of interacting relationships and feedbacks,
the response of which may be simulated over time.
The organization of information and relationships within the
simulation model may follow definite theoretical patterns, such as
the energy analysis framework developed by Odum (1971) based on
modeling patterns of energy flow. Others have used a less rigorously
organized approach in which the modeler devises causal relationships
not necessarily following a specific theoretical pattern, such as
the models of system dynamics (Forrester, 1968). This latter class
of simulation models also includes the combination of selected
parameters for the purpose of forecasting, such as the model of the
Susquehanna River Basin by Hamilton et al. (1969). Undoubtedly the


9
best-known utilization of simulation models has been the formulation
of various world models (Meadows et a!., 1974; Mesarovic and Peste!,
1974). Simulation studies have also been used frequently in eco
logical studies, as summarized by Patten (1971).
Perhaps one of the more severe problems with simulation tech
niques lies in the ease with which a relatively simple model can be
expanded into increasing size and complexity, exploiting the confusion
between complexity and accuracy. The outcome of even complex socio
economic models generally rests on only a few critical assumptions,
and by changing these basic assumptions the behavior of the model may
be completely altered. Thus, complex socioeconomic models have the
ability to obscure basic relationships with extraneous and essentially
nonfunctional detail.
Once the model is constructed and operational, if the output
does not appear to be "right," then its structure may be altered
until the "correct" results are produced. However, undue emphasis can
be placed on model manipulation without necessarily creating improved
understanding of the socioeconomic system being examined, as suggested
by Lee (1973, p. 168):
There is a popular illusion that confronting a computer
with one's ideas enforces rigor and discipline, thereby
encouraging the researcher to reject or clarify fuzzy
ideas. But in a more useful sense, the effect is the
opposite; it is all too easy to become inmersed in the
trivial details of working with a problem on the computer,
rather than to think it through rationally. The effort
of making the computer understand is then taken for intel
lectual activity and creative problem solving.


10
This criticism becomes increasingly valid as the complexity of the
model is increased. Nonetheless, the simulation methodology is
unique in its ability to incorporate within the framework of a single
model a variety of different relationships and techniques. A properly
constructed and applied simulation model is an excellent analytic
tool, perhaps unparalleled as a means to integrate complex systems.
Previous Resource Studies in Puerto Rico
This research examines Puerto Rico's post-war development
period, and particularly those patterns which have evolved in the 1970s.
Macroeconomic studies undertaken prior to the 1973 oil embargo tend
not to reflect the realization that development conditions are changing
in Puerto Rico. Thus, earlier studies reflect entirely different
conditions of economic performance and shed less light on the nature
of the difficulties the island faces in the 1970s. Historic patterns
of socioeconomic development have been examined in works such as
those of Lewis (1963), Ross (1966), and Curet-Cuevas (1976). Some of
the development patterns and problems which emerged in the 1970s were
documented and analyzed by the Committee to Study Puerto Rico's
Finances (1975) and the Comit Interagencial (1975).
No study has been undertaken which directly addresses the
problem of resource policy and its relationship to the overall long-
range development process. A major social benefit-cost study of a
proposed copper mining project was undertaken (Logic, 1974), but the
social benefit-cost framework utilized was limited in scope and did
not address overall development issues in depth. A major water supply


n
study was conducted by the U.S. Army Corps of Engineers (1977) con
currently with this research, but was focused primarily on defining
technical supply alternatives. The island's new agricultural plan
(Vicente-Chandler, 1978) addressed some facets of agricultural water
management, but this treatment was necessarily limited in scope.
The most comprehensive overall treatment of Puerto Rico's water
resource issues is contained in the 1973 and 1975 Water Resource
Assessments for Puerto Rico (Puerto Rico Department of Natural Re
sources, 1974; Morris et al., 1977). Many of the findings reported
in this research stemmed directly from background studies prepared
for the latter of these assessments.
A considerable record of hydrologic data exists for Puerto
Rico and is available through a combination of local and federal
agencies. The U.S. Geological Survey is the most active agency on
the island with respect to water resources data collection and analy
sis. The water resource characteristics of most portions of the
island as well as many problems of specific interest have been
studied and results published or made available in unpublished
form. Hydrologic conditions in south coast watersheds are described
in reports by Anderson (1977), Crooks et al. (1969), Daz (1974),
Giusti (1968, 1971), Grossman (1969), Heisei and Gonzalez (1976),
McClymonds (1971), and McClymonds and Diaz (1972).
Geological Survey reports are augmented by the reports of
other government agencies and their consultants, plus the University
of Puerto Rico contribution which is promulgated primarily through the


12
Water Resources Research Institute in Mayaguez. The total number of
reports published in the past 20 years dealing with water supply in
Puerto Rico probably numbers over 100. Yet, despite the number of
publications related to water resource issues on the island, there
has been little focus on integrating the overall problem within the
framework of long-range development.
Study Methodology
Regional Development Model
This research begins with the construction of a regional
development model for Puerto Rico. This regional model has been
constructed in two basic sections focusing respectively on demographic
and economic parameters. Theoretical relationships for each parameter
are developed, quantified, and combined to create the composite model.
The simulation model is calibrated using data from the 1947-1977 period,
and is run until the year 2020.
In the demographic sector the population is divided into nine
age groups, with smaller age intervals being used for younger age
groups. Fertility and mortality rates are modeled as exogenous
variables, and net migration is modeled to be a function of the island
unemployment rate and the magnitude of income transfers.
The economic sector focuses on the role of capital as a
variable describing economic performance, recognizing that capital
is a quantifiable parameter which reflects a variety of other factors
such as entrepreneurship, level of economic organization, savings and


13
investment behavior, etc. Land, labor and resource availability are
examined as input variables describing economic performance in
Puerto Rico over the historic period.
Capital is divided into those stocks which are owned by
residents and by non-residents to examine the long-run effects of the
steadily increasing portion of productive capital which is externally
owned. Transfers from the federal government are shown to be an
increasingly important source of local income, but contribute neglig
ibly to the formation of local productive investment. The relationship
between capital and production and the level of employment in the
modern sector of the economy are both determined by the capital-labor
ratio, an exogenous variable. Employment in the traditional agricul
ture sector is assumed to decline steadily to a low but stable level.
The complete model, containing the demographic and economic
sections and their feedback via the net migration function, is simulated
using the DYNAMO II language (Pugh, 1973). Alternative values for the
foreign investment rate, the local investment rate, and the capital-
labor ratio are applied to generate four future scenarios. The results
of simulations to the year 2020 are examined to suggest those types
of policy which can generate more favorable patterns of regional
development.
Resource Management Model
Important resource management implications of changing regional
development policy are examined on the island's south coast. Water
demand conditions are described to ask what types of use patterns may


14
occur in the future. An income and cost model for sugarcane farms
is constructed to ask if a rational framework can be constructed for
evaluating irrigation demand in the sugar industry.
The hydrologic implications of increasing agricultural
consumptive use, increasing demand in the municipal and industrial
sectors, and different levels of artificial recharge are all examined
using an aggregate water and salt budget model for the south coastal
aquifers. This model is run over a 25-year period, with the objective
of describing the types of hydrologic changes which could accompany
significant increases in irrigation efficiency. Recommendations are
made for implementing institutional changes which can promote efficient
patterns of resource use, while avoiding deleterious effects to the
ground water system.
Report Organization
After the introductory comments in this chapter, the second
chapter describes the island of Puerto Rico and some of the problems
which have accompanied economic growth over the post-World War II
period. The south coast area and its hydrologic characteristics are
also described.
In the third chapter socioeconomic data from the 1947-1977
period are interpreted and the regional development model is
generated, showing the manner in which each model parameter is derived.
The results of calibration with historic data are summarized and
alternative future scenarios are described.


15
In Chapter IV, the water resource characteristics of the south
coast are examined, describing the level of water supply and demand
and the characteristics of current and potential future patterns of
water utilization. A simple water management model is constructed
to reflect the potential hydrologic effects of changed development
policies in the agricultural sector. The scenarios which are applied
to the water management model, as well as the results of simulating
each of these scenarios, are also described.
The management implications of these models are discussed in
Chapter V, showing the relationship between regional development
policy and water management in the agricultural sector. Existing
water management institutions are described, and recommendations are
made for changes in this institutional structure to accommodate a
changing regional development strategy.
Chapter VI briefly summarizes the conclusions and recom
mendations stemming from this research.


CHAPTER II
STUDY AREA DESCRIPTION
Location
The island of Puerto Rico is the easternmost of the Greater
Antilles (Fig. 1). Puerto Rico consists of one main island, two
smaller inhabited islands, and several offshore cays, all having a
total area of 3,435 square miles (Pied, 1969). The main island is
approximately 30 miles wide and 100 miles long. Being hilly or
mountainous throughout the interior, the majority of the population
and economic activity are supported on the narrow coastal alluvial
plains. The estimated 1977 population was 3.3 million. San Juan
is the capital city, and the San Juan metropolitan area has a popu
lation of approximately one million.
The south coast study area (Fig. 2) consists of 14 municipali
ties having a combined 1970 population of 448,000, of which 54 percent
were classified as urban. Ponce, the largest city in the study area
and the second largest city on the island, had a 1970 population of
133,000.
The study area contains the steep southern slopes of the
island's mountain range, a narrow band of foothills, and a relatively
oroad alluvial plain which attains a width of four miles at its
broadest point. Because it falls in a rain shadow the south coastal
plains are semi-arid, receiving an average of 35 inches of rain
annually, concentrated in a fall wet season.
16


17
Fig. 1. Location map.


__ JO 20 30m)( Eg
Fig. 1. Location of the south coast study area and the included municipalities.


19
Physical Setting
Geology
Puerto Rico was formed as a result of submarine volcanism
and uplifting which began approximately 120 million years ago in the
Cretaceous Period. Erosion and reef building during submergence
combined to form the coastal metamorphic and limestone deposits which
overlay the parent volcanic rock, which is exposed throughout the
interior (Beniroth, 1969). Limestone deposits exceeding 2,000 feet
in thickness occur near the coast and have developed karst landforms
including extensive sinkhole formation, haystack hills, and the absence
of surface drainage. Limestone formations outcrop primarily on the
western two-thirds of the island, and on the north coast these for
mations have been developed as an important aquifer.
The island's maximum elevation is 4,389 feet above sea level,
and the entire island interior is characteristically hilly or mountain
ous. Some 38 percent of the island's total land area has slopes
in excess of 45 degrees. Generalized topographic characteristics are
summarized in Fig. 3 showing the extent of hill and mountain terrain
and the narrowness of the alluvial plains.
Vegetation and Land Use
The island has six life zones, which have been mapped by
Ewel and Whitmore (1973) using the method of Holdridge (1967). The
diversity of life zones reflects primarily differences in elevation
and exposure, giving rise to differences in temperature and rainfall.
The south coastal plain is located in the sub-tropical dry forest life
zone.


ARECIBO
SAN JUAN
ELEVATIONS N FEET
8,000 ANO OVER
1,000 8,000
1,000-2,000
HT:!: 1 aoo-i.ooo
| | 0-800
10 20 SO 40 80
mMJiiLLZx:... i : ~ i_- .i urczziziz]
KILOMETERS
10 20 30
CMjcr~.::r ; ~ ~t~v::.: l izzm
MILES
CITIES
OVER 800,000 INHABITANTS
(5) 0>/ER 100,000 INHABITANTS
(§) OVER 00,000 INHABITANTS
Fig. 3. Generalized topographic map of Puerto Rico.
Source: Puerto Rico Public Parks and Recreation Administration, 1970.
OVER 20,000 INHABITANTS


21
Due to intensive population pressures and an earlier dependence
on subsistence agriculture, which still exists in isolated loations
(Pool and Morris, 1976), the only areas of natural vegetation are
limited to the Luquillo National Forest and the Commonwealth forest
system, encompassing a total of 88,000 acres (4 percent of the island
area). However, considerable areas of marginal agricultural lands on
highland slopes have been abandoned and are reverting to secondary
forest.
Current land use in the south coast area is summarized in
Table 1. Agriculture accounts for the single largest category,
utilizing 51 percent of the land in the area; sugarcane is the
predominant crop. Of the 90,000 acres reportedly in sugarcane, at
least 50,000 acres receive irrigation on a regular basis.
Climate and Hydrology
Climate. Puerto Rico experiences an insular tropical trade-
wind climate. The average annual temperature in San Juan is 78 F,
and the record low is 61 F. Temperatures at higher elevations inland
are lower, and may fall below 50 F overnight in the winter. Super
imposed on the east-northeast trade winds is a land-sea breeze pattern
which results in easterly onshore winds during the daytime and
easterly offshore winds at night. There is a regular diurnal pattern
in wind speed on_the south coast which varies from 3.5 mph at midnight
to 12 mph at noon, with wind velocities in the late summer and fall
being somewhat less than other seasons.


Table 1. Land Use ori the South Coast of Puerto Rico for 1972 (Acres).
Municipal i t.y
Total
Land
Area
Agricultural Land Area
Sugar
Total Cane Grazing
Forest
Water
and
Wetland
Urban and
Rural
Residential
Commercial
Industrial
Extractive
Other9
Arroyo
10,U52
5,677
3,368
1,853
3,022
7
1,158
76
112
Coamo
SO,912
32,675
0
28,126
16,679
0
1,188
107
263
Gunica
25,478
10,684
4,033
6,246
12,126
981
1,107
357
223
Guayama
44,756
17,114
9,031
6,710
22,449
2,198
2,228
410
357
Guayanilla
29,190
12,157
5,535
4,373
13,631
1,304
1,429
369
300
Juana Diaz
40,082
22,211
10,173
9,110
13,772
704
1,784
295
1,316
Lajas
40,120
31,866
13,129
17,003
5,577
786
1,395
353
143
Patillas
30,927
10,864
2,760
6,601
18,367
494
1,020
67
115
Peuelas
29,652
9,759
3,058
4,269
16,646
113
1,014
1,572
548
Ponce
76,593
33,377
10,992
8,668
31,642
1,240
6,995
1,526
1,813
Salinas
46,433
16,818
8,008
7,891
10,244
3,565
2,431
312
12,963
Santa Isabel
23,104
17,921
11,924
4,656
2,835
847
856
251
394
Vi 11 alba
24,419
12,896
2,057
8,734
10,232
230
916
55
90
Vauco
44,913
26,991
3,561
11,546
14,901
338
2,320
161
202
Region Total
516,631
261,010
87,529
125,786
192,313
12,807
25,841
5,911
18,839
includes: Non-productive, outdoor recreation, communication and transportation.
Source: Puerto Rico Department of Natural Resources, Environmental Inventory, 1972.


23
Precipitation and surface water. Average annual rainfall is
70 inches per year island-wide, with a range from 30 to 200 inches per
year between the driest and wettest stations, respectively (Fig. 4).
Inasmuch as this variation is due to orographic effects, the mean
long-term runoff from watersheds may be predicted from elevational
data alone (Black and Veatch Engineers, 1971). As a result of the
impinging trade winds the north coast is characteristically moist,
whereas the south coast falls in a rain shadow. Patterns of rainfall
and pan evaporation on the north and south coasts are compared in
Fig. 5.
Rainfall records for the longest continually operating
stations on the island are graphed in Fig. 6 using a differential
mass diagram. Periods of above average rainfall appear as upward
sloping line segments and drought periods appear as downward sloping
segments, with the slope between any two points directly related
to the severity of the.departure from average rainfall. Although
relatively long-term variation is absent in the San Juan data, cyclic
patterns become evident in the data from the south coast stations,
with the past decade being generally drier than the period of record
on the south coast. The Ensenada station (Gunica) is the driest
station on the island, receiving a mean annual precipitation of
29.5 inches.
On the south coast, a higher variation in rainfall occurs during
the drier first half of the calendar year than in the more moist second
half. In Fig. 7 the calendar year is divided into the first and second


6
£ lo 20 "30
Fig. 4. Average annual rainfall in Puerto Rico (inches per year).
Source: Black and Veatch Engineers, 1970.


PER MONTH
25
Fig. 5. Average rainfall and pan evaporation for the north and
south coastal climatic regions of Puerto Rico. Climatic
regions are defined by the U.S. Weather Service.
Source: National Climatic Center. 1973. Monthly averages
of temperature and precipitation for state climatic
divisions, 1941-70: Puerto Rico and Virgin Islands.
Asheville, North Carolina.


Cumulative Rainfall Departure from Mean of Record (inches)
25
Fig. 6. Differential mass diagram of annual precipitation for those
stations in Puerto Rico having the longest continuous
rainfall records. Ensenada is the driest station on the
island. Average rainfall over the periods of record are: En
senada, 29.60 inches; Aguirre, 40.94 inches; San Juan (city),
60.17 inches. Data for Aguirre are incomplete for 1970 and
are not plotted.


Percentage of Time Indicated Precipitation
is Equaled or Exceeded
27
Precipitation as Percentage of Mean
Fig. 7 Cumulative probability of rainfall in the first and second
halves of the calendar year as a function of the mean
rainfall for that same six-month period, south coast of
Puerto Rico (Villa!ba station).


28
half and the cumulative probability of rainfall is compared with
respect to the mean of record for each six-month period. The most
severe drought conditions on the south coast occur during the summer,
following low rainfall in the spring.
The island's highly dissected mountainous interior gives
rise to numerous small streams characterized by small tributary
watersheds, steep slopes, and short length prior to reaching the
ocean. There are 26 "major" stream basins on the island, but only
seven have watersheds greater than 100 square miles. The largest
watershed is the Rio Loiza which covers 310 square miles.
Streams on the south coast are small and none flow throughout
their reach over the entire year. The upper stream reaches generally
maintain a year-round streamflow, but in most seasons diversions for
irrigation plus percolation into the aquifer deplete this streamflow
as soon as it reaches the alluvium.
Water supply development. Unregulated stream diversions
represented the primary source of irrigation water on the south coast
until the latter portion of the 19th century, at which time centrifugal
pumps were installed on some farms. The American occupation of the
island brought with it an influx of investment capital. Mainland
corporations plus wealthier local families undertook large-scale
irrigation on sugar plantations and supported the implementation of
large-scale public irrigation works. The South Coast Irrigation
District was operational by the First World War, providing both irri
gation and hydropower supplies.


29
The history of reservoir construction on the island is sum
marized in Table 2. Of the 25 reservoirs constructed in Puerto Rico
to date, 68 percent have had power generation facilities, 48 percent
supply water for irrigation, and 40 percent include a domestic supply
component in their design. Two additional reservoirs are being
constructed in Ponce for combined flood control and water supply bene
fits of 37,000 acre feet/year, but will not enter service until the
mid-1980s. Only one south coast reservoir, Toa Vaca, has municipal
water supply as its primary function; all others have been developed
primarily for irrigation supply.
The South Coast Irrigation District consists of three inde
pendent reservoirs and canal systems, supplying an average of 70,000
acre feet/year to approximately 28,000 acres. The District has seen a
gradual deterioration in service over the decades due to the combina
tion of reservoir sedimentation, deterioration of canal sections,
possible land use changes, and possible changes in the water management
effectiveness of both the supplying agency as well as the users.
The Southwest Puerto Rico Project supplies an average of
35,000 acre feet/year of irrigation water to 22,000 acres in the Lajas
Valley. This system entered operation in 1954, and consists of five
interconnected reservoirs and stream diversions, two power-generating
stations, a concrete-lined irrigation canal, and a drainage system.
Ground water. Aquifer areas in Puerto Rico are outlined in
Fig. 8. The development of limestone formations predominates on the
north coast west of San Juan, whereas ground water development on the


Table 2. Reservoirs in Puerto Rico
Current
Storaye of
Watershed Original Beneficial
Reservoir River Construction Area Storaye Use
Name
Impounded
Year
(Sq. Miles)
Use
(Acre-Feet)
(Acre-Feet)
1
Comerlo #1
La Plata
1907
136.0
P
0
2
Comerlo H2
La Plata
1913
135.0
P
4,918
600b
3
Carite
Guamaru
1913
7.9
P/l/W
11,310
9,540a
Guayaba 1
Jacayuas
1913
43.0
I/W
9,800
7,900b
5
Codillo
Coamo
1914
58.0
1
2,827
0
6
Pati1 las
Pali lias
1914
25.2
I
15,000
14, 424b
7
Guaja taca
Guaja taca
1929
24.6
P/l/W
32,600
a
Guineo
Arec ibo
1931
1.6
P/I
1 ,860
1,810a
9
Matrullas
Arecibo
1934
4.4
P/l
3,590
2,945a
10
Dos Bocas
Aiecibo
1942
1/0.0
P
32,000
II
Garzas
Arecibo
1943
6.2
P/W
4,700
12
Cidra
Bayamn
1946
8.6
w
5,300
4,852b
13
Las Curias
Puerto lluevo
1946
1.1
w
1,120
14
Caonillas
Arecibo
1948
50.5
p
49,000
43,549b
15
Pel lejas
Arecibo
1950
8.5
p
152
le
Adjuntas
Arecibo
1950
14.7
p
645
17
Viv
Arecibo
1950
6.5
p
277
IB
Loco
Loco
1951
8.4
1
1 ,950
19
LucheLti
Yauco
1952
17.3
P/l/W
16,500
12,00c
20
Loiza
1 oiza
1954
206.0
P/W
20,000
15,629b
.'1
Prieto
Aasco
1955
9.6
p/l
700
22
Guayo
Aasco
1956
9.6
p/l
17,400
23
ahuecas
Aasco
1956
17.4
p/l
1 ,800
24
Loa Vaca
Toa Vaca
1972
22.0
1/W
50,890
25
La Plata
La Plata
1976
173.0
w
53,140
CJ
o
a(Soil Conservation Service, 1973).
^(Puerto Rico Water Resource Authority, 1973).
Personal Communication, toy. francisco Servera, Chief Irrigation engineer, Water Resource
Authority, San Juan, 26 September 1977.
dp=power; I-irriyation; W^water supply.
Sotnce: Puerto Rico UepartnienL of Natural Resources (unpublished data).


San Juan
Santa
Isabol
AQUIFER AREAS IN PUERTO RICO
J] FRESH WATER YZZ BHACKISH WATER
Fig. 8. Aquifer areas in Puerto Rico.


south coast has occurred in the alluvial water table aquifer. Both
formations are prolific aquifers, and individual wells with yields
of 2,000 gpm or more may be developed. Throughout the island interior,
water-yielding zones of fracture in volcanic formations have been
developed for ground water supply, but these wells are generally for
domestic use and capacities are characteristically limited to 5-20
gallons per minute.
The south coastal alluvium lying east of Ponce is the most
copious aquifer in Puerto Rico, sustaining an annual withdrawal
of approximately 200,000 acre feet per year. This alluvium consists
of a loose agglomeration of interbedded and interfingering sedimentary
materials, ranging from silts to cobbles. Alluvial formations are
continuous from Ponce eastward to Guayama, but to the west of Ponce
are confined to individual river valleys. The alluvium has a maximum
depth of approximately 250 feet, and is generally underlain by limestone
formations containing ground water of high mineral content. These
limestone formations outcrop as foothills along the entire south coast,
and westward from Pence they extend to the ocean and form hills which
separate the alluvial valleys. The south coast soils are derived from
a mixture of volcanic and limestone parent materials and are generally
neutral to basic in pH.
Limestone formations underlying the south coast alluvium have
not been developed for water supply on a significant scale. Shallow
penetration of this aquifer in the Yauco Valley has yielded water of
suitable quality (personal communication, Lee Eaves, Manager, Carib
bean Well and Pump Service, Ponce, Puerto Rico, 1977) and limestone


33
formations have been tapped for water supply in the upper reaches of
the alluvium inland from Ponce (McClymonds, 1971). However, the
water from these formations is generally of inferior quality and is
infrequently utilized.
Limited areas of saline intrusion occur along the coast, but
in most locations it is not yet a serious problem. The most extensive
area of intrusion has occurred beneath the City of San Juan, and
intrusion of salts into wells in several other locations has occurred
when depression cones intercepted saline wedges lying in the lower
reaches of rivers. There is a system of wells on the south coast for
monitoring water level and intrusion, but similar information for the
north coast is lacking (Diaz, 1974).
Socioeconomic Setting
History
Puerto Rico was discovered by Columbus on his second voyage
and was settled by Ponce de Len during the first decade of the
sixteenth century. Under Spanish rule San Juan and the island of
Puerto Rico played a military and economic role secondary to both
Santo Domingo and Havana, more important Spanish cities in the
Caribbean. Nevertheless, considerable expense was undertaken by
Spain to fortify the entrance to San Juan Harbor in order to provide
refuge for Spanish treasure ships and to maintain control of the
strategic port.
Under Spanish rule Puerto Rico's political and economic
development lagged. For example, in 1898, the salary of the Spanish


34
Governor was greater than island-wide expenditures for education on
the island's 950,000 inhabitants (Lewis, 1963).. In the late nineteenth
century, efforts to break free of Spanish domination appeared to be
bearing fruit. However, by 1898 the island was still not politically
autonomous and the Governor was still appointed by the Spanish Crown.
When Cuba revolted against Spain precipitating the Spanish-American
War, Puerto Rico did not follow suit.
In 1898 Puerto Rico became a territory of the United States
as part of the spoils of the war with Spain. Following annexation
the Governor was appointed by the U.S. President, and it was not until
1947 that the Governor was elected locally.
Heavy investment in the sugar industry by mainland corpora
tions rapidly followed annexation, resulting in dramatic changes on
the island. A diversified but undercapitalized agricultural system
was bought out by monied American interests and converted to the
lucrative sugar export business (Fig. 9). Due to the abundance
of labor, unemployment and underemployment was the rule and wages were
maintained at poverty levels. Unlike other countries in Latin America
where additional lands were available for the development of sub
sistence agriculture further inland, on insular and heavily populated
Puerto Rico this alternative was highly restricted. The worker was
effectively tied to the land holdings of the sugar and coffee landlords
who needed labor only seasonally (Ross, 1966). As a result of competi
tion for limited land resources, smaller and less competitive units
were gradually absorbed by more efficient and better capitalized farms


Raw Sugar Production
(million tons per year)
35
1 T
1.0
O
a.

0.51-
I
i
L
=
<
s
* 1
0 I.
1820
w.V.
>.SV \ A>,
.v**.*>v
!840
;860
:S30
1900 1920 1940 I960 I960
Year
Fig. 9. Annual production of raw sugar in Puerto Rico.
Source: Puerto Rico Dept, of Agriculture, San Juan.


36
(Mintz, 1972a), similar to the land tenure trend documented in other
land-limited agrarian economies (Sansom, 1970).
The 1920s ana 1930s had seen a steady decline in the plight
of the Puerto Rican worker. The hurricanes of 1928 and 1932 virtually
destroyed coffee plantations and the tobacco crops. As an indicator
of the degraded economic conditions, Ross (1966) noted that in the
early 1930s not more than 2,000 families on the island had sufficient
income to pay taxes, yet 39,000 were employed as domestic servants
(7.5 percent of the labor force). Home needlework was estimated to
employ over 30,000, or approximately 30 percent of those engaged in
the "manufacturing" trades. In agriculture the 500-acre rule^ was not
enforced, and an estimated 20 percent of all agricultural land in
Puerto Rico was held in violation of it, primarily by the sugar com
panies.
The 1940s were a period of profound economic as well as
political change on the island. Although the results of these changes
were not visible during that decade, the fundamental political and
economic directions which evolved during that period have remained
largely unchanged to the present. In the 1940s work was begun in
earnest to change the political status of Puerto Rico, beginning with
the election of the Governor locally and eventually resulting in the
formation of the Commonwealth status (Estado Libre Asociado) in 1952.
The mid-1940s, under the term of appointed Governor Maxwell Tugwell,
"*U.S. Congressional Joint Resolution 20 of 1900 established
federal policy that no individual or corporation in Puerto Rico should
own over 500 acres. (Rivera-Ros, 1978)


37
also saw the organization of the executive branch of the Puerto Rican
Government as it is known today. The year 1947 also marked the
beginning of reliable economic data, which was compiled by the then
new Planning Board; and in this same period the industrial development
agency, Fomento, was also created.
With limited agricultural land and high population density it
was realized that an economic system based on agriculture alone could
not be responsible for generating the income necessary to bring the
island's population out of poverty. The late 1940s saw the beginning
to the end of this poverty as a result of three factors: (1) the
attraction of mainland manufacturing investment through an industrial
incentive program known as "Operation Bootstrap," (2) the massive
migration of Puerto Ricans to the New York area which stabilized the
size of the island's labor force, and (3) the growth of transfer pay
ments from the federal government. Taken together, these three
factors created the fundamental changes in the Puerto Rican system
which now provides adequate food, shelter and medical services for the
entire population, plus a modest measure of luxury for many.
Socioeconomic Objectives
The initial development process reflected movement toward
the obvious and primary goal of escaping from pervasive poverty.
However, as progress toward the abolishment of extreme poverty began
to be realized, a more definitive statement of social goals was
developed, as quoted below from the "Message of the State of


38
the Country," delivered by Governor Muoz Marn to the Legislature
in 1964:1
I point out six things that I judge fundamental to the pur
pose of our people, and on which we will invest a good
portion of the continued increases of our economic assets:
Education for all in quantity, quality and depth,
Maximum health with substantial equality for all
with respect to quality of service,
Approximate balance of quality of life between rural
and urban population, development of cities in an
orderly form,
Home ownership for all families,
That a growing portion of the growing Puerto Rican
economy, and consequently of the decisions of its
private sector, be in the hands of the sons and
daughters of this country as has been the case in
all the presently developed countries of the world,
Abolition of extreme poverty.
These enumerated goals are the desired final products of the
island's socioeconomic development process. The pursuit of increasing
income through industrialization and economic growth has been pursued
with intensity, yet has created patterns of growth which are not
entirely compatible with achievement of the stated goals. That dilemma
is examined in this study.
Socioeconomic Conditions
Economic characteristics. Although the island is poorer than
the lowest income state, in comparison to neighboring countries in
the Caribbean and Latin America, it has gained considerable wealth.
^Diario de Sesiones, Cuarta Sesin Conjunta, 11 February 1964,
p. 5. Author's translation.


39
During the period-foil owing World War II the island enjoyed a special
set of circumstances which combined to produce a period of rapid
economic growth, industrialization and social change. The input of
industrial capital from the mainland seeking to utilize the island's
cheap labor supply, its access to U.S. markets, and exemption from
both local and federal corporate income taxes, created a period of
rapid industrial expansion starting in the late 1940s and continuing
into the early 1970s.
The initial success of the island's development program was
based less on clever design or able implementation than on the island's
relationship with the United States. Mot only has the mainland infused
capital, entrepreneurship and transfer payments into the island on a
large scale, but it also absorbed the massive exodus of Puerto Ricans
from the island during the 1950s.
However, the conditions which combined to create the oppor
tunity for rapid economic growth and stable levels of unemployment
have proven to be transient. The post-war growth began to falter and
in the early 1970s conditions began to depart recognizably from the
patterns of previous decades. Rising wage levels on the island
helped stem the migration of labor to the mainland while simultaneously
making the island less desirable for labor-intensive industries. Mew
industries locating on the island became steadily more capital-
intensive, obtaining the benefits of tax exemption but oriented less
toward the employment of the increasingly costly labor force. Infra
structure requirements and the discharge of pollutants have increased


40
as a function of capital intensity thereby increasing both monetary
and non-monetary costs of providing each additional job.
Despite intensive industrialization, the island's unemployment
problem has not been resolved. The unemployment rate has never
dropped below 10 percent over the entire development period, and in
1977 it averaged 20 percent, the highest value recorded over the
entire post-war period. The island's increasing income has not been
used to generate a stream of savings and productive local investment,
but rather has been used to support an increasing burden of debt.
The Commonwealth Government has relied increasingly on
federal aid programs as a source of income and employment. By 1977
the value of unilateral transfer payments from the U.S. equaled
26 percent of the island GNP, and transfers to individuals accounted
for 28 percent of personal income (Puerto Rico Planning Board, 1978a,
1978c)J The implementation of the federal food stamp program in
Puerto Rico has been the greatest single contributor to increased
transfer payments during the 1970s, and over 60 percent of the island
population now participate in this program.
The income level on the south coast is lower than the island
average, and the trend has been for this gap to increase slowly.
A variety of socioeconomic parameters for south coast municipalities
are summarized in Table 3.
1 Socioeconomic accounts data, hereinafter not accompanied by
a citation, shall be understood to be contained in the economic
accounts of Puerto Rico (Puerto Rico Planning Board, 1978a, 1978c) or
of the United States (Economic Report of the President, 1978).


Table 3. Selected Socioeconomic Parameters for South Coast Municipalities, Puerto Rico.
Municipal it.y
Family Income
Under $2,000
(Percentage)3
Employment
Rate in
Growing
Industries^
Dwel1ings
Without
Inside
Toi1ets
(Percentage)0-
Median
Years
of .
School0
Population
Per
Square
Mi lee
Net
Migration'
Urban
Population
(Percentage^
Arroyo
46.9
151.0
63.1
5.9
368.9
23.7
41
Co amo
51.4
143.1
55.1
5.5
343.7
+
18.7
46
Gunica
40.8
205.4
53.9
6.2
402.4
+
9.3
60
Guayama
34.7
185.3
50.4
6.6
557.7
-
15.9
63
Guayanil la
39.2
180.5
65.8
5.8
432.0
+
.7
29
Juana Diaz
42.2
160.0
60.8
5.7
594.6
-
9.9
36
Lajas
41 .0
199.0
60.2
5.9
275.8
-
9.8
21
Pati1 las
53.3
134.0
68.8
4.0
371 .4
-
20.7
14
Penuelas
51.5
137.0
68.3
4.9
363.2
-
17.5
20
Ponce
33.2
219.7
33.5
7.7
1 ,370.5
-
15.1
83
Salinas
45.4
166.0
64.2
5.6
316.5
-
26.9
46
Santa Isabel
38.9
158.5
63.6
5.5
472.2
-
15.5
28
Villa!ba
55.8
120.1
75.6
4.3
506.3
-
20.0
22
Yauco
45.2
147.5
63.5
5.6
516.2

21.4
37
Percentage of families with incomes less than $2,000 per year, 1969.
bRate of employment per 1,000 inhabitants in growing industries, 1970.
Percentage of dwellings without inside toilets, 1970.
^Median number of years of school completed for persons 25 years or older, 1970.
Population per square kilometer, 1970.
Percentage of net migration from 1960-1970, based on the difference in actual population change com
pared to the change predicted by the rate of natality and mortality in each municipality.
9Percentage of population classified as "urban" by the Planning Board, 1970.
Source: Puerto Rico Planning Board, 1976.


42
Demographic characteristics. Puerto Rico experienced a
classic demographic transition in terms of changing fertility and
mortality rates. However, migration to the mainland converted the
demographic transition period from one of rapid population growth
to one of population stagnation. Conversely, the post-transition
period which the island has already entered has been characterized
by high rates of population growth. This demographic anomaly,
created by migration, is of primary importance in explaining the
dramatic economic changes which have occurred in Puerto Rico over
the post-war period.
The migration from the island, primarily to the New York area,
was so large that it actually resulted in two consecutive years of
decreasing population on the island in 1953 and 1954, despite high
fertility. More importantly, the major portion of these emigrants
were young and just entering the labor force (Friedlander, 1965). As
a result of migration the population of Puerto Ricans living on the
mainland U.S. increased from an estimated 100,000 in 1947 to
1.5 million in 1974, representing the exportation of 400,000 or more
labor-force members over that 27-year period.1 Over that same period
the island economy never saw an unemployment rate under 10 percent
and generated a net increase of only 203,000 jobs, despite strong
industrial promotion activities.
As economic conditions on the island began to show improve
ment in the 1960s, the pace of net emigration slowed. This flow has
^Data provided by the Puerto Rico Planning Board, Division of
Demographic Statistics, 1976.


43
now reversed, and during the 1970s Puerto Rico has experienced net
immigration, despite a local unemployment in excess of 15 percent.
It is possible that a significant portion of this immigration which
occurred, despite poor employment opportunities, can be attributed
to the growth in welfare benefits on the island.
Institutional Framework
Cotmonwealth Government institutions characteristically have
a broad and strong legal mandate for resource planning and management
action, and public policy is the most important single factor
influencing patterns of resource utilization on the island. The
government supplies all municipal water and most irrigation water
island-wide. Through the Puerto Rico Sugar Corporation the government
operates approximately 90 percent of the island's irrigated farm land,
and the Puerto Rico Land Authority is the largest owner of irrigated
lands. Government agencies supply a significant portion of the
industrial water used on the island and regulate the withdrawals by
those other industries which are self-supplied. The pattern and
location of industrial development, and its corresponding water demand,
is determined through the zoning powers of the Puerto Rico Planning
Board.
Despite these large resource management responsibilities, a
coherent strategy for water resource development has not emerged,
aside from the protection of existing beneficial uses which is required
by law. During the past decade the island's resource management
problems and conflicts have grown in severity while satisfactory


44
solutions have become increasingly difficult to define and implement.
Resource development decisions have been made based on poor analysis,
or even by default (Margalin and Campen, 1970).
Two pieces of legislation are of particular importance in
establishing the legal framework for environmental resource management
on the island. The Public Policy Environmental Act^ promulgated public
environmental policy and established the Environmental Quality Board
(EQB) as a watchdog agency. Section 4 of this law provides that all
agencies of the government shall use an interdisci pi inary system of
study in analyzing environmental problems, guaranteeing the integrated
use of natural and social sciences.
The Law for Conservation, Development and Use of the Water
Resources of Puerto Rico2 establishes that all fresh and coastal waters
within the jurisdiction of Puerto Rico are the wealth and property of
the People, including all water both above and below ground. All
waters fall under the administrative jurisdiction of the Conmonwealth
Government as represented by the Secretary of Natural Resources, who
is provided broad planning and management powers and responsibilities.
The water law provides that planning and management actions shall be
based on socioeconomic benefit-cost analysis, with the objective of
enhancing the well-being, economic development and public safety of
the island, and that all analysis shall be based on an interpretation
^Law No. 9, July 1, 1970, Legislative Assembly of the Common
wealth of Puerto Rico.
2Law No.136, June 3, 1976, Legislative Assembly of the Common
wealth of Puerto Rico.


45
of the role of the proposed management alternatives with respect to
the overall hydrologic cycle and its effects on natural systems.
Water resource planning and management responsibilities are
fragmented among numerous Commonwealth agencies, with the result that
no single agency may be said to play a lead role. The principal
agencies involved and their primary areas of responsibility are sum
marized below.
The Puerto Rico Planning Board is the ultimate planning
authority in the Commonwealth Government and establishes overall
planning guidelines which are to be followed by the other agencies.
The primary resource management functions of the Planning Board, an
Executive Branch agency, include the continual updating and implemen
tation of the master land-use plan, which includes decision making
over the future location of industrial sites and other intensive
resource users. In addition, the Board is responsible for the co
ordination of the plans of other government agencies.
The Puerto Rico Aqueduct and Sewer Authority (PRASA), a public
corporation, is responsible for the planning, construction and main
tenance of all municipal water supply and wastewater collection and
treatment facilities on the island. Of the total population of
3.1 million in 1975, an estimated 2.6 million persons were served by
the Authority (house connections plus public fountains). Of the total
1975 withdrawals of 306 mgd, metered deliveries were 199 mgd, or an
island-wide average of 77 gallons per capita per day. Approximately
30 percent of all withdrawals do not appear as metered deliveries, but


46
are lost due to in-plant uses by PRASA plus pipe exfiltration, fire
fighting, and clandestine use. The Authority is responsible for the
operation and maintenance of several water supply reservoirs, includ
ing the Toa Vaca reservoir on the south coast.
The Environmental Quality Board (EQB) is the local counterpart
of the Environmental Protection Agency and is responsible for the
promulgation and enforcement of environmental quality standards. The
EQB has established water quality standards for both fresh and ocean
waters, and has programs to improve environmental quality through the
reduction of point sources of water, air and noise pollution. It is
responsible for the conduct of the 208 water quality programs on the
island and wastewater facility planning.
The Puerto Rico Water Resource Authority (PRWRA) is a public
corporation which maintains and operates the electric power generation
facilities island-wide. In addition, the Authority owns and operates
the three government irrigation systems on the island, two of which
are in the south coast area. An average of 100,000 acre feet/year is
supplied to approximately 50,000 acres lying within the South Coast
and Lajas Valley Irrigation Districts. The third district is on the
moist north coast, where only 600 acres are currently under irrigation.
The Authority also operates reservoirs having hydropower facilities,
but less than one percent of the island's total electric supply is
derived from hydropower.
The Department of Natural Resources is the newest of the
Commonwealth agencies, having been organized in 1973. Under the


47
provisions of the 1976 water law, the Department is required to inven
tory all water uses and wells island-wide, establish a system of
water use permits, regulate ground water drilling and withdrawals,
and prepare a water plan which will incorporate socioeconomic cost
benefit analysis. Of all the government entities in Puerto Rico,
the Department has the broadest water resource responsibilites, but
to date the role played by this Department has been minor. The
failure of the Department to fulfill its obligatory functions, as
provided in the water law, has been the subject of recent litigation.
Additional Commonwealth and Federal agencies are involved in
water resource planning and management on the island, with the number
of agencies having significant roles totaling at least 16.
Misin Industrial de Puerto Rico vs. Fred Soltero Harrington,
Secretary of Natural Resources. Superior Court of Puerto Rico, 23-
23 August 1978, San Juan. As of this writing this case had not yet
been decided.


CHAPTER III
REGIONAL MODEL
The regional model for the island of Puerto Rico is formulated
in this chapter. It has been constructed as two sub-models of
population and economic performance which are linked through two
relationships: (1) the population and its age distribution determines
the size of the labor force, and (2) economic performance and labor
force variables together determine unemployment, which influences
migration. This model is summarized in Fig. 10, using the symbols
defined in Fig. 11.
In this chapter the model structure is described, historic
relationships are synthesized, and the model is calibrated using data
for the 1947-1977 period. The assumptions for projecting modeled
relationships to the year 2020 are also outlined.
The primary purpose of this model is to examine alternative
levels of future economic performance given different assumptions
concerning the rate and source of future capital formation and the
capital intensity of production. Although the population model
remains unchanged for all scenarios, different patterns of population
growth are produced in each scenario due to the effect of different
unemployment levels on the rate and direction of migration.
48


Fig. 10. Regional model for Puerto Rico in the DYNAMO language.
See Fig. 11 for explanation of symbols.
Legend:
¡Pt = Population of age group "i"
dt = Crude death rate
b-(- = Crude birth rate
Ut = Unemployment rate in Puerto Rico (percentage)
P| = Population of working age in Puerto Rico
P! = Labor force in Puerto Rico
= Labor force participation rate
Lt = Capital-labor ratio for Puerto Rico
Y^. = Gross National Product of Puerto Rico (1954 dollars)
Ht = Remission of business profits abroad (1954 dollars)
aKt = Locally owned capital stocks (1954 dollars)
= Externally owned capital stocks (1954 dollars)
cKt = Stock of consumer assets
= Depreciation rate of capital stocks
Ac = Depreciation rate for consumer assets
Et = Total employment in Puerto Rico
E' = Employment in the traditional agricultural sector
F{. = Rate of external capital investment (1954 dollars)
St = Rate of savings and investment in the local economy
Gt = Transfer payments per capita (1954 dollars)


O-A
50


51
Source or sink of conserved material
State variable defining the storage level of a
conserved material
Equation controlling the flow rate of a
conserved material
Exogenously specified variable
Auxiliary equation which is computed but has
no material flow associated with it
Causal linkage without material flow
Flow of conserved material
Fig. 11. Description of symbols used in the regional model in
Fig. 10.


52
Population Sub-Model
General Equations
Pressat (1972) has described the growth of a closed population
by
Pt+At = Pt + Bt,t+At Dt,t+At
(3-1)
By adding a term for net immigration the complete population equation
may be obtained:
) p + r n 4* M
t+At t t,t+At t,t+At t,t+At
(3-2)
where
P = population
B = births over interval t,t+At
D = deaths over interval t,t+At
M = net immigration over interval t,t+At
t = time, and
At = time step
The rate of births, deaths and immigration may be defined as
Bf
bt = P^ (3-3)
dt Pt (3-4)
(3-5)


53
where
b = crude birth rate
d = crude death rate
m = net immigration rate
The population equation may then be written in its simulation form:
Pt+At = Pt + At Pt (bt dt + mt^
= Pt [1 + At (bt dt + mt)] (3-6)
The age structure of the population may be generated by using a
separate equation for each age group, adding rate equations to express
the transfer of population sequentially from younger to older age
groups as a result of aging.
The population of Puerto Rico has been divided into nine age
groups, with the population from 0-19 years being broken into 5-year
classes and the remaining population being broken into 10-year
intervals. Smaller age classes have been applied to the younger age
groups because the model is more sensitive to their behavior. Mor
tality occurs in all age groups, but is so small that it may be
neglected for all ages except infants and the population over 40 years.
Similarly, births are neglected in all but the 15-39 year groups.
The crude rate of fertility, mortality, and migration
(bt, dt, mt) are converted to the age specific rate for each age
group (-jb-j., ^d^, ^m^.) by multiplying by the age specific coefficients
shown in Table 4. Thus


54
Table 4. Age Specific Coefficients for Population Equations.
Age Group
Age Specific Coefficients
Aging
Coefficients
i
Years
Births
icb
Deaths
i^d
Migration
i ^
ix
iy
1
0-4
0
0.2
0.1
0
0.2
2
5-9
0
0
0.1
0.2
0.2
0
O
10-14
0
0
0
0.2
0.2
4
15-20
1.8
0
0.25, 0.10a
0.2
0.2
5
20-29
4.0
0
0.45, 0.30a
0.2
0.0
6
30-39
1.7
0
0.1
0.1
0.1
7
/
40-49
0
0.4
0
0.1
0.1
3
50-59
0
1.5
0
0.1
0.1
9
60+
0
8.5
0, 0.25a
0.1
0
aMigration coefficients were shifted from the first to the
second value in 1967.


55
ibt=
icb bt
idt =
icd dt
imt =
icm mt
where
icb
age specific coefficient for birth rate
icd =
age specific coefficient for death rate, and
icm =
age specific coefficient for net migration rate
The population of all nine age groups may be described using two basic
equations. The equation for the youngest age group is
lpt+l
= lPt + At(i icb bt ipt lcd dt lpt
+ lcm mt Pt l^*Pt) (3"7>
The population of all other age groups is given by
iPt+l
' ,Pt + At(iX + ,-cm mt ,Pt
- dt ,Pt .y (3-8)
In these equations the coefficients and .¡y show respectively the
gain and loss of population by each age group as a result of aging.
Fertility
One of the most marked social effects of industrialization and
increasing incomes is that of initiating the demographic transition,


56
characterized by a rapid decrease in mortality and the retarded
decrease in fertility, as summarized in Table 5. These changes are
attributable to the changes in both the level and sources of income
which occur as a result of industrialization and urbanization.
Table 5. Characteristics of the Demographic Transition.
State
of Industrialization
Fertility
Mortality
Population
Growth Rate
Nil
High
High
Low
Developing
High
Decreasing
High
Advanced
Low
Low
Low
Source: Heer, 1972.
Decreases in fertility and mortality in the pattern of the
demographic transition have accompanied industrialization in Puerto
Rico, as shown in Fig. 12. Weller (1968) studied changing fertility
patterns in Puerto Rico and concluded that the changing employment
role of the woman outside of the house was a significant factor in
reducing fertility. Friedlander (1965) correlated the educational level
of Puerto Rican women to number of children (Table 6). Myers and
Morris (1966) analyzed fertility reduction in Puerto Rico as a
function of the rural-to-urban migration and determined that the
fertility of mobile women was significantly lower than for those who
had not migrated to the San Juan metropolitan area.


Rates per 1,000 Inhabitants Percentage Millions
57
Fig. 12. Historic trends in selected demographic parameters for Puerto
Rico, (a) Estimated annual population at mid-year; (b) An
nual percentage rate of population increase or decrease;
(c) Annual rates/1,000 inhabitants for crude fertility,
crude mortality, and net migration.
Source: Puerto Rico Health Department (n.d.).


58
Table 6. Educational Level Achieved vs. Com
pleted Fertility for Puerto Rican
Women.
Mother's Education
Number of Children
None
6.1
1-2 years
5.0
3-5 years
4.0
6-8 years
3.4
High school
2.4
Source: Friedlander, 1965.
These and numerous other studies have emphasized that the
framework within which fertility decisions are made is complex. The
child is a non-market good, making it often difficult to analyze
fertility on the basis of economic parameters alone. The cost of
children is a function of the opportunities which the parents must
forego as a result of child-bearing. Family size may change in
response to the changing tastes of the parents for leisure time,
travel, economic goods, etc. The relative cost of children also in
creases as the family moves from a traditional agrarian setting to
the city. Factors which tend to reduce fertility in the urban-
industrial i zed setting include: (1) increased cost of living space,
(2) the higher cost of goods in the market system, (3) lack of un
skilled jobs for child employment such as are available in the
traditional agrarian setting, (4) compulsory school attendance,


59
reducing again the child's working ability, (5) availability of
improved pension systems in old age, and (6) changing values, tech
niques and information on contraception and abortion (Easterlin,
1971; Schultz, 1973; Willis, 1973).
Despite the apparent complexity of fertility decisions, income
and fertility decline are strongly correlated over the post-war
development period in Puerto Rico (Fig. 13). This suggests that in
come changes may be used as a surrogate for the variety of socioeconomic
changes which characteristically occur during development and which
create the demographic transition. Inasmuch as changing income
levels are perhaps the best overall measure of the development process
(Meier, 1970), this good correlation between increasing income and
decreasing fertility rates during the initial development period is
expected.
However, as higher income levels are achieved the relation
ship between fertility and income becomes increasingly ambiguous,
and nonmonetary factors play a larger role in the determination of
demographic characteristics. Freedman and Coombs (1966) and Willis
(1973) have noted that there is only weak correlation between income
and family size in the United States. Sweezy (1971) has noted that
fertility rates changed imperceptibly in the United States between
the four years preceding the Depression (1925-1929) and the subsequent
four most severe years of the Depression, indicating the lack of
short-term fertility response to income changes. Long-run income and
fertility trends in the United States are summarized in Fig. 14,
showing the uncertainty of this relationship in an industrialized


Crude Birth Rate
(Annual birlhs/1,000 population)
60
>~o
*-> O
o
i-
-3
e
>
Personal Consumption Expenditures Per Capita (1954 dollars)
Fig. 13. Fertility (b) as a function of personal consumption expendi
tures (z, used as a proxy for income) in Puerto Rico.
Data sources: Puerto Rico Health Department (n.d.) and
Puerto Rico Planning Board (1978c).
Fig. 14. Comparison of the crude birth rate and gross national
product per capita (in 1929 dollars) for the United
States, showing the uncertain relationship between
income and fertility.
GNP per Capita


61
economy. Once the demographic transition is essentially completed,
social factors only poorly related to economic performance appear to
dominate fertility decisions.
A sigmoid curve is hypothesized to be most adequate for
describing the overall long-run fertility reduction process (Coale,
1974), and has been fitted to Puerto Rican fertility data in Fig. 15.
The crude birth rate in Puerto Rico is modeled to stabilize at 15
births per 1,000 of total population, which is approximately the
birth rate required to maintain a stable population. The fitted
equation is
27
1 + e0.123(T- 1965)
+ 15
(3-9)
where
T = year
A sigmoid curve was used by Lotka (1924) to predict the long-term
population growth of the United States. However, Lotka's predicted
population levels were in error due to the unforseeable post-war
baby boom.
Mortality
The crude mortality rate in Puerto Rico declined rapidly
during the late 1940s and early 1950s and soon stabilized at the
level at which it remains today. A rapid decrease in mortality is
characteristically obtained in the early stages of a development


Crude Birth Rate
(Live births/1,000 of total population)
Fig. 15. Fertility in Puerto Rico fitted to a logistic curve, assuming that the lower limit of future
fertility will be 15/1,000.
Data Source: Puerto Rico Health Department (n.d.).


63
process due to the effectiveness of public health services. However,
once these basic services are provided, further increases in income
have little effect on mortality. Although the age-specific mortality
may remain constant, the crude death rate will slowly increase as the
population distribution ages. The crude mortality rate in Puerto
Rico (Fig. 16) has been modeled to decline in a linear fashion and
then to stabilize according to the following relationship:
d1947-1953 = 1402-7 (5/?)T (3-10)
dl954-2020 = 7- (3-11)
The age specific mortality rate has been defined as a fixed multiple
of the crude mortality rate. Because changes in the mortality rate
will have little effect on the model, the use of a more elaborate
mortality function is unwarranted.
Migration
Neoclassical theory predicts the migration of population from
areas of low income and high unemployment to areas of higher income
and lower unemployment, a trend which would tend to generate equilib
rium levels of unemployment and income nationwide. However, the real
world represents a marked departure from this model and strong
differences in income and unemployment levels persist, including
enclaves of traditionally low income such as Appalachia. Richardson
(1973) reviewed inter-regional migration models, pointing out that
differences in levels of unemployment appeared to be the most


(deaths / thousand)
Fig. 16.
Crude mortality rate in Puerto Rico.


65
significant single variable explaining migration, as predicted by
neoclassical theory. However, the characteristically poor statisti
cal fit achieved by these models indicated that other factors played
an equally important role.
At least four parameters in addition to simple differentials
in income and unemployment need be considered to explain migration
patterns among regions (Isard, 1975; Richardson, 1973). These may
be summarized as:
1. Monetary cost of moving
2. Psychic cost of leaving family, friends and
familiar surroundings
3. Changes in non-monetary income due to differences
in culture or environmental factors such as climate
4. Uncertainty and the imperfect information on which
migration decisions are based
Some of these factors cannot be quantified, but do help to
explain some of the observed temporal and spatial patterns which have
characterized Puerto Rican migration. Although migration to the
mainland has been underway since the beginning of this century, these
factors combined to prevent large-scale migration until after the
Second World War (Mintz, 1972b). Important factors delaying migration
were the relatively high cost of the passage in relation to pre-war
earnings, and the time lag which was necessary for the initial
emigrants to establish themselves on the mainland to serve as a source
of information and assistance for potential migrants yet on the island.


66
By migrating from the island to the Puerto Rican neighborhoods
in the New York City area it was possible to minimize the migration
distance with respect to factors such as culture and language differ
ences. The factor of uncertainty was reduced when family or friends
preceded the migrant and could assist in finding lodging and employment.
This attempt to minimize these migration costs or distances accounts
for the continuing clustering of Puerto Ricans in ethnic communities,
a pattern which suggests that the employment opportunities available to
migrants will be significantly different from the national average.
Migrants to the mainland in the 1950s were composed primarily
of younger persons (Friedlander, 1965), and the net return of migrants
appears to follow a similar pattern (Zell, 1973). It is estimated by
the Puerto Rico Planning Board (1978b) that 69 percent of the net
immigration to the island in 1975 was composed of return migrants, an
additional 18 percent was composed of Puerto Ricans born in the United
States (children of migrants), while the remaining 13 percent repre
sented immigration from foreign countries. The concentration of
return migrants in the 14-29 year age groups has had a major effect
on the unemployment rate in that group, as summarized in Table 7.
It is not known to what extent this higher unemployment among return
migrants reflects the "frictional" effect of higher job mobility
among returnees or their difference in competitiveness in the local
job market. A portion of the unemployment may also reflect an employ
ment strategy designed to maximize the receipt of unemployment and
other social welfare benefits (Zell, 1973).


Table 7.
Effect of Returned Puerto Rican Migrants on the Percentage
Rate of Unemployment in Puerto Rico, 1972.
Item
Returned Miqrant
Non-miqrant
Total unemployment rate
19.9%
10.1%
Participation rate in
14-29 year group
71.6%
49.1%
Percentage of population
in San Juan area
15.9%

Percentage of unemployment
in San Juan area
24.6%

Percentage of island population,
excluding San Juan area
23.8%

Percentage of island unemploy
ment, excluding San Juan area
44.0%

Source: Zell, 1973.


68
Unacceptable results are obtained when the net migration
between Puerto Rico and the mainland is related to simple differences
in the rate of unemployment. The fitted linear equation is
m = 16.1 2.98 Ud (3-12)
where
m = net migration rate to Puerto Rico, positive values
denoting immigration (migrants per 1,000 of total
island population)
U = island unemployment rate (percentage)
Ud = difference between mainland and island unemployment
rate (percentage)
This equation yielded a correlation coefficient of only 0.37, reflect
ing the highly scattered nature of the data (Fig. 17).
When the unemployment rate in Puerto Rico alone is substituted
for the unemployment differential a more consistent relationship is
obtained. Net migration may be modeled as a simple linear function of
island unemployment over the 1950-1971 period, obtaining a correlation
coefficient of 0.70 (Fig. 18). The fitted equation is
m = 39.2 4.04 U (3-13)
However, the data from the years since 1972 fall far outside this
historic relationship, suggesting that the parameters influencing net
migration have changed significantly during the 1970s.
It is hypothesized that high rates of net immigration to the
island, despite the highest unemployment rates of the entire development


Immigration to Puerto Rico
(rate per 1,000 inhabitants)
69
Difference in Unemployment Rates
(Puerto Rico United States, percentage)
Fig. 17. Net immigration to Puerto Rico as a function of the
difference in the unemployment rate in Puerto Rico and
the United States in the preceding year. This relation
ship achieved a somewhat better linear regression fit
(r^ = .50) than the comparison of unemployment and net
migration during the same year (r? = .37).


70
*1977
1976
J
j
i
-401 L
1C
o
15
i
I
i
~ZQ
Unemployment Rate
(percentage)
Fig. 13. Correlation of net immigration to Puerto Rico with the
unemployment rate in Puerto Rico. Data from years 1972-
1977 are plotted separately because they do not fall
within the historic relationship.


71
period, have been promoted by the growing magnitude of transfer pay
ments. When transfer payments per capita (in constant dollars) are
added as a second independent variable to the linear migration model,
the correlation coefficient is improved to 0.83. The fitted equation
is
m = 24.8 0.158 G + 1.55
(3-14)
where
G = transfer payments per capita (1954 dollars)
This suggests that income transfers have indeed had a measurable ef
fect on recent migration.
However, it is not possible to forecast future migration using
the function relating net migration to unemployment as well as income
transfers (Equation 3-14). Use of this relationship would generate
continuing strong net immigration to the island unless a dramatic
decrease in transfer payments occurred, which appears unlikely. It
seems more likely that the population of Puerto Ricans (or others) who
might be influenced to migrate to the island as a result of welfare
considerations will eventually be exhausted, and immigration due to
income transfers will diminish as the supply of "welfare migrants"
becomes reduced. However, there appears to be no manner in which the
total population of potential "welfare migrants" can be estimated, so
an alternative migration model has been used.
Migration between Puerto Rico and the mainland is modeled
on the sole basis of the unemployment rate in Puerto Rico:


72
m = 39.2 4.04 U + I (3-15)
where
I = adjustment parameter for immigration rate (Fig. 19)
In order to account for the high rate of net immigration during the
1970s, despite high unemployment on the island, the function "I" has
been used to temporarily shift to the right the curve which was fitted
to migration data over the 1950-1971 period in Fig. 18 (Equation 3-13).
This function reflects that the "zero migration" level of island
unemployment was temporarily shifted due to the dramatic change in
other conditions, such as the presence of increasing levels of
transfer payments and possibly reduced benefits and job opportunities
in New York City during that city's fiscal difficulties in the early
1970s. This has been accomplished by first increasing and then
decreasing the intercept value in the migration equation using the
function values from Fig. 19.
The future value for the function in Fig. 19 is maintained
at a higher level than the pre-1971 period to reflect the effect of
the increased level of transfer payments on migration patterns. Zell
(1973) has hypothesized that the higher unemployment rate among
return migrants (Table 7) could reflect a strategy of maximizing income
assistance payments, and the empirical data used in Equation 3-14
does suggest that increasing transfer payments have been influential
in promoting return migration to Puerto Rico. If it is true that a
significant portion of the return migrants are being induced to migrate


MIGRATION (rote per thousand inhabitants)
YEAR
Fig. 19. Function utilized to specify the rate of net immigration into Puerto Rico in the
regional model. It is assumed that the incentive to immigrate to the island in
the post-1970 period will be enhanced by the effect of increased federal income
assistance programs now available.


74
due to the increased level of income assistance available on the
island, then the rate of unemployment needed to achieve zero migra
tion is likely to be higher in the future.
Economic Sub-Model
General Equations
Economic relationships are constructed to model historic and
future levels of income and employment in Puerto RicoJ Only three
state variables (level equations in the DYNAMO language) are modeled
in the economic sub-model. Two of these are for locally owned and
externally owned stocks of productive capital, respectively, and the
third is for consumer assets. The general form for the stock
equations is
Kt+1 = Kt + At (St Yt A Kt) (3-16)
where
S = rate of savings and investment
Y = income (1954 dollars)
A = rate of depreciation
K = stock of capital (1954 dollars)
All other equations express instantaneous values, and as such are
"auxiliary" equations in the DYNAMO language.
^Al 1 dollar quantities in the model and the text of this
chapter have been adjusted to 1954 value.


75
Performance of the economic sub-model is determined largely by
the behavior of the two stocks of productive capital and by values of
functions determined exogenously and varied from one model run to
another to generate alternative future scenarios.
In contrast to the population sub-model, in which the
parameters remain constant for all model runs, parameter values in the
economic sub-model are altered for each model run to generate alterna
tive scenarios. The parameters which are manipulated and the character
istics of each of these four scenarios are summarized in Table 8.
Scenario "A" is a constrained extrapolation of historic growth
trends, the rate of future local savings stabilizing at zero. Scenario
"B" is perhaps a more probable scenario, reflecting a somewhat lower
growth rate of external investment plus a perturbation in investment
flows in the later 1980s caused by, perhaps, a second petroleum
embargo. Scenarios "C" and "D," respectively, consider the changes
which might accompany low or zero levels of growth in external invest
ment, combined with increasing levels of local savings and investment.
The specific values for each parameter in each of the scenarios are
found in Figs. 26, 30, and 37 in this section.
Productive Capital
Sources of capital. Economic development ultimately proceeds
from human development (Schumacher, 1973). An underdeveloped area is
an area populated by underdeveloped people. The development (or
importation) of human resources makes possible the mobilization of
physical resources which results in the production of wealth. The


76
Table 8. Input Scenarios for the Puerto Rico Regional Model.
Parameter
Scenario
A
Bd
C
D
h*
High
Medium
Low
Zero
Sb
Zero
Low
High
High
o
r~
o
High
High
Low
Low
aForeign investment rate.
^Puerto Rican investment rate.
cCapital-labor rate.
din scenario "B" the stream of investment is perturbed in the
late 1980s resulting in a period of decreased investment, similar to
the effect of the 1973 oil embargo and subsequent recession.


77
utilization of capital equipment is the key element of the development
process which permits increasing economic output (and resource in
puts) to be achieved. Industrial capital is that physical structure
which enables human labor to be effectively coupled with the energy
available from fossil fuel and other energy sources to achieve
productivity increases.
The development process is characterized by changes in the
structure of the socioeconomic system which creates an increase in
the rate of savings, investment of these savings in the accumulation
of productive capital, and resultant increases in production. Some
of these changes are necessary preconditions to development, whereas
others may be considered a product of that process (Rostow, 1958;
Kuznets, 1958; Gunder-Frank, n.d.).
Physical investment in capital, as evidenced by structures
and machinery, is the last step in the organization of a productive
process. Capital investment may be taken as evidence of the avail
ability of adequately skilled labor and managerial expertise, the
presence of industrial and other requisite technology, the functioning
of financial institutions, and the anticipated ability to market the
goods produced. When the decision to make productive capital invest
ment in a region is repeated by numerous entrepreneuers, be they
individual, corporate, or government, then the development process is
begun. This process may be sustained and regular increases in output
achieved when a sufficient rate of capital investment is achieved.
Thus, capital accumulation becomes the focal point of regional or
national development (Lewis, 1958).


73
The income stream generated by an economy may be divided
between consumptive expenditures and savings, with the latter being
available for investment in productive capital. This capital is
created by foregoing current consumption, thereby permitting a portion
of production to be devoted to the creation of capital stocks which
can be employed to increase future levels of production.
There are large differences in the tendency for various
sectors of society to accumulate savings. The top income group
accounts for most personal savings, and lower income groups have low
or even negative savings rates. However, total personal savings is
not large when compared to business savings, which constituted an
average of 71 percent of total savings in the United States over the
1970-1977 period. Lewis (1958) has proposed that when the rate of
capital accumulation in an economy is low it may be traced to the
small size and/or low profits in the productive sectors which provide
the capitalists, be they private or government, limited resources
and poor incentive for re-investment.
Merhav (1969) has noted that the central issue lying at the
root of economic development theory is the problem of escaping from
the low-level equilibrium trap. In this trap an economic system
cannot achieve positive real per capita growth because of the in
adequacy of productive investment, which in turn cannot be achieved
due to the low level of per capita income and savings. This low-
level trap has been described for Puerto Rico by Friedlander (1965),
and is summarized in Fig. 20.


79
Fig. 20. Low-income trap.
Source: Adopted from Friedlander (1965).


80
The classic low-income trap is created when the rate of
population growth in an economy grows faster than the economic growth
rate, resulting in continual impoverishment and failure of the local
economy to generate capital resources needed to finance higher rates
of economic growth. Development theory holds that the trap may be
avoided by increasing national investment by using the input of foreign
capital, or through the control of population growth rates (i.e., by
exporting migrants in this case). Both methods have been applied in
Puerto Rico.
The upward sloping curve of investment represents the increas
ing rate of investment which is assumed to occur as a result of a
positive marginal rate of savings in response to income increases.
The downwards concavity of the curve reflects a hypothesized decrease
in the marginal productivity of capital at higher levels of economic
development. The manipulation of capital and investment is the
critical variable for the "escape," and is a central parameter in
the formulation of many development models and policies.
Friedlander (1965) postulated that Puerto Rico could avoid
this trap by achieving rapidly increasing income levels through
externally financed industrialization, and achieving population
stabilization through migration. The resultant income increases were
anticipated to create an increase in the savings rate until the local
investment resources became sufficient to finance the development
process. That the rate of savings should increase as a function of
income is suggested by cross-sectional data, such as shown in Fig.21.


Savings Rate
(percentage of family income)
31
-15 !-
C 5 10 .5
Family Income
(thousands of current dollars/year)
Fig. 21. Cross-sectional savings characteristics of Puerto Rican
families as a function of family income.
Source: Committee to Study Puerto Rico's Finances, 1975.


32
However, the extrapolation of cross-sectional savings behavior
to income increases over time is not valid, as can be inferred from
previous experience elsewhere as well as from post-war patterns of
savings in Puerto Rico. Long-term income and savings data for the
United States and Puerto Rico, graphed in Fig. 22, show that the per
centage of income saved has not increased regularly as a function of
income increases over time. The post-war rate of savings in Puerto
Rico has declined steadily, showing clearly that increases in income
have not increased the rate of savings in the local economy.
Estimation of capital stock. The total annual addition to
capital (gross domestic investment) consists of additions to fixed
capital plus changes in inventory. The net addition to fixed capital
may be computed by discarding inventory changes and subtracting the
annual depreciation from the gross addition to fixed capital. Housing
stocks are included in the estimate of productive capital, being
necessary to produce housing services, the value of which is reflected
in the national income accounts.
An official estimate of capital stock is not prepared by the
Puerto Rico Planning Board, but an estimated capital stock series
(excluding land) has been constructed for the island (see Appendix A)
and is summarized in Fig. 23. Total productive capital is divided
into two classes, that which is locally owned (aK) and that which is
externally owned (5K), as imputed by earnings data, assuming that
the earnings rate of locally and externally owned capital is identical.
The net inflow of external capital into Puerto Rico is modeled as a


Percentage of Personal Disposable Income Saved
83
;o -
8
1951 -
-4L
-8 u
3 r
10 -
-12 L
1929
o
1940
s

/
1947/
*1949
'1975
!947
1977
J L.
LEGEND
0 United States
Puerto Rico
o
1977
-J L.
iOOO
2000
Personal Disposable Income per Capita
(1954 dollars)
Fig. 22. Relationship between personal disposable income per capita
(in constant 1954 dollars) and percentage of income appear
ing as personal savings for the United States and Puerto
Rico.


Capital Stock
(billions of 1954 dollars)
84
o i
1940
1950
I960
Year
1970 1980
Fig. 23. Capital stock series for Puerto Rico (excluding land),
showing total capital stock and capital stock owned by
residents of Puerto Rico, as imputed from earnings.


85
contribution to the stock of externally owned capital, while local
savings and investment is contributed to the stock of locally owned
capital (it is assumed that savings equals investments). The
depreciation rate is the same for these two stocks of capital. The
equations are
aKt+l = aKt + at(s y aKt Ak> <3-,7>
b*t+l = bKt + t(F bKt flk) (3-18)
where
S = rate of local savings or investment
Ak = capital depreciation rate
Y = GNP of Puerto Rico (1954 dollars)
F = rate of foreign investment (1954 dollars/year)
aK = locally owned capital (1954 dollars)
bK = externally owned capital (1954 dollars)
Earned income, minus savings, plus transfer payments (G), is
eqivalent to local consumption, and is contributed to the stock of
local consumer assets (CK):
cKt+l = cKt + AtOrO S) + G Ac cKt) (3-19)
These consumer assets represent a mixture of consumer durables and
non-durables, not including housing (which is counted as productive
capital). A depreciation rate of 50 percent is estimated for this


86
stock. Inasmuch as this stock has no effect on any other model
parameter, inaccuracies in this parameter will not affect model per
formance.
External sources of capital. The capital required to finance
investment activities can come from two sources: savings from within
the economy, or some external source of savings. A bottleneck to
economic growth can be created by the insufficiency of local invest
ment resources and the propensity to invest the available savings in
relatively non-productive endeavors (e.g., real estate). This bottle
neck may be broken perhaps most readily by importing financial capital
and entrepreneurship. Having experienced poor results in the govern
ment financed and managed industrialization projects in the late 1940s,
the importation of capital and entrepreneurship became the development
policy adopted by the island's government (Ross, 1966). Relatively
little emphasis was given to the development of local entrepreneurship
(Curet-Cuevas, 1976).
The time series of Gross Domestic Investment on the island is
portrayed in Fig. 24, showing the increasing role of external invest
ment as a source of capital compared to the role of local savings,
which have actually become negative in recent years. The computation
of the percentage contribution of each major source of savings to total
investment on the island is plotted in Fig. 25, showing even more
clearly the poor record of local savings formulation and the heavy
reliance on external capital sources.


MILLIONS OF 1954 DOLLARS
87
YEAR
Fig. 24. Sources of Gross Domestic Investment (GDI) in Puerto
Rico, showing the contribution from local and external
sources.
Data source: Puerto Rico Planning Board (1978c).
YEAR
Fig. 25. Gross Domestic Investment in Puerto Rico, showing the percen
tage contribution of four sources of savings: (A) net ad
justed inflow of external capital, (B) depreciation,
(C) government savings, and (D) private savings. Note that
private savings is plotted with respect to zero, and all
others are plotted with respect to private savings.
Data source: Puerto Rico Planning Board (1978c).


83
The annual rate of foreign investment has been modeled as an
exponential growth equation which has been constrained by a decreasing
rate of growth:
Ft = $350x1 C)6 [l + e 3(T"1979i] (T-1979) (3_20)
where
Ft = annual external investment (1954 dollars)
5 = initial value for annual capital growth rate
The decreasing rate of investment growth reflects the hypothesis that
many of the conditions which contributed to Puerto Rico's rapid post
war economic growth rate are transient in nature, and are weakening as
a result of increasing local wage levels, increased local energy cost,
and changes in industrial tax incentive programs.^ The values of Ft
used in each scenario are summarized in Fig. 26.
Although capital importation has generated rapid economic
growth, it also has created external repayment obligations against the
stream of business profits since most entrepreneurs were nonresident
individuals or corporations. Not unexpectedly, net property earnings
remitted to nonresidents have increased dramatically, from 7 percent
of total property income on the island in 1947 to 62 percent in 1977.
In 1962, externally owned industries accounted for 60 percent of the
^The future of the tax incentive program is uncertain,
particularly inasmuch as it is intimately linked to the issue of
statehood. Were Puerto Rico to become a state it would no longer be
possible to offer federal corporate income tax exemption as an
industrial incentive.


EXTERNAL INVESTMENT
89
YEAR
Fig. 26. Scenarios for the rate of external investment in Puerto
Rico, for use in the regional model.


90
total value added in manufacture on the island, and this figure had
risen to 70 percent by 1967^ (Curet-Cuevas, 1976).
The rate of profit remission is calculated as the product of
the value of the externally owned capital and the rate of return
earned by this capital:
Ht = bKt(0.12 + 0.1I3e*07(T-1946)) (3-21)
where
Hb = remission of profits (1954 dollars)
The historical and projected change in the rate of earnings from ex
ternally owned capital in Puerto Rico is summarized in Fig. 27.
Local sources of capital. Low levels of local savings have
plagued the island economy throughout its entire history, having roots
in the colonial era when business profits and savings were remitted
to Spain (Lewis, 1963). Restricted savings rates continued to be a
problem of post-war development (Comit Interagencial, 1975; Curet-
Cuevas, 1976; MacCoby and Fielder, 1972). There is no clear explana
tion for the low and decreasing level of local savings and investment,
which have decreased despite rapid economic growth (Fig. 28). Suggested
O
reasons for low or negative rates of personal savings have been listed
by the Committee to Study Puerto Rico's Finances (1975, p. 27):
"'More recent data are unavailable.
^Includes savings from unincorporated businesses.


Full Text

PAGE 1

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PAGE 256

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81,9(56,7< 2) )/25,'$


REGIONAL DEVELOPMENT AND WATER RESOURCE MANAGEMENT:
IMPLICATIONS OF A CHANGING AGRICULTURAL SECTOR
ON PUERTO RICO’S SOUTH COAST
BY
GREGORY LEE MORRIS
A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR TH
DEGREE OF DOCTOR OF PHILOSOPHY
UNIVERSITY OF FI
.ORI DA
1979
rn

ACKNOWLEDGMENTS
The assistance of the members of my committee is gratefully
acknowledged. In particular, I wish to acknowledge the patient and
encouraging assistance I have received from my chairman, Dr. Kylstra,
and my long-standing inspirational debt to Dr. Odum. I also appre¬
ciate the understanding demonstrated by my committee in accepting my
five years of commuting between Gainesville and Puerto Rico as I at¬
tempted to balance job responsibilities and income against research
requirements and expenses.
I owe a great personal debt to Douglas Pool. He was
responsible for introducing me to Puerto Rico, and has served as a
reliable and helpful friend. He also single-handedly ran a
difficult agricultural venture during my unexpectedly long absence
from the island while bringing this research to its conclusion.
There are many individuals on the island, too numerous to
name, who have offered readily of themselves and provided personal
insights into the social, cultural and political aspects of Puerto
Rico. These include many friends at the Department of Natural Re¬
sources in San Juan, the Tirado family, Janet Weiss, Hugh Thorne, and
my dedicated friend and companion, Miriam Rabón.
From my family in Sarasota I have received financial aid
and friendly advice and support at the most timely moments. In
i i

Gainesville, my sister has provided three years of accommodations,
airport limousine service, and good humor.
Finally, I am fortunate to have the very professional typing
services of Sofia Kohli ("Superfish"). Her experience and ability
facilitated the preparation of the final document immeasurably.

TABLE OF CONTENTS
Page
ACKNOWLEDGMENTS ii
ABSTRACT vii
CHAPTER I: INTRODUCTION AND OVERVIEW . . I
Problem Statement 1
Methods of Regional Analysis 3
Input-Output 3
Neoclassical Growth Models 5
Simulation Models 8
Previous Resource Studies in Puerto Rico ... 10
Study Methodology 12
Regional Development Model 12
Resource Management Model 13
Report Organization 14
CHAPTER II: STUDY AREA DESCRIPTION 16
Location 16
Physical Setting 19
Geology 19
Vegetation and Land Use 19
Climate and Hydrology 21
Socioeconomic Setting 33
History 33 •
Socioeconomic Objectives 37
Socioeconomic Conditions 38
Institutional Framework 43
CHAPTER III: REGIONAL MODEL . . . 48
Population Sub-Model 52
General Equations 52
Fertility 55
Mortality 61
Migration 63
Economic Sub-Model 74
General Equations 74
Productive Capital 75
IV

TABLE OF CONTENTS—Continued
Page
Production Relationships 95
Economic Dependence 112
Population and Economic Linkage 116
Employment 117
Labor Force 117
Unemployment and Migration 119
Model Calibration 120
Regional Model Simulation Results 122
CHAPTER IV: WATER MANAGEMENT MODEL 131
Supply Curve for Water 132
General Considerations 132
Supply Curve Construction 133
Demand Curve for Water 140
General Considerations 140
Municipal Water 142
Industrial Water 145
Recreation and Natural Systems 150
Agricultural Water Demand 151
Existing Conditions 151
Water Demand in the Sugar Industry .... 153
Water Demand by Non-Sugar Crops 166
Aggregate Irrigation Demand 169
Changing Pattern of Irrigation Demand . . 175
Water Management Model 178
Safe Yield Criteria 179
Water and Salt Budget 179
Model Assumptions and Equations 183
Water Resource Scenarios 192
Model Results 194
CHAPTER V: DISCUSSION 197
Development Objectives 197
Alternative Development Patterns 201
Feasibility of Development Alternatives . 201
Alternative Development Patterns in
Agriculture 204
Resource Implications of Agricultural
Change 207
Management Changes 207
Institutional Needs and Constraints . . . 209
A Proposal for Resolving the
Institutional Problem 212
v

TABLE OF CONTENTS--Continued
Page
CHAPTER VI: SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS 217
Summary and Conclusions 217
Overview 217
Regional Growth 218
Resource Management 220
Recommendations 223
Entrepreneurship 223
Agriculture 223
Water Management 224
REFERENCES 225
APPENDIX A: CAPITAL STOCK ESTIMATE FOR PUERTO RICO 239
APPENDIX B: REGIONAL MODEL EQUATIONS 244
BIOGRAPHICAL SKETCH 249
vi

Abstract of Dissertation Presented to the Graduate Council
of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Doctor of Philosophy
REGIONAL DEVELOPMENT AND WATER RESOURCE MANAGEMENT:
IMPLICATIONS OF A CHANGING AGRICULTURAL SECTOR
ON PUERTO RICO'S SOUTH COAST
By
Gregory Lee Morris
March 1979
Chairman: Chester D. Kylstra
Major Department: Environmental Engineering Sciences
As provided by the Water Resources Council's "Principles and
Standards," resource management in the United States is conducted
with the objective of providing for increases in income and maintenance
of environmental quality. However, these criteria inadequately express
development goals in Puerto Rico, where a development policy aimed
principally at providing increases in income and industrialization
through capital importation and increases in transfer payments have
served to greatly increase the island's level of economic dependency.
Over 25 percent of all income on the island was derived from unilateral
federal transfers by 1977. The savings rate in the island's private
sector has decreased and is now negative, with income increases being
used to support higher levels of debt rather than increases in produc¬
tive investment.
A simulation model is constructed based on theoretical rela¬
tionships to examine these development patterns. It is shown that
continuation of existing development patterns may provide long-run
VI i

increases in income and employment, but that this may be accompanied by
even higher levels of dependency. Under these conditions public
sector resource decisions based on income and employment will only
perpetuate these undesirable patterns.
These patterns can be broken only through the promotion of
local investment and entrepreneurial activity. A prime sector for
the promotion of entrepreneurship is the island's backwards agricultural
sector, which stands in stark contrast to the modern industrial sector.
Most of Puerto Rico's mechanizable lands, and nearly all irrigated
lands on the semi-arid south coast, are planted in sugarcane on govern¬
ment operated farms. The government sugar industry suffers losses of
approximately $500 per acre per year. In response to these losses,
and in the interest of promoting agricultural modernization, government
policy has recently been implemented to lease government sugar lands
to private growers for the production of non-sugar crops.
Hydrologic and irrigation conditions on the south coast are
described, showing that a significant portion of the economic problems
in the sugar industry may be attributed to archaic irrigation practices.
Private farms are expected to be characterized by increasing irrigation
efficiency, which could increase the rate of consumptive use and
decrease recharge from irrigation percolation, creating an unfavorable
water balance in the already heavily drafted south coastal aquifer.
The conversion from sugarcane to diverse seasonal crops will also
create the potential for economically efficient transfers among private
farms.
vi i i

Existing water management institutions in Puerto Rico are
poorly adapted to accommodate these changes in irrigation management.
The primary problem lies in the lack of accountability which the
resource manager has toward the resource user. An institutional
framework is synthesized in this research which is aimed at improving
this accountability through creation of a local water management insti¬
tution which will be capable of providing for long-term as well as
seasonal transfers among users in response to changing crop patterns
and economic demand.
IX

CHAPTER I
INTRODUCTION AND OVERVIEW
Problem Statement
Regional growth creates changes in patterns of natural
resource utilization. By understanding these changes and their
implications, management policies may be implemented to increase the
value of resources to society. This value to society is determined
by the contribution which a particular resource use makes to patterns
of regional development which are themselves perceived to be desirable.
Thus, regional development and resource management policies are
intimately linked to one another. Changing development policies and
patterns of growth can foster changes in resource allocation. This
in turn, can create the need for revised resource management policies
and institutions. Conversely, the development policy itself must be
formulated within the constraints imposed by the region's resource
base.
The relationship between changing regional development
strategy and water resource management in Puerto Rico is examined.
Following three decades of intensive development effort, Puerto Rico
in the 1970s has high levels of unemployment and has become increas¬
ingly dependent on growth in transfer payments from the federal
government, which now equal 26 percent of the island GNP. A majority
1

2
of business earnings are now remitted to non-residents, reinforcing
the island's dependence on capital imports. Some of the changes in •
development policies needed to deal with the conditions will also
require changes in patterns of resource use and management policies.
A regional development model for Puerto Rico is constructed
and simulated to examine growth patterns under current and alternative
development strategies over the period 1947-2020. It is asked
whether the strategy of industrialization, emphasizing heavy reliance
on capital imports and transfer payments, can generate patterns of
development which are consistent with the island's long-run goals,
i.e., to reduce unemployment, increase income levels, and increase the
island's economic self-reliance.
Changes in regional development patterns may modify patterns
of resource use. This relationship between a changed regional
development strategy and water resource management is explored for
Puerto Rico's semi-arid south coast. Models of water resource use are
constructed and used to suggest some of the water management implica-
i
tions of new development policy, focusing on the potential effects of
changing irrigation management accompanying the shift from unprofit¬
able sugarcane production on government-managed plantations to the
profitable production of non-sugar crops on numerous smaller private
farms.
The hydrologic changes are assessed from supply and demand
conditions and a water management model. The water management model
is run over a period of 25 years to define those changes in ground

3
water withdrawal, consumptive use in agriculture, and artificial
recharge which could create an unfavorable water or salt balance.
These results are used to suggest institutional changes which are
needed to accommodate these changing water management conditions.
Methods of Regional Analysis
A variety of quantitative analytical models may be utilized
to examine regional growth patterns and potential, including export
base, cumulative causation, industry structure analysis, shift share
analysis, etc. However, many of these models have serious theoretical
or operational weaknesses and cannot be used to directly address the
specific relationship of resource infrastructure to the regional
growth process. Three types of models which have been used to
evaluate the role of resources in regional growth are discussed:
input-output, neoclassical growth models, and simulation modeling.
Input-Output
The input-output (1-0) framework is a matrix of the linkages
among the sectors of the existing economic system. Utilizing an 1-0
model an analyst can examine the response of all sectors of the
economy to any initial changes which it is desired to test. In its
static form the technologic structure of the system is held constant.
The conversion of a static 1-0 model to a dynamic framework requires
not only the conversion of the model's internal structure, but also
requires that the exogenous sectors change. Richardson (1973) has
suggested that a separate model might be constructed to generate the

4
changes in exogenous variables over time which would be required for
the dynamic operation of an 1-0 model. When used as a dynamic tool
the analyst makes judgmental estimates of the changes in the
coefficients which may occur over time, plus the effect of changing
technology and substitutions on both the input and the output sides.
Changes in industrial mix and other "add-ons" are required to make
this static model perform in a dynamic framework.
Input-output techniques were used by Kelso et al. (1973) to
study the effects of a declining water resource base on the Arizona
economy. These declines are being caused by withdrawals from desert
aquifers in excess of recharge rates, resulting in declining ground
water availability. In its dynamic form the structure of this 1-0
model was altered in accordance with a variety of different growth
scenarios to show the possible effects of water shortage on the economy
over a 50-year period.
Serious impediments to the implementation of an 1-0 model are
the lack of readily quantifiable available data and the amount of
time and expense involved in data collection. Puerto Rico has
detailed information on inter-regional trade, a serious data deficiency
in most regions, and has had several 1-0 models constructed over the
past 15 years. However, in these models the agricultural sector is
aggregated and the role of irrigated agriculture is thereby masked.
There is also considerable uncertainty as to the stability of the
pattern of 1-0 linkages in Puerto Rico's economy over the long run.
Other general weaknesses of the 1-0 model include the assumption of

5
linear relationships throughout and the essentially ad-hoc procedures
which are necessary to convert it to a dynamic framework.
Neoclassical Growth Models
Lewis et al. (1973) emphasized the general inadequacy of the
regional growth models formulated to date, and underscored the need
to gain an improved understanding of regional growth processes as a
prerequisite to being able to predict the effect of water resource
investment (or any other investment) on a region's economy. They
proposed that an adequate regional model should explicitly consider
the sources of regional growth and interactions among those growth-
promoting factors, with particular emphasis on those factors which
are amenable to policy manipulation. Inasmuch as no general type of
analytical framework exists which can adequately account for the
variation among structures and growth processes in different regions,
it was stressed that each regional model would require separate syn¬
thesis.
Lewis et al. (1973) proposed that regional economic charac¬
teristics could be described using a neoclassical production function
model of the type
Q = f(K,R,L,T)
where
Q = output,
K = capital,

6
R = resources, including land,
L = labor, and
T = technological advance.
This relationship may be solved for the marginal products of each input
factor:
3Q. 3£. 3Q. 3£.
3K’ 9R ’ 3L’ 3T’
or it may be rewritten in the growth accounting form:
q = ak + 3r + eH + t
where
a = Ak; and t = A2k
L Q
AQ1 = output increase from technological advance
The elasticities of production for K, R and L, respectively, are a,
3, and e. These elasticities represent the percentage change in output
corresponding to a percentage change in the respective input factor,
e.g.,
30 K
a " 3K * Q
Under the assumption of perfectly competitive factor and
product markets and full utilization of resources (i.e., full employ¬
ment), it can be shown that the marginal revenue product of each factor

7
is equal to its marginal product times the product price. As summar¬
ized by Denison (1974, p. 51) in his growth accounting study:
If a small percentage increase in the number of units of
all of the factors would increase output of the sector
by x percent, then a percentage increase of the same
amount in the number of units of only one factor would
increase output by x times the share of that factor
in total earnings in the sector.
Richardson (1973), however, has opposed using the neoclassical
approach in regional growth analysis, noting that several of the
theoretical assumptions made in computing the elasticities of factor
inputs are unrealistic at the regional level. Perhaps the most
serious defect is the assumption of full employment. Departures from
full employment among regions are generally an issue of central concern
in regional analysis, but these departures are not consistent with
the neoclassical assumption that factor inputs be fully utilized.
This is particularly important in Puerto Rico where the unemployment
rate has never registered less than 10 percent. An additional problem
in the neoclassical models is the difficulty with which uncertainty
can be admitted, and the explicit consideration of uncertainty is a
central issue in Puerto Rico.
Finally, the neoclassical approach assumes a world of perfect
competition, along with its correspondingly perfect information flows,
marginal adjustment of production, and relatively easy entry to and
exit from production. These assumptions are far from realistic in
Puerto Rico, particularly in the island's irrigated agricultural
sector. To date, this sector has been operated as a government

8
monopoly which has been so unresponsive to prices that it continues
producing sugarcane, even though the income earned barely covers
50 percent of the production cost. The entry to production of non¬
sugar crops is proving to be extremely difficult due to innumerable
institutional and physical problems such as government policy, credit
availability, land tenure, lack of local experience in non-sugar
crops, etc.
Simulation Models
Simulation techniques may be utilized to incorporate a variety
of relationships within a single model. These relationships are
expressed as a system of equations (often nonlinear) obtained through
the application of other analytical techniques such as regression
analysis, etc. These relationships may be combined in the simulation
model to create a system of interacting relationships and feedbacks,
the response of which may be simulated over time.
The organization of information and relationships within the
simulation model may follow definite theoretical patterns, such as
the energy analysis framework developed by Odum (1971) based on
modeling patterns of energy flow. Others have used a less rigorously
organized approach in which the modeler devises causal relationships
not necessarily following a specific theoretical pattern, such as
the models of system dynamics (Forrester, 1968). This latter class
of simulation models also includes the combination of selected
parameters for the purpose of forecasting, such as the model of the
Susquehanna River Basin by Hamilton et al. (1969). Undoubtedly the

9
best-known utilization of simulation models has been the formulation
of various world models (Meadows et a!., 1974; Mesarovic and Peste!,
1974). Simulation studies have also been used frequently in eco¬
logical studies, as summarized by Patten (1971).
Perhaps one of the more severe problems with simulation tech¬
niques lies in the ease with which a relatively simple model can be
expanded into increasing size and complexity, exploiting the confusion
between complexity and accuracy. The outcome of even complex socio¬
economic models generally rests on only a few critical assumptions,
and by changing these basic assumptions the behavior of the model may
be completely altered. Thus, complex socioeconomic models have the
ability to obscure basic relationships with extraneous and essentially
nonfunctional detail.
Once the model is constructed and operational, if the output
does not appear to be "right," then its structure may be altered
until the "correct" results are produced. However, undue emphasis can
be placed on model manipulation without necessarily creating improved
understanding of the socioeconomic system being examined, as suggested
by Lee (1973, p. 168):
There is a popular illusion that confronting a computer
with one's ideas enforces rigor and discipline, thereby
encouraging the researcher to reject or clarify fuzzy
ideas. But in a more useful sense, the effect is the
opposite; it is all too easy to become inmersed in the
trivial details of working with a problem on the computer,
rather than to think it through rationally. The effort
of making the computer understand is then taken for intel¬
lectual activity and creative problem solving.

10
This criticism becomes increasingly valid as the complexity of the
model is increased. Nonetheless, the simulation methodology is
unique in its ability to incorporate within the framework of a single
model a variety of different relationships and techniques. A properly
constructed and applied simulation model is an excellent analytic
tool, perhaps unparalleled as a means to integrate complex systems.
Previous Resource Studies in Puerto Rico
This research examines Puerto Rico's post-war development
period, and particularly those patterns which have evolved in the 1970s.
Macroeconomic studies undertaken prior to the 1973 oil embargo tend
not to reflect the realization that development conditions are changing
in Puerto Rico. Thus, earlier studies reflect entirely different
conditions of economic performance and shed less light on the nature
of the difficulties the island faces in the 1970s. Historic patterns
of socioeconomic development have been examined in works such as
those of Lewis (1963), Ross (1966), and Curet-Cuevas (1976). Some of
the development patterns and problems which emerged in the 1970s were
documented and analyzed by the Committee to Study Puerto Rico's
Finances (1975) and the Comité Interagencial (1975).
No study has been undertaken which directly addresses the
problem of resource policy and its relationship to the overall long-
range development process. A major social benefit-cost study of a
proposed copper mining project was undertaken (Logic, 1974), but the
social benefit-cost framework utilized was limited in scope and did
not address overall development issues in depth. A major water supply

n
study was conducted by the U.S. Army Corps of Engineers (1977) con¬
currently with this research, but was focused primarily on defining
technical supply alternatives. The island's new agricultural plan
(Vicente-Chandler, 1978) addressed some facets of agricultural water
management, but this treatment was necessarily limited in scope.
The most comprehensive overall treatment of Puerto Rico's water
resource issues is contained in the 1973 and 1975 Water Resource
Assessments for Puerto Rico (Puerto Rico Department of Natural Re¬
sources, 1974; Morris et al., 1977). Many of the findings reported
in this research stemmed directly from background studies prepared
for the latter of these assessments.
A considerable record of hydrologic data exists for Puerto
Rico and is available through a combination of local and federal
agencies. The U.S. Geological Survey is the most active agency on
the island with respect to water resources data collection and analy¬
sis. The water resource characteristics of most portions of the
island as well as many problems of specific interest have been
studied and results published or made available in unpublished
form. Hydrologic conditions in south coast watersheds are described
in reports by Anderson (1977), Crooks et al. (1969), Díaz (1974),
Giusti (1968, 1971), Grossman (1969), Heisei and Gonzalez (1976),
McClymonds (1971), and McClymonds and Diaz (1972).
Geological Survey reports are augmented by the reports of
other government agencies and their consultants, plus the University
of Puerto Rico contribution which is promulgated primarily through the

12
Water Resources Research Institute in Mayaguez. The total number of
reports published in the past 20 years dealing with water supply in
Puerto Rico probably numbers over 100. Yet, despite the number of
publications related to water resource issues on the island, there
has been little focus on integrating the overall problem within the
framework of long-range development.
Study Methodology
Regional Development Model
This research begins with the construction of a regional
development model for Puerto Rico. This regional model has been
constructed in two basic sections focusing respectively on demographic
and economic parameters. Theoretical relationships for each parameter
are developed, quantified, and combined to create the composite model.
The simulation model is calibrated using data from the 1947-1977 period,
and is run until the year 2020.
In the demographic sector the population is divided into nine
age groups, with smaller age intervals being used for younger age
groups. Fertility and mortality rates are modeled as exogenous
variables, and net migration is modeled to be a function of the island
unemployment rate and the magnitude of income transfers.
The economic sector focuses on the role of capital as a
variable describing economic performance, recognizing that capital
is a quantifiable parameter which reflects a variety of other factors
such as entrepreneurship, level of economic organization, savings and

13
investment behavior, etc. Land, labor and resource availability are
examined as input variables describing economic performance in
Puerto Rico over the historic period.
Capital is divided into those stocks which are owned by
residents and by non-residents to examine the long-run effects of the
steadily increasing portion of productive capital which is externally
owned. Transfers from the federal government are shown to be an
increasingly important source of local income, but contribute neglig¬
ibly to the formation of local productive investment. The relationship
between capital and production and the level of employment in the
modern sector of the economy are both determined by the capital-labor
ratio, an exogenous variable. Employment in the traditional agricul¬
ture sector is assumed to decline steadily to a low but stable level.
The complete model, containing the demographic and economic
sections and their feedback via the net migration function, is simulated
using the DYNAMO II language (Pugh, 1973). Alternative values for the
foreign investment rate, the local investment rate, and the capital-
labor ratio are applied to generate four future scenarios. The results
of simulations to the year 2020 are examined to suggest those types
of policy which can generate more favorable patterns of regional
development.
Resource Management Model
Important resource management implications of changing regional
development policy are examined on the island's south coast. Water
demand conditions are described to ask what types of use patterns may

14
occur in the future. An income and cost model for sugarcane farms
is constructed to ask if a rational framework can be constructed for
evaluating irrigation demand in the sugar industry.
The hydrologic implications of increasing agricultural
consumptive use, increasing demand in the municipal and industrial
sectors, and different levels of artificial recharge are all examined
using an aggregate water and salt budget model for the south coastal
aquifers. This model is run over a 25-year period, with the objective
of describing the types of hydrologic changes which could accompany
significant increases in irrigation efficiency. Recommendations are
made for implementing institutional changes which can promote efficient
patterns of resource use, while avoiding deleterious effects to the
ground water system.
Report Organization
After the introductory comments in this chapter, the second
chapter describes the island of Puerto Rico and some of the problems
which have accompanied economic growth over the post-World War II
period. The south coast area and its hydrologic characteristics are
also described.
In the third chapter socioeconomic data from the 1947-1977
period are interpreted and the regional development model is
generated, showing the manner in which each model parameter is derived.
The results of calibration with historic data are summarized and
alternative future scenarios are described.

15
In Chapter IV, the water resource characteristics of the south
coast are examined, describing the level of water supply and demand
and the characteristics of current and potential future patterns of
water utilization. A simple water management model is constructed
to reflect the potential hydrologic effects of changed development
policies in the agricultural sector. The scenarios which are applied
to the water management model, as well as the results of simulating
each of these scenarios, are also described.
The management implications of these models are discussed in
Chapter V, showing the relationship between regional development
policy and water management in the agricultural sector. Existing
water management institutions are described, and recommendations are
made for changes in this institutional structure to accommodate a
changing regional development strategy.
Chapter VI briefly summarizes the conclusions and recom¬
mendations stemming from this research.

CHAPTER II
STUDY AREA DESCRIPTION
Location
The island of Puerto Rico is the easternmost of the Greater
Antilles (Fig. 1). Puerto Rico consists of one main island, two
smaller inhabited islands, and several offshore cays, all having a
total area of 3,435 square miles (Pied, 1969). The main island is
approximately 30 miles wide and 100 miles long. Being hilly or
mountainous throughout the interior, the majority of the population
and economic activity are supported on the narrow coastal alluvial
plains. The estimated 1977 population was 3.3 million. San Juan
is the capital city, and the San Juan metropolitan area has a popu¬
lation of approximately one million.
The south coast study area (Fig. 2) consists of 14 municipali¬
ties having a combined 1970 population of 448,000, of which 54 percent
were classified as urban. Ponce, the largest city in the study area
and the second largest city on the island, had a 1970 population of
133,000.
The study area contains the steep southern slopes of the
island's mountain range, a narrow band of foothills, and a relatively
oroad alluvial plain which attains a width of four miles at its
broadest point. Because it falls in a rain shadow the south coastal
plains are semi-arid, receiving an average of 35 inches of rain
annually, concentrated in a fall wet season.
16

17
Fig. 1. Location map.

__ JO 20 30m)( Eg
Fig. 1. Location of the south coast study area and the included municipalities.

19
Physical Setting
Geology
Puerto Rico was formed as a result of submarine volcanism
and uplifting which began approximately 120 million years ago in the
Cretaceous Period. Erosion and reef building during submergence
combined to form the coastal metamorphic and limestone deposits which
overlay the parent volcanic rock, which is exposed throughout the
interior (Beniroth, 1969). Limestone deposits exceeding 2,000 feet
in thickness occur near the coast and have developed karst landforms
including extensive sinkhole formation, haystack hills, and the absence
of surface drainage. Limestone formations outcrop primarily on the
western two-thirds of the island, and on the north coast these for¬
mations have been developed as an important aquifer.
The island's maximum elevation is 4,389 feet above sea level,
and the entire island interior is characteristically hilly or mountain¬
ous. Some 38 percent of the island's total land area has slopes
in excess of 45 degrees. Generalized topographic characteristics are
summarized in Fig. 3 showing the extent of hill and mountain terrain
and the narrowness of the alluvial plains.
Vegetation and Land Use
The island has six life zones, which have been mapped by
Ewel and Whitmore (1973) using the method of Holdridge (1967). The
diversity of life zones reflects primarily differences in elevation
and exposure, giving rise to differences in temperature and rainfall.
The south coastal plain is located in the sub-tropical dry forest life
zone.

ARECIBO
SAN JUAN
ELEVATIONS N FEET
nmm
8 POO AND OVER
t POO -3,000
hud
o
o
o
N
•o
o
o
p^rm-rj
800-1,000
1 1
0-800
10 20 SO 40 80
. i : ~ ii:.- í .i htcizezz]
KILOMETERS
10 10 30
TT—l izz—m
MILES
CITIES
OVER 800,000 INHABITANTS
(5) OVER lOOpOO INHABITANTS
(§) OVER 00,000 INHAB1TAHTS
• (VER 20,000 INHABITANTS
Fig. 3. Generalized topographic map of Puerto Rico.
Source: Puerto Rico Public Parks and Recreation Administration, 1970.

21
Due to intensive population pressures and an earlier dependence
on subsistence agriculture, which still exists in isolated loations
(Pool and Morris, 1976), the only areas of natural vegetation are
limited to the Luquillo National Forest and the Commonwealth forest
system, encompassing a total of 88,000 acres (4 percent of the island
area). However, considerable areas of marginal agricultural lands on
highland slopes have been abandoned and are reverting to secondary
forest.
Current land use in the south coast area is summarized in
Table 1. Agriculture accounts for the single largest category,
utilizing 51 percent of the land in the area; sugarcane is the
predominant crop. Of the 90,000 acres reportedly in sugarcane, at
least 50,000 acres receive irrigation on a regular basis.
Climate and Hydrology
Climate. Puerto Rico experiences an insular tropical trade-
wind climate. The average annual temperature in San Juan is 78° F,
and the record low is 61° F. Temperatures at higher elevations inland
are lower, and may fall below 50° F overnight in the winter. Super¬
imposed on the east-northeast trade winds is a land-sea breeze pattern
which results in easterly onshore winds during the daytime and
easterly offshore winds at night. There is a regular diurnal pattern
in wind speed on_the south coast which varies from 3.5 mph at midnight
to 12 mph at noon, with wind velocities in the late summer and fall
being somewhat less than other seasons.

Table 1. Land Use ori the South Coast of Puerto Rico for 1972 (Acres).
Municipal i t.y
Total
Land
Area
Agricultural Land Area
Sugar
Total Cane Grazing
Forest
Water
and
Wetland
Urban and
Rural
Residential
Commercial
Industrial
Extractive
Other9
Arroyo
10,U52
5,677
3,368
1,853
3,022
7
1,158
76
112
Coamo
SO,912
32,675
0
28,126
16,679
0
1,188
107
263
Guánica
25,478
10,684
4,033
6,246
12,126
981
1,107
357
223
Guayama
44,756
17,114
9,031
6,710
22,449
2,198
2,228
410
357
Guayanilla
29,190
12,157
5,535
4,373
13,631
1,304
1,429
369
300
Juana Diaz
40,082
22,211
10,173
9,110
13,772
704
1,784
295
1,316
Lajas
40,120
31,866
13,129
17,003
5,577
786
1,395
353
143
Patillas
30,927
10,864
2,760
6,601
18,367
494
1,020
67
115
Peñuelas
29,652
9,759
3,058
4,269
16,646
113
1,014
1,572
548
Ponce
76,593
33,377
10,992
8,668
31,642
1,240
6,995
1,526
1,813
Salinas
46,433
16,818
8,008
7,891
10,244
3,565
2,431
312
12,963
Santa Isabel
23,104
17,921
11,924
4,656
2,835
847
856
251
394
Vi 11 alba
24,419
12,896
2,057
8,734
10,232
230
916
55
90
Vauco
44,913
26,991
3,561
11,546
14,901
338
2,320
161
202
Region Total
516,631
261,010
87,529
125,786
192,313
12,807
25,841
5,911
18,839
includes: Non-productive, outdoor recreation, communication and transportation.
Source: Puerto Rico Department of Natural Resources, Environmental Inventory, 1972.

23
Precipitation and surface water. Average annual rainfall is
70 inches per year island-wide, with a range from 30 to 200 inches per
year between the driest and wettest stations, respectively (Fig. 4).
Inasmuch as this variation is due to orographic effects, the mean
long-term runoff from watersheds may be predicted from elevational
data alone (Black and Veatch Engineers, 1971). As a result of the
impinging trade winds the north coast is characteristically moist,
whereas the south coast falls in a rain shadow. Patterns of rainfall
and pan evaporation on the north and south coasts are compared in
Fig. 5.
Rainfall records for the longest continually operating
stations on the island are graphed in Fig. 6 using a differential
mass diagram. Periods of above average rainfall appear as upward
sloping line segments and drought periods appear as downward sloping
segments, with the slope between any two points directly related
to the severity of the.departure from average rainfall. Although
relatively long-term variation is absent in the San Juan data, cyclic
patterns become evident in the data from the south coast stations,
with the past decade being generally drier than the period of record
on the south coast. The Ensenada station (Guánica) is the driest
station on the island, receiving a mean annual precipitation of
29.5 inches.
On the south coast, a higher variation in rainfall occurs during
the drier first half of the calendar year than in the more moist second
half. In Fig. 7 the calendar year is divided into the first and second

6
£ lo 20 "30
Fig. 4. Average annual rainfall in Puerto Rico (inches per year).
Source: Black and Veatch Engineers, 1970.

PER MONTH
25
Fig. 5. Average rainfall and pan evaporation for the north and
south coastal climatic regions of Puerto Rico. Climatic
regions are defined by the U.S. Weather Service.
Source: National Climatic Center. 1973. Monthly averages
of temperature and precipitation for state climatic
divisions, 1941-70: Puerto Rico and Virgin Islands.
Asheville, North Carolina.

Cumulative Rainfall Departure from Mean of Record (inches)
25
Year
Fig. 6. Differential mass diagram of annual precipitation for those
stations in Puerto Rico having the longest continuous
rainfall records. Ensenada is the driest station on the
island. Average rainfall over the periods of record are: En¬
senada, 29.60 inches; Aguirre, 40.94 inches; San Juan (city),
60.17 inches. Data for Aguirre are incomplete for 1970 and
are not plotted.

Percentage of Time Indicated Precipitation
is Equaled or Exceeded
27
Precipitation as Percentage of Mean
Fig. 7 . Cumulative probability of rainfall in the first and second
halves of the calendar year as a function of the mean
rainfall for that same six-month period, south coast of
Puerto Rico (Villa!ba station).

28
half and the cumulative probability of rainfall is compared with
respect to the mean of record for each six-month period. The most
severe drought conditions on the south coast occur during the summer,
following low rainfall in the spring.
The island's highly dissected mountainous interior gives
rise to numerous small streams characterized by small tributary
watersheds, steep slopes, and short length prior to reaching the
ocean. There are 26 "major" stream basins on the island, but only
seven have watersheds greater than 100 square miles. The largest
watershed is the Rio Loiza which covers 310 square miles.
Streams on the south coast are small and none flow throughout
their reach over the entire year. The upper stream reaches generally
maintain a year-round streamflow, but in most seasons diversions for
irrigation plus percolation into the aquifer deplete this streamflow
as soon as it reaches the alluvium.
Water supply development. Unregulated stream diversions
represented the primary source of irrigation water on the south coast
until the latter portion of the 19th century, at which time centrifugal
pumps were installed on some farms. The American occupation of the
island brought with it an influx of investment capital. Mainland
corporations plus wealthier local families undertook large-scale
irrigation on sugar plantations and supported the implementation of
large-scale public irrigation works. The South Coast Irrigation
District was operational by the First World War, providing both irri¬
gation and hydropower supplies.

29
The history of reservoir construction on the island is sum¬
marized in Table 2. Of the 25 reservoirs constructed in Puerto Rico
to date, 68 percent have had power generation facilities, 48 percent
supply water for irrigation, and 40 percent include a domestic supply
component in their design. Two additional reservoirs are being
constructed in Ponce for combined flood control and water supply bene¬
fits of 37,000 acre feet/year, but will not enter service until the
mid-1980s. Only one south coast reservoir, Toa Vaca, has municipal
water supply as its primary function; all others have been developed
primarily for irrigation supply.
The South Coast Irrigation District consists of three inde¬
pendent reservoirs and canal systems, supplying an average of 70,000
acre feet/year to approximately 28,000 acres. The District has seen a
gradual deterioration in service over the decades due to the combina¬
tion of reservoir sedimentation, deterioration of canal sections,
possible land use changes, and possible changes in the water management
effectiveness of both the supplying agency as well as the users.
The Southwest Puerto Rico Project supplies an average of
35,000 acre feet/year of irrigation water to 22,000 acres in the Lajas
Valley. This system entered operation in 1954, and consists of five
interconnected reservoirs and stream diversions, two power-generating
stations, a concrete-lined irrigation canal, and a drainage system.
Ground water. Aquifer areas in Puerto Rico are outlined in
Fig. 8. The development of limestone formations predominates on the
north coast west of San Juan, whereas ground water development on the

Table 2. Reservoirs in Puerto Rico
Reservoir
Name
River
Impounded
Construction
Year
Watershed
Area
(Sq. Miles)
Used
Original
Storage
(Acre-Feet)
Current
Storaye of
Belief 1c ial
Use
(Acre-Feet)
1
Comerlo #1
La Plata
1907
136.0
P
0
2
Comerlo )2
La Plata
1913
135.0
P
4,918
6006
3
Carite
Guamaru
1913
7.9
P/l/W
11,310
9,540d
Guayabal
Jacaguas
1913
43.0
I/W
9,800
7,900b
5
Coamo
Coamo
1914
58.0
1
2,827
0
6
Pati1 las
Pal)lias
1914
25.2
I
15,000
14,424b
1
CiuJ j J ttlCü
Guaja taca
1929
24.6
P/I/W
32,600
ii
Guineo
Arecibo
1931
1.6
P/1
1 ,860
1,810d
9
Matrullas
Arecibo
1934
4.4
P/1
3,590
2,945d
lu
Dos Bocas
Arecibo
1942
1/0.0
P
32,000
11
Garras
Arecibo
1943
6.2
iv w
4,700
12
Cidra
Bayamón
1946
8.6
w
5,300
4,852b
13
Las Curias
Puerto lluevo
1946
1.1
w
1,120
14
Caonillas
Arecibo
1948
50.5
p
49,000
43,5496
15
Pel lejas
Arecibo
1950
8.5
p
152
lu
Adjuntas
Arecibo
1950
14.7
p
645
17
Viví
Arecibo
1950
6.5
p
277
id
Loco
toco
1951
8.4
1
1 ,950
19
l.uchetti
Yauco
1952
17.3
P/l/W
16,500
12,0l)0c
20
Loira
1 oirá
1954
206.0
P/W
20,000
15,629b
Cl
Prieto
Añasco
1955
9.6
p/1
700
22
Guayo
Añasco
1956
9.6
171
17,400
23
íahuecas
Añasco
1956
17.4
IV1
1,800
24
Toa Vaca
Toa Vaca
1972
22.0
1/U
50,890
25
La Plata
La Plata
1976
173.0
w
53,140
d(Soil Conservation Service, 1973).
^(Puerto Rico Water Resource Authority, 1973).
•-Personal Communication, Eng. Francisco Servera, Cliief Irrigation Engineer, Water Resource
Authority, San Juan, 26 September 1977.
dp=power; I-irrigation; W^water supply.
Soutce: Puerto Rico Department of Natural Resources (unpublished data).

San Juan
Santa
Isabol
AQUIFER AREAS IN PUERTO RICO
| ] FRESH WATER YZZÁ BHACKISI1 WATER
Fig. 8. Aquifer areas in Puerto Rico.

south coast has occurred in the alluvial water table aquifer. Both
formations are prolific aquifers, and individual wells with yields
of 2,000 gpm or more may be developed. Throughout the island interior,
water-yielding zones of fracture in volcanic formations have been
developed for ground water supply, but these wells are generally for
domestic use and capacities are characteristically limited to 5-20
gallons per minute.
The south coastal alluvium lying east of Ponce is the most
copious aquifer in Puerto Rico, sustaining an annual withdrawal
of approximately 200,000 acre feet per year. This alluvium consists
of a loose agglomeration of interbedded and interfingering sedimentary
materials, ranging from silts to cobbles. Alluvial formations are
continuous from Ponce eastward to Guayama, but to the west of Ponce
are confined to individual river valleys. The alluvium has a maximum
depth of approximately 250 feet, and is generally underlain by limestone
formations containing ground water of high mineral content. These
limestone formations outcrop as foothills along the entire south coast,
and westward from Pence they extend to the ocean and form hills which
separate the alluvial valleys. The south coast soils are derived from
a mixture of volcanic and limestone parent materials and are generally
neutral to basic in pH.
Limestone formations underlying the south coast alluvium have
not been developed for water supply on a significant scale. Shallow
penetration of this aquifer in the Yauco Valley has yielded water of
suitable quality (personal communication, Lee Eaves, Manager, Carib¬
bean Well and Pump Service, Ponce, Puerto Rico, 1977) and limestone

33
formations have been tapped for water supply in the upper reaches of
the alluvium inland from Ponce (McClymonds, 1971). However, the
water from these formations is generally of inferior quality and is
infrequently utilized.
Limited areas of saline intrusion occur along the coast, but
in most locations it is not yet a serious problem. The most extensive
area of intrusion has occurred beneath the City of San Juan, and
intrusion of salts into wells in several other locations has occurred
when depression cones intercepted saline wedges lying in the lower
reaches of rivers. There is a system of wells on the south coast for
monitoring water level and intrusion, but similar information for the
north coast is lacking (Diaz, 1974).
Socioeconomic Setting
History
Puerto Rico was discovered by Columbus on his second voyage
and was settled by Ponce de León during the first decade of the
sixteenth century. Under Spanish rule San Juan and the island of
Puerto Rico played a military and economic role secondary to both
Santo Domingo and Havana, more important Spanish cities in the
Caribbean. Nevertheless, considerable expense was undertaken by
Spain to fortify the entrance to San Juan Harbor in order to provide
refuge for Spanish treasure ships and to maintain control of the
strategic port.
Under Spanish rule Puerto Rico's political and economic
development lagged. For example, in 1898, the salary of the Spanish

34
Governor was greater than island-wide expenditures for education on
the island's 950,000 inhabitants (Lewis, 1963).. In the late nineteenth
century, efforts to break free of Spanish domination appeared to be
bearing fruit. However, by 1898 the island was still not politically
autonomous and the Governor was still appointed by the Spanish Crown.
When Cuba revolted against Spain precipitating the Spanish-American
War, Puerto Rico did not follow suit.
In 1898 Puerto Rico became a territory of the United States
as part of the spoils of the war with Spain. Following annexation
the Governor was appointed by the U.S. President, and it was not until
1947 that the Governor was elected locally.
Heavy investment in the sugar industry by mainland corpora¬
tions rapidly followed annexation, resulting in dramatic changes on
the island. A diversified but undercapitalized agricultural system
was bought out by monied American interests and converted to the
lucrative sugar export business (Fig. 9). Due to the abundance
of labor, unemployment and underemployment was the rule and wages were
maintained at poverty levels. Unlike other countries in Latin America
where additional lands were available for the development of sub¬
sistence agriculture further inland, on insular and heavily populated
Puerto Rico this alternative was highly restricted. The worker was
effectively tied to the land holdings of the sugar and coffee landlords
who needed labor only seasonally (Ross, 1966). As a result of competi¬
tion for limited land resources, smaller and less competitive units
were gradually absorbed by more efficient and better capitalized farms

Raw Sugar Production
(million tons per year)
35
Fig.
i.O
0.51-
I
¡
L
o
Cl
=
<
•* 1
0 I.—
1820
,.sv \ . A>,
.v**.*>v
!840
;860
:S30
1900
1920
¡940 I960 ¡930
Year
9. Annual production of raw sugar in Puerto Rico.
Source: Puerto Rico Dept, of Agriculture, San Juan.

36
(Mintz, 1972a), similar to the land tenure trend documented in other
land-limited agrarian economies (Sansom, 1970).
The 1920s ana 1930s had seen a steady decline in the plight
of the Puerto Rican worker. The hurricanes of 1928 and 1932 virtually
destroyed coffee plantations and the tobacco crops. As an indicator
of the degraded economic conditions, Ross (1966) noted that in the
early 1930s not more than 2,000 families on the island had sufficient
income to pay taxes, yet 39,000 were employed as domestic servants
(7.5 percent of the labor force). Home needlework was estimated to
employ over 30,000, or approximately 30 percent of those engaged in
the "manufacturing" trades. In agriculture the 500-acre rule^ was not
enforced, and an estimated 20 percent of all agricultural land in
Puerto Rico was held in violation of it, primarily by the sugar com¬
panies.
The 1940s were a period of profound economic as well as
political change on the island. Although the results of these changes
were not visible during that decade, the fundamental political and
economic directions which evolved during that period have remained
largely unchanged to the present. In the 1940s work was begun in
earnest to change the political status of Puerto Rico, beginning with
the election of the Governor locally and eventually resulting in the
formation of the Commonwealth status (Estado Libre Asociado) in 1952.
The mid-1940s, under the term of appointed Governor Maxwell Tugwell,
"*U.S. Congressional Joint Resolution 20 of 1900 established
federal policy that no individual or corporation in Puerto Rico should
own over 500 acres. (Rivera-Ríos, 1978)

37
also saw the organization of the executive branch of the Puerto Rican
Government as it is known today. The year 1947 also marked the
beginning of reliable economic data, which was compiled by the then
new Planning Board; and in this same period the industrial development
agency, Fomento, was also created.
With limited agricultural land and high population density it
was realized that an economic system based on agriculture alone could
not be responsible for generating the income necessary to bring the
island's population out of poverty. The late 1940s saw the beginning
to the end of this poverty as a result of three factors: (1) the
attraction of mainland manufacturing investment through an industrial
incentive program known as "Operation Bootstrap," (2) the massive
migration of Puerto Ricans to the New York area which stabilized the
size of the island's labor force, and (3) the growth of transfer pay¬
ments from the federal government. Taken together, these three
factors created the fundamental changes in the Puerto Rican system
which now provides adequate food, shelter and medical services for the
entire population, plus a modest measure of luxury for many.
Socioeconomic Objectives
The initial development process reflected movement toward
the obvious and primary goal of escaping from pervasive poverty.
However, as progress toward the abolishment of extreme poverty began
to be realized, a more definitive statement of social goals was
developed, as quoted below from the "Message of the State of

38
the Country," delivered by Governor Muñoz Marín to the Legislature
in 1964:1
I point out six things that I judge fundamental to the pur¬
pose of our people, and on which we will invest a good
portion of the continued increases of our economic assets:
Education for all in quantity, quality and depth,
Maximum health with substantial equality for all
with respect to quality of service,
Approximate balance of quality of life between rural
and urban population, development of cities in an
orderly form,
Home ownership for all families,
That a growing portion of the growing Puerto Rican
economy, and consequently of the decisions of its
private sector, be in the hands of the sons and
daughters of this country as has been the case in
all the presently developed countries of the world,
Abolition of extreme poverty.
These enumerated goals are the desired final products of the
island's socioeconomic development process. The pursuit of increasing
income through industrialization and economic growth has been pursued
with intensity, yet has created patterns of growth which are not
entirely compatible with achievement of the stated goals. That dilemma
is examined in this study.
Socioeconomic Conditions
Economic characteristics. Although the island is poorer than
the lowest income state, in comparison to neighboring countries in
the Caribbean and Latin America, it has gained considerable wealth.
^Diario de Sesiones, Cuarta Sesión Conjunta, 11 February 1964,
p. 5. Author's translation.

39
During the period-foil owing World War II the island enjoyed a special
set of circumstances which combined to produce a period of rapid
economic growth, industrialization and social change. The input of
industrial capital from the mainland seeking to utilize the island's
cheap labor supply, its access to U.S. markets, and exemption from
both local and federal corporate income taxes, created a period of
rapid industrial expansion starting in the late 1940s and continuing
into the early 1970s.
The initial success of the island's development program was
based less on clever design or able implementation than on the island's
relationship with the United States. Mot only has the mainland infused
capital, entrepreneurship and transfer payments into the island on a
large scale, but it also absorbed the massive exodus of Puerto Ricans
from the island during the 1950s.
However, the conditions which combined to create the oppor¬
tunity for rapid economic growth and stable levels of unemployment
have proven to be transient. The post-war growth began to falter and
in the early 1970s conditions began to depart recognizably from the
patterns of previous decades. Rising wage levels on the island
helped stem the migration of labor to the mainland while simultaneously
making the island less desirable for labor-intensive industries. Mew
industries locating on the island became steadily more capital-
intensive, obtaining the benefits of tax exemption but oriented less
toward the employment of the increasingly costly labor force. Infra¬
structure requirements and the discharge of pollutants have increased

40
as a function of capital intensity thereby increasing both monetary
and non-monetary costs of providing each additional job.
Despite intensive industrialization, the island's unemployment
problem has not been resolved. The unemployment rate has never
dropped below 10 percent over the entire development period, and in
1977 it averaged 20 percent, the highest value recorded over the
entire post-war period. The island's increasing income has not been
used to generate a stream of savings and productive local investment,
but rather has been used to support an increasing burden of debt.
The Commonwealth Government has relied increasingly on
federal aid programs as a source of income and employment. By 1977
the value of unilateral transfer payments from the U.S. equaled
26 percent of the island GNP, and transfers to individuals accounted
for 28 percent of personal income (Puerto Rico Planning Board, 1978a,
1978c)J The implementation of the federal food stamp program in
Puerto Rico has been the greatest single contributor to increased
transfer payments during the 1970s, and over 60 percent of the island
population now participate in this program.
The income level on the south coast is lower than the island
average, and the trend has been for this gap to increase slowly.
A variety of socioeconomic parameters for south coast municipalities
are summarized in Table 3.
1 Socioeconomic accounts data, hereinafter not accompanied by
a citation, shall be understood to be contained in the economic
accounts of Puerto Rico (Puerto Rico Planning Board, 1978a, 1978c) or
of the United States (Economic Report of the President, 1978).

Table 3. Selected Socioeconomic Parameters for South Coast Municipalities, Puerto Rico.
Municipal it.y
Family Income
Under $2,000
(Percentage)3
Employment
Rate in
Growing
Industries^
Dwel1ings
Without
Inside
Toi1ets
(Percentage)0-
Median
Years
of .
School0
Population
Per
Square
Mi lee
Net
Migration'
Urban
Population
(Percentage^
Arroyo
46.9
151.0
63.1
5.9
368.9
23.7
41
Co amo
51.4
143.1
55.1
5.5
343.7
+
18.7
46
Guánica
40.8
205.4
53.9
6.2
402.4
+
9.3
60
Guayama
34.7
185.3
50.4
6.6
557.7
-
15.9
63
Guayanil la
39.2
180.5
65.8
5.8
432.0
+
.7
29
Juana Diaz
42.2
160.0
60.8
5.7
594.6
-
9.9
36
Lajas
41 .0
199.0
60.2
5.9
275.8
-
9.8
21
Pati1 las
53.3
134.0
68.8
4.0
371 .4
-
20.7
14
Penuelas
51.5
137.0
68.3
4.9
363.2
-
17.5
20
Ponce
33.2
219.7
33.5
7.7
1 ,370.5
-
15.1
83
Salinas
45.4
166.0
64.2
5.6
316.5
-
26.9
46
Santa Isabel
38.9
158.5
63.6
5.5
472.2
-
15.5
28
Villa!ba
55.8
120.1
75.6
4.3
506.3
-
20.0
22
Yauco
45.2
147.5
63.5
5.6
516.2
“
21.4
37
Percentage of families with incomes less than $2,000 per year, 1969.
bRate of employment per 1,000 inhabitants in growing industries, 1970.
Percentage of dwellings without inside toilets, 1970.
^Median number of years of school completed for persons 25 years or older, 1970.
Population per square kilometer, 1970.
Percentage of net migration from 1960-1970, based on the difference in actual population change com¬
pared to the change predicted by the rate of natality and mortality in each municipality.
9Percentage of population classified as "urban" by the Planning Board, 1970.
Source: Puerto Rico Planning Board, 1976.

42
Demographic characteristics. Puerto Rico experienced a
classic demographic transition in terms of changing fertility and
mortality rates. However, migration to the mainland converted the
demographic transition period from one of rapid population growth
to one of population stagnation. Conversely, the post-transition
period which the island has already entered has been characterized
by high rates of population growth. This demographic anomaly,
created by migration, is of primary importance in explaining the
dramatic economic changes which have occurred in Puerto Rico over
the post-war period.
The migration from the island, primarily to the New York area,
was so large that it actually resulted in two consecutive years of
decreasing population on the island in 1953 and 1954, despite high
fertility. More importantly, the major portion of these emigrants
were young and just entering the labor force (Friedlander, 1965). As
a result of migration the population of Puerto Ricans living on the
mainland U.S. increased from an estimated 100,000 in 1947 to
1.5 million in 1974, representing the exportation of 400,000 or more
labor-force members over that 27-year period.1 Over that same period
the island economy never saw an unemployment rate under 10 percent
and generated a net increase of only 203,000 jobs, despite strong
industrial promotion activities.
As economic conditions on the island began to show improve¬
ment in the 1960s, the pace of net emigration slowed. This flow has
^Data provided by the Puerto Rico Planning Board, Division of
Demographic Statistics, 1976.

43
now reversed, and during the 1970s Puerto Rico has experienced net
immigration, despite a local unemployment in excess of 15 percent.
It is possible that a significant portion of this immigration which
occurred, despite poor employment opportunities, can be attributed
to the growth in welfare benefits on the island.
Institutional Framework
Corrmonweal th Government institutions characteristically have
a broad and strong legal mandate for resource planning and management
action, and public policy is the most important single factor
influencing patterns of resource utilization on the island. The
government supplies all municipal water and most irrigation water
island-wide. Through the Puerto Rico Sugar Corporation the government
operates approximately 90 percent of the island's irrigated farm land,
and the Puerto Rico Land Authority is the largest owner of irrigated
lands. Government agencies supply a significant portion of the
industrial water used on the island and regulate the withdrawals by
those other industries which are self-supplied. The pattern and
location of industrial development, and its corresponding water demand,
is determined through the zoning powers of the Puerto Rico Planning
Board.
Despite these large resource management responsibilities, a
coherent strategy for water resource development has not emerged,
aside from the protection of existing beneficial uses which is required
by law. During the past decade the island's resource management
problems and conflicts have grown in severity while satisfactory

44
solutions have become increasingly difficult to define and implement.
Resource development decisions have been made based on poor analysis,
or even by default (Margalin and Campen, 1970).
Two pieces of legislation are of particular importance in
establishing the legal framework for environmental resource management
on the island. The Public Policy Environmental Act^ promulgated public
environmental policy and established the Environmental Quality Board
(EQB) as a watchdog agency. Section 4 of this law provides that all
agencies of the government shall use an interdisci pi inary system of
study in analyzing environmental problems, guaranteeing the integrated
use of natural and social sciences.
The Law for Conservation, Development and Use of the Water
Resources of Puerto Rico2 establishes that all fresh and coastal waters
within the jurisdiction of Puerto Rico are the wealth and property of
the People, including all water both above and below ground. All
waters fall under the administrative jurisdiction of the Conmonwealth
Government as represented by the Secretary of Natural Resources, who
is provided broad planning and management powers and responsibilities.
The water law provides that planning and management actions shall be
based on socioeconomic benefit-cost analysis, with the objective of
enhancing the well-being, economic development and public safety of
the island, and that all analysis shall be based on an interpretation
^Law No. 9, July 1, 1970, Legislative Assembly of the Common¬
wealth of Puerto Rico.
2Law No.136, June 3, 1976, Legislative Assembly of the Common¬
wealth of Puerto Rico.

45
of the role of the proposed management alternatives with respect to
the overall hydrologic cycle and its effects on natural systems.
Water resource planning and management responsibilities are
fragmented among numerous Commonwealth agencies, with the result that
no single agency may be said to play a lead role. The principal
agencies involved and their primary areas of responsibility are sum¬
marized below.
The Puerto Rico Planning Board is the ultimate planning
authority in the Commonwealth Government and establishes overall
planning guidelines which are to be followed by the other agencies.
The primary resource management functions of the Planning Board, an
Executive Branch agency, include the continual updating end implemen¬
tation of the master land-use plan, which includes decision making
over the future location of industrial sites and other intensive
resource users. In addition, the Board is responsible for the co¬
ordination of the plans of other government agencies.
The Puerto Rico Aqueduct and Sewer Authority (PRASA), a public
corporation, is responsible for the planning, construction and main¬
tenance of all municipal water supply and wastewater collection and
treatment facilities on the island. Of the total population of
3.1 million in 1975, an estimated 2.6 million persons were served by
the Authority (house connections plus public fountains). Of the total
1975 withdrawals of 306 mgd, metered deliveries were 199 mgd, or an
island-wide average of 77 gallons per capita per day. Approximately
30 percent of all withdrawals do not appear as metered deliveries, but

46
are lost due to in-plant uses by PRASA plus pipe exfiltration, fire¬
fighting, and clandestine use. The Authority is responsible for the
operation and maintenance of several water supply reservoirs, includ¬
ing the Toa Vaca reservoir on the south coast.
The Environmental Quality Board (EQB) is the local counterpart
of the Environmental Protection Agency and is responsible for the
promulgation and enforcement of environmental quality standards. The
EQB has established water quality standards for both fresh and ocean
waters, and has programs to improve environmental quality through the
reduction of point sources of water, air and noise pollution. It is
responsible for the conduct of the 208 water quality programs on the
island and wastewater facility planning.
The Puerto Rico Water Resource Authority (PRWRA) is a public
corporation which maintains and operates the electric power generation
facilities island-wide. In addition, the Authority owns and operates
the three government irrigation systems on the island, two of which
are in the south coast area. An average of 100,000 acre feet/year is
supplied to approximately 50,000 acres lying within the South Coast
and Lajas Valley Irrigation Districts. The third district is on the
moist north coast, where only 600 acres are currently under irrigation.
The Authority also operates reservoirs having hydropower facilities,
but less than one percent of the island's total electric supply is
derived from hydropower.
The Department of Natural Resources is the newest of the
Commonwealth agencies, having been organized in 1973. Under the

47
provisions of the 1976 water law, the Department is required to inven
tory all water uses and wells island-wide, establish a system of
water use permits, regulate ground water drilling and withdrawals,
and prepare a water plan which will incorporate socioeconomic cost
benefit analysis. Of all the government entities in Puerto Rico,
the Department has the broadest water resource responsibilites, but
to date the role played by this Department has been minor. The
failure of the Department to fulfill its obligatory functions, as
provided in the water law, has been the subject of recent litigation.
Additional Commonwealth and Federal agencies are involved in
water resource planning and management on the island, with the number
of agencies having significant roles totaling at least 16.
‘Misión Industrial de Puerto Rico vs. Fred Soltero Harrington,
Secretary of Natural Resources. Superior Court of Puerto Rico, 23-
23 August 1978, San Juan. As of this writing this case had not yet
been decided.

CHAPTER III
REGIONAL MODEL
The regional model for the island of Puerto Rico is formulated
in this chapter. It has been constructed as two sub-models of
population and economic performance which are linked through two
relationships: (1) the population and its age distribution determines
the size of the labor force, and (2) economic performance and labor
force variables together determine unemployment, which influences
migration. This model is summarized in Fig. 10, using the symbols
defined in Fig. 11.
In this chapter the model structure is described, historic
relationships are synthesized, and the model is calibrated using data
for the 1947-1977 period. The assumptions for projecting modeled
relationships to the year 2020 are also outlined.
The primary purpose of this model is to examine alternative
levels of future economic performance given different assumptions
concerning the rate and source of future capital formation and the
capital intensity of production. Although the population model
remains unchanged for all scenarios, different patterns of population
growth are produced in each scenario due to the effect of different
unemployment levels on the rate and direction of migration.
48

Fig. 10. Regional model for Puerto Rico in the DYNAMO language.
See Fig. 11 for explanation of symbols.
Legend:
iPj- = Population of age group "i"
dt = Crude death rate
b-(- = Crude birth rate
Ut = Unemployment rate in Puerto Rico (percentage)
P| = Population of working age in Puerto Rico
P!¿ = Labor force in Puerto Rico
qt = Labor force participation rate
Lt = Capital-labor ratio for Puerto Rico
Y|. = Gross National Product of Puerto Rico (1954 dollars)
Ht = Remission of business profits abroad (1954 dollars)
aKt = Locally owned capital stocks (1954 dollars)
= Externally owned capital stocks (1954 dollars)
cKt = Stock of consumer assets
= Depreciation rate of capital stocks
Ac = Depreciation rate for consumer assets
Et = Total employment in Puerto Rico
E^. = Employment in the traditional agricultural sector
F{. = Rate of external capital investment (1954 dollars)
St = Rate of savings and investment in the local economy
Gt = Transfer payments per capita (1954 dollars)

O-A
50

51
Source or sink of conserved material
State variable defining the storage level of a
conserved material
Equation controlling the flow rate of a
conserved material
Exogenously specified variable
Auxiliary equation which is computed but has
no material flow associated with it
Causal linkage without material flow
Flow of conserved material
Fig. 11. Description of symbols used in the regional model in
Fig. 10.

52
Population Sub-Model
General Equations
Pressat (1972) has described the growth of a closed population
by
Pt+At = Pt + Bt,t+At ' Dt,t+At
(3-1)
By adding a term for net immigration the complete population equation
may be obtained:
) — p + r n 4* M
t+At ‘ t t,t+At " t,t+At t,t+At
(3-2)
where
P = population
B = births over interval t,t+At
D = deaths over interval t,t+At
M = net immigration over interval t,t+At
t = time, and
At = time step
The rate of births, deaths and immigration may be defined as
Bf
bt = P^ (3-3)
dt - Pt (3-4)
(3-5)

53
where
b = crude birth rate
d = crude death rate
m = net immigration rate
The population equation may then be written in its simulation form:
Pt+At = Pt + At * Pt (bt " dt + mt^
= Pt [1 + At (bt - dt + mt)] (3-6)
The age structure of the population may be generated by using a
separate equation for each age group, adding rate equations to express
the transfer of population sequentially from younger to older age
groups as a result of aging.
The population of Puerto Rico has been divided into nine age
groups, with the population from 0-19 years being broken into 5-year
classes and the remaining population being broken into 10-year
intervals. Smaller age classes have been applied to the younger age
groups because the model is more sensitive to their behavior. Mor¬
tality occurs in all age groups, but is so small that it may be
neglected for all ages except infants and the population over 40 years.
Similarly, births are neglected in all but the 15-39 year groups.
The crude rate of fertility, mortality, and migration
(bt, dt, mt) are converted to the age specific rate for each age
group (-jb-j., ^d^, ^m^.) by multiplying by the age specific coefficients
shown in Table 4. Thus

54
Table 4. Age Specific Coefficients for Population Equations.
Age Group
Age Specific Coefficients
Aging
Coefficients
i
Years
Births
icb
Deaths
i^d
Migration
i ^
ix
i*
1
0-4
0
0.2
0.1
0
0.2
2
5-9
0
0
0.1
0.2
0.2
0
O
10-14
0
0
0
0.2
0.2
4
15-20
1.8
0
0.25, 0.10a
0.2
0.2
5
20-29
4.0
0
0.45, 0.30a
0.2
0.0
6
30-39
1.7
0
0.1
0.1
0.1
7
/
40-49
0
0.4
0
0.1
0.1
3
50-59
0
1.5
0
0.1
0.1
9
60+
0
8.5
0, 0.25a
0.1
0
aMigration coefficients were shifted from the first to the
second value in 1967.

55
ibt=
icb * bt
idt =
icd * dt
imt =
icm ’ mt
where
icb
age specific coefficient for birth rate
icd =
age specific coefficient for death rate, and
icm =
age specific coefficient for net migration rate
The population of all nine age groups may be described using two basic
equations. The equation for the youngest age group is
lpt+l
= lPt + At(i icb ' bt • ipt " lcd * dt • lpt
+ lcm * mt * Pt - l^*Pt) (3"7>
The population of all other age groups is given by
iPt+l
' ,Pt + At(iX • j.jP,. + lC|n • mt • ,Pt
- \ ' iPt ' 1* ' iPt> (3'8)
In these equations the coefficients and .¡y show respectively the
gain and loss of population by each age group as a result of aging.
Fertility
One of the most marked social effects of industrialization and
increasing incomes is that of initiating the demographic transition,

56
characterized by a rapid decrease in mortality and the retarded
decrease in fertility, as summarized in Table 5. These changes are
attributable to the changes in both the level and sources of income
which occur as a result of industrialization and urbanization.
Table 5. Characteristics of the Demographic Transition.
State
of Industrialization
Fertility
Mortality
Population
Growth Rate
Nil
High
High
Low
Developing
High
Decreasing
High
Advanced
Low
Low
Low
Source: Heer, 1972.
Decreases in fertility and mortality in the pattern of the
demographic transition have accompanied industrialization in Puerto
Rico, as shown in Fig. 12. Weller (1968) studied changing fertility
patterns in Puerto Rico and concluded that the changing employment
role of the woman outside of the house was a significant factor in
reducing fertility. Friedlander (1965) correlated the educational level
of Puerto Rican women to number of children (Table 6). Myers and
Morris (1966) analyzed fertility reduction in Puerto Rico as a
function of the rural-to-urban migration and determined that the
fertility of mobile women was significantly lower than for those who
had not migrated to the San Juan metropolitan area.

Rates per 1,000 Inhabitants Percentage Millions
57
Fig. 12. Historic trends in selected demographic parameters for Puerto
Rico, (a) Estimated annual population at mid-year; (b) An¬
nual percentage rate of population increase or decrease;
(c) Annual rates/1,000 inhabitants for crude fertility,
crude mortality, and net migration.
Source: Puerto Rico Health Department (n.d.).

58
Table 6. Educational Level Achieved vs. Com¬
pleted Fertility for Puerto Rican
Women.
Mother's Education
Number of Children
None
6.1
1-2 years
5.0
3-5 years
4.0
6-8 years
3.4
High school
2.4
Source: Friedlander, 1965.
These and numerous other studies have emphasized that the
framework within which fertility decisions are made is complex. The
child is a non-market good, making it often difficult to analyze
fertility on the basis of economic parameters alone. The cost of
children is a function of the opportunities which the parents must
forego as a result of child-bearing. Family size may change in
response to the changing tastes of the parents for leisure time,
travel, economic goods, etc. The relative cost of children also in¬
creases as the family moves from a traditional agrarian setting to
the city. Factors which tend to reduce fertility in the urban-
industrial i zed setting include: (1) increased cost of living space,
(2) the higher cost of goods in the market system, (3) lack of un¬
skilled jobs for child employment such as are available in the
traditional agrarian setting, (4) compulsory school attendance,

59
reducing again the child's working ability, (5) availability of
improved pension systems in old age, and (6) changing values, tech¬
niques and information on contraception and abortion (Easterlin,
1971; Schultz, 1973; Willis, 1973).
Despite the apparent complexity of fertility decisions, income
and fertility decline are strongly correlated over the post-war
development period in Puerto Rico (Fig. 13). This suggests that in¬
come changes may be used as a surrogate for the variety of socioeconomic
changes which characteristically occur during development and which
create the demographic transition. Inasmuch as changing income
levels are perhaps the best overall measure of the development process
(Meier, 1970), this good correlation between increasing income and
decreasing fertility rates during the initial development period is
expected.
However, as higher income levels are achieved the relation¬
ship between fertility and income becomes increasingly ambiguous,
and nonmonetary factors play a larger role in the determination of
demographic characteristics. Freedman and Coombs (1966) and Willis
(1973) have noted that there is only weak correlation between income
and family size in the United States. Sweezy (1971) has noted that
fertility rates changed imperceptibly in the United States between
the four years preceding the Depression (1925-1929) and the subsequent
four most severe years of the Depression, indicating the lack of
short-term fertility response to income changes. Long-run income and
fertility trends in the United States are summarized in Fig. 14,
showing the uncertainty of this relationship in an industrialized

Crude Birth Rate
(Annual birlhs/1,000 population)
60
>~o
*-> O
— o
i-
-3
e
>
Personal Consumption Expenditures Per Capita (1954 dollars)
Fig. 13. Fertility (b) as a function of personal consumption expendi¬
tures (z, used as a proxy for income) in Puerto Rico.
Data sources: Puerto Rico Health Department (n.d.) and
Puerto Rico Planning Board (1978c).
Fig. 14. Comparison of the crude birth rate and gross national
product per capita (in 1929 dollars) for the United
States, showing the uncertain relationship between
income and fertility.
GNP per Capita

61
economy. Once the demographic transition is essentially completed,
social factors only poorly related to economic performance appear to
dominate fertility decisions.
A sigmoid curve is hypothesized to be most adequate for
describing the overall long-run fertility reduction process (Coale,
1974), and has been fitted to Puerto Rican fertility data in Fig. 15.
The crude birth rate in Puerto Rico is modeled to stabilize at 15
births per 1,000 of total population, which is approximately the
birth rate required to maintain a stable population. The fitted
equation is
27
1 + e0.123(T- 1965)
+ 15
(3-9)
where
T = year
A sigmoid curve was used by Lotka (1924) to predict the long-term
population growth of the United States. However, Lotka's predicted
population levels were in error due to the unforseeable post-war
baby boom.
Mortality
The crude mortality rate in Puerto Rico declined rapidly
during the late 1940s and early 1950s and soon stabilized at the
level at which it remains today. A rapid decrease in mortality is
characteristically obtained in the early stages of a development

Crude Birth Rate
(Live births/1,000 of total population)
Fig. 15. Fertility in Puerto Rico fitted to a logistic curve, assuming that the lower limit of future
fertility will be 15/1,000.
Data Source: Puerto Rico Health Department (n.d.).

63
process due to the effectiveness of public health services. However,
once these basic services are provided, further increases in income
have little effect on mortality. Although the age-specific mortality
may remain constant, the crude death rate will slowly increase as the
population distribution ages. The crude mortality rate in Puerto
Rico (Fig. 16) has been modeled to decline in a linear fashion and
then to stabilize according to the following relationship:
d1947-1953 = 1402-7 ' (5/?)T (3-10)
dl954-2020 = 7-° (3-11)
The age specific mortality rate has been defined as a fixed multiple
of the crude mortality rate. Because changes in the mortality rate
will have little effect on the model, the use of a more elaborate
mortality function is unwarranted.
Migration
Neoclassical theory predicts the migration of population from
areas of low income and high unemployment to areas of higher income
and lower unemployment, a trend which would tend to generate equilib¬
rium levels of unemployment and income nationwide. However, the real
world represents a marked departure from this model and strong
differences in income and unemployment levels persist, including
enclaves of traditionally low income such as Appalachia. Richardson
(1973) reviewed inter-regional migration models, pointing out that
differences in levels of unemployment appeared to be the most

(deaths / I ho us and )
Fig. 16.
Crude mortality rate in Puerto Rico.

65
significant single variable explaining migration, as predicted by
neoclassical theory. However, the characteristically poor statisti¬
cal fit achieved by these models indicated that other factors played
an equally important role.
At least four parameters in addition to simple differentials
in income and unemployment need be considered to explain migration
patterns among regions (Isard, 1975; Richardson, 1973). These may
be summarized as:
1. Monetary cost of moving
2. Psychic cost of leaving family, friends and
familiar surroundings
3. Changes in non-monetary income due to differences
in culture or environmental factors such as climate
4. Uncertainty and the imperfect information on which
migration decisions are based
Some of these factors cannot be quantified, but do help to
explain some of the observed temporal and spatial patterns which have
characterized Puerto Rican migration. Although migration to the
mainland has been underway since the beginning of this century, these
factors combined to prevent large-scale migration until after the
Second World War (Mintz, 1972b). Important factors delaying migration
were the relatively high cost of the passage in relation to pre-war
earnings, and the time lag which was necessary for the initial
emigrants to establish themselves on the mainland to serve as a source
of information and assistance for potential migrants yet on the island.

66
By migrating from the island to the Puerto Rican neighborhoods
in the New York City area it was possible to minimize the migration
distance with respect to factors such as culture and language differ¬
ences. The factor of uncertainty was reduced when family or friends
preceded the migrant and could assist in finding lodging and employment.
This attempt to minimize these migration costs or distances accounts
for the continuing clustering of Puerto Ricans in ethnic communities,
a pattern which suggests that the employment opportunities available to
migrants will be significantly different from the national average.
Migrants to the mainland in the 1950s were composed primarily
of younger persons (Friedlander, 1965), and the net return of migrants
appears to follow a similar pattern (Zell, 1973). It is estimated by
the Puerto Rico Planning Board (1978b) that 69 percent of the net
immigration to the island in 1975 was composed of return migrants, an
additional 18 percent was composed of Puerto Ricans born in the United
States (children of migrants), while the remaining 13 percent repre¬
sented immigration from foreign countries. The concentration of
return migrants in the 14-29 year age groups has had a major effect
on the unemployment rate in that group, as summarized in Table 7.
It is not known to what extent this higher unemployment among return
migrants reflects the "frictional" effect of higher job mobility
among returnees or their difference in competitiveness in the local
job market. A portion of the unemployment may also reflect an employ¬
ment strategy designed to maximize the receipt of unemployment and
other social welfare benefits (Zell, 1973).

Table 7.
Effect of Returned Puerto Rican Migrants on the Percentage
Rate of Unemployment in Puerto Rico, 1972.
Item
Returned Miqrant
Non-miqrant
Total unemployment rate
19.9%
10.1%
Participation rate in
14-29 year group
71.6%
49.1%
Percentage of population
in San Juan area
15.9%
—
Percentage of unemployment
in San Juan area
24.6%
—
Percentage of island population,
excluding San Juan area
23.8%
—
Percentage of island unemploy¬
ment, excluding San Juan area
44.0%
—
Source: Zell, 1973.

68
Unacceptable results are obtained when the net migration
between Puerto Rico and the mainland is related to simple differences
in the rate of unemployment. The fitted linear equation is
m = 16.1 - 2.98 Ud (3-12)
where
m = net migration rate to Puerto Rico, positive values
denoting immigration (migrants per 1,000 of total
island population)
U = island unemployment rate (percentage)
Ud = difference between mainland and island unemployment
rate (percentage)
This equation yielded a correlation coefficient of only 0.37, reflect¬
ing the highly scattered nature of the data (Fig. 17).
When the unemployment rate in Puerto Rico alone is substituted
for the unemployment differential a more consistent relationship is
obtained. Net migration may be modeled as a simple linear function of
island unemployment over the 1950-1971 period, obtaining a correlation
coefficient of 0.70 (Fig. 18). The fitted equation is
m = 39.2 - 4.04 U (3-13)
However, the data from the years since 1972 fall far outside this
historic relationship, suggesting that the parameters influencing net
migration have changed significantly during the 1970s.
It is hypothesized that high rates of net immigration to the
island, despite the highest unemployment rates of the entire development

Immigration to Puerto Rico
(rate per 1,000 inhabitants)
69
Difference in Unemployment Rates
(Puerto Rico - United States, percentage)
Fig. 17. Net immigration to Puerto Rico as a function of the
difference in the unemployment rate in Puerto Rico and
the United States in the preceding year. This relation¬
ship achieved a somewhat better linear regression fit
(r^ = .50) than the comparison of unemployment and net
migration during the same year (r? = .37).

70
*1977
*1976
J
I
-401 L
1C
o
¡5
!
I
i
2*0
Unemployment Rate
(percentage)
Fig. 13. Correlation of net immigration to Puerto Rico with the
unemployment rate in Puerto Rico. Data from years 1972-
1977 are plotted separately because they do not fall
within the historic relationship.

71
period, have been promoted by the growing magnitude of transfer pay¬
ments. When transfer payments per capita (in constant dollars) are
added as a second independent variable to the linear migration model,
the correlation coefficient is improved to 0.83. The fitted equation
is
m = 24.8 - 0.158 G + 1.55 Ü
(3-14)
where
G = transfer payments per capita (1954 dollars)
This suggests that income transfers have indeed had a measurable ef¬
fect on recent migration.
However, it is not possible to forecast future migration using
the function relating net migration to unemployment as well as income
transfers (Equation 3-14). Use of this relationship would generate
continuing strong net immigration to the island unless a dramatic
decrease in transfer payments occurred, which appears unlikely. It
seems more likely that the population of Puerto Ricans (or others) who
might be influenced to migrate to the island as a result of welfare
considerations will eventually be exhausted, and immigration due to
income transfers will diminish as the supply of "welfare migrants"
becomes reduced. However, there appears to be no manner in which the
total population of potential "welfare migrants" can be estimated, so
an alternative migration model has been used.
Migration between Puerto Rico and the mainland is modeled
on the sole basis of the unemployment rate in Puerto Rico:

72
m = 39.2 - 4.04 U + I (3-15)
where
I = adjustment parameter for immigration rate (Fig. 19)
In order to account for the high rate of net immigration during the
1970s, despite high unemployment on the island, the function "I" has
been used to temporarily shift to the right the curve which was fitted
to migration data over the 1950-1971 period in Fig. 18 (Equation 3-13).
This function reflects that the "zero migration" level of island
unemployment was temporarily shifted due to the dramatic change in
other conditions, such as the presence of increasing levels of
transfer payments and possibly reduced benefits and job opportunities
in New York City during that city's fiscal difficulties in the early
1970s. This has been accomplished by first increasing and then
decreasing the intercept value in the migration equation using the
function values from Fig. 19.
The future value for the function in Fig. 19 is maintained
at a higher level than the pre-1971 period to reflect the effect of
the increased level of transfer payments on migration patterns. Zell
(1973) has hypothesized that the higher unemployment rate among
return migrants (Table 7) could reflect a strategy of maximizing income
assistance payments, and the empirical data used in Equation 3-14
does suggest that increasing transfer payments have been influential
in promoting return migration to Puerto Rico. If it is true that a
significant portion of the return migrants are being induced to migrate

MIGRATION (rote per thousand inhabitants)
YEAR
Fig. 19. Function utilized to specify the rate of net immigration into Puerto Rico in the
regional model. It is assumed that the incentive to immigrate to the island in
the post-1970 period will be enhanced by the effect of increased federal income
assistance programs now available.

74
due to the increased level of income assistance available on the
island, then the rate of unemployment needed to achieve zero migra¬
tion is likely to be higher in the future.
Economic Sub-Model
General Equations
Economic relationships are constructed to model historic and
future levels of income and employment in Puerto RicoJ Only three
state variables (level equations in the DYNAMO language) are modeled
in the economic sub-model. Two of these are for locally owned and
externally owned stocks of productive capital, respectively, and the
third is for consumer assets. The general form for the stock
equations is
Kt+1 = Kt + At • (St • Yt - A • Kt) (3-16)
where
S = rate of savings and investment
Y = income (1954 dollars)
A = rate of depreciation
K = stock of capital (1954 dollars)
All other equations express instantaneous values, and as such are
"auxiliary" equations in the DYNAMO language.
^Al 1 dollar quantities in the model and the text of this
chapter have been adjusted to 1954 value.

75
Performance of the economic sub-model is determined largely by
the behavior of the two stocks of productive capital and by values of
functions determined exogenously and varied from one model run to
another to generate alternative future scenarios.
In contrast to the population sub-model, in which the
parameters remain constant for all model runs, parameter values in the
economic sub-model are altered for each model run to generate alterna¬
tive scenarios. The parameters which are manipulated and the character¬
istics of each of these four scenarios are summarized in Table 8.
Scenario "A" is a constrained extrapolation of historic growth
trends, the rate of future local savings stabilizing at zero. Scenario
"B" is perhaps a more probable scenario, reflecting a somewhat lower
growth rate of external investment plus a perturbation in investment
flows in the later 1980s caused by, perhaps, a second petroleum
embargo. Scenarios "C" and "D," respectively, consider the changes
which might accompany low or zero levels of growth in external invest¬
ment, combined with increasing levels of local savings and investment.
The specific values for each parameter in each of the scenarios are
found in Figs. 26, 30, and 37 in this section.
Productive Capital
Sources of capital. Economic development ultimately proceeds
from human development (Schumacher, 1973). An underdeveloped area is
an area populated by underdeveloped people. The development (or
importation) of human resources makes possible the mobilization of
physical resources which results in the production of wealth. The

76
Table 8. Input Scenarios for the Puerto Rico Regional Model.
Parameter
Scenario
A
Bd
C
D
«Y*
High
Medium
Low
Zero
Sb
Zero
Low
High
High
o
(—
73
o
High
High
Low
Low
aForeign investment rate.
^Puerto Rican investment rate.
cCapital-labor rate.
din scenario "B" the stream of investment is perturbed in the
late 1980s resulting in a period of decreased investment, similar to
the effect of the 1973 oil embargo and subsequent recession.

77
utilization of capital equipment is the key element of the development
process which permits increasing economic output (and resource in¬
puts) to be achieved. Industrial capital is that physical structure
which enables human labor to be effectively coupled with the energy
available from fossil fuel and other energy sources to achieve
productivity increases.
The development process is characterized by changes in the
structure of the socioeconomic system which creates an increase in
the rate of savings, investment of these savings in the accumulation
of productive capital, and resultant increases in production. Some
of these changes are necessary preconditions to development, whereas
others may be considered a product of that process (Rostow, 1958;
Kuznets, 1958; Gunder-Frank, n.d.).
Physical investment in capital, as evidenced by structures
and machinery, is the last step in the organization of a productive
process. Capital investment may be taken as evidence of the avail¬
ability of adequately skilled labor and managerial expertise, the
presence of industrial and other requisite technology, the functioning
of financial institutions, and the anticipated ability to market the
goods produced. When the decision to make productive capital invest¬
ment in a region is repeated by numerous entrepreneuers, be they
individual, corporate, or government, then the development process is
begun. This process may be sustained and regular increases in output
achieved when a sufficient rate of capital investment is achieved.
Thus, capital accumulation becomes the focal point of regional or
national development (Lewis, 1958).

73
The income stream generated by an economy may be divided
between consumptive expenditures and savings, with the latter being
available for investment in productive capital. This capital is
created by foregoing current consumption, thereby permitting a portion
of production to be devoted to the creation of capital stocks which
can be employed to increase future levels of production.
There are large differences in the tendency for various
sectors of society to accumulate savings. The top income group
accounts for most personal savings, and lower income groups have low
or even negative savings rates. However, total personal savings is
not large when compared to business savings, which constituted an
average of 71 percent of total savings in the United States over the
1970-1977 period. Lewis (1958) has proposed that when the rate of
capital accumulation in an economy is low it may be traced to the
small size and/or low profits in the productive sectors which provide
the capitalists, be they private or government, limited resources
and poor incentive for re-investment.
Merhav (1969) has noted that the central issue lying at the
root of economic development theory is the problem of escaping from
the low-level equilibrium trap. In this trap an economic system
cannot achieve positive real per capita growth because of the in¬
adequacy of productive investment, which in turn cannot be achieved
due to the low level of per capita income and savings. This low-
level trap has been described for Puerto Rico by Friedlander (1965),
and is summarized in Fig. 20.

79
Fig. 20. Low-income trap.
Source: Adopted from Friedlander (1965).

80
The classic low-income trap is created when the rate of
population growth in an economy grows faster than the economic growth
rate, resulting in continual impoverishment and failure of the local
economy to generate capital resources needed to finance higher rates
of economic growth. Development theory holds that the trap may be
avoided by increasing national investment by using the input of foreign
capital, or through the control of population growth rates (i.e., by
exporting migrants in this case). Both methods have been applied in
Puerto Rico.
The upward sloping curve of investment represents the increas¬
ing rate of investment which is assumed to occur as a result of a
positive marginal rate of savings in response to income increases.
The downwards concavity of the curve reflects a hypothesized decrease
in the marginal productivity of capital at higher levels of economic
development. The manipulation of capital and investment is the
critical variable for the "escape," and is a central parameter in
the formulation of many development models and policies.
Friedlander (1965) postulated that Puerto Rico could avoid
this trap by achieving rapidly increasing income levels through
externally financed industrialization, and achieving population
stabilization through migration. The resultant income increases were
anticipated to create an increase in the savings rate until the local
investment resources became sufficient to finance the development
process. That the rate of savings should increase as a function of
income is suggested by cross-sectional data, such as shown in Fig.21.

Savings Rate
(percentage of family income)
31
-15 !- •
C 5 10 .’5
Family Income
(thousands of current dollars/year)
Fig. 21. Cross-sectional savings characteristics of Puerto Rican
families as a function of family income.
Source: Committee to Study Puerto Rico's Finances, 1975.

32
However, the extrapolation of cross-sectional savings behavior
to income increases over time is not valid, as can be inferred from
previous experience elsewhere as well as from post-war patterns of
savings in Puerto Rico. Long-term income and savings data for the
United States and Puerto Rico, graphed in Fig. 22, show that the per¬
centage of income saved has not increased regularly as a function of
income increases over time. The post-war rate of savings in Puerto
Rico has declined steadily, showing clearly that increases in income
have not increased the rate of savings in the local economy.
Estimation of capital stock. The total annual addition to
capital (gross domestic investment) consists of additions to fixed
capital plus changes in inventory. The net addition to fixed capital
may be computed by discarding inventory changes and subtracting the
annual depreciation from the gross addition to fixed capital. Housing
stocks are included in the estimate of productive capital, being
necessary to produce housing services, the value of which is reflected
in the national income accounts.
An official estimate of capital stock is not prepared by the
Puerto Rico Planning Board, but an estimated capital stock series
(excluding land) has been constructed for the island (see Appendix A)
and is summarized in Fig. 23. Total productive capital is divided
into two classes, that which is locally owned (aK) and that which is
externally owned (5K), as imputed by earnings data, assuming that
the earnings rate of locally and externally owned capital is identical.
The net inflow of external capital into Puerto Rico is modeled as a

Percentage of Personal Disposable Income Saved
83
;o -
8
1951 -
-4L
-8 u
â– 3 r
â– 10 -
-12 L
1929
o
1940
s
• •»
/
1947—/
*1949
'1975
!947
1977
LEGEND
0 United States
• Puerto Rico
o
1977
-J L.
iOOO
2000
Personal Disposable Income per Capita
(1954 dollars)
Fig. 22. Relationship between personal disposable income per capita
(in constant 1954 dollars) and percentage of income appear¬
ing as personal savings for the United States and Puerto
Rico.

Capital Stock
(billions of 1954 dollars)
84
o i
1940
1950
I960
Year
1970 1980
Fig. 23. Capital stock series for Puerto Rico (excluding land),
showing total capital stock and capital stock owned by
residents of Puerto Rico, as imputed from earnings.

85
contribution to the stock of externally owned capital, while local
savings and investment is contributed to the stock of locally owned
capital (it is assumed that savings equals investments). The
depreciation rate is the same for these two stocks of capital. The
equations are
aKt+l = aKt + at(s • Y - aKt ‘ Ak> <3-,7>
b*t+l = bKt + ¿t(F - bKt • flk) (3-18)
where
S = rate of local savings or investment
Ak = capital depreciation rate
Y = GNP of Puerto Rico (1954 dollars)
F = rate of foreign investment (1954 dollars/year)
aK = locally owned capital (1954 dollars)
bK = externally owned capital (1954 dollars)
Earned income, minus savings, plus transfer payments (G), is
eqivalent to local consumption, and is contributed to the stock of
local consumer assets (CK):
cKt+l = cKt + AtOrO - S) + G - Ac • cKt) (3-19)
These consumer assets represent a mixture of consumer durables and
non-durables, not including housing (which is counted as productive
capital). A depreciation rate of 50 percent is estimated for this

86
stock. Inasmuch as this stock has no effect on any other model
parameter, inaccuracies in this parameter will not affect model per¬
formance.
External sources of capital. The capital required to finance
investment activities can come from two sources: savings from within
the economy, or some external source of savings. A bottleneck to
economic growth can be created by the insufficiency of local invest¬
ment resources and the propensity to invest the available savings in
relatively non-productive endeavors (e.g., real estate). This bottle¬
neck may be broken perhaps most readily by importing financial capital
and entrepreneurship. Having experienced poor results in the govern¬
ment financed and managed industrialization projects in the late 1940s,
the importation of capital and entrepreneurship became the development
policy adopted by the island's government (Ross, 1966). Relatively
little emphasis was given to the development of local entrepreneurship
(Curet-Cuevas, 1976).
The time series of Gross Domestic Investment on the island is
portrayed in Fig. 24, showing the increasing role of external invest¬
ment as a source of capital compared to the role of local savings,
which have actually become negative in recent years. The computation
of the percentage contribution of each major source of savings to total
investment on the island is plotted in Fig. 25, showing even more
clearly the poor record of local savings formulation and the heavy
reliance on external capital sources.

MILLIONS OF 1954 DOLLARS
87
YEAR
Fig. 24. Sources of Gross Domestic Investment (GDI) in Puerto
Rico, showing the contribution from local and external
sources.
Data source: Puerto Rico Planning Board (1978c).
YEAR
Fig. 25. Gross Domestic Investment in Puerto Rico, showing the percen¬
tage contribution of four sources of savings: (A) net ad¬
justed inflow of external capital, (B) depreciation,
(C) government savings, and (D) private savings. Note that
private savings is plotted with respect to zero, and all
others are plotted with respect to private savings.
Data source: Puerto Rico Planning Board (1978c).

83
The annual rate of foreign investment has been modeled as an
exponential growth equation which has been constrained by a decreasing
rate of growth:
Ft = $350x1 C)6 [l + ¿e- *03(T_ 1979)] (T_1979) (3_2o)
where
Ft = annual external investment (1954 dollars)
5 = initial value for annual capital growth rate
The decreasing rate of investment growth reflects the hypothesis that
many of the conditions which contributed to Puerto Rico's rapid post¬
war economic growth rate are transient in nature, and are weakening as
a result of increasing local wage levels, increased local energy cost,
and changes in industrial tax incentive programs.^ The values of Ft
used in each scenario are summarized in Fig. 26.
Although capital importation has generated rapid economic
growth, it also has created external repayment obligations against the
stream of business profits since most entrepreneurs were nonresident
individuals or corporations. Not unexpectedly, net property earnings
remitted to nonresidents have increased dramatically, from 7 percent
of total property income on the island in 1947 to 62 percent in 1977.
In 1962, externally owned industries accounted for 60 percent of the
^The future of the tax incentive program is uncertain,
particularly inasmuch as it is intimately linked to the issue of
statehood. Were Puerto Rico to become a state it would no longer be
possible to offer federal corporate income tax exemption as an
industrial incentive.

EXTERNAL INVESTMENT
89
YEAR
Fig. 26. Scenarios for the rate of external investment in Puerto
Rico, for use in the regional model.

90
total value added in manufacture on the island, and this figure had
risen to 70 percent by 1967^ (Curet-Cuevas, 1976).
The rate of profit remission is calculated as the product of
the value of the externally owned capital and the rate of return
earned by this capital:
Ht = bKt(0.12 + 0.1I3e“*07(T-1946)) (3-21)
where
Hb = remission of profits (1954 dollars)
The historical and projected change in the rate of earnings from ex¬
ternally owned capital in Puerto Rico is summarized in Fig. 27.
Local sources of capital. Low levels of local savings have
plagued the island economy throughout its entire history, having roots
in the colonial era when business profits and savings were remitted
to Spain (Lewis, 1963). Restricted savings rates continued to be a
problem of post-war development (Comité Interagencial, 1975; Curet-
Cuevas, 1976; MacCoby and Fielder, 1972). There is no clear explana¬
tion for the low and decreasing level of local savings and investment,
which have decreased despite rapid economic growth (Fig. 28). Suggested
O
reasons for low or negative rates of personal savings have been listed
by the Committee to Study Puerto Rico's Finances (1975, p. 27):
"'More recent data are unavailable.
^Includes savings from unincorporated businesses.

Rate of Return
(percentage)
91
t
I
O' 1 ■ ¡ i ! ! i !—
I960 i960 !970 19 80 1990
Year
Fig. 27. Historic and projected rate of return on externally owned
capital in Puerto Rico. Regression equation fitted over the
period 1947-1977.
i
1
J
20CO

Savings (percentage)
92
Year
Fig. 28. Trends in savings rate in Puerto Rico. The rate of
savings by Commonwealth plus municipal governments
and by the local private sector are computed as percent¬
age of government receipts and percentage of GNP,
respectively.

93
1. Puerto Rico's immersion in Mainland cultural values
which emphasize material consumption and which advertise
a consumption stereotype beyond the reach of most Puerto
Ricans.
2. The highly developed consumer-credit facilities of
Puerto Rico, which make possible "dissaving" through
installment purchase of consumer durables.
3. The rapid historical growth of family incomes in
Puerto Rico, which if expected to continue, makes
rational the postponement of saving for retirement until
late in the working life.
4. The large net Federal transfers to Puerto Rican
households, which makes possible an excess of consumption
over pre-transfer disposable income.
5. A social-insurance system which is generous relative
to the Island's production and income levels. Retire¬
ment and health programs and subsidization of housing
and higher education all reduce the need for individual
saving.
It appears unlikely that the failure to generate local savings
can be attributed to a decrease in the local earnings because total
income as well as property income accruing to Puerto Ricans has been
generally increasing, despite the increasing remission of property
income abroad (Fig. 29). The rate of savings by the island's govern¬
ment entities has also decreased, despite increasing government re¬
ceipts.
Investment in Puerto Rico is assumed to be equal to savingsJ
The magnitude of local investment is calculated as the product of the
^Savings are not always equal to investment in the short run,
particularly during economically depressed periods. However, it is
used as a simplifying assumption for the long-run regional model.

Percentage 1954 Dollars (millions)
94
Year
Year
Fig. 29. Measures of the rate of remission of property income in
Puerto Rico to residents and non-residents.
Data source: Puerto Rico Planning Board (1978c).
Per Capita Property Income
(1954 dollars)

95
local income (i.e., GNP) and the savings rate. The rate of savings
is a forcing function in the model which is varied from one scenario
to another. These alternative values, summarized in Fig. 30, are
input to the model as tabular functions.
Production Relationships
Measurement concepts. Not all of the production within an
economy appears as income within that system, since some of the input
factors used in local production may have been imported, which will
require that a portion of the income from local production be remitted
"abroad" in compensation. To the extent that factor imports are not
compensated by local factor exports, then the value of total local
production will not be equal to total local income.
The total output of an economy is measured as the Gross
Domestic Product (GDP), whereas the production which appears as income
to the local economy is measured as the Gross National Product (GNP).
The difference between GNP and GDP is normally so small that it may be
neglected. For instance, the values for GNP and GDP in the United
States economy differed by less than 1 percent in 1977. However, the
1977 GNP for Puerto Rico accounted for only 81 percent of the GDP, and
this percentage has been declining regularly over the past two
decades. This difference reflects the increasing remission of factor
earnings from Puerto Rico to nonresident owners of capital.
Physical development is ultimately a product of human develop¬
ment, and physical measures reflect the effects of this process rather
than its cause. However, physical production relationships can be

SAVINGS RATE
96
Fig. 30. Scenarios for the rate of local savings and investment
in Puerto Rico, for use in the regional model.

97
usefully examined to suggest the relative importance of different
quantifiable parameters to changes in levels of production. This,
in turn, may suggest that certain physical and institutional
parameters are more limiting than others.
Production in Puerto Rico could potentially be constrained
by several quantifiable factor inputs:
Y = f (land, labor, capital, energy, water)
where
Y = product (i.e., GNP)
However, not all of these, nor any of them, are necessarily functioning
as limiting factors at a particular point in time. Regression tech¬
niques may be applied to compute the importance of each input factor
in explaining production, but this does not necessarily demonstrate
causality.
Correctly included in the production function are only those
variables which will increase output (at the time modeled) if their
input quantity is increased. Input parameters not having this property
are not limiting factors, and an incremental change in their level
of availability will not affect output. It should also be recalled
that the physical parameter which is quantified may only serve as
evidence of underlying (but perhaps non-quantifiable) conditions
which ultimately influence production. For instance, Denison (1974)
asserted that, ultimately, the source of all productivity increase is

98
due to increases in knowledge. Production relationships should be
examined with these considerations in mind.
Capital and labor. A production relationship of the form
Y = A • K8
may be fitted to Puerto Rico data using capital alone as the sole
variable explaining output. The fitted equation is
Y = 1.31K° *89 r2 = 0.99 (3-22)
The capital stock value used in this relationship is the total produc¬
tive capital (see Appendix A).
A production function of the Cobb-Douglas type (Walters, 1963)
may be used to model the relationship of both capital and labor to
production, using the general form
Y = A • Ka . E8
This function has been fitted to annual data in Puerto Rico over the
period 1947-1977 to obtain
Y = 2.40 K-87E-38 r2 = 0.96 (3-23)
That the correlation coefficient, corrected for degrees of freedom,
decreased as a result of adding the labor variable indicates that it is
of no assistance in explaining changed economic production in Puerto
Rico. Rather, unemployed or underemployed agricultural labor has been
abundant in Puerto Rico throughout the development period, and produc¬
tion gains have been created by increasing the stock of capital in a

99
labor surplus economy. Rather than producing an increment in output,
an addition to labor supply under these conditions might only con¬
tribute to unemployment.
The decline in labor force employed in agriculture has con¬
tinued into the 1970s, accompanied by a shift of labor into other
sectors of the economy (Fig. 31). In Fig. 32 it is shown that
industrialization and increasing employment levels have been accom¬
panied by a decreasing labor force participation ratej and until the
1970s generally decreasing levels of unemployment. Unemployment rates
on the island have remained between two and three times as high as
mainland unemployment rates since the 1950s.
Land. Although the island's high population density (950
persons/square mile) and rugged terrain suggest that a land limita¬
tion may indeed have a logical basis, the available evidence indicates
that this has not been the case. Land imposed two types of limita¬
tions on production, one being the restricted availability of building
sites and the other being the limited availability of solar energy and
soils suitable for agriculture.
Throughout the post-war development period adequate land has
been available, at locations near port facilities, water supply and
other infrastructure, for most industrial development except the
largest and most controversial projects such as open-pit mining, a
petroleum super-port, and a nuclear power plant. However, that projects
^Participation rate is the percentage of the population of
working age (14 years and older) which is employed or is seeking em¬
ployment.

Annual Change in
Agricultural Employment Employment (thousands)
ICO
Fig. 31. Changing labor force characteristics in Puerto Rico
showing (a) changing labor force distribution among
sectors, and (b) annual change in agricultural
employment.
Data source: Puerto Rico Department of Labor, undated
statistical series.

Ratio of Unemployment
Unemployment Rate (percentage) Employment (thousands)
101
500[
1940
i 950
I960
1970
1980
s.
!
5 (C)
Unempioymart Ratio
i
4 |L
\
2 r
» A -y
z \
2|
| i
i
i
i
1940
!950 I9S0 1970
i980
Year
Fig. 32. Employment and unemployment in Puerto Rico, (a) Historically
increasing total employment in Puerto Rico, accompanied by
a decreasing labor force participation rate, (b) Unemploy¬
ment rate in Puerto Rico and the United States, (c) Ratio
of the unemployment rate in Puerto Rico to the unemployment
rate in the United States.

102
of this nature experience siting difficulties along some Eastern
seaboard areas of the mainland suggest that siting difficulties in
Puerto Rico are not unique. For light and medium intensity industries
both land and often buildings are readily available at industrial
parks around the island as part of the Fomento development package.
The only sector in which real land constraints have existed
is in agriculture. Land was intensively used in Puerto Rico at the
turn of the century (Bryan, 1899), being similar in many respects to
current land-use patterns in agrarian Haiti. Intensive land use
continued throughout the predevelopment period with lands having 60 to
80 percent slopes being farmed (Roberts, 1942). Under these conditions
land availability represents a definite production limitation on the
agrarian solar energy based economy.
However, the conversion to a fossil fuel economy has removed
the agricultural land area constraint on total production. The value
of agricultural production today is probably more limited by insti¬
tutional constraints such as the government intervention in the sugar
industry, rather than absolute land area limitations per se. Accord¬
ingly, little benefit is seen in attempting to develop a land parameter
to explain post-war patterns of economic growth.
Water. What has been the possible role of water resource
development in promoting post-war economic growth in Puerto Rico?
Issues of some complexity, which differ from one region to another,
affect the potential for water resource investment to influence
regional growth. Although Meier (1970) has suggested that water

103
resource investment is perhaps secondary only to transportation as an
investment need in developing areas, studies by Cox et al. (1971) and
Haveman (1972) have shown that within a developed economy investment
in water resources per se is a poor mechanism for promoting economic
growth. McCuen (1974) has argued that the growth potential of the
water resource investment in itself may not be particularly large,
its influence being determined by the presence or absence of other
contributory and comp!ementary development inputs.
Attanasi (1975) constructed a regression model to examine
the economic response of four regions within Puerto Rico to different
levels of water resource investment and other public sector expendi¬
tures over the 1960-1968 period, and concluded that:
. . . [there are] several general implications. First,
there appear to be substantial variations in regional
responses to water resource investment, when responses
are measured in terms of industrialization and changes
in regional income distribution [among regions within
Puerto Rico]. Second, the results suggested that the
nature of the water resource investment determines whether
to expect increases in regional industrialization. This
latter point may be significant when examining longer
time periods. Because such regions receiving heavy
irrigation investments (without hydropower facilities)
are unlikely to attract manufacturing activities, there
will be no industrial base to sustain the income growth
and redistribution of income resulting from the initial
investment. Finally, the effectiveness of achieving
income redistribution by such investments appears to depend
crucially on the level of development within the region,
as the substantially less developed areas indicated the
smallest responses to such investments. (P. 74)
However, knowledge of the industrialization process in Puerto
Rico suggests that the model employed by Attanasi (1975) was improperly
formulated, which may help explain why such substantial variations

104
were obtained in the regression coefficients relating water resource
investment to change in manufacturing income (both positive and nega¬
tive coefficients were obtained). Attanasi failed to include in the
model, or even to mention in his presentation, that the Commonwealth
Government has applied variable tax exemption periods to different
regions of the island and has constructed industrial buildings at
numerous rural locations as primary tools for redistributing industrial
investment away from San Juan and into lower income regions of the
island.
This model also improperly specified the explanatory parameter
used to assess proximity to cargo ports, inasmuch as it considered
neither the very substantial differences in the level of service
available at different ports nor the development of private port
facilities by petrochemical industries. The presence or absence of
hydropower facilities is probably spurious also, inasmuch as it is a
minor component of total electrical energy supply in all regions.
Any correlation between irrigation investment and industrialization
is also thought to be spurious.
Finally, it has been the author's experience that actual water
resource investment in Puerto Rico has tended to lag behind industrial
development on the island, with water supply development for major
industrial customers typically occurring only after a construction
commitment from that industry has been obtained. In most cases water¬
intensive industries have preferred to develop private ground water
supplies, and the labor-intensive industries have been adequately

105
supplied with water for sanitary and housekeeping purposes by the
normal development of municipal supplies, which was proceeding at a
rapid rate in the 1960s.
Due to these aforementioned weaknesses of the Attanasi (1975)
model it cannot be accepted as evidence of a positive causal relation¬
ship between water resource investment and historic industrial growth
patterns in Puerto Rico. There are, however, several locations on
the island where water availability has become a parameter signifi¬
cantly influencing the location of even moderately water-intensive
industries under existing conditions of water management. Constrained
ground water supplies have caused industrial water use permits to be
reduced in the Yauco Valley (Cortez, 1976), and ground water constraints
have similarly been shown to be probable in the Barceloneta area on
the north coast (Morris, 1978), where the expansion of water-intensive
industries has recently been restricted due to water supply considera¬
tions. However, even though water supply is a parameter of increasing
importance influencing industrial location decisions within Puerto
Rico, the overall level of water supply is considered to be a minor
influence on aggregate economic performance.
Energy. Two types of energy constraints on economic production
may occur in Puerto Rico. The first of these is a global constraint
in which economic production worldwide becomes limited due to the
decreasing availability of rich energy resources. The second type
of constraint is that of locational cost differences. As a result of
Puerto Rico's geographical proximity to cheap (pre-embargo) Venezuelan

106
petroleum, the island was considered to have an abundant supply of
cheap energy (Isard et al., 1959; Isard, 1975). However, the price
increases for foreign petroleum have altered these conditions, and
Puerto Rico now has more costly energy supplies than mainland locations,
which can blend foreign petroleum with less costly domestic supplies.
With the depletion of U.S.’ domestic petroleum supplies it is
unlikely that foreign suppliers will again see the need to undercut
the price of domestic petroleum. This will insure that in the future
Puerto Rico will experience, at best, energy cost parity with mainland
locations, as opposed to its earlier cost advantage. The island would
also presumably suffer a cost disadvantage in the use of coal due to
transport costs, and perhaps even a cost disadvantage in the use of
nuclear power due to higher island construction costs. However, it
could experience a cost advantage and become an "energy rich" region
if wind, direct solar, or ocean thermal layer energy technology
becomes competitive.
For the remainder of this century energy will perhaps be
more costly in Puerto Rico than mainland locations, and the trend of
energy costs will be upward. Cost increases to date have already
been reflected in a decreasing energy intensity of production on the
island (Fig. 33). Of course, the continuation of federal subsidies
to Puerto Rico and other regions facing higher energy costs may distort
this relative cost structure.
Although energy availability is considered to be a constraint
of increasing importance in the future, it would be erroneous to

Measures of the trends in the energy intensity of production
in Puerto Rico.
~n
CQ
CO
CO
Annual Energy Consumption
(metric tons coal equivalents per employee)
Energy Consumption
(kg coal equivalents per
1954 dollar of GDP)
<5°
o
01
“< <0
fD O)
W o
-5
u>
-j
o
u>
00
o
â– jj m
<9 =>
-1 <9
\
I
I
I
/
/
5°
o
04
b
o
(kg coal equivalents per $ 1954 capital stock)

108
utilize the short period of post-embargo data (which are distorted
by the 1970s recession) to formulate empirical relationships for a
long-run model. Rather, it is suggested that, for the purpose of
this study, the best manner in which future energy scarcity may be
modeled is to restrict overall production by restricting the availa¬
bility of capital or the capital-labor ratio.
Production equations. Capital is the most useful parameter
for describing economic growth in Puerto Rico and is thus the
variable which plays the central role in the formulation of the
regional model. The relationship between capital and output in an
economy may be expressed by the capital-output ratio. This ratio
expressed the concept that, in aggregate terms, a given increment in
capital is required to generate an increment in production. Output
in the region is modeled as a function of the stock of productive
capital and the capital-output ratio:
Yt = Rt * Kt (3-24)
where
R-t = capital-output ratio (dimensionless)
= total productive capital stock (1954 dollars)
Yt = GNP (1954 dollars)
The capital-output ratio of industrialized countries typically
remains in the range of 3 to 4 (Meier, 1970). Samuelson (1976) has
noted that the capital-output ratio for the United States has remained

109
at a value of approximately 3 over the past century. The capital-
output ratio for Puerto Rico may be computed from either the
GDP or GNP, and both measures are shown in Fig. 34. The capital-
output ratio of the GNP has risen more rapidly than that computed on
the GDP basis, reflecting the decreasing efficiency in converting
production into local income due to the increasing remission of
business earnings abroad.
The relationship between capital and employment is expressed
by the capital-labor ratio, which may be used to impute the amount
of capital associated with each additional job. Inasmuch as produc¬
tivity increases are related to the amount of capital which is
available to the labor force, the capital-labor ratio rises dra¬
matically as a function of industrialization, as has been the case in
Puerto Rico where the capital-labor ratio has risen from $2,000 to
$13,000 over the post-war period (Fig. 35).
The trend of increasing capital-labor ratio implies that
the creation of each new job will carry increasingly heavy invest¬
ment needs in both the private and the public sector. The recent
trend in public sector costs of each new job created in Puerto Rico
has been for these costs to rise rapidly, from $723 in 1969 to
$1,871 in 1975 (Puerto Rico Management and Economic Consultants,
1976).
The empirical relationship between the capital-output ratio
and the capital-labor ratio in Puerto Rico is shown in Fig. 36.
This linear relationship is assumed not to change over the period
modeled, i.e.,

no
«3
CC
Q.
+->
3
O
I
+J
CL
re
o
2.0-
1.0
1940
1950
I960
Year
1970
1980
Fig. 34. Capital-output ratio for Puerto Rico, computed using
both GDP and GNP as measures of output.
4->
03
SL.
O
-Q
03
03
cd
CJ
o
r—
Q.
E
a
&-
CD
CL
CO
S-
03
O
"O
LO
cr>
o
to
o
o
o
¡o L
o
1940
1950
i960
Year
197 0
1980
Fig. 35. Historical trend of capital-labor ratio for Puerto Rico.

m
—: i 1 , . i i
5,300 ¡0,000 15,000
CAPITAL- LABOR RATIO (L)
(1954 dollars )
Fig. 36. Linear relationship between the capital-output ratio and
the capital-labor ratio in Puerto Rico.

112
Rt = 1.09 + (115.4x10-6) • Lt
(3-25)
where
Rt = capital-output ratio (dimensionless)
Lt = capital-labor ratio (1954 dollars/employee)
The future value for the capital-output ratio in Puerto Rico is
modeled from this relationship, using projected values of the capital-
labor ratio to compute the value of the capital-output ratio. The
values for the capital-labor ratio in each scenario are summarized
in Fig. 37 and are computed from the relationship
(3-26)
+ 4000
where
y = scenario-dependent variable
Economic Dependence
Production minus savings is equal to income in a closed
economic system. However, in the setting of an open regional economic
system not all of the production factors may be locally owned, and the
income earned by these factors may be remitted to nonresidents. This
has occurred in Puerto Rico, and gives rise to the previously described
differences between the GNP and GDP in the island economy. Growing
external investment in the island, not compensated by investment
abroad by Puerto Ricans, has generated an increasing stream of business

113
o
H
<
x
x
o
<
-i
i
-i
<
a.
<
CJ
Fig. 37. Scenarios for the capital-labor ratio (L.) in Puerto
Rico for use in the regional development''model.

114
earnings which are remitted to nonresidents. The value of these
remitted earnings had grown to 26 percent of the island's 6NP by 1977.
This flow to the exterior has been balanced by a net flow of
transfer payments to the island of approximately the same magnitude
(Fig. 38). This near equivalence appears to have occurred more by
chance than by design. The growing role of transfer payments as a
source of local income is evident in Fig. 39, showing the gradual
decrease in property income and the compensatory increase in the
share of employee compensation and transfer payments. In 1977 transfer
payments constituted 28 percent of total personal income in Puerto
Rico.
The fact that the net flow of business remissions is
approximately balanced by income transfers does not imply that the
overall effect on the local economy is neutral, for it is not. The
outgoing funds represent sources of income which have a high propen¬
sity toward productive re-investment. The incoming funds are primarily
of the social welfare type and have a very low propensity for re¬
investment, being used principally to meet the consumption expenditures
of lower income families.
The growing importance of external investment and transfer
payments indicates that, with economic growth, the island is steadily
increasing its dependency on the mainland economy. In this research
this dependency is measured as the ratio of business profits remitted
to the island's earned income (i.e., GNP). These business remittances
reflect the payments made to the exterior for production factors on

115
Year
Fig. 38. Net factor payments and income transfers to Puerto
Rico. Negative net factor payments represent a net
flow into Puerto Rico, primarily from the operational
disbursements of federal agencies on the island.
Data source: Puerto Rico Planning Board (1978a, 1978c)
CD
M- E
O O
CJ
CD C
CD ►—i
C3
4-> i—
C fO
CD C
CJ O
CO
CD S-
CL CD
CL
Year
Fig. 39. Changing pattern of income sources in Puerto Rico.
Data source: Puerto Rico Planning Board (1978c)

116
which the island is dependent. This "economic dependency" parameter
is computed in the model by
(3-27)
where
= measure of economic dependence (value of property
income remitted abroad, as percentage of the GNP)
Ht = property income remitted abroad
Yj. = GNP of Puerto Rico
As long as transfer payments to the island are equal to the remission
of business profits this same parameter will also reflect the level
of income dependence on transfers.
Population and Economic Linkage
The population sub-model and the economic sub-model are linked
through the parameters of labor force and unemployment, the latter
which in turn drives migration. This creates feedback between these
two sub-models. As unemployment increases the net migration to the
mainland is increased, thereby constraining further increases in un¬
employment due to reduction in the local labor supply. Conversely,
decreases in unemployment are constrained by the tendency for labor
supply to increase due to labor force immigration.

117
Employment
Total employment is divided between two sectors, traditional
agriculture and the modern sector. Employment in the traditional
sector is taken to consist of total agricultural employment minus
10,000 agricultural workers who are assumed to be employed in the
modern agricultural sector. Employment in agriculture declines as a
function of time and is included in the model as a function having
the values shown in Fig. 40. Employment in the non-agricultural
sector has been modeled to increase as a function of total capital
stock (gK+^K) and the capital-labor ratio (Lt). Total employment
(Et) is given by
E
t
aKt + bKt r,
Lt *
(3-28)
where
Et = total employment
Ej. = employment in traditional agriculture
Labor Force
The age structure of the population is used to calculate the
population of working age:
P[ = 0.2
3Pt + 4Pt * 5Pt *
6Pt + 7Pt + 8Pt
+ 0.76 • gPt
(3-29)

PARTICIPATION RATE
118
Fig. 40. Historic and projected values of employment in the tradi¬
tional agricultural sector (E^) used in the regional model
for Puerto Rico.
-9
O
o
-3
a
9
CL
1940 I960 1980 2000 2C20
YEAR
Fig. 41. Historic and projected values for the
pation rate (qt) used in the regional
Rico.
labor force partici-
model of Puerto

where
Pj. = population of working age
Less than 50 percent of the population of working age is actually
employed or seeking employment, and therefore a member of the labor
force. This percentage is expressed by the labor force participation
rate:
P't = p; • qt (3-30)
where
P£ = labor force
= labor force participation rate
This relationship is graphed over the historic period, and the pro¬
jected values are shown in Fig. 41. The participation rate is entered
into the model as a tabular function which is not changed from one
scenario to another.
Unemployment and Migration
Unemployment is the difference between the number of jobs
available and the number of persons either holding or seeking jobs.
The rate of unemployment is calculated from these two parameters as

120
where
Ut = rate of unemployment (i.e., 100 Ut is the percentage
rate of unemployment)
This value of unemployment is used in the migration equation to compute
the rate of net migration between Puerto Rico and the mainland at each
time step of the model (Equation 3-15).
The regional model is of the simulation type, and therefore
must be initialized with the starting values for several of its
parameters, such as the initial population in each age class and the
initial capital stock values. These values are used to compute the
value of unemployment and migration. In the next time step "t" the
population age classes are adjusted to reflect the population gains
and losses to migration and other effects (aging, births, deaths)
which occurred during the "t-1" time period.
Model Calibration
The results of simulating the regional model over the period
1947-1977, and comparison of model output to actual conditions over
that period, are summarized in Fig. 42. Due to the long-run nature
of the regional model the detail has not been added which would be
necessary to accurately simulate all of the highly volatile relation¬
ships in the mid-1970s. Thus, although the model follows most
patterns qutie closely, it does not simulate the net migration parameter
on an annual basis. However, even this parameter (which was the most

(role/ 1000 of island population) (thousands)
121
YEAR
Fig. 42. Model calibration. Annual historic data points are compared
to the values generated by the regional model (solid lines),
for selected parameters.

122
variable parameter in the model) is modeled to a reasonable degree of
accuracy when several years of data are averaged. However, this does
not necessarily detract from the overall veracity of the long-run
relationships.
The population segment of the regional model also accurately
generates historic age distribution patterns. In Table 9 the age
structure generated by the model is compared to the island age struc¬
ture reported by the 1970 census. The 1977 population generated by
the model is 3.387 million, 2 percent higher than the 1977 population
estimate of 3.310 million (Puerto Rico Planning Board, 1978c).
Regional Model Simulation Results
The desirability of following one or another development
pathway relates ultimately to social well-being, and the model outputs
for the various scenarios must be examined in this context. Although
the selection and weighing of public decision criteria will ultimately
reflect political considerations, some insight into the relative
merit of alternative development pathways may be obtained by examining
three representative criteria. Three classes of outputs are selected
as proximate criteria for measuring well-being: (1) income,
(2) employment opportunities, and (3) economic self-reliance. These
are measured respectively as earned income, unemployment rate, and
the fraction of total income remitted abroad. Earned income rather
than total income is selected as a parameter to omit the counting of
transfer payments as a development benefit. Although government policy

123
Table 9. Comparison of actual 1970 age structure in Puerto Rico
to the structure generated by the regional model.
Age
Groups
(.years)
Age Distribution
Actual
(Percentage)
Model
0 - 4
11.7
12.1
5 - 9
12.5
11.9
10 - 14
12.4
12.1
15 - 19
10.7
11.1
20 - 29
15.4
15.0
30 - 39
11.1
11.3
40 - 49
9.3
9.6
50 - 59
7.5
7.8
60+
9.4
9.1

124
in Puerto Rico does in fact attempt to maximize all sources of income,
including transfers, this author considers it inappropriate to
include these transfers as an income objective.
The 2020 values of each of the three proximate criteria are
compared to their 1975 and 1977 values in Table 10 for the four
scenarios defined in Table 8. Perhaps the most salient feature of
the model output is that rather dramatic changes in the measure of
economic self-reliance (Fig. 43) are not accompanied by similarly
dramatic changes in unemployment or income (Figs. 44 and 45, respec¬
tively) .
Long-term net immigration and continuing population growth
at approximately historic levels occur in all scenarios, with the
highest growth rate occurring in scenario "C," which has the lowest
unemployment levels (Fig. 46). All scenarios suggest that in the
long run the island may experience unemployment rates which decrease
to relatively low levels, in turn creating continued immigration.
However, all scenarios suggest that in the short run (through the
mid-1980s) the current pattern of net immigration will be temporarily
reversed. This proceeds from the short-term migration assumptions
used in the model, which are highly uncertain. If, for example,
the unemployment rate drops more rapidly than the model suggests
in the late 1970s and early 1980s, then the rate of emigration to
the mainland would be expected to be considerably lower than predicted.
The dynamics of the 1970s' immigration are not well under¬
stood, and the extension of the historically derived relationship

Table 10. Summary of Output Values from the Regional Model of Puerto Rico for the Year 2020, Compared to
1975 and 1977 Values.
Population
(thousands)
Earned
Incorne3
Economic
Dependence^
Unemployment
Rate
1975
3,076
$1,113
18%
15.4%
1977
3,310
$1,086
26%
20.1%
Scenario "A"
5,730
$1,850
42%
9.3%
Scenario "B"
5,190
$1,840
42%
8.8%
Scenario "C"
8,130
$1,640
22%
7.6%
Scenario "D"
5,760
$1,600
21%
8.5%
aGNP per capital in 1954 dollars.
^Transfer payments as percentage of GNP.

( Porcentaje)
126
SO r
45
30
ECONOMIC DEPENDENCE (Percentage of local Income remitted abroad)
SCENARIOS
• A
o 3
O C
9 0
• •
• • - '
Historical Data
• •
• •
♦ • oooo
• • oo
• oo
• • o o
• oo
• •
..*• 0°°
•* 0°°°
o°°°
•• oo°°
o
' oo
.V,99®855S5^S°°oo^,
»4s88 “••S2«°boo
ooouu ooo”u0CCO
000ooo OOOq
00(5 0^
•<5o3‘
••
„ee
oL
1950
I960 1970
I960 1990
YEAR
2000 2010
2020
Fig. 43. Scenarios of the measure of economic dependence in Puerto
Rico generated by the regional model.

4 c i r
30 r
20
o
Cl
UNEMPLOYMENT RATE
SCENARIOS
0 B
0 c
o D
Historical Data
• • •
. V ••••*.•
• •
¿So
10
oo
o o
• o
o#oo
o tOO
o o
• G
u • G
°C^ °o 0
CO¬
CI» _
O D
0« © G
• • o
• #oo 0
• •00
• • o
o oooooo
0 o ©oo o
\m ’ © QOOO» • oooo® ' ' „ HQ
••••?• o° -v^-P00
°; °0O0OO0°0C^00
ocoooooocc
2020-
Fig. 44
Scenarios of unemployment rate generated by the regional
model of Puerto Rico.

( thousands of
128
4,000
3,000-
EARNED INCOME PER CAPITA
SCENARIOS
• A
o E
O C
o D
IT.
OOCO OOi
Historical Data
.sjjgt?
6§S°
1,000 -
r •
• •
1950 i960 1970
!980
YEAR
1990 2000 2010 2020
Fig. 45. Scenarios of earned income per capita generated by the
regional model of Puerto Rico.

129
POPULATION
SCENARIOS
6 L-
3 —
o.
• A
° E
O C
o D
Historical Data
nC° .** oOG o°°
nO°...‘ o°° o°°
•' og O
^00 • Oo o o
„00 ••oo o
--OO • «O © oo
„ oooOO*oooooo ooo
.ooo ooo oo
• • • •
• •• OOCH
• • • OC
• • oo
• • o©
~ © .ooa
°° ^oooo
oo oo
o _oo
•••
L#« ••
i 9 50
'960
1970
1980
YEAR
1990
2000
2010
2020
Fig. 46. Scenarios of total island population generated by the
regional model of Puerto Rico.

130
into the future may prove to be invalid. It should also be noted that
labor force availability has not been modeled to constrain the
creation of new jobs. It is quite possible that the achievement of
low unemployment rates (i.e., the 7 percent level implied in some
scenarios) may not actually be achieved due to a slow-down in job
creation due to decreased local labor availability.
In summary, the model suggests that the island's initial
growth period has ended and future growth patterns will be quite
different from that of the pre-1970 period. The goal of providing
adequate levels of income has been achieved and long-run unemployment
levels should also decrease to lower levels. However, the goal of
economic development has not been attained, and is in fact becoming
more elusive as the island steadily increases its dependence on
external sources of capital and income transfers. The level of direct
and indirect income assistance available on the island is already
quite high with respect to the level of earned income. This can only
serve to reinforce dependence on this assistance as a primary means of
livelihood. The continuation of these trends does not represent
a viable avenue toward true economic development in which the island
residents Darticipate significantly as investors and entrepreneurs in
their own economy.

CHAPTER IV
WATER MANAGEMENT MODEL
Changes in Puerto Rico's regional development policy can
significantly affect patterns of resource use. In this chapter
water management conditions on the island's south coast are described
and a model is developed to examine the potential effects of new
development policies on these resources. The regional and water
resource models are not formally linked. Rather, water management
implications are imputed from the types of changes in agricultural
land use which may accompany new development policies.
Patterns of water supply are described and a supply curve
is quantified. An examination of existing and projected water
demands suggests the levels of future demand which may occur and the
extent to which demand in each sector may be affected by changing
island-wide development policy. Conditions which prevent the con¬
struction of a demand curve are described.
Primary attention is directed at the irrigated agricultural
sector, which accounts for 80 percent of all fresh water withdrawals
on the south coast. New development policies which promote private
sector agricultural entrepreneurship could create changes in on-farm
irrigation management which deleteriously affect the aquifer water
and salt budget. These changes are analyzed using a simple

132
ground-water budget simulation model for different scenarios of
ground-water withdrawal and recharge.
Supply Curve for Water
General Considerations
The economic availability of water on the south coast may
be summarized by constructing a supply curve which incorporates
existing plus potentially developable supplies. The concept of
economic availability is important because scarcity is related to
cost. Virtually unlimited supplies of fresh water could be made
available from the desalting of seawater were users willing and able
to bear its high cost. The relevant allocation problem, then, is
the management of the limited supplies of low cost water which are
available. Because lower cost supplies are characteristically
developed initially, as resource development proceeds to higher cost
supplies the opportunity for transfers of low-cost supplies to higher
valued uses is enhanced.
However, several important conditions exist on the south
coast which depart from the perfect competition idealizations of
economic theory. This inhibits the construction and analysis of
supply and demand relationships in a meaningful fashion.
Water is not a commodity which may be bought, sold, and
readily transported or transferred from one user to another in a
competitive market (Hartman and Seastone, 1970). Puerto Rico Water
Law^ establishes that water is a public good and therefore cannot be
1 Law 136 of 3 June 1976, Section 4.

133
sold in a private market. Each user develops a private source or
purchases water from either of the two government corporations which
supply municipal and irrigation water. As a result the water market
is essentially non-competitive; the cost of water from each source
is different and independent of the cost elsewhere in the market.
Supplies are not necessarily developed in order of increasing
cost, and the supply curve is characteristically discontinuous rather
than smooth, reflecting the presence of large supply projects. This
occurs because low-cost surface water supplies characteristically
cannot be developed unless large increments are supplied to exploit
economies of scale. For example, a reservoir site on the Río Manatí
could be developed to supply the south coast, but does not yield its
full economy of scale unless 225,000 acre-feet/year are supplied
(Black and Veatch Engineers, 1977). In those cases where future
demand and ability to pay is either low or uncertain, it is rational
to initially develop smaller projects having higher unit costs in
order to avoid the yet higher costs of oversupply.
i
Supply Curve Construction
The costs which are reported in constructing supply relation¬
ships are total economic costs. However, the cost of government-
supplied irrigation water (from reservoirs) is subsidized, with the
users bearing approximately 25 percent of the total cost. The
remaining cost is subsidized through revenue from the sale of
electricity and from Commonwealth tax revenue. Most of this govern¬
ment supplied (and subsidized) water is used by the Sugar Corporation,

134
another government corporation. All costs are reported in current
dollars.
The availability of agricultural supplies has been estimated
at the 90-percent level of confidence in three categories: ground
water, surface water from irrigation districts, and unregulated stream
diversions. Examination of the available irrigation well pumping data
from Central Aguirre (1972-1976) showed no discernible relationship
between annua.1 ground water withdrawal and rainfall or drought.
Agricultural wells are not pumped to capacity in wet years; therefore,
the estimate of the average ground water availability has been taken
to represent the level of availability at the 90-percent level of
confidence.
Deliveries from the irrigation districts have been subjected
to frequency analysis. For the Lajas Valley only the last 15 years
of data were analyzed inasmuch as farmers were significantly under¬
utilizing the available water supplies prior to 1962, and the
inclusion of these earlier years would have led to severe underesti¬
mation of the available supplyJ A frequency analysis of the most
recent 22 years of data from the South Coast Irrigation District has
been performed, the data from prior years being unavailable. Irri¬
gation supply from stream diversions without the benefit of regulating
structures is assumed to follow the same probability distribution as
long-term rainfall at Ponce. The frequency distributions for these
sources are plotted in Fig. 47.
Irrigation deliveries to the Lajas Valley began in 1955.

Fraction of Mean Value
135
Percentage of Years Equaled or Exceeded
Fig. 47. Cumulative frequency diagram for irrigation water deliveries
in the South Coast and Lajas Irrigation Districts, and for
rainfall at Ponce.
Legend
o o
• «
Station
Ponce
Lajas
South Coast
Mean of Record
34.9 inches/year
34,532 acre feet/year
70,064 acre feet/year

136
The costs^ for obtaining irrigation water on the south coast
are estimated as follows:
1. Surface water from the irrigation districts
costs approximately $20-$30/acre foot based on
the cost of operating and maintaining the systems,
plus debt service. Income from the sale of this
water to farmers covers only about 25 percent of this
cost, and the remaining 75 percent is subsidized
from other government revenue.
2. Ground water is estimated to cost approximately
$12/acre foot, including the cost of well and
pump amortization, maintenance and electricity.
3. Stream diversions and private reservoirs account
for a minor portion of total irrigation withdrawal,
and probably have an acquisition cost in the
vicinity of $2/acre foot.
For the purpose of comparison, some of the most expensive irrigation
water used on mainland corrmercial farms is in San Diego County,
California, where water costs in 1977 reached $175/acre foot for
filtered, chlorinated water delivered to the farm under pressure
(personal communication, Bernarr Hall, Agricultural Agent, San Diego
County, California, 1977). However, the cost of obtaining irrigation
water in the western states more typically falls in the range of
]A11 doll ar quantities in this chapter are based on current
value.

137
$5-$20/acre foot (personal communication, H. Bell, Water Master,
Wellton-Mohawk Irrigation District, Yuma, Arizona, 1976).
The current level of municipal and industrial withdrawal
on the south coast is estimated to be available at the 95-percent
level of confidence. The cost of municipal and industrial ground
water is estimated to be $16/acre foot. This is higher than the cost
of agricultural ground water, reflecting newer wells, higher pumping
head, and higher costs of construction and maintenance. Surface
water is assumed to cost $30/acre foot, the same as agricultural sup¬
plies, except that 11,000 acre feet/year from the Toa Vaca reservoir
is estimated to cost $100/acre footJ The total existing water supply
on the south coast, as a function of confidence level and cost, is
summarized in Table 11, and the supply curve is graphed in Fig. 48.
Due to the already high rate of ground-water withdrawal (estimated
at 70 percent of average annual recharge) and the potential for saline
intrusion into the coastal aquifer, it is assumed that no additional
ground water withdrawals may be sustained under current management
conditions.
Future water supply alternatives for the south coast have
been outlined by Black and Veatch Engineers (1977) and the U.S.
Army Corps of Engineers (1977). The cost and quantity of water supply
which could be made available under three alternative plans devised by
^The cost of water from the Toa Vaca reservoir is much higher
than other supply alternatives which exist. This reservoir was con¬
structed as the first stage of a 5-stage project, which was never
completed. The reservoir is greatly oversized in relation to its
watershed because it was sized to store flows from north coast water¬
sheds which were to be diverted by tunnel.

Table 11.
Estimates of Water Availability and Cost on the South Coast
of Puerto Rico (Acre Feet per Year).
Confidence Levels3
Cost
(Dol1ars
per
Acre
Foot)e
Water Source
Averaqe13
90 Percent 95 Percent
Agricultural Water
Lajas irrigation
district0
34,500
24,200
30
South coast irriga¬
tion district01
70,000
44,800
30
Stream diversions
22,000
14,700
2
Ground water
145,000
145,000
12
Municipal Water
Toa Vaca reservoir
11,200
100
Other surface water
8,400
30
Ground water
19,200
16
Industrial Water
Ground water
35,800
16
aThe indicated annual flows will be equaled or exceeded in
the indicated percentage of the years, based on historic data.
^The average does not coincide exactly with the 50 percent
level due to the skewed nature of the distributions.
C1962-1976; total forebay deliveries, including canal losses.
dlS53-1974.
eCur^ent dollars.

139
WITHDRAWALS (1000 AF/yr)
Fig. 48. Supply curve for water for the south coast of Puerto
Rico showing estimated 1975 conditions based on
Table 11, and -the estimated availability of future
supplies. Irrigation supplies are reported at the
90-percent level of confidence.

140
the U.S. Army Corps of Engineers (1977) is also summarized in Fig.
48 as representative of future supply availability. Plan "B" empha¬
sizes the recycling of wastewater, Plan "E" combines recycling with
the construction of surface water reservoirism, and Plan "G" is
based entirely on the development of new surface water supplies. The
development of these new supplies is not anticipated to affect
existing supplies.
Demand Curve for Water
General Considerations
A demand curve expresses the relationship between the cost
of water and the quantity withdrawn. Movements along the curve
reflects changes in the willingness and ability of users to pay for
different levels of water due to changes in price alone. A shifting
of the curve, on the other hand, reflects the effect on demand of
non-price variables such as changing technology, population, income
levels, etc. The demand curve is characteristically downward sloping
due to the decreasing marginal utility associated with increments
in the quanity used (i.e., the highest valued use is satisfied first
and other uses are satisfied in order of decreasing value). If the
demand curve is superimposed on the supply curve their intersection
will occur at the quantity and price of existing use.
If it were possible to construct a valid demand curve and
to project it into the future, then this information could be
combined with the regional supply curve to form a useful model for

141
projecting future resource demand and development needs. This approach
perhaps offers inherent superiority to simple extrapolation models
by explicitly including the important demand constraint imposed by
increasing costs, which extrapolation models may or may not consider.
However, a number of important conditions seriously constrain
the construction of demand relationships of this type for the south
coast of Puerto Rico. The demand curve reflects willingness to pay
over a range of prices and quantities. The actual price paid and the
quantity of water delivered defines only a single point on the demand
curve. Consequently, the slope of the curve (price elasticity) and
the general configuration of the curve as a function of price and
quantity must be imputed from a chracteristically small, if not
miniscule, data base.
The economic cost of water is often not the primary determinate
of demand. Municipal sector demand is influenced by changes in popula¬
tion and income over time; industrial water use is influenced by
increasingly stringent effluent limitations; agricultural use is
influenced by changing crop patterns and irrigation technology. The
extent to which price effects can be separated from these other
effects is questionable.
This section examines water demand, within the constraints
imposed by these limitations, for three sectors: municipal, self-
supplied industry, and agriculture. Primary attention is focused
on agriculture, which accounts for approximately 80 percent of total
fresh water withdrawals on the south coast, and which is anticipated

142
to experience significant changes in water management conditions due
to changing crop patterns and irrigation technology.
Municipal Water
Municipal water is supplied by the Puerto Rico Aqueduct and
Sewer Authority (PRASA), which in the 1940s consolidated the many
separate city systems into a single island-wide public corporation.
This system has been continually expanded until now most persons
on the island are connected to pressurized public supply, and a uniform
rate schedule is applied to all portions of the island.
Demand changes in this sector have been influenced primarily
by the extension of pressurized service to an increasing portion of
the population and by per capita consumption increases associated with
increasing income over the development period (Fig. 49). Changing
development and lifestyle conditions in Puerto Rico suggest that
these factors have had the greatest influence on changing levels of
water demand, and that price effects have been considerably less
important. However, it is not possible to test this hypothesis
because demand changes over time will reflect both price and non¬
price changes. Cross-sectional data are not available because
uniform water rates are applied island-wide.
The sources of municipal water supply on the south coast are
summarized in Table 12. The south coast population is relatively
sparse, incomes are generally low, and consequently in most areas
the withdrawal of municipal water is very small compared to agricul¬
tural withdrawals. The Portugés-Bucaná floodway and reservoir system,

Total Metered Deliveries
Percent (millions of gallons per day)
143
1950 ¡960 ¡970
Y £ A R
Fig. 49. Historical trends of municipal water service in Puerto
Ri co.
Source: Puerto Rico Aqueduct and Sewer Authority
Per Capita Deliveries
(gallons per day)

144
Table 12. Municipal Water Withdrawals on the South Coast for Calendar
Year 1974.
Installation
Groundwater
AF/Year
Surface Water
AF/Year
Guayama
1,086
3,069
Patillas
571
0
Salinas
1,299
0
Santa Isabel
526
0
Juana Dfaz
1,568
0
Co amo
0
1,512
Ponce
7,515
13,362
Guayanilla
829
0
Yauco
123
1,635
Guánica
1,299
0
Rural Independent
4,424
0
TOTAL
19,240
19,578
Source: Puerto Rico Aqueduct and Sewer Authority, 1976.

145
now under construction by the U.S. Army Corps of Engineers, is antici¬
pated to supply a firm yield of 37,000 acre feet/year (33 mgd) to the
Ponce area starting in the mid-1980s. This addition to currently
available supplies is sufficient to meet municipal water demands
through the year 2000 at the projected 3-percent demand growth rate
(Morris et al., 1977). It is assumed that municipal deliveries will
increase at 3 to 6 percent annually in the future.
Industrial Water
Smaller industries on the south coast, as elsewhere on the
island, have tended to rely on PRASA for water supply, and approxi¬
mately 7 percent of all PRASA deliveries are made to industrial
customers. Larger and more water-intensive industries, on the other
hand, have generally preferred to develop ground water for process
uses, though often continuing to rely on public supplies for sanitary
uses. Estimated freshwater withdrawals by south coast industries
are summarized in Table 13.
Only one effort has been made to date to obtain complete
industrial water use data on the island, but that effort was
terminated prior to its completion and was never published by the
original investigators. The available data from that study were
compiled and analyzed by Morris and Barreto (1976) in order to obtain
estimates of per employee water consumption within major industrial
groups. This information, summarized and compared with industrial
water use on the mainland in Table 14, shows that in the heavy

146
Table 13. Estimated 1975 Withdrawal of Water for Self-Supplied
Industrial Uses on the South Coast
Industry Group3
Groundwater
AF/Year
Sugar Mills
Electric Powerb
Petrochemicals
Others
5,600
5,600
16,800
7,850
TOTAL
35,850
industries supplied by the Aqueduct and Sewer Authority are
included under municipal withdrawals in Table 12.
^Make-up water at the Costa Sur and Aguirre plants.

Table 14. Industrial Water Use Intensity in
Mainland Average.
Percentage of
Employment
1‘J72 Covered in
Industry and S.I.C. Codea Employment Survey
20
food
With sugar mills
27,739
48
Without sugar mi 1 Is
20,052
44
21
fubacco
4,508
37
22
Text i les
7,819
77
23
Apparel
39,624
27
24
Wood
1,194
8
25
Furii i turo
3,213
28
26
Paper
1,567
53
27
Printing
2,968
27
28
Chemicals
8,979
53
29
Petroleum
2,181
88
30
Rubber
3,494
33
31
Leather
6,611
59
32
Stone, Clay, Glass
6,250
60
33
Primary Metals
956
73
34
Metal Products
5,247
25
3b
Machinery
2,229
37
36
Elec. Machinery
14,671
32
37
Transportation Eg.
712
0
38
Instruments
6,066
22
39
Mi seellaneous
3,720
37
lotal
with sugar mills
149,748
40
Tutal
without sugar mills
142,061
39
dStandard Industrial
Classification Code.
•‘Millions of gallons
per day.
cAssumed value.
Source
:: Morris and Barreto,
, 1976.
Puerto Rico and Comparison to
Total Withdrawal per
Withdrawals Employee (Gal.)
of Surveyed Puerto Rico Ü.S.
Industries (ingd)k Average Average
19.200
1,430
1,400
10.400
1,170
—
0.438
260
168
0.812
140
644
0.159
20
0.015
150
1,146
0.035
40
79
4.780
5,770
9,762
0.055
70
9.050
1,910
14,584
3.740
1,940
25,157
1.610
1,380
1,439
0.352
90
215
9.340
2,510
1,432
0.731
1,050
11,196
0.314
240
249
0.104
120
421
1 .070
230
264
100c
551
0.137
100
363
0.030
30
175
6Ü.36
Sl.lh

148
industrial sector in particular the intensity of water use is much
lower on the island than is characteristic of mainland industries.
A recent factor of considerable importance in changing water
use intensity has been the implementation of water quality standards,
and it is probable that in recent years the demand effect of changing
costs for raw water have been entirely masked by changes in water use
technology and recycling which have been pursued in the interest of
meeting effluent regulations.
A high degree of uncertainty exists concerning future patterns
of self-supplied industrial water demand. This is perhaps best
illustrated by referring to Fig. 50, which shows the range of
industrial demand projections which have been made for the south coast
by different groups over the past decade. The current industrial
growth outlook is entirely different today than it was in the late
1960s when the promotion of leading heavy industries, including
petrochemical and primary metals complexes, was the anticipated
pattern of industrial development (Adams, Howard and Opperman Con¬
sultants, 1969). Industrial water demand may not grow rapidly,
particularly if future development progrmas focus less intensely
on the attraction of large capital intensive industries, and if the
promotion of these heavy industries is made more difficult by changes
in the island's industrial tax exemption policies. Water demand by
self-supplied industries is assumed to grow at the annual rate of
1 percent in the future.

Industrial Water Demand
(millions of gallons per day)
149
Fig. 50. Comparison of demand projections for industrial water on
the south coast of Puerto Rico which were made over the
period 1968-1976.
Sources: (A) Adams, Howard and Opperman Consultants
(1968); (B) 1970 Fomento projection reported in Morris
(1974); (C) high and low projections by Department of
Natural Resources (Morris et al., 1977); (D) Development
and Resources Corporation (1970); (E) Committee on the
Financing of the Toa Vaca Complex, reported in Development
and Resources Corporation (1970); (F) 1974 Fomento pro¬
jection and reported in Morris (1974).

150
Recreation and Natural Systems
Freshwater recreation on the south coast is neglible. Stream-
flow is intermittent and is characteristically of poor quality.
There is only one natural freshwater body on the south coast, Laguna
Cartagena in the Lajas Valley, which covers approximatley 30 acres.
The water level in this lake is controlled by the Lajas Valley
Irrigation System. Occasional bathing occurs in irrigation ponds,
and bathing and car washing occur at road crossings in the foothills.
Body contact with water in reservoirs is limited, and is discouraged
by the presence of schistosomiasis parasites. Due to these conditions
none of the water management alternatives considered herein are
anticipated to have a significant effect on freshwater recreation.
Water management impacts on south coast ecological systems
are expected to stem principally from reservoir construction and the
diversion of streamflow. The capture and diversion of streamflow can
affect the nutrient budget of downstream marine areas derived of
seasonal flood pulses. However, nutrient deficits created by reduced
flood flows may be compensated for by nutrient enrichment derived
from wastewater effluents and agricultural runoff. Reduced flood flows
and sediment capture in reservoirs could, on the other hand, contribute
to the integrity of coastal ecosystems by reducing the stress on
sediment-sensitive coral reefs. These sediment loads are higher
today than under natural conditions due to erosion-promoting land use
changes. Another obvious, but unavoidable, effect of reservoir
construction is to submerge a portion of a stream and its adjacent

151
lands. The assessment of these impacts is beyond the scope of this
study. It is assumed that these effects are not so large that they
materially affect the selection of water management alternatives.
Agricultural Water Demand
Existing Conditions
Irrigation has been practiced in Puerto Rico for over a
century and extensive irrigation systems were operating by the time
of the First World War. Historic records are incomplete and it is not
possible to determine by what amount irrigation usage has changed
in the past decades. Nonetheless, the available information suggests
that irrigation withdrawals on the south coast are lower now than two
decades ago due to supply decreases attributable to reservoir sedimen¬
tation, physical deterioration of irrigation systems, possible
decreased pumpage of ground water from government-managed farms, and
a cycle of drier years in the past decade which has affected water
availábility.
In 1944 it was estimated that there were 78,000 acres on the
island under irrigation (Puerto Rico Office of Information, 1944).
Furiman and Smith (1951) reported 125,000 acres of sugarcane to be
under irrigation. It is estimated that there are today approximately
70,000 acres in Puerto Rico which receive irrigation at least
occasionally, including 50,000 acres within the three irrigation
districts. Until 1977 an estimated 95 percent of this irrigated
land was planted in sugarcane and the remainder divided among
vegetables, grains, fruit trees and pasture. Starting in 1977

152
approximately 7,000 acres were leased to private growers for the pro¬
duction of non-sugar crops on the south coast near Santa Isabel.
Several thousand acres of sugarcane land on the north coast are also
being leased for the production of rice under irrigation in areas
which were not previously irrigated (by mid-1978 rice production had
not yet begun). All this has occurred as part of the new plan for
island agriculture (Vicente-Chandler, 1978).
Irrigation techniques on most farms have seen essentially
no advance in the past 30 years, and basic approaches toward improving
irrigation efficiency which have been applied throughout the world for
decades are conspicuously absent on most farms. The most fundamental
problems are the lack of water accountability and the design and
operation of the entire system based on low delivery rates of one cubic
foot per second (cfs) or less per irrigator.
In most systems water is obtained from a ditch by the irrigator
and is diverted to individual furrows with a shovel. Turnouts to
individual fields and furrows are made by moving small earthen dams.
The irrigator's judgment is the only device used to measure the amount
of water which is applied to the field. Most farms have no water
measurement devices.
Farm ditches are generally earthen, of small capacity and in
poor condition with their banks being broken, eroded and clogged
with vegetation. High levels of irrigation efficiency cannot be
obtained with a gravity system if adequate land preparation is not
undertaken, but land leveling is only rarely practiced in Puerto Rico.

153
Most fields have irregular slopes and are irrigated without the
benefit of siphon tubes, gated pipe or other delivery systems which
enable each irrigator to handle larger quantities of water.
Predictably, the labor cost of irrigation is very high.
Irrigators working for the Sugar Corporation can apply 6 inches of
irrigation water to 2 or 2.5 acres in a 7\ hour day. This results
in a labor requirement for water application of approximately 6 to
lh hours per acre foot (personal communication, E. Mejfas, Chief
Irrigation Engineer, Central Aguirre, Puerto Rico, 1977). By compari¬
son, a single irrigator in the most efficent gravity systems on the
mainland can handle flows up to 30 cfs, for a labor requirement on the
order of 0.3 to 0.4 hours per acre foot applied (personal communication,
H. Bell, Water Master, Wellton-Mohawk Irrigation District, Yuma,
Arizona, 1976). Overhead and trickle irrigation systems are finding
increased use on the south coast, but during 1978 there were probably
not more than 2,000-3,000 acres regularly irrigated by overhead
systems, and less than 500 acres using trickle irrigation on row
crops plus orchards. The costs of irrigation in Puerto Rico using
different systems which obtain varying levels of water use efficiency
are compared in Table 15.
Water Demand in the Sugar Industry
Production and cost relationships for sugarcane have been
synthesized to determine the level of economic demand which might be
exhibited for this crop and the water management strategies which would

154
Table 15. Comparative Cost of Irrigating Sugarcane on the South Coast
of Puerto Rico; Existing Conditions Compared with Higher
Efficiency Alternatives.
Irrigation Method
and Attainable Efficiency^
Cost per Acre
Applied
to Field
Foot of Water9
Consumptive
Use
Existing Conditions (.40)c
$35.00
$ 88
Furrow Irrigation (.60)^
Siphons and ditch checks on
precision-graded land
36.50
61
Gated pipe on precision-graded land
57.60
96
Sprinkler Irrigation (.60)°*
Big Squirt (sprinkler)
63.20
105
Center Pivot (sprinkler)
64.20
107
Big-Gun Portable (sprinkler)
68.40
114
Drip Irrigation (.85)°*
85.80
101
9Cost of water acquisition not included (current dollars).
^Value in parentheses denotes estimated attainable level of
irrigation efficiency.
cAllison, 1976b.
^Al1ison et al., 1976.

155
appear economically rational. The quantitative model which follows
only accounts for the profit and loss status of the farm operation
and relates production changes only to changes in irrigation regime.
Heavy losses are also suffered in the milling and refining operations,
which account for the balance of the economic losses in the industry.
For this reason the losses described in this model are lower than the
total losses of $500 per acre which have been cited previously.
Farm income. Farm income per acre in sugarcane production is
determined by the tonnage of the cane delivered to the mill, the
sugar fraction obtained from grinding this cane, and the market price
for sugar. The tonnage and the sugar fraction are influenced by
agronomic practices, with the sugar fraction being additionally
influenced by the harvest method since the inclusion of a large
fraction of trash with the harvested cane reduces the efficiency
of the milling operation and the sugar fraction output per unit of
input. Delay in crushing also permits the sucrose to revert to non-
crystalline sugars, again reducing yield.
The portion of the sugar value which is remitted to the farm
is determined by the Sugar Board formula (personal communication,
William Allison, College of Agriculture, University of Puerto Rico,
Mayaguez, 1977):
S = 0.54 + F
where
S = farm share
F = fraction of 96° baume sugar

156
In addition the farm is reimbursed for the vlaue of the molasses, with
each gallon of molasses having a value equivalent to 1.7 pounds of
sugar. A molasses yield of approximately 6 gallons per ton of cane
is normally obtained, and 66 percent of the molasses value is remitted
as the farm share. Accordingly, income from molasses may be treated
as an additional 7 pounds of sugar per ton of cane.
Combining the income from sugar and molasses, farm income per
acre in sugar production may be expressed as
Y = (Q • F • S • K + .07Q) P
where
Y = income (do!1ars/acre)
Q = yield (tons/acre)
P = market price for raw sugar (do!lars/hundredweight)
K = coefficient (20 hundredweight/ton)
Farm costs. Sugarcane production costs may be divided into
growing, irrigation, and harvesting costs. Growing costs include
items such as land, labor, interest, capital investments or improve¬
ments, materials, equipment, and management which are associated
with land preparation, planting, application of nutrients and other
non-irrigation treatments required to bring the crop to maturity.
Irrigation costs include the cost of water borne by the farm plus
the cost of application and the associated labor, equipment, capital
improvements, etc. Harvesting costs are borne by the farm but

157
off-farm transport is charged to the mill. Unit production costs for
sugarcane production on the south coast of Puerto Rico are summarized
in Table 16.
Table 16. Representative Sugarcane Production Costs
on the South Coast of Puerto Rico.
Cultivation
Plant cane
$437/acre
First ratoon
233/acre
Second ratoon
228/acre
Irrigation
Conventional furrow
$45/acre foot
Improved
44/acre foot
Harvest
Hand
$7.00/ton
Cut-load system
3.50/ton
Source: Allison, 1975.
Productivity of irrigation. The response of sugarcane on
Puerto Rico's south coast to moisture inputs has been reported by
Furiman and Smith (1951), Vásquez (1970) and Allison (1976b), as
summarized in Table 17. There is a significant divergence among the
reported values for the ratio of consumptive use to cane yield, which
may be graphed as an envelope of values for the production relationship
with respect to water inputs (curves A, B, C, and D in Fig. 51).

158
Table 17. Reported Values of Consumptive Water Use for Sugarcane in
Puerto Rico.
Yield
(Tons per Acre Foot of Water
Consumptively Used on One Acre)
Treatment Sugarcane Sugar
8 normally irrigated fields3
8.5
1.07
5 test tanks3,b
7.1
1.48
Frequent irrigation until
5 months prior to harvest0
14.8
1.74
Frequent irrigation until
3 months prior to harvest0
14.3
1.65
Infrequent irrigation
throughout growing season0
13.4
1.45
Estimate by Aliisond
13.9
2.09
aFuriman and Smith, 1951.
^Included in this table are only the results in the five (of
nine) test tanks in which the cane remained alive throughout the growing
season. The cane in one tank was severely damaged by insects, and
in the other three died of water stress,
cvásquez, 1970.
dAllison, 1976b.

(tons sugarcane/acre)
155
CROP CONSUMPTIVE USE (W)
(inches of water per crop )
Fig. 51. Production for the response of sugarcane to moisture inputs
on the south coast of Puerto Rico.
MARGINAL PRODUCT dQ/dW (Ions sugarcane/inches of water)

160
By using a quadratic equation to describe the marginal
product curve a third order production equation is obtained
(Gregory, 1971). That is, marginal production may be defined by
4S- = a + bW + cW2
dW
and total production by
bW2 cW3
Q = aW + ~2~ + —+
30 < W < 85
where
Q = total product (tons sugarcane/acre)
W = moisture consumptively used
a, b, c, and d = coefficients
The second and third order equations have been used to
respectively model the marginal and total produce curves for the
response of sugarcane to moisture inputs (Fig. 51). The total product
function falls within the envelope of values reported by Furiman and
Smith (1951), Vásquez (1970), and Allison (1976b). This production
function has been fitted to generate a maximum yield of 70 tons
cane/acre corresponding to the consumptive use of 80 inches of
moisture over the crop cycle, with the availability of moisture in
excess of this level inhibiting yield.
The growth response of sugarcane to inputs of water depends
on the timing as well as the total magnitude of the water available.
Seasonal differences in plant water requirements occur due to

161
differences in weather and the growth stage of the plant. Water re¬
quirements are lower during the winter and are also reduced in the
early growth stages when a large leaf area is not fully developed.
The seasonality of average crop water requirements and the
availability of rainfall on the south coast are shown in Fig. 52.
Consumptive use is adjusted to reflect 85 percent of the maximum
concumptive use rate of sugarcane, and is further reduced to reflect
the lower irrigation requirements for very young cane and of that
portion of the farm which is temporarily fallow (Allison, 1976b).
Curve "A" is drawn assuming average rainfall inputs with 60 percent
irrigation efficiency of rainfall; consumptive use contribution is
21.5 inches/year, and 28.9 inches must be supplied by irrigation.
Curve "B" is drawn assuming reliable rainfall inputs total 30 percent
of average precipitation and contribute only 10.7 inches/year to
consumptive use, and 39.7 inches must be supplied by irrigation. The
irrigation requirement is the difference between the consumptive
use and rainfall curves.
Three irrigation alternatives are considered for the south
coast: conventional gravity, advanced gravity, and drip irrigation.
The conventional irrigation system is that currently in use which
has already been described. The costs for each system were summarized
in Table 15. The improved gravity system has a higher cost per acre
foot applied than the conventional systemJ but increases the irriga¬
tion efficiency which tends to reduce the cost of each acre foot of
‘Capital costs increase and labor costs decrease.

162
MONTHS
Fig. 52. Monthly consumptive use for sugarcane on the south
coast of Puerto Rico, divided into the contributions
from rainfall and irrigation. The irrigation require¬
ment is the difference between the consumptive use
and rainfall curves.

163
consumptive use. The improvements over the conventional system which
are made in the advanced system are: (1) land grading. (2) ditch
improvement, (3) use of siphon tubes, gated pipe or other methods to
permit each irrigator to handle a larger head of water, (4) improving
water allocation between farms having water surplus and deficit, and
(5) increasing on-farm storage capacity. By implementing these
improvements the application efficiency of irrigation water may be
improved to as much as 60 percent (Allison, 1976b). That this level
of efficiency is achievable in a gravity system is also suggested by
Willardson (1972), who noted that the uniformity of application was
the primary variable to control in order to achieve these high
efficiencies. Gray (1971) reported that average irrigation efficien¬
cies of greater than 50 percent on gravity systems are not uncommon
in the western United States.
The third system considered is drip irrigation, which may
be used to attain an irrigation efficiency in excess of 80 percent.
Unfortunately, it is possible that by maintaining continuously moist
soil the efficiency of rainfall utilization may decrease. In all
irrigation systems it is assumed that three feet of annual rainfall
are received and that it has a 30 percent irrigation efficiency.
Net income. From this information it is now possible to
construct additional equations to describe productivity and net income
for sugarcane as a function of water management practices. These
equations may be arranged as an income maximization problem to
Maximize:
Y = (F • S • K + .07) P • Q - (Cp + C-:I + Ch • Q)

164
subject to
W = R • Er + I • Ei
Q = 0.0328 W2 - 2.734xl0"4 W3
Ci = 40 + 100 (E.¡)2-2
Ci < 102
where
= harvest cost (3.5 dollars/ton cane)
C-¡ = irrigation cost (dollars/acre foot applied)
Cp = production cost (300 dollars/acre)
E.j = irrigation efficiency of irrigation
Er = irrigation efficiency of rainfall (0.3)
F = sugar fraction obtained at milling (0.10)
I = irrigation application per crop (feet of water)
P = sugar price (13 dollars/hundredweight)
Q = yield of sugarcane (tons/acre)
R = depth of rainfall (3 feet/year)
S = farm share
W = crop consumptive use (inches)
Y = net income (dollars/acre)
The results of this model, summarized in Table 18, show the effect on
net earnings when various amounts of irrigation are applied using
irrigation systems characterized by differences in irrigation efficiency
and cost.

Table 18. Matrix of Effect of Irrigation Management on Sugarcane Farm Net Income and Yield on the South
Coast of Puerto Rico.
Depth of
Irrigation
(Feet)
Conventional
Gravity
Irrigation
Advanced
Gravity
Irrigation
Drip
Irrigation
Irrigation
0.3
Efficiency
0.4
Irrigation
0.5
Efficiency
0.6
Irrigation
0.8
Efficiency
0.9
16
-126(66)
14
-113(60)
-66(70)
12
-126(53)
-13(66)
-62(70)
10
-155(44)
-21(58)
29(67)
-46(70)
8
-192(34)
-69(47)
18(58)
47(66)
7
-211(30)
-101(41)
-13(51)
38(60)
-28(70)
-51(69)
6
-229(25)
-136(34)
-55(44)
4(53)
20(66)
62(69)
5
-245(21)
-170(28)
-103(36)
-47(44)
6(58)
80(63)
4
-257(16)
-202(22)
-151(28)
-106(34)
-47(47)
31(53)
Note: Net income reported in current dollars per acre and yield in tons cane per acre, using the
notation: profits (tons).

166
The current practice is to apply approximately four feet of
irrigation at a 40 percent irrigation efficiency. However, at this
level of efficiency a break-even yield of approximately 50 tons
cane/acre is required, which may be obtained by applying nearly 10 feet
of irrigation water. This strategy has been used in the past with
some farms reportedly applying as much as 10 feet of irrigation in a
single season (Munson, 1964). However, it appears improbable that
government (or private) sugar forms will be able to achieve profitable
operation, and future irrigation demand by the sugar industry will be
determined by government policy rather than economic criteria.
Water Demand by Non-Sugar Crops
In contrast to the situation for sugarcane, a strong potential
exists for generating high net earnings from a variety of non-sugar
crops. Vegetables, tropical specialty crops, tree crops, traditional
staples, and forage may realize high net incomes if grown under irri¬
gation in Puerto Rico. The process of converting to these crops
has begun but is proceeding slowy due to the lack of local production
and marketing experience. That production of non-sugar crops has not
occurred on a large scale earlier is attributable to a variety of
factors.
The first and perhaps most fundamental constraint has been
the lack of agricultural entrepreneurship. The acquisition of agri¬
cultural lands by well-capitalized mainland corporations and a few
local families for the purpose of producing sugar dramatically de¬
creased the diversity of the local agricultural sector. The plantation

167
form of management effectively separated the owners from the actual
farm operation as landowners leased or sold their lands to the large
corporate farms, creating absentee ownership patterns. This effective¬
ly removed most of the landowners from entrepreneurial roles in
agriculture and led them to develop urban occupations and lifestyles
which today seriously impedes their re-entry into agriculture.
The ability of a landowner to play an entrepreneurial role
has been further inhibited by the land tenure system in which large
undivided blocks of land are passed from one generation of heirs to
the next in condominium, leaving each individual with a relatively
small undivided interest in the land. A potential owner-entrepreneur
would need to convince the majority of the family that they should
abandon the rent payments made by the sugar industry and risk that
income (and perhaps even mortgage the land) in order to venture into
the production and marketing of an unproven crop. In those instances
where the holding is controlled by a single elderly family patriarch
the desire to avoid risk and continue in the traditional sugar lease
can be strong. These conditions, then, largely explain the lack of
entrepreneurship among landowners.
To explain the failure of agricultural entrepreneurs to
arise from elsewhere in the soicety it must be recalled that agricul¬
ture in Puerto Rico represents the "old " whereas industry and urban
occupations represent the "new " and a dramatic departure from the
recent experience of extreme rural poverty. This feeling was rein¬
forced by the essentially exclusive focus of the island's development

168
programs on industry and the virtual exclusion of agriculture. This
problem has been exacerbated by the lack of employment opportunities
in local agriculture, with neither small family farms nor government-
managed planations providing the salaries or opportunity for
advancement needed to attract the island's more capable individuals.
The supply of entrepreneurs in Puerto Rico was small, but
still not absent. However, these few entrepreneurs faced a variety
of problems in attempting to introduce efficient agricultural practices
to the island. Wish and Harrison (1969, p. 171) have summarized some
of the characteristics of agricultural entrepreneurs in Puerto Rico:
We find the innovator is young, well-educated, a foreigner,
and one who utilizes the mass media to a significant degree.
In general, he is well informed; he knows of the govern¬
ment programs set up to help him and his business; and in
addition, he has a knowledge of prices in other areas. He
has traveled more than normal and believes that man can
influence his environment. The harbinger of change is not
the man with a store in the poorest section of town, but
neither is he necessarily the member of the establishment
which bankers sometimes prefer.
Agricultural financing through commercial institutions has been
extremely scarce, amounting to only 1.4 percent of total loans in Puerto
Rico from 1970 through 1977 (Puerto Rico Planning Board, 1978b).
Government-sponsored loan programs have tended to emphasize
established growers with proven crops. The absence of an established
marketing system for non-traditional crops added yet another dimension
to the start-up problem. Local extension support in other than
traditional crops is absent, and the transfer of agricultural knowledge
from other areas to the island's circumstances is a costly undertaking

169
which few entrepreneurs have the resources or patience to bear. Taken
together, these problems have defeated all but a small handful of
entrepreneurs and have maintained their numbers at such a low level
that a critical mass of production ability and demonstration effect
has never been present.
Finally, the critical role played by the government must be
identified. Although the aforementioned problems are difficult to
overcome, they are not insurmountable. However, the additional factor
of the entry of the government into farm management, using tax revenue
to subsidize the plantation system, has been effective in preventing
innovation and change. Not only were landowners receiving rent pay¬
ments, providing no incentive for them to seek alternative agricultural
land uses, but the government discouraged landowners from renting
mechanizable agricultural lands for uses other than sugar production.
A departure from this policy was not made until 1977.
Aggregate Irrigation Demand
A demand curve for irrigation water in Arizona was derived
by Kelso et al. (1973) using linear programming models of representa¬
tive farms to predict the water costs at which the production of each
crop would cease due to reduced net income. The shape of the demand
curve (Fig. 53) reflected that the greatest volume of water was
applied to crops which have low net income and are therefore highly
sensitive to water cost. Increases in the cost of water would reduce
the acreage under irrigation by eliminating the production of the

Water Cost
(dollars/acre foot)
170
Water Demand
(billions of acre feet/year)
Fig. 53. Aggregate derived marginal demand for irrigation water for
all farms in the Salt River Project, Arizona, 1966.
Source: Kelso et al. (1973, p. 129).

171
lower valued crops. Only a small fraction of the total acreage in
Arizona is planted in crops having high net income (i.e., muskmelons,
vegetables, bermuda grass, and cotton) and would be relatively
insensitive to changes in water cost.
The demand curves derived by Kelso et al. (1973) were projected
to impute future irrigation demand based on the assumption that the
acreage in high value crops could not be expanded due to market
restrictions. A similar assumption was made by Dean and King (1971)
for agricultural water use in California. Changes in net income and
production acreage were assumed to occur in response to changing
water price, but not due to non-price factors such as changing agri¬
cultural technology, crop selection, market conditions, government
policy, etc.
However, a demand model of this type cannot be applied to
the south coast of Puerto Rico. The demand for irrigation on the
island is currently determined primarily by the political and insti¬
tutional factors associated with the Puerto Rico Sugar Corporation.
The assumption that crop substitutions will not occur is inapplicable.
The irrigated sector in Puerto Rico is undergoing rapid change, and
the implementation of these changes is a central objective of
government policy (Vicente-Chandler, 1978).
The size of the potential market is not restricted, but is
quite large compared to the irrigated acreage in Puerto Rico.
Approximately 30 million acres are under irrigation in the 17 western
states, of which 1.35 million are devoted to vegetable production

172
(Todd, 1970). Puerto Rico's 50,000 acres under irrigation are small
in comparison. Unlike any part of the mainland, the island is never
affected by cold weather, thereby potentially enjoying a seasonal
market advantage for winter produce and the potential to market
tropical produce in eastern markets. The local market is poorly
penetrated by local growers at this date, despite the transport cost
advantage of $0.03 to $0.10 per pound and the freshness advantage
which local products enjoy over imports from the mainland. Penetration
of the local market may improve.
The combination of these factors suggest that the island's
demand curve for irrigation water may not have a configuration
similar to the curve in Fig. 53. However, the actual configuration
of the demand curve for irrigation is unknown. The short-run curve
is determined by government policy, and the long-run curve will be
determined by unforseeable conditions of policy, markets, and
agricultural production technology. Irrigated agriculture is beginning
to undergo not a marginal adjustment, but rather a fundamental change
which may significantly shift the demand curve. The full impact of
this change is not clearly evident at this point.
It is hypothesized that aggregate irrigation demand on the
south coast of Puerto Rico will not change significantly prior to
the end of the 2Cth century. Plausible scenarios may be suggested
in which agricultural demand either increases or decreases in the
future, but there appears no reason to suspect that they are any more
or less probable than the "no change" scenario.

173
It is further hypothesized that current irrigation water
demand is little influenced by the consideration of water cost. This
author is not aware of any change in irrigation practices on either
government or private farms on the south coast which have been imple¬
mented to reduce the cost of water acquisition. Irrigation management
changes have been implemented for the purpose of decreasing labor
costs or improving moisture control.
Total water demand on Puerto Rico's south coast may be divided
among three sectors: municipal and industrial, private agriculture
(non-sugar crops), and government agriculture (sugarcane). These
three demand sectors are shown in Fig. 54. However, this demand curve
and the supply curve in Fig. 48 cannot be compared directly because
water within the region is not traded in a competitive market, but
depends on patterns of prior appropriation and the spatial distribu¬
tion of water resources with respect to demand centers. Therefore,
the utilization of a region's water resources will not necessarily
occur in the order of increasing costs, even though each user may
develop his privately available supplies in order of increasing cost.
The economic ability to pay for water in the private agricul¬
tural sector is unknown at this time; crop budgets for most irrigated
non-sugar crops in Puerto Rico are highly speculative. However,
considering the available crop budget data, it appears that non-sugar
crops will be able to bear a cost of $25-50 per acre foot.
The economic performance of sugarcane under government
management described previously shows that the demand for water by

PRICE (dollars per Acre Fool)
174
Fig. 54.
IOO
90
30
70
60
50
40
30
20
10
<
to
3
a
<
a.
o
3
3
Lli
X
3
s—
3 a.
O o
S o
<
a
o
lli 3
r- to
< i
> o
£3
1
G0VERNMENT
AGRICULTUR E
(Sugarcane)
100 200 300
QUANTITY (thousand acre feet per year)
400
Aggregate demand curve for water on the south coast of
Puerto Rico.

175
that industry is based on unpredictable government policy. The
government's demonstrated willingness and ability to pay for the water
applied to sugarcane is equal to the average price currently being paid
for that water, which is $17 per acre foot (average of all sources).
It is assumed that sugarcane lands will be converted to non¬
sugar crops at a rate which results in a decrease in the withdrawal
on government farms at the same rate that withdrawal on private
farms is increased. The net result will be a stable level of with¬
drawals, despite potentially increasing water acquisition costs. This
assumption is based on Commonwealth Government policy, which is to
release lands from sugarcane production only as rapidly as successful
private farms can be organized to operate the released acreage. This
policy is aimed at reducing the unemployment effects of agricultural
change (personal communication, Heriberto Martinez, Secretary of
Agriculture, San Juan, 1978).
Changing Pattern of Irrigation Demand
Although the configuration of the future demand curve for
irrigation water cannot be predicted, it is nonetheless possible to
identify several types of water management changes which might
accompany a change from sugarcane to other crops. Four particular
aspects of irrigation demand are anticipated to change: (1) demand
seasonality, (2) size of farms, (3) drought damage potential, and
(4) ability to pay.
The South Coast Irrigation District was designed to deliver
a constant flow of water on a 24-hour year-round basis, this being

the anticipated demand pattern for sugarcane (Munson, 1964). However,
the short crop cycles and the seasonal nature of the fresh produce
market makes it likely that where produce crops replace sugarcane
the maximum acreage will be planted in the winter, while the summer
months may see a reduction of acreage in production plus a shift
toward less valuable crops. This could generate not only a seasonal
pattern of water demand, but also a seasonal pattern in the willingness
of growers to pay for irrigation water. Fortuitously, under this
system the maximum acreage in production would occur during and
inmediately following the wet season, whereas the smallest acreage
and less valuable crops would be grown in the drought-prone summer
season.
The consolidation of smaller production units into large
plantations has, over the decades, resulted in only three farms
managing all sugar production on the south coast. The smallest of
these three farms encompasses 10,000 acres. In contrast, produce
farms are anticipated to be much smaller, with individual farms
probably ranging from 100 to 1,000 acres in size. Whereas the large
sugar farms could shift water deliveries from one area to another as
the need arose, the division of these lands into smaller farms may
reduce this flexibility. Combined with the anticipated seasonal nature
of production on some farms, the potential need for a water transfer
mechanism is suggested.
A third difference between sugarcane and non-sugar crops is
their response to water stress. Fruits and vegetables have a

177
consumptive use pattern which varies as a function of season and crop
maturity. A water stress suffered for even a short period during
fruiting will greatly reduce the yield and marketability of these
crops. In contrast, sugarcane will experience retarded growth during
a period of water stress but will not be rendered unmarketable, and
the subsequent reapplication of water can reinitiate growth (personal
communication, E. Mejias, Chief Irrigation Engineer, Central Aguirre,
Puerto Rico, 1977). The incentive to maintain adequate water applica¬
tions to tree crops will also be greater than in sugarcane, since the
stream of earnings spread over several years could be affected by
drought damage. Thus, in contrast to having a single crop with a uni¬
form damage function, irrigated lands may be planted in a variety
of crops having different damage functions which vary seasonally.
This again suggests the desirability of an efficient water transfer
mechanism among farms.
The final difference between sugar and non-sugar crops is
earnings ability. Whereas sugarcane appears to be unable to generate
positive net earnings under the management practices which are fore¬
seeable on the south coast, twelve new farms encompassing 7,000 acres
were privately financed in 1978 under the anticipation that the private
irrigated agricultural sector will be able to create sufficient earn¬
ings to bear the full cost of water, as well as to generate substantial
net income. This is an important factor inasmuch as it provides the
economic wherewithal to undertake the necessary changes in irrigation
supply and management on the south coast which is needed to support
growth in the private sector.

173
In the following section a simple model is formulated to
examine some of the possible hydrologic implications of these
changing conditions of agricultural water use.
Water Management Model
Changes in irrigation regime may significantly alter condi¬
tions in the south coastal aquifer. Although a passive analog model
of the south coast has been constructed and used to examine a variety
of water management conditions (Bennett, 1976; Heisel and González,
1976), the effect of major changes in irrigation regime has not been
investigated to date.
A simple water and salt budget model is constructed below
which may be used to examine various scenarios of change in irrigation
consumptive use, rates of municipal and industrial withdrawal, and
rate of artificial recharge. This model shows, in an aggregate manner,
those conditions which can result in unfavorable long-run water and
salt balances.
In assuming a uniform aquifer, as this model does, important
water quality differences with respect to-depth and location are
ignored. Nonetheless, even this aggregated model represents the
overall effect of hydrologic changes which a changed irrigation
regime may produce. It is plausible, however, that recurrent extreme
hydrologic events could inhibit movement toward the predicted steady-
state conditions.

179
Safe Yield Criteria
Two factors constrain the sustainable yield from coastal
aquifers: saline intrusion and mineralization of ground water as salts
from irrigated soils percolate downward. A net seaward hydraulic
gradient must be maintained not only to prevent saline intrusion but
also to continuously flush accumulating salts from the aquifer,
thereby maintaining a favorable salt balance. The safe yield may be
computed based on the difference between total recharge and the amount
of subsurface discharge required to prevent saline intrusion, or
on criteria of maintaining a favorable salt balance, whichever is more
constraining.
The safe yield for island aquifers has been computed by Black
and Veatch Engineers (1977) based on average recharge conditions and
using the criteria that saline water should not be permitted to
intrude more than 1,000 feet inland utilizing the Gyzen-Herzberg
relationship (DeWiest, 1965). According to this criterion most of
the south coast aquifer areas are already fully utilized or overdrafted
(Table 19).
Water and Salt Budget
A generalized water budget for south coast aquifers is
summarized in Fig. 55. An estimated 40 percent of all irrigation
withdrawals from ground water sources, and 50 percent of surface
water irrigation withdrawals, appear as aquifer recharge either as
seepage from the conveyance system or from the farm. Black and Veatch

180
Table 19. Summary of Estimated Subsurface Discharge and Development
Potential of Selected Aquifers.
Aquifer Area
Existing Subsurface
Discharge to Sea
(AF/Year)
Minimum
Discharge
(AF/Year)a
Development
Potential
(AF/Year)^
Humacao
4,500
300
4,200
Yabacoa
(-2,500)
1,000
overdrafted
Guánica
9,300
2,500
6,800
Yauco
(- 200)
300
overdrafted
Guayanilla
(- 400)
1,100
overdrafted
Penuelas
1,900
1,900
0
Ponce
8,100
14,800
overdrafted
Juana Diaz
14,300
9,200
5,100
Santa Isabel
22,300
21,300
900
Salinas
10,900
14,200
overdrafted
Guayama
12,400
9,500
2,900
aBased on aquifer transmissivity and the requirement to
maintain sufficient hydraulic gradient to prevent saline intrusion
more than 1,000 feet inland.
^Computed as the difference between existing and minimum
safe discharge.
Source: Black and Veatch Engineers, 1977.

r
ASA WRA OTHER
Fig. 55. Aggregate water and salt budget model of estimated 1977
conditions in the aquifers on the south coast of Puerto
Rico, from Guánica to Patillas. Surface water supplies
are from the Aqueduct and Sewer Authority (ASA), Water
Resource Authority (WRA), and private stream diversions
for irrigation (OTHER).

182
Engineers (1977) estimated that deep percolation of irrigation water-
accounts for 36 percent of all aquifer recharge. The remainder of
this irrigation water is evaporated from crop and non-crop surfaces.
The flows in Fig. 55 have been adjusted from the ground water
budget prepared by Black and Veatch Engineers (1977) to include a
component of ground water recharge from municipal and industrial use
(i.e., from wastewater drainfields and exfiltration from water and
sewer lines). It is estimated that 30 percent of all municipal
withdrawals and 5 percent of all industrial (ground water) withdrawals
currently appear as aquifer recharge.
The second constraint on ground water utilization is that
imposed by deleterious changes in water quality. The level of
dissolved solids in south coast ground water ranges from 300-600 mg/£
(Black and Veatch Engineers, 1970). The elevated solids content of
ground water reflects the (1) solution of minerals in the soil column
by percolating water, (2) leaching of the salts deposited in the upper
soil layers by evaporated irrigation water, and (3) dissolved solids
contributed from percolating municipal andindustrial wastewaters.
The tendency for dissolved solids to accumulate in an aquifer is
counteracted by the continual removal of mineralized ground water
via seepage into the ocean or the withdrawal of mineralized water
from wells and the subsequent discharge of this water into the ocean.
However, ground water withdrawals which percolate back into the aquifer
after having been used for irrigation or other uses have a signifi¬
cantly higher dissolved solids content than the water which was with¬
drawn, thereby increasing the salt concentration in the aquifer.

183
The estimated salt concentration of each component of ground
water recharge and discharge is also shown in Fig. 55. These com¬
ponents of recharge and discharge may be combined in a simple model
which may be solved for the steady-state value of dissolved solids
under specified conditions. Alternatively, this model may be solved
iteratively to show the pattern of changing hydrologic conditions,
given a pattern of changing withdrawals, recharge rates and water
quality.
Model Assumptions and Equations
The generalized water and salt balance model for the south
coast aquifer is constructed based on the following estimates and
assumptions:
1. There is no indication that a long-term increase
in soil salinity is occurring on the irrigated
lands on the south coast. This results from the
generally adequate drainage of these alluvial
soils, plus sufficient deep percolation as a
result of existing irrigation practices and
seasonally heavy rainfall. Therefore, the entire
salt load in irrigation water is assumed to be
carried into the aquifer.
2. The average water quality of streams recharging
the aquifer is taken to be 250 mg/¿ (Table 20).
It is assumed that the percolating streamflow

Table 20. Total Dissolved Solids in Selected Streams on the South Coast of Puerto Rico.
Total
Dissolved
Solids
(mg/£)
a
Total
River
1968
1969
1970
1971
1972
All
Samples
No. of
Samples
Río Coamo
274
318
291
330
338
309
35
Rto Descalabrado
300
295
__b
__b
__b
299
7
Rio Toa Vaca
209
237
248
__b
b
266
19
Rio Jacaguas
378
213
368
__b
— b
322
4
Rio Inabdn
143
151
165
146
180
152
30
Rio Tallaboa
(at Peñuelas)
188
159
192
233
b
188
27
Rio Guayanilla
245
217
233
251
238
238
35
Rio Loco
b
__b
275
454
269
332
9
Average of all rivers
248
227
253
283
256
238
166
aEach entry is the simple average of all samples collected for each stream
each calendar year without consideration of flow rate.
t>Not sampled.
Source: Water resources data for Puerto Rico, part 2a: Water quality records 1968-
1972. U.S. Geological Survey, San Juan.

185
acquires an additional 50 mg/2, of solutes prior
to reaching the aquifer.
3. Estimates of municipal and industrial withdrawals
were shown in Tables 12 and 13, respectively.
The once through use of municipal water is
estimated to contribute 200 mg/l of solids to
the wastewater stream,1 and it is estimated that
30 percent of all municipal withdrawals and
5 percent of all self-supplied industrial ground
water withdrawals appear as aquifer recharge of
degraded quality.
4. In the aquifer itself it is assumed that all
dissolved solids are conserved, with neither
solution nor precipitation processes occurring.
The ground water withdrawn for all uses, plus the
ground water which appears as subsurface discharge
to the ocean, is assumed to have an average solids
concentration equal to the average solids level in
the aquifer, which is currently estimated to be
450 mg¡I (Black and Veatch Engineers, 1970).
5. Recharge from irrigation, streamflow and
rainfall are those reported by Black and
^U.S. Geological Survey studies in San Juan have shown that
the dissolved solids in municipal water increase by approximately
200 mg/2, between the raw water intake and the sewage treatment
plant (personal communication, Ferdinand Quinones, U.S. Geological
Survey, San Juan, 1977). Similar conditions are assumed to obtain
on the south coast.

186
Veatch Engineers, 1977), as summarized in
Table 21.
Model equations may be constructed for computing the discharge
rate from the aquifer to the ocean and the concentration of dissolved
solids in the aquifer by iterative solution. These equations are
described below with time-variant parameters being identified with
the time subscript "t".
The water budget equations are solved for conditions of no
change in storage:
= 0 = £ Inputs - E Outputs
dt
d V _
dt " s
R +
.R +
aRt +
mRt +
oDt
This mass balance is solved for the rate of ground water discharge to
the ocean over time (0Dt), to determine if minimal criteria for net
seaward discharge of 76,000 AF/year are being met (Black and Veatch
Engineers, 1977). The equations are
aRt =
gct
aD + sGt *
mRt
m^t
UDt + mst^
.R. =
.0 •
.D
i t
i t
i t
SR = 161.000
rR = 13,000

187
Table 21.
Recharge of South
Feet/Year).
Coast Aquifers
by Source (Acre
Aquifer
Intercepted
Streamflow
Direct
Precipitation
Irrigation
Return
Total
Guánica
15,000
400
5,400
20,800
Yauco
3,700
400
2,700
6,800
Guayanilla
9,500
1,000
4,100
14,600
Peñuelas
9,500
800
2,700
13,000
Ponce
18,600
2,300
17,000
37,900
Juana Diaz
22,100
1,700
14,700
38,500
Santa Isabel
38,400
1,700
21,000
61,100
Salinas
25,900
2,000
16,600
44,500
Guayama
17,600
2,800
7,500
27,900
Arroyo
0
200
4,500
4,700
Patillas
0
0
1,500
1,500
TOTALS
160,300
13,300
97,700
271,300
59%
5%
36%
100%
Source: Black and Veatch Engineers, 1977.

138
where
mDt = 20,000 • (1 + gG)T
iDt = 35,000 • (1 + iG)T
mSt = 23,000 • (1 + sG)T
9Ct
m^t =
s^t
aD =
iDt =
mDt =
oDt =
nG =
: G =
-G =
aRt
recharge coefficient for irrigation from ground
water sources (values in Table 22)
recharge coefficient for industrial water from
ground water
recharge coefficient for municipal water from all
sources (values in Table 22)
recharge coefficient for irrigation from surface
water sources (values in Table 22)
agricultural discharge from wells (AF/year)
industrial discharge from wells (AF/year)
municipal discharge from wells (AF/year)
ground water discharge to the ocean (AF/year)
growth rate of municipal ground water withdrawals
(values in Table 22)
growth rate of industrial ground water withdrawals
(values in Table 22)
growth rate of municipal surface water withdrawals
(values in Table 22)
= recharge from agriculture (AF/year)

Table 22. Parameters for Hydrologic Model Scenarios.
Irrigation
Ground
Irrigation
Surface
Withdrawal Growth Ratesb
Scenario
Municipal
Recharge
Coefficient
mQt
Water
Recharge
Coefficient3
gct
Water
Recharge
Coefficient3
sCt
Municipal
Surface
Water
Municipal
Ground
Water
9G
Industrial
Ground
Wcjter
Standardc
0.3
0.40
0.50
0
0
0
A
0.3
0.40-0.25
0.500.35
0
0
0
B
0.3
0.400.25
0.500.35
0.03
0.03
0.01
C
0.5
0.400.25
0.500.35
0.06
0.03
0.01
D
0.5
0.400.25
0.500.35
0.03
0.03
0.01
E
0.5+0.75d
0.400.15
0.500.25
0.03
0.03
0.01
F
0.5+0.75d
0.400.15
0.500.25
0.06
0.03
0.01
aThe irrigation recharge coefficient in scenarios A-F begins at the standard value and decreases by
0.01 unit per year to the value shown in the table. Lower coefficients correspond to higher irrigation ef¬
ficiency.
DRate of exponential growth.
cSolution for steady state defined by existing conditions.
^Coefficient increases from the initial to final value at 0.01 units per year.

190
|FL = recharge from industrial use (AF/year)
mRt = recharge from municipal use (AF/year)
rR = recharge from rainfall (13,000 AF/year)
SR = recharge from streamflow (161,000 AF/year)
aS = agricultural surface water withdrawals (AF/year)
mSt = municipal surface water withdrawals (AF/year)
T = time (years)
V = volume of water stored in aquifer (assumed constant
and estimated to be 1.6x10^ acre feet)
The recharge coefficients define the fraction of withdrawals from a
particular source which is estimated to reappear as aquifer recharge.
The solids budget is computed at each time step using flow
values from the water budget equations. The solids budget equations
are solved for the average level of dissolved solids in the aquifer
(Zt) by
n = n + —
Vi wt At
and
Z
t
Qt
W • K
where
vr = £ inputs - 2 outputs

The equations are, for agricultural water
axt = aYt = aD • zt ’ K
for municipal water,
m^t
(Zt + M) • mDt + (SZ + M)
m
h = Zt • mDt • K
for industrial water,
,xt = (Zt + H) • ,Dt * i'C • K
iYt = Zt • ,Dt • K
for stream recharge,
SX = SR • (SZ + N)
for recharge from rainfall,
rX = rR • rZ
for discharge to the ocean,

192
where
K = constant (1.359x10"3 short tons/AF ppm)
M = solids added by once-through water use (200 ppm)
N = solids added to percolating surface water (50 ppm)
Q = solids content of aquifer (short tons)
aXt = salt input from irrigation (short tons)
aYt = salt withdrawal via irrigation wells (short tons)
mXt = salt input from municipal recharge (short tons)
mY^. = salt withdrawal via municipal wells (short tons)
.¡Xt = salt input from industrial recharge (short tons)
-¡Yt = salt withdrawal from industrial wells (short tons)
SX = salt input from stream recharge (short tons)
rX = salt input from rainfall recharge (short tons)
QYt = salt loss via aquifer discharge to ocean (short tons)
Zt = average solids concentration in aquifer (ppm)
rZ = solids concentration in rainfall recharge (100 ppm)
SZ = solids concentration in surface water supplies (250 ppm)
Water Resource Scenarios
New regional development strategies could promote the creation
of private farms and the withdrawal of government from agricultural
field operations. Scenarios are generated to reflect some of the
water management changes (primarily increased irrigation efficiency)
which may accompany the conversion from government to private agricul¬
ture on irrigated lands. Also included in these scenarios are different

193
levels of municipal and industrial withdrawal and recharge which are
not necessarily linked to any particular development policy.
Logical scenarios for private sector agriculture can be
constructed which use more or less water than currently used by
sugarcane, depending on the selection of crop cycles and assumptions
of future acreage under irrigation. The scenarios in this section
all assume that aggregate irrigation withdrawals will remain at the
existing level and that only changes in irrigation efficiency^ will
occur.
The types of water management changes which are expected to
accompany conversion from government sugar plantations to private
farming on irrigated lands have already been discussed and may be
summarized as:
1. Division of three government-managed plantations
into perhaps 100 smaller independently managed
private farms, thereby erecting barriers to the
transfer of irrigation water from one area to
another.
2. Changed seasonality in aggregate water demand,
value of crops, and willingness to pay for irri¬
gation.
3. Non-uniform drought damage function among farms
and seasons, with generally increased drought
damage potential.
^Fraction of withdrawals which are consumptively used (i.e.,
evaporation plus transpiration).

194
4. Improved ability to pay for water.
5. Increasing irrigation efficiency.
The values of input scenarios are summarized in Table 22. The
"standard" scenario is a solution of existing conditions for the
steady-state concentration of dissolved solids. All other scenarios
embody increases in irrigation efficiency and changing flow rates.
The irrigation efficiency increases in scenarios A-D correspond to
implementation of improved gravity irrigation and occasional use of
drip and overhead irrigation, whereas scenarios E and F correspond
to the widespread use of drip and overhead irrigation, thereby in¬
creasing consumptive use to higher levels.
Model Results
The model output is summarized in Fig. 56. The dashed line
in the figure represents the minimum level of discharge estimated
necessary to prevent saline intrusion by Black and Veatch Engineers
(1977). The kinks in the graphs of discharge at year 15 occur because
in this model irrigation efficiency (qCt and sCt in Table 22) is
assumed to increase for only a limited number of years.
The standard scenario shows that a gradual increase in dis¬
solved solids may be occurring which could eventually increase the
average solids level from 450 mg/2, to approximately 550 mg/2, in the
aquifer. Considerably higher levels of future dissolved solids are
produced in all other scenarios, which are all characterized by
significant increases in irrigation efficiency. Scenario "A" shows

TOS (mo/I) T 0$ (mfl/|)
195
Fig. 56. Solution of hydrologic model for the scenarios of recharge
and discharge in Table 22 showing changing levels of
aquifer dissolved solids and average annual discharge to
the ocean.

196
that only moderate increases in irrigation efficiency (which reduces
recharge from irrigation by 15 percent of withdrawals), even though .
not accompanied by increased aquifer withdrawals, can result in a
deleterious aquifer balance. This condition is worsened if, as shown
in scenario "B," ground water withdrawals continue to increase.
An acceptable overall water balance is achieved only in
scenarios "C" and "F," in which the development of new surface water
sources for municipal and industrial uses is emphasized and a major
portion of this water appears as aquifer recharge. The recharge of
this surface water also constrains the dissolved solids level in
these two scenarios.

CHAPTER V
DISCUSSION
The objectives and patterns of development in Puerto Rico
are discussed in this chapter, examining whether the criteria cur¬
rently used to select from among policy alternatives accurately
reflect the long-run regional goals. In particular it is questioned
whether the dual operational criteria of income maximization and the
generation of industrial employment are adequate for use as policy
selection criteria in Puerto Rico.
The effect of regional policy changes aimed at promoting
local entrepreneurship are examined in the irrigated agricultural
sector. These new policies could result in the conversion of
large irrigated acreages from government to private management. The
hydrologic effects of these management changes were described in
Chapter IV. In this chapter are described changes in water management
institutions which can facilitate efficient resource management under
these new conditions, maximizing the utility of the resource to its
users while protecting against degradation from over-exploitation.
Development Objectives—
Development objectives in Puerto Rico may be aggregated into
four broad categories:
1. Increased income and consumption
197

198
2. Abolishment of poverty
3. Promotion of regional economic self-reliance
4. Preservation or enhancement of environmental,
social, cultural, and amentiy values
However, Puerto Rico has not moved toward the satisfaction of all four
of these goals simultaneously. The tools used to achieve income
increases and abolish poverty have, in turn, greatly increased economic
dependency. Industrialization has been based on imported financial
and entrepreneurial resouces, and income assistance programs are
generously financed by the federal government. Furthermore, the
island's growing income stream is not being used to reduce this
dependency. Rather, income increases in Puerto Rico are being accom¬
panied by a regularly decreasing savings rate (recall Fig. 28) and
federal transfers to the island continue to grow rapidly.
Although the reliance on capital importation may be a necessary
instrument for initially achieving a high rate of economic growth, the
continual heavy dependence on this instrument at later stages is not
consistent with the attainment of a fully developed economic system.
The failure to develop a strong local investment sector has resulted
that most of the island's productive assets, and the income therefrom,
are the property of non-residents. Lewis (1963, p. 198) noted that,
"The old type sugar absenteeism has merely been succeeded by a new
type of industrial absenteeism. The absentee landlord of the old days
has been replaced by the absentee shareholder of the new."

199
Growth in employment and income continue to be the primary
goals of government policy. The importance of providing industrial
employment is summarized by Rivera-Ríos (1978, p. 17):
Since the beginning, Fomento has promoted almost any
firm that showed an interest in Puerto Rico. There
has been some criticism of that policy, on the ground
that Puerto Rico should exercise greater care in going
after industries that promise greater benefits. How¬
ever, there is considerable competition among developing
areas and Puerto Rico still needs every job it can
generate.
Far greater importance is placed on increases in income than
on the goal of regional economic self-reliance. This is suggested by
the curious combination of policies under the Hernández-Colón ad¬
ministration J While that administration was attempting to gain
increased political and economic self-sufficiency for the island in
its negotiations of a "Compact of Permanent Union" with the federal
government, it simultaneously initiated the federal food stamp
program in Puerto Rico. This latter action has made the population
much more dependent on rather than independent of the mainland.
It is also revealing that perhaps the most vigorously
contested issue with respect to the island's future political status
hinges on the effect that statehood, commonwealth and independence
would have on income, and particularly on whether the payment of
federal income taxes would be more or less than offset by the
additional transfer payments which would accrue to the island if
treated as a state under federal expenditure programs.2
^Popular Democratic Party Governor, and proponent of common¬
wealth status.
^Puerto Ricans do not now pay federal taxes, yet are eligible
for most federal expenditure programs. In some of these programs

200
If economic self-reliance has been virtually ignored as a
criterion for policy decisions in preference to rapid income increases,
can it in fact be a legitimate and important social goal?^ Its
importance depends on the type of participation which Puerto Rico
desires in the United States and global economic systems.
Ownership of productive resources embodies power and control.
If the absence or presence of Puerto Ricans in economic decisions
is important, then ownership becomes important. If Puerto Rican
participation in the profits from island business is deemed important,
then again ownership is important. However, if it is considered of
little importance that Puerto Ricans should exercise significant power
in the private sector of the island economy, then the reliance of
non-resident entrepreneurs is not necessarily an unfavorable policy.
Although economic self-reliance and the widespread participa¬
tion of Puerto Ricans in the island economy in ownership roles has
been stated to be an important goal of development (see page 38),
movement toward this objective has been highly constrained by short-
run political considerations which emphasize the achievement of income
increases by whatever means may be available.
payments to the island are limited by law to levels lower than for
states. Studies to date indicate that increased taxation would more
than offset increased federal expenditures, and that a net decrease
in disposable island income of approximately 500 million current
dollars would accompany statehood (Keifer, 1977).
^Statehood advocates may view the growing dependency of the
island on the mainland as favorable. Closer ties to the mainland,
including statehood, are seen as the best way for the island to
achieve prosperity and guaranteed political stability.

201
Alternative Development Patterns
The regional model suggests that there may be alternative
development patterns which differ to a rather small degree in levels
of income, but which contrast markedly in the measure of economic
self-reliance. If increased economic self-reliance is to be sought,
then the patterns of development suggested by scenarios "C" and "D"
(Fig. 43) are probably superior to the patterns reflected in
scenarios "A" and "B." These latter scenarios predict that a con¬
tinuation of the post-war development trends may in fact produce
relatively low long-run unemployment rates (i.e., less than 10 per¬
cent), accompanied by increasing levels of income (Figs. 44 and 45).
However, the island's productive capital will be externally owned
and Puerto Ricans will not participate to a significant extent in
the local economy in an ownership role. Transfer payments may continue
to increase, suggesting that the art of living on welfare may become
a firmly entrenched lifestyle.
Feasibility of Development Alternatives
The mere projection of alternative growth patterns using a
mathematical model does little to answer questions concerning the
feasibility of implementing one or another of these alternatives. A
variety of highly uncertain conditions influence the potential for
future growth in Puerto Rico and the economic and political feasibil¬
ity of significantly altering development patterns.
No scenario applied to the regional model has considered the
potential for growth to continue at the historic (i.e., pre-1973)

202
rates. It is postulated that global and national economic effects of
decreasing energy availability and the changing relative competitive
position of Puerto Rico will produce these reduced rates of economic
growth.
Long-run resource constraints. The industrial age has been
characterized by exponential growth. Although it is physically
impossible for exponential growth to be maintained indefinitely on
a planet of finite resources, few are willing to consider that real
constraints on economic growth may be proximate due to the scarcity
of energy or other resources. It has been widely argued that our
current inability to foresee technological breakthroughs does not
indicate that they will not occur. Rather, it is argued that tech¬
nological advance, when combined with product and factor substitutions,
will be sufficient to maintain increases in per worker productivity
for a "long" time, as has been the case for the first two centuries
of industrialization (Barnett and Morse, 1963; Cole et al., 1973;
Nordhaus, 1974; Peterson and Fisher, 1976; Samuel son, 1976; Shapiro,
1974; Solow, 1974).
Economic production is achieved by performing work, which
requires the flow of energy. This implies that the level of energy
availability per worker is intimately linked to the attainable level
of per worker productivity. Darmstadter (1971) has documented this
empirical relationship between energy utilization and economic per¬
formance in industrial economies.
Energy does not have the same substitution flexibility as
other resources. Rather, its level of availability acts as a

203
potential limiting factor on economic production (Odum, 1971;
Georgescu-Roegen, 1975). If technological advance cannot continue
to provide increasing levels of energy flow per worker, then the
historic trend of increasing per worker productivity will be con¬
strained. The reversal in the price trend for energy in the 1970s
is an indicator that the relative availability of energy is decreas¬
ing, suggesting that future productivity gains will be constrained
rather than augmented by the trend of energy availability. This
reduces the feasibility of pursuing a regional development program
which attempts to achieve long-run growth in the historic pattern.
In addition to technological scarcity effects there are
obviously ramifications for international political and economic
stability associated with the changing geography of energy supply.
An economic perturbation associated with this type of instability
is applied in Scenario "B" of the regional model. If national or
global economic conditions deteriorate the island economy can be
expected to suffer correspondingly.
Changing regional competitiveness. The relative competitive
position of Puerto Rico in attracting investment resources is the
second important determinate of the island's economic growth poten¬
tial. Although the island has attracted a growing fraction of total
mainland investment resources over the post-war period, it is not
clear to what extent this trend is dependent on the island's unique
status as a region of the United States where industries may be

204
exempted from both local and federal income taxes. If the island
viere to become a state this advantage would be lost; the effect on
industrial growth cannot be guessed at this point.
A variety of factors in addition to tax exemption had in¬
creased the island's attractiveness for industrial investment, such
as the low cost of inputs such as labor and energy. However, the
costs for both of these inputs have risen more rapidly in Puerto Rico
than on the mainland in the past decade. Other salient factors
include the increasing economies of agglomeration in Puerto Rico's
industrial sector and changes in the intensity of promotion effort.
A variety of these factors are discussed by the Puerto Rico Develop¬
ment Administration (1975).
These and other conditions (i.e., increasing wages, increased
energy costs) could extend the reduced rate of growth in the 1970s
into the long run. Under these conditions of reduced growth rates
the development tools and growth patterns on which the island's
post-war development policies have been based may become less effective
and new patterns of policy focus may provide greater long-run
satisfaction.
Alternative Development Patterns in Agriculture
That alternative development patterns may exist does not
demonstrate that they may be feasible in all respects. For example,
the government support of the sugar industry has proven to be
politically feasible, but not economically so. Can local entrepreneur-
ship be successfully developed, and if so, what policy tools are
appropriate?

205
To address this question in the context of all sectors of
the economy would clearly be far beyond the scope of this study.
Rather, this question has been addressed only for the irrigated
agricultural sector, which is undergoing rapid changes having sig¬
nificant implications for water management on the island's south
coast.
A potentially important area for the development of local
entrepreneurship is the agricultural sector. A strengthened agri¬
cultural sector would also aid the island's balance of trade position;
the island imported 980 million (current) dollars worth of food in
1977. Agricultural development has lagged historically as the produc¬
tion of non-sugar crops has been restricted largely to the island's
sloping soils while the island's prime mechanizable lands have been
retained in sugar production. Subsidy programs have not made local
agriculture viable, even though the combined budget of agriculture
agencies in Puerto Rico is now greater than the net income from
agriculture.^
Agriculture on the south coast is dependent on irrigation,
and water management improvements are intimately tied to agricultural
development in this area. Most irrigated land is planted in sugarcane
on three government-managed plantations, the smallest of which covers
approximately 10,000 acres. The government-owned Puerto Rico Sugar
Corporation sustained losses of more than $70 million island-wide
^The 1978 fiscal year budget for agricultural agencies in
Puerto Rico is $356 million (Vicente-Chandler, 1978), and the net
income from agriculture in 1977 was $325 million, in current dollars.

206
in 1976 (over $500 per acre), and the same level of loss is projected
for 1977 (Vicente-Chandler, 1978).
The desirability of converting from government plantations
to efficienly sized private farms is suggested by the development
model formulated in this research, based on the need to promote
locally owned production and business profits for re-investment.
The opportunity for the development of a profitable modern
agricultural sector is present in Puerto Rico. And, as events of
the past two years are demonstrating, it indeed appears feasible to
promote agricultural entrepreneurship on the island.
Constraints on agricultural entrepreneurship in Puerto Rico
were discussed in Chapter IV. The government's new agricultural
program appears to have focused correctly at some of the more
severe impediments by: (1) making available mechanizable irrigated
land for the production of non-sugar crops, and (2) providing loan
guarantees to commercial banks for investment in the modern agricul¬
tural sector and licensing the Bank of America to operate in Puerto
Rico, an organization specializing in agricultural credit. The need
for improved agricultural credit institutions has been long recognized
(King, 1953). These incentives have created a dozen irrigated farms.
These farms may provide an important basis for promoting agricultural
development on the island if a sufficient number of them can
financially survive the initial period of "commercial experimentation"
required to develop the practical aspects of an agricultural technol¬
ogy which is new to the island.

207
Resource Implications of Agricultural Change
Management Changes
Irrigation accounts for approximately 80 percent of all
fresh water withdrawals on the south coast. The model constructed
in Chapter IV showed that changing patterns of agricultural management
can greatly affect the south coast's irrigation and hydrologic
regime. All water use sectors on the south coast rely heavily on
ground water. However, the changes in irrigation practices which are
expected to accompany agricultural change should significantly increase
irrigation efficiency (i.e., increase the fraction of withdrawal which
is consumptively used), thereby reducing considerably the ground water
recharge from irrigation percolation. This creates the potential for
both saline intrusion and increasing dissolved solids levels in the
aquifer.
Increases in irrigation efficiency will pose difficult water
management problems, particularly if highly efficient techniques
(such as drip irrigation) are applied on a large scaled Each 1.3
percent increase in consumptive use of irrigation water will reduce
total recharge to the already heavily drafted aquifers by approximately
1.0 percent (2,850 AF/year).
To the extent that current souces of recharge are reduced
by the increasing consumptive use of irrigation water, it will be
^Water savings is not the primary reason for implementing
drip irrigation. Although drought was instrumental in the rapid
conversion of large acreages in California to this water-efficient
method of irrigation, in converstaion with the author (September 1977),
vegetable farmers in San Diego County, California, stated that they
would continue to use drip irrigation regardless of water cost due to
the enhancement in crop yield and quality which were provided by

208
necessary to provide replacement recharge from surface water sources.
Alternatively, an increasing fraction of the total water supply could
be provided from surface water sources, thereby reducing ground
water withdrawal rates. Because the agricultural sector is the
predominant water user on the south coast this necessarily implies
that new surface water supplies will be needed for agriculture or
ground water withdrawals will need to be reduced (if anticipated
future demand conditions occur).
A variety of water supply, conservation and reuse alternatives
have been shown to exist on the south coast (Black and Veatch Engineers,
1977; II.S. Army Corps of Engineers, 1977). The technical feasibility
of recharging wastewater via irrigation is well known and is currently
being investigated by the U.S. Geological Survey on a pilot scale at
Ft. Allen on the island's south coast. The hydrologic effects of
large-scale wastewater recharge projects on the south coast have been
examined by Heisel and Gonzalez (1976) using an electric analog model.
With technical feasibility demonstrated the problem is to
identify an economic-institutional framework which will function to
select and implement one of the technically feasible alternatives.
These water management changes cannot be implemented because con¬
tinuing losses in the sugar industry constrain economic feasibility
from the aspect of ability to pay. It is assumed herein that the
improved moisture control. Moisture control, not water savings, is
also the reason for using drip irrigation on Puerto Rico's south
coastal plain.

209
conversion to non-sugar crops will provide the ability to bear the
full cost of irrigation service in the future.
Institutional Needs and Constraints
Two factors constrain the future role of surface water in
the agricultural sector. First, the existing surface water supply
system is antiquated and is providing a steadily decreasing level
of irrigation supply. This in itself will promote increased ground
water withdrawals. Second, increasing irrigation efficiency will
tend to restrict the demand for the development of new irrigation
supplies from surface sources.
These factors suggest that private market mechanisms will not,
by themselves, provide an adequate framework for water management.
Rather, ground water will be treated as a common pool resource which
will be exploited by each user based on rational private decisions,
but the net result will be degraded aquifer supplies for all users
(or perhaps saline intrusion which affects only the users nearest
the coast).
Hirshleifer et al. (1969) have discussed the common pool
problem, pointing out that it may be solved only by creating insti¬
tutions to constrain private action to be consistent with the common
good. The institutional framework is created to transcend the
property right of each individual to consider the common costs which
accure to all resource users (i.e., such as from overpumping). The
institution overseeing pool exploitation restricts private action

210
to maintain these costs at acceptable levels. However, the benefits
from resource use accrue exclusively to the private users.
Institutions are required to select and implement water
management actions, and the inability to identify and implement effec¬
tive resource management actions must ultimately be attributed to
institutional failures.
Margal in and Campen (1970) described severe decision-making
problems in Puerto Rico, noting that decisions were poorly analyzed.
The failure to develop and exploit technical expertise within agencies
caused inordinate reliance to be placed on the recommendations of
(mainland) consultants who are not necessarily well versed on the
island's problems.
Water resource decision making in Puerto Rico today remains,
in practice, essentially an ad hoc procedure which appears to rely
heavily on the executive fiat exercised by the Governor. Perhaps the
most important check on this process is the requirement for quasi-
judicial public hearings. Ross (1973) noted that the public hearing
represents a vital protection to the public interest, without which
it would be much easier to advocate limited and biased positions.
The author's experience suggests that public hearings do serve to
protect public interest in Puerto Rico.
The observed institutional failures can be traced primarily
to lack of accountability. Throughout the Commonwealth Government
the link between resource users and managing institutions is charac¬
teristically weak. Agency responsibility is principally to the

211
Governor in Puerto Rico's highly centralized political system. The
tendency to vote a straight ticket also tends to make legislators
ultimately responsible to the Governor, who is also the party presi¬
dent and is most instrumental in selecting the party election ticket.
Recent litigation against the Puerto Rico Department of Natural
Resources^ has been undertaken for the purpose of utilizing the
courts to impose accountability on that agency, which has not com¬
plied with its obligatory water management duties.
Another important factor contributing to poor agency perfor¬
mance is the systematic reduction in agency competence by a highly
politicized bureaucracy in which party and personal loyalty is of
greater esteem than technical or managerial ability. This appears
to be an increasingly serious problem, with wholesale changes in
agency personnel occurring with each change in political administra¬
tion. This insures that many programs have built-in discontinuity.
Accountability can be a problem in the irrigated agricul¬
tural sector. The only input which farms have into the operation
of the irrigation districts is through the Secretary of Agriculture,
who (at his discretion) can make recommendations to the Executive
Director of the Water Resource Aughority. Within the Water Resource
Authority the operation of irrigation districts is a minor (and
unprofitable) operation of decidedly inferior priority. Although
irrigation exists for the direct benefit of farms, this circuitous
^Misión Industrial de Puerto Rico vs. Fred Soltero Harrington,
Secretary of Natural Resources. Superior Court of Puerto Rico, 23-24
August 1978, San Juan.

212
chain of accountability from the existing management institutions
to the agricultural community could become a serious problem in the
setting of a private agricultural sector with diverse and changing
crop patterns.
A Proposal for Resolving the Institutional Problem
General needs. The types of water management problems which
are expected to accompany conversion to a private irrigated agricul¬
tural sector were summarized in Chapter IV. Existing Commonwealth
institutions appear poorly prepared to accommodate these water
management changes. The two primary characteristics which need to
be incorporated into future water management institutions are
(1) accountability to users, and (2) flexibility in water management.
Withdrawal quota , the primary water management tool in Puerto
Rico,1 is an inadequate resource management device for use on the
south coast. Withdrawal quotas offer no control over consumptive
use changes, which is the real problem. Attempting to limit consump¬
tive use to existing levels, however, may also be self-defeating.
Not only would it entail measurement problems but it could also
limit agricultural production, which is not consistent with the
government's agricultural policy. It should also be recognized that
the simple assignment of quotas still does not provide a mechanism
for creating additional surface water supplies, which eventually need
to be developed to augment the declining supplies available from the
'‘Law 136 of 3 June 1976.

213
South Coast Irrigation District if current levels of irrigation are
to be maintained.
The basic objective of management is not to constrain
resource usage per se. Rather, emphasis should be directed toward
avoiding and resolving conflicts, within the constraints of equity,
to provide for maximum long-run value from the resources available
(which includes ecological and amenity values, as appropriate). To
achieve this end an approach to resource management that is more
positive rather than restrictive is necessary. Rather than establish¬
ing an institution with the sole purpose of restricting use, it is
more useful to establish an institutional framework which will permit
orderly expansion of use and orderly transfer of use from lower to
higher values over the long run as well as during periods of
seasonal drought.
The water district. It is proposed that a more suitable
institutional framework may be established by creating an institution
along the lines of a water management district for each water resource
area, as the need exists. The entire south coast could comprise a
single district; or, alternatively, could be divided into two districts
using the foothills west of Ponce as a dividing line. The district
would operate under guidelines established by law and other public
policy, but would be directly responsible to local users for the
management and allocation of water within its jurisdiction. This is
the precise responsibility which existing institutions have so
successfully avoided to date.

214
All ground water usage and district-delivered surface water
supplies would fall under the district's jurisdiction. No purpose
would be served if the management responsibility for surface and
ground water were separated. Agricultural, municipal, and industrial
users would all fall under the jurisdiction of the district, but the
district would also be directly accountable to those same users by
their representation on the district's decision-making board.
The district would derive funding from fees assessed to all
users of ground water plus district-delivered surface supplies. How¬
ever, another agency (i.e., the Aqueduct and Sewer Authority) would
not necessarily be precluded from constructing a surface supply for
its exclusive use as long as this was not injurious to other users.
If surface water development or other costs must be borne as a means
of preserving ground water integrity, then ground water users could
be required to bear a proportional share of the surface water
development or other costs.
Financing. Two alternative funding arrangements appear
feasible. Under one system district income cculd be derived exclu¬
sively from water sales (surface and ground water). The unit price
for water could be adjusted upwards to curtail demand consistent with
the available supplies. In some respects this is similar to
marginal pricing (Hirshleifer et al., 1969) in that the district
would retain the "scarcity rents" derived from matching supply with
demand. This income could then be applied toward supply expansion.
Alternatively, a system similar to the water banking system
described by Angelides and Bardach (1978) could be implemented. Using

215
this system a user fee is levied on all lands designated for the
receipt of district-delivered water, and a separate fee would be
assessed against each ground water well. This would entitle each
user to a fixed portion of the total supply available, with the
actual amount of water being a function of rainfall. Each user
could purchase or sell allotments at a price established by the
district.
During a period of drought the fee per allotment may be in¬
creased so that demand is consistent with the supply of allotments
being offered for sale. At higher prices there will be greater incen¬
tive to sell allotments and less incentive to purchase them. The
revenue from the purchase and sale of allotments among users would
pass from buyer to seller, with the district acting only as an
intermediary.
To some extent the on-farm use of water would undoubtedly
be adjusted through drought periods by acreage changes in short-cycle
crops. However, this water market mechanism can serve to make
supplies available to growers having long-cycle crops (i.e., tree
crops) who cannot make short-term acreage adjustments.
Summary. It must be emphasized that local accountability and
control is an essential facet of this institutional proposal. This
makes these strong resource management powers directly accountable
to the local resource users rather than to the political process in
San Juan which responds slowly, if at all, to resource management
problems.

216
Although there would be innumerable details to be worked out
in the creation of an institutional framework along the lines of that
outlined, this framework does appear to address the basic problems
which have plagued water management institutions in Puerto Rico for
at least a decade, and perhaps longer. It is too early to attempt to
implement these changes due to the current financial conditions of
irrigated agriculture. However, when the portion of agricultural
irrigated lands under private management increases, and if consumptive
use on private farms is as great or greater than sugar farms, then
the establishment of new water management institutions should be
considered with priority.

CHAPTER VI
SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS
Summary and Conclusions
Overview
Regional growth and development change the productive struc¬
ture of an economic system. Regional policy tools can be developed
and employed to accommodate these changes, enabling a region's
resources to be orderly and equitably transferred from one use to
another in response to the changing values of the society. This
research has examined the pattern of economic growth in Puerto Rico
and its implications for irrigated agriculture and water resource
management on the island's semi-arid south coast. It is shown that
the island's existing water management tools function poorly as a
mechanism to develop and reallocate these resources, and an alterna¬
tive institutional framework is suggested to alleviate the more seri
ous problems which currently exist.
A proliferation of quantitative resource planning and manage
ment techniques have been developed in recent decades, responding in
part to the advances in computational ability afforded by electronic
computers. However, use of these tools in socioeconomic analysis
(as opposed to purely physical analysis) does not necessarily
improve decision making. Excessive attention may be applied to the
217

218
manipulation of quantitatively elegant tools without adequately
examining the perhaps tenuous assumptions and poor data base on
which the analysis is based. Such an analysis may have an appear¬
ance of sophistication which masks a weak foundation.
Three particular classes of problems severely limit the
utility of sophisticated resource planning models in a developing
area such as Puerto Rico: (1) highly uncertain functional relation¬
ships within an unstable socioeconomic system; (2) decision criteria
which only poorly measure changes in social well-being; and (3) the
inability of sophisticated models to communicate effectively with
decision makers. Under these conditions a sophisticated analytical
framework may obscure rather than elucidate the basic problems which
need resolution, and may have little or no impact on policy. This
suggests that, in a practical sense, much can be gained by developing
a more straightforward approach to making resource management decisions.
This research illustrates the manner in which simple models can be
utilized to address fundamental resource management issues in a
developing area.
Regional Growth
From the mid-1940s until the early 1970s Puerto Rico enjoyed
rapidly increasing income and levels of open unemployment which
slowly dropped from over 15 percent to 10 percent of the labor
force. The island achieved this pattern of economic growth by
importing productive capital and exporting population. Low wages,
exemption from local and federal corporate income tax, the
availability of cheap supplies of foreign petroleum, and aggressive

219
salesmanship were the primary components of the island's industrial
attraction package.
However, growth which occurred during the post-war development
decades did not serve to develop the island's economic self-reliance,
but rather has created a pattern of ever-increasing economic dependence.
The long history of dependence on capital imports has caused an
increasing (and now major) portion of island business profits to accrue
to non-residents. This creates a circle of investment input and
earnings repatriation which maintains dependence on external capital
imports. The local savings rate has decreased steadily for the past
two decades and is now negative, despite rising incomes. Increased
income has been used to support increased debt rather than a source
of productive investment.
During the 1970s the island's dependence on income transfers
from the federal government increased dramatically. Real per capita
personal income increased at the annual rate of 1.8 percent from
1970 to 1977, but this increase was entirely due to increases in trans¬
fer payments. Earned income during that same period actually decreased.
Unilateral transfers from the federal government now equal 26 percent
of the island GNP. Curiously, the magnitude of these transfers has
almost exactly matched the magnitude of business earnings in Puerto
Rico remitted abroad.
The 1970s have also seen a reversal in the migration trend
away from Puerto Rico, and net immigration to the island is now large.
This has maintained the island's population growth rate above 2 percent
for the first time since 1950. That strong immigration occurred despite

220
high rates of local unemployment (which reached 20 percent in 1977)
suggests that a significant portion of this immigration may be related
to the increase in income assistance now available on the island.
A simple simulation model has been used to examine the
potential implications of continuing current trends and policies.
This model suggests that although these trends could perhaps provide
relatively low levels of unemployment and generally increasing income
in the long run, they may also be accompanied by even greater levels
of economic dependence. Instead of creating an economically balanced
community, dependence on welfare could become firmly entrenched as a
means of livelihood; Puerto Ricans would participate in the island
economy primarily as workers and consumers, while non-residents would
predominate as the entrepreneurs and owners of productive resources.
These unfavorable development patterns stem directly from
policies aimed at promoting increases in income and employment as
rapidly as possible and by whatever means possible. Income and employ¬
ment alone are inappropriate criteria for development planning in Puerto
Rico. Public policy needs to increasingly consider the need to
develop local entrepreneurship and investment within the economy
rather than to continually seek external economic resources.
Resource Management
Investment and entrepreneurship in the private agricultural
sector in Puerto Rico has been lacking. Agriculture is the most
backward sector of the local economy. However, it is an important
source of economic self-reliance, particularly in low-income areas

221
where foodstuffs constitute so large a portion of consumer expenditures.
A policy to promote local entrepreneurship could logically begin with
the underdeveloped agricultural sector.
Most flat and irrigated land in Puerto Rico is currently
planted in sugarcane by the government-owned Puerto Rico Sugar Corpora¬
tion, which loses over $500/year for each acre in production. However,
the potential for a profitable non-sugar agricultural sector exists,
and in 1977 government policy was altered to reflect this potential.
A recent program to lease government land to private growers and to
provide government guarantees for production loans could be instrumental
in converting most of Puerto Rico's irrigated lands from sugarcane into
non-sugar crops under private management.
Production of non-sugar crops will entail dramatic changes in
the pattern of agricultural management which has obtained on the
south coast since the early portion of this century. Three large
government farms would be replaced by numerous (50-100) private farms,
ranging from 100-1,000 acres in size. This could create the following
types of changes in irrigation management.
1. Erect barriers to the transfer of irrigation
water from one area to another
2. Create a seasonal demand for irrigation, as
opposed to the constant year-round demand for
water by sugar plantations
Create a non-uniform drought damage function
for various crops in different seasons, as
3.

222
opposed to an essentially uniform damage
function when all lands are planted in sugar¬
cane
4. Improve earnings and therefore the ability of
farms to pay for irrigation services, and
5. Increase irrigation efficiency and consumptive
use
These conditions suggest the need for a mechanism to efficiently trans¬
fer water among users.
By constructing an idealized water and salt budget model for
the south coast aquifer, it was shown that increases in irrigation
efficiency can significantly reduce the rate of recharge (from irriga¬
tion return flows) to the aquifer. Because south coast aquifers are
already heavily drafted, increases in consumptive use which decrease
recharge significantly can promote saline intrusion. The return flow
of irrigation water is estimated to account for approximately 36 per¬
cent of aquifer recharge, and the existing low level of irrigation
efficiency leaves considerable room for efficiency increases which can
increase consumptive use and decrease deep percolation. This suggests
that new surface water supplies will need to be made available in the
future if ground water integrity is to be maintained, unless irrigation
withdrawals are significantly curtailed.
Existing institutions in Puerto Rico are ill-suited to perform
the water management functions which will be required to resolve these
problems. The key institutional problem is ultimately the lack of

223
accountability to the water users afforded by the existing institu¬
tional framework. This problem can be resolved by creating a user-
funded and user-controlled water management institution which is
responsible to those same users (agricultural, industrial and munici¬
pal) for the conjunctive management of all ground and surface waters
within its jurisdiction.
Recommendations
Entrepreneurship
Commonwealth Government policy during the post-war period has
focused on achieving increases in employment and income with relatively
little emphasis being given to the development of local investment
and entrepreneurship. However, if the island is to avoid continually
increasing economic dependence then increased emphasis must be given
to promoting local business as a primary development objective.
Agriculture
The new plan for agricultural development on flat lands
appears properly oriented toward breaking the strongest bottlenecks
restraining agriculture in Puerto Rico; the availability of credit
and suitable quality land. Support for this program should be con¬
tinued, recognizing that the first several years entail heavy costs
for "commercial experimentation" in order to develop the practical
aspects of an agricultural technology which is new to the island.
Initial efforts will not be a complete and immediate success, but the
long-run potential for creating a modern agricultural sector is strong.

224
This sector can develop into an important source of local entrepreneur-
ship. Other benefits will also accrue in terms of income and employ¬
ment, reduced cost of maintaining the sugar industry, and improving
balance of payments as local production is exported and partially
supplants agricultural imports.
Water Management
Efficient water management in Puerto Rico is severely con¬
strained by institutional design, and there is a strong need to
implement an institutional system in which resource managers are
clearly accountable to resource users. This direct accountability
is perhaps the most direct manner to insure that these resources are
managed efficiently and in the public interest. As the ability to pay
for agricultural water is established a locally financed and con¬
trolled water management district for the south coast should be
created to conjunctively manage surface and ground water.

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APPENDIX A
CAPITAL STOCK ESTIMATE FOR PUERTO RICO
Capital stock is not estimated by the Puerto Rico Planning
Board, but national accounts data show the annual increment in
capital in several categories. From this data it is possible to
estimate capital stock in various categories using the perpetual
inventory method, as described by Ason (1975) in his estimate of the
capital stock in Puerto Rico. In this method the annual capital
investment is added to the total stock value computed for the previous
year, after depreciation has been subtracted. The depreciation is
computed as a constant fraction of the total stock. The computing
formula for this method is
' where
= total stock of capital at the end of year t
AKt = annual investment in capital
DEP = rate of depreciation
To utilize this method it is necessary to have an initial
value of capital stock from which the series of annual calculations
begin. In the case of Puerto Rico, an initial capital stock value for
239

240
each category of interest is assigned for the year 1946, since the
capital investment series for the island starts with the year 1947.
The importance of inaccuracies in the initial stock estimate is
diminished over time due to the convergent nature of this series.
Table A-l shows the categories of capital stock which have
been evaluated. The depreciation rates which have been used are those
utilized by Asón (1975), and the initial 1946 values are close to his
values. The initial stock value utilized corresponds to an initial
capital-output ratio of approximately 1.75 in 1947, computed as total
capital stock divided by the GNP. The report of the Committee to
Study Puerto Rico's Finances (1975) suggests that a higher value for
the capital-output ratio might be appropriate for this period, sug¬
gesting values of 2.0 and 2.4. However, these higher values have been
rejected because they resulted in a capital series which experienced
an initial period of decline, as shown in Fig. A-l. Note that despite
the differences in assumed capital stock values for 1946, there is
very little difference in the stock value for 1977, demonstrating
that the magnitude of the initial stock value is not critical for
determining the later values in the series.
The complete estimate for capital stock is presented in
Table A-2. The capital-output ratio is computed and is shown to be
growing. The decrease in the rate of capital accumulation in Puerto
Rico in the 1970s is clearly evident in the graph in Fig. A-l.

Table A-l. Summary of Parameters
Used to Estimate Capital
Stocks.
Stock Category
Depreciation Rate3
1946 Initial Valueb
1977 Final Valueb
TOTAL STOCK
0.056c
1,200 (100%)
9,502 (100%)
Inventory
0.000
180 (15%)
1,747 (18%)
Fixed Capital
1,020 (85%)
7,755 (82%)
Non-residential Construetiond
0.056
375 (31%)
3,526 (37%)
Residential Construction6
0.039
475 (40%)
2,622 (28%)
f
Machinery and Equipment
0.138
170 (14%)
1,607 (17%)
aVa1ues from Asón (1975).
^Values in millions of 1954 dollars.
^Imputed value.
^Non-residential construction (private and public).
Residential construction (i.e., private and public dwellings).
^Machinery and equipment (private and public).

Billions of 1954 Dollars
Year
Fig.A-1. Capital stock series for Puerto Rico, compared to the island GNP. Two initial values for capital
stock are compared, corresponding to alternative assumptions for the capital-output ratio (COR)
in 1946.

243
Table A-2. Estimated Stocks of Selected Capital Accounts for Puerto
Rico (Millions of 1954 Dollars).
Fiscal
Year
Total
Stock
Inven¬
tory
Fixed
Capital
Residential
Construction
Non-residential
Construction
Machinery
and
Equipment
1946
1,200
180
1,020
475
375
170
1947
1,240
209
1,031
469
377
185
1948
1,298
217
1,081
474
394
213
1949
1,364
223
1,141
485
425
231
1950
1,417
222
1,195
495
462
238
1951
1,496
244
1,252
513
491
248
1952
1,610
286
1,324
544
518
262
1953
1,684
285
1,399
565
550
284
1954
1,779
299
1,480
580
591
309
1955
1,893
313
1,580
602
641
337
1956
2,003
325
1,678
631
684
363
1957
2,139
338
1,801
649
753
394
1958
2,283
357
1,926
684
824
418
1959
2,464
408
2,056
723
882
451
1960
2,661
442
2,219
772
954
493
1961
2,837
461
2,376
826
1,026
524
1962
3,108
536
2,572
894
1,112
566
1963
3,381
604
2,777
961
1,197
619
1964
3,701
665
3,036
1,044
1,299
693
1965
4,133
776
3,357
1,157
1,436
764
1966
4,553
886
3,667
1,288
1,542
837
1967
4,977
918
4,059
1,441
1,694
924
1968
5,421
969
4,452
1,604
1,857
991
1969
5,930
1,053
4,877
1,771
2,009
1,097
1970
6,498
1,085
5,413
1,912
2,280
1,221
1971
7,140
1,157
5,983
2,070
2,571
1,342
1972
7,768
1,220
6,548
2,239
2,857
1,452
1973
8,335
1,384
6,951
2,382
3,018
1,551
1974
8,676
1,415
7,261
2,500
3,192
1,569
1975
9,044
1,505
7,539
2,576
3,400
1,563
1976
9,379
1,675
7,704
2,620
3,507
1,577
1977
9,502
1,747
7,755
2,622
3,526
1 ,607

APPENDIX B
REGIONAL MODEL EQUATIONS
This appendix contains the DYNAMO II'equations used to simulate
the regional model of Puerto Rico. The DYNAMO II language is described
by Pugh (1973). The total computer cost incurred in the construction,
calibration, and operational runs of this model was $46.
244

0 5 FfO RUAR Y 1 0 9
NFRDC
CAPO t 1ST UTIL I TV
-* P Up TO RIC ü M O D E L
N K l=fl 3 OE 6
fI K2-á I0L6
N AS SETS-0
N TIMS=1947
N PO=340000
N P5=205000
N PI 0=255 000
N P15=225000
N P 2 0= J55 00 0
N P 30=2 45000
N P 4 0 = 1 6 50 00
M «0 0= lA 5000
N Pt.0 = 1 270 00
NO T¡-
C G RO .V = * 0 o
C KDFP = .04 A , L¡ = )
C AD5P=.5
C A 5 =0 * 1 3 , P5 = 1068 , CC 5 = 2 5 00, 05= 1 4000
C C5 0= 0 . B , C5 1 = . 1 0 , C5 2 = . 1 0 ,C 55 = . 1 0
C Cñ >= ü .4 , C6 0= l . 5, Cu 1 -ñ . 5 , C 5 6= 1 . A ,C 3 7=4.0 ,C 5 3= 1 . 7
C A3=0 . 123, B3 = I Míe ,CC3= 15,0 3 = 27
NO T â– â– 
NHTF COEFFICIENTS FOR CL R FUNCTION PRO JFf TI f'M INTO FUTURE
C A 5 = 0 •205,8ñ=I 968 ,CC6 = 4000
A O6 . K = TA6HL( T ABC 6.T TME.K, 1^7^,2017.4)
NOTE
l K1.K-M.JLDTM04.JK -P3 . JK)
l K2.K-K2.JLDTMP1 .JK-P2.JK)
L ASSETS.K=ASSETS.J+0~={(GNP.JK-R4. JK)-R3.JKfPFMTT.J)
L PO ,K=P0. JPOT'M P 1 «. JK-PSO . JK-P 1 O . JK L P51 . JK )
L P5 .K--PO.J LDTMP10.JKLP52.JK-F 11. JK )
L P1 0.K =P1 O. J LOT* ( PI 1 .JK-R12.JK )
L p 1 r . K = P 1 5. J + f)T* ( P 1 2 . JK +P 53. JK-R 1 3 . JK )
L °2 O. K = i>2 0. J+OT*( R 1 3 . JK +P5 4 .JK-P 1 4 . JK )
L P 30. K =P3 O. J +D Tv ( P14.JK + P55 . JK 1 5 . JK )
L P4O•K = P 4 O . J LOT * < Rl5»J K—P 1 5.JK-P5 0.JK )
L PS 3.K =P50. J-LUT* ( P1 6 . JK-P60 . JK -P 1 7 . JK )
L PEO .K =P 60. J LOT*' ( P l 7 . JK-P 6 1 . JK + Rfi?. . JK )
NO Te
R P1,KL=rnPINV.K
P P2.KL=K2.KTK DE P
P «3 . KL =K1 ,K*K!),7P
R R 4 • K L = P P I N V . K
R R 5 • K L = A 5SETS .K * A 9E P
R GMP, Kt.= ( K I . I< LK2 . K ) / CO P, . K
NO T 2
P R1 O.KL-0.2«PO.K
rv>
-p>
en

0 5 FEBRUARY 19 70
NLRPC
CARO LIST UTILITY
R Rl l.KL=0.i!*P5.K
P >- 1 2 . KL= 0 . 2 *P l 0. K
R t: l 3 • K L— 0.2 * P 1 5 . K.
P PI 4.KL = 0. l'kP?.O.K
P R 15.KL---0.1 *R jO.K
F R'l6.KL-0.1+P40.K
P PI7.KL-0.1* P S 0 • K
P Kl«.KL=CF R .K *( PI 5.K *C5 6 +P20 .K *C 5T + P30.K*C53)
P F 5 K L--PO « K7 lDP * K
P PS 1 .KL-CS 1 *P VSMOVP . K
P R5 2 . KL •- C5 2 » P AS MOVE . K
R 0 5 3. K.L--CS3 . KfPASMClvr. K
P ff)4 «K.L-C54 • K *PASMO VF • K
P B55.KL=C55*PASMOVF.K
F P59.KL-P40.K*C59yCDR.K
P R6 0•K L—P50. K*C60*CDR.K
h f6l.KL-P60.K5 C 6 1* C D D •K
P P 6 2 . K L. = C 62 . K *P A S MOVE . K
N 0 T r
A CL P. K=Cl I P ( 1 ,0.1 <563 , T I Mf .K ) *( (05/ { 1 t-EXP( A5* ( Rb-T IMS .Kit) )+CC5) +
X CL I P ( O , 1 , 1 9 6 3 . T I ME . K ) -H ( t. 6 . K / { IF F XP ( A 6* ( B Ó-T I ME . K ) ) > ) +CC.6 )
A JOBS,K~({Kl. KFK2»K)/CLK»K)f-AGFMP.K
A AGE M P #K = TAL1HL{ AC TA 3 » T I MF. . K , 1 0 47,2007.1 0 ) * 1 000
A COR .K = CL IP ( l .0 , 1 95 3, T I M£: . K ) *C TUAR . K + CL I P ( 0 . t , 1 953 , T I ME . K ) “ 4S
X ( 1 . 0 9 F1 1 5.4 7-6*CLR.K) 01
A COP TAB , K-TABULE TCOR,tjMf,K,1947,19S3,2)
S FTOT.K-Kl.K+K2.K
S Pf MI T . K -K2 • K* ( 1 1 .3* EXP{-.07*(TIMF•K~l946 ) )+12 ) *.01
S PERCE N T .K=K2 ,K / ( K 1 .KfK2.K )
NUTI-.
A PASMO VF.K-NE T mig,k¿TOTOOP.K
A WORK AG:,K = P I 5 • K FP2 0 ,K <-P30.KlP40.KFP5G.Kt.76FP60.Kf .20*nl O.K
A LA OF 0 9 . K-W ORKAGF .K* PART.K
A PAP T . K-TABML {PTA R , T T ML . K , 19 4 7,1 98.3 ,4 )
A CDR . K -TABHL ( COPT AB, TT M’.K , 1047, 1957, t 0 ) / 1 000
A COR. K - ( ( 03/ ( 1 FFXPÍ A .K* ( TI Mf: . K-R.3 ) ) ) ) LCC3 )/ I 0 0 0
A A ,K-CL IP ( 1 , 0 , I 96 6, T I ME • K ) x A .3 F C L I P ( 0 . 1 , 1 9 66 . T I ME , K ) * 0 . 03
A UN. MR,K =(LABFOR.K-JOBS ,KI/LABTOF,K
A 1 OTP .IP .F =P O. K+P5.KF-P1 O .KFP 15 . KF P20 « K -F-P3 0 .K + P4 0 .K +P50 .K FP6 0 .K
A NETM I C. ,K- ( 3 9 .2-4 04 *UNFMP.K +TAPHL ( M If. TAB, T I MF . K , 1 97 1 ,1953,6) > * l E-3
NO TE
NOTC FORCIN', FUNCTIONS CXOGCMOUS TO MODEL - USF TABULAR INPUT
NO T p FORINV - FOREIGN I NVFSTM.'-MT
NOT-r RRINV - P. P. INVESTMENT FfJOM LOCAL RE-SOURCES
NOTE
A CGP. <=CGr’OW ‘EXP ( 9 3 * ( T I ML .K - 19 79 ) ) H
A FOP I N V.K--TARML ( F OPC AP , TI ML . K , l 9 4 7,1 979.2 ) * 1 F6 *
X CL IP{ 1 ,0,1979,T I MR.K) FCLIP(0. 1 , 19 70, TIME.K)*

05 FEBRUARY 1970
Nft ROO
CARO LIST IJTI L I TY
X ( 85 OF 6*r XP ( (TIME.. K-l 079 ) *LO(jN ( CGR .K ) )*SWITCH( i » 0 . B ) *-
X TAÃœHL (RE TAB . TI ME .K , t 9 "7 8,7008.3) * IE 6*SW! TC.H( 0 . I .B ) )
T FFTAB-300/959/1200/1350/800/1200/1500/l000/2000/2010/2015
A PP I NV . K=TA BHL.C PR IN* TI MS . K . 1 94 7 » 1 97 9*2) *IP6 *CLIP( 1.0*197 O.TIME.K) +
X CL IP ( 0, 1 , 1 979, TI HP .K ) «GNP . JK*TA BHL ( SA VE , T I ME . K , 1 07 9.1 999.5 )
5 E ARNP 0•K=GNP.JK/TOTPOP.K
S IN COM PC . K = ( GNP. J K+REM I T. K ) / TQTC'OP.K
S A I D.K = P EMIT .K/ GNP.. JK
NOTE AID - FRACTION rip LOCAL INCOME COMPOSED OF TRANSFERS
NOTE IT I 5i ASSUMED THAT TRANSFERS = REMITTED FARMINGS TO COITAL
A CS3.K=0.25—CLIP10..1, 1967,TIME.K )
A C64.K = 0.45 —CL IP( 0,. 15, 1967.TI ME.K)
A C6 2.K = CLIP(0, .25.19 67. T IMF .K )
Nil T £.
T TCOR= 1.76/1.67/1.62/1.59
T AGTA0-250/150/00/43/25/25/25
T FORCAP-74/66/l 02/26/7 7/1 1 0/150/i55/2 01/37P/324/431/68 4/7 02/873/
X 606/050
T PR IN = 29/70/56/13 5/136/130/154/174/248/26 2/351/JO 0/329/314/-12/0/
X 1 5 0
T CDRT AEJ= 1 2/ 7
T °T AB=.55/.55/.40/,463/.442/.455/.45/.42/.42/.44
T MIG T A 0= 0/4 5/10
NOTE FUTURE INPUT TABLES
T SA VE = 0/ 0/ 0/0/0
T T A BD 6 = 1 1 00 0/1000 0/1 12 50/1 3000/l4 000/15 00 0/160 00/l7000/I3000/
X 19000/20000
NO TF
NO TF
NO T F
PL OT JOOS= J( 0.2 E6 )/NCTM I G = N ( -4 F-2.4 E-2 ) /UNEHP=U (0, . 4) /
X TOTPOP = P(O, 12E6)
PLO-7- K l = 1 . K2 =2, KTOT-K ( 0 . 4 0 F 0 )/PFRC E.N T = A ( 0 » 1 )
PL OT PRINV =1. CQC I NV = F ( 0,4EC )/C.LP~C{0,4 0F3 ) / GNP = G{ 0 , I 2E9 >
P1.0 T FAR HP C =0 . I NCÃœMPC =1 ( 0. 4 000 ) /RE MI T = R { 0 ,4 E9 ) / A I D = B ( 0 , .6 )
NO T "
SPEC
LLNGTH--2020/DT
=.1/PRTPFP=
1/PLTPFR=1
NOTE
SCENARIO -
A
PR ¡NV-LOW /
RORINV=HIGH
/
CLR=H I Gl
UN
A SCENARIO
C
B= 1
RU N
SCENARIO -
e
mote
SCENARIO -
PR I NV =H I GH
/ FOP INV = LOW
/
CLP = LOVJ
c
C G P 0 W = . 0 4
T
3 4VE=.04/.0
5 /.
0 6 / . 0 ~V . 0 8
TP T A BD 6 = 1 1 000/10000/l 0500/1 15 00/1 2 000/1200 0/12000/12 O OO/I2000/
X 12000/12000
PUN C SCENARIO
NOTE SCENARIO -
D PriNV=HIGH / FORI NV = ST ARLE / Cl.R=LCW

0 5 Pgl'PUAPY 19^
NFOOr
CAPO L 1ST UTIL I TY
CGPOW=0
0 SCE rNARIG

BIOGRAPHICAL SKETCH
Gregory L. Morris was born in Cincinnati, Ohio, on January 26,
1949, grew up in Sarasota, Florida, and graduated from Sarasota High
School in 1966. That same year he entered the U.S. Naval Academy at
Annapolis, Maryland, and was awarded his Bachelor of Science Degree
from that institution in June of 1970. Upon graduation he received a
medical discharge from the U.S. Navy and entered graduate school in
the Department of Environmental Engineering Sciences at the University
of Florida, receiving his Master of Engineering Degree in June of 1972.
Following graduation he was employed to design wastewater treatment
systems in Florida and in Peru.
In March of 1973 he re-entered the Environmental Engineering
Sciences Department to begin work toward a doctoral degree. From
March 1973 to February 1974 tie was employed part-time as a research
assistant in systems ecology. In March of 1974 he began employment as
the Director of Water Resources Planning in the Puerto Rico Department
of Natural Resources, and moved to San Juan.
Until the present time he has exercised a variety of government
and non-government water resource management functions on the island,
and has commuted between Puerto Rico and Gainesville to continue work
toward the doctoral degree. In September of 1974 he became the Study
Director for the 1975 Water Resource Assessment for Puerto Rico and the
U.S. Virgin Islands, and continued his employment with the Department
of Natural Resources in that capacity until November of 1977 .
249

250
During 1977, with two partners, he organized AGRO Corporation
and began farming produce crops under irrigation on Puerto Rico's
south coast, moving to the south coast town of Santa Isabel in January
of 1978. During 1977, 1978 and 1979 he also served as a consultant
to Misión Industrial de Puerto Rico and Servicios Legales de Puerto
Rico. In this capacity he directed a study of ground water contamina¬
tion from industrial sources for the Puerto Rico Environmental Quality
Board, and participated in judicial and quasi-judicial proceedings
aimed at improving water management on the island.

I certify that I have read this study and that in my opinion
it conforms to acceptable standards of scholarly presentation and is
fully adequate, in scope and quality, as a dissertation for the degree
of Doctor of Philosophy.
'Chester D. Kyistra Associate Professor of Nuclear
Engineering
I certify that I have read this study and that in my opinion
it conforms to acceptable standards of scholarly presentation and is
fully adequate, in scope and quality, as a dissertation for the degree
of Doctor of Philosophy.
^¿ames Heaney, Co-Chairman
Professor of Environmental
Engineering Sciences
I certify that I have read this study and that in my opinion
it conforms to acceptable standards of scholarly presentation and is
fully adequate, in scope and quality, as a dissertation for the degree
of Doctor of Philosophy.
Howard T. Odum
Graduate Research Professor of
Environmental Engineering Sciences

I certify that I have read this study and that in my opinion
it conforms to acceptable standards of scholarly presentation and is
fully adequate, in scope and quality, as a dissertation for the degree
of Doctor of Philosophy.
/fty/
y/-
Ariel E.
Associate
kiigo
Professor of Botany
I certify that I have read this study and that in my opinion
it conforms to acceptable standards of scholarly presentation and is
fully adequate, in scope and quality, as a dissertation for the degree
of Doctor of Philosophy.
Clyde F. Kiker'
Associate Professor of Food and
Resource Economics
This dissertation was submitted to the Graduate Faculty of the College
of Engineering and to the Graduate Council, and was accepted as partial
fulfillment of the requirements for the degree of Doctor of Philosophy.
March 1979
(2-
Dean, College of Engineering
Dean, Graduate School

UNIVERSITY OF FLORIDA
3 1262 08394 202 8



UNIVERSITY OF FLORIDA
3 1262 08394 202 8


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