History of Puerto Rico - Economic History

Economic History

Coffee was a major industry before the 1940s. Arabica beans were introduced to the island in 1736. Production soared in the central mountainous area after 1855 because of cheap land, a low-paid and plentiful workforce, good credit facilities, and a growing market in the U.S., Spain and Europe. Decline set in after 1897, and the end came with a major hurricane in 1928 and the 1930s depression. While coffee declined, sugar and tobacco grew in importance, thanks to the large mainland market.

The island's social and economic structure modernized after 1898, with new infrastructure such as roads, ports, railroads and telegraph lines, and new public health measures. The high infant mortality death rate of the late 19th century declined steadily, thanks in large measure to basic public health programs.

Land tenure did not become concentrated in fewer hands, but incomes increased as American agribusiness and capital investments arrived. The land tenure system in the firm control of local farmers (small, medium, and large). After 1940 dairying became an industry second only to sugar, and had a higher dollar output than the better-known traditional crops - coffee and tobacco.

In the 1920s, the economy of Puerto Rico boomed. A dramatic increase in the price of sugar, Puerto Rico's principal export, brought cash to the farmers. As a result the island's infrastructure was steadily upgraded. New schools, roads and bridges were constructed. The increase in private wealth was reflected in the erection of many residences, while the development of commerce and agriculture stimulated the extension of banking and transport facilities. THowever, the economic growth would come to a screeching halt in 1929 when the New York stock market crashed and the worldwide Great Depression began.

This period of prosperity came to an end with the onset of the Great Depression. At the time, agriculture was the main contributor to the economy. Industry and commerce slowed during the 1930s as well. The depression was further aggravated when on September 27, 1932, Hurricane San Ciprián struck the island. Exact figures of the destruction are not known but estimates say that 200–300 people were killed, more than a thousand were injured, and property damage escalated to $30–50 million ($510 million to $850 million as of 2012). The agricultural production, the principal economic driver for the island, came to a standstill. However, the decline of the economy would not end there. A new federal minimum wage law of 25 cents an hour took effect in 1938. As a consequence, two-thirds of the island's textile factories closed because worker productivity was below that level.