Puerto Rico— Caribbean Chemical Center N e w $12 mil l ion ammonia plant, $55 mil l ion oi l r e f m e r j e s spur chemical expansion in Puerto Rico E. T. ELLEN IS, Economic Development Administration, Commonwealth o f Puerto Rico, New York, Ν. Y.

Puerto Rieo's new $15 million International Air Terminal opened last year in San Juan. Used by all airlines, t h e air­port is assuming greater importance to the island's indus­trialization program as mainland manufacturers are widen­ing their use of air freight to ship their products to the north. This contrasts with barge shipments (below) at Ochoa Fertilizer's plant at Martinpena—one of its three plants that distribute 5 0 % of the fertilizer consumed on the island

rAST BECOMING THE CARIBBEAN'S hub of chemical making, Puerto Rico, a mountainous island half the size of New Jersey, keeps spurting ahead in production of fertilizers, insecticide, paints, plastic and refinery products, cosmetics, and perfumes. And with two big new oil refineries and a $12.3 million ammonia plant (under construction), it looks like the Commonwealth's economy is set for another big push.

Much of this junior-sized boom (by mainland standards) is the result of a Commonwealth industrial incentives pro­gram which is accomplishing what it set out to do: At­tract new industry and thus cut down on the 90,000 Puerto Ricans still unemployed in a total work force ol 650,000. About 200,000 of this total are underemployed.

Chemical, fertilizer, and plastics products firms make up about 10% of the 400 U. S. mainland companies (alsc electronics, metals, precision apparatus, leather and rubbei goods, textiles, and shoes) which have expanded to Puertc Rico largely because of tax exemptions, technical aid, lon§ term bank loans, and natural advantages the island offers

In 1940, when t he industrialization program was firs introduced to build up Puerto Rico's economy, Sugar wai King. By 1955, all agricultural income accounted fo: 1 6 % of total net income. In the same interim, with tin program picking up speed, income from manufacturinj jumped from $26 million to $151 million a n d this montl caught u p to agriculture when 20 new plants were in augurated in a single day. Total number of manufacturinj establishments, including the government-aided plants, i n o w 1938 compared with 798 in 1940.

This marked shift from agriculture to industry—pace by expansion of U. S. industry to Puerto Rico—is helpin trie economies of both areas. In Puerto Rico, for example where unemployment still wavers around 15%, th equivalent of 10 million jobless in the continental U. S mainland affiliates have created direct and indirect e n ployment for 65,000 Puerto Ricans.

These new jobs are reflected in Puerto Rico's bolstere purchasing power. In 1955, when the island's net incorr reached $990 million (more than triple., t ha t of 1940 Puerto Rico's 2,250,000 citizenry purchased a recoi $574 million worth of mainland goods, including $£ million for chemical products, making the average islands Uncle Sam's best overseas customer.

As a result of modern health and sanitation measure

Puerto Rico is today one of the health­iest areas flying the U. S. flag. Since 1940, life expectancy on the island has risen from 46 to 61 years. The birth rate, while still high, is showing signs of slowing up, but the exceptionally high rate of a decade or so ago shows u p in the 20,000 Puerto Ricans who now reach working age each year.

"Operation Bootstrap's" record (popular name for Puerto Rico's pro­gram of self-help) speaks for itself. Factory pay now averages 57 cents per hour compared to 35 cents per hour 10 years ago. Hundreds of skilled fac­tory hands are being produced daily in the island's vocational and training schools.

Following vocational school and special in-plant training, workers usu­ally attain U. S. mainland productivity and in some cases surpass mainland levels, because of their innate manual dexterity. Noted for their eagerness to work and pride in the job, the new Puerto Rican workers however, have their drawbacks too. As many come straight from rural areas, they must first b e indoctrinated to factory regimen.

In higher education, the University of Puerto Rico, with its 12,000 student body is among the largest universities in the Western Hemisphere and now boasts of one of the few technical schools south of the border with a

department of industrial engineering.

Drugs and Plastics Lead the W a y Against this background, Puerto

Rico's largely mainland affiliated chem­ical industry has been growing steadily since 1949. D r u g plants have in­creased from zero to a round dozen with latest information indicating fur­ther expansion in 1956. Plastics in­stallations (molders and fabricators) have sprouted even more rapidly, from four i n 1950 to the more than 25 which now consume 5 million pounds of im­por ted resin each year.

And elsewhere on the island, the t empo is equally brisk. Fertilizer mix­ing, done by eight island plants, is on the increase. Five new calcium car­bona te plants reportedly are in sight. Inching u p is potassium sulfate, super­phosphate, hydrochloric and sulfuric acid production, with the last slated for a whopping increase once the new Gonzalez ammonia plant goes on stream this December. Three other companies produce oxygen and acetylene.

Plant scientists a re currently cultivat­ing a yam that grows wild in Puerto Rico for use as derivative for cortisone. A new company, Root Chemicals, in cooperation with the U. S. Department of Agriculture, is now working to cul­t ivate 10O0 acres of these yams this

year in order to make cortisone and sex hormones, according to latest reports. Scientists may also come up with new uses for bagasse, a by-product of the sugar industry. Puerto Rico produces 1.7 million tons of bagasse each year.

The island has "practically un­limited" reserves of high-grade silica and limestone, according to Economic Development Administration econo­mist Eric Cumpiano, who last week completed a six-month survey of pros­pects for a glass fiber industry in Puerto Rico. Silica and limestone are the major raw materials used to produce glass fibers.

His findings: Glass fiber production can be six to 12 times more profitable in Puerto Rico than in certain areas of the U. S. mainland by combining lower delivered total cost to important U . S. southeast markets with tax exemption.

Cumpiano's recommendations: Gear initial glass fiber operations in the island to the production of general fiber products such as thermal and acoustical insulation, as there is now a substantial market for this category both in Puerto Rico and nearby Caribbean areas. Later expand to production of textile glass fibers for sale to the U. S. main­land and in the currently expanding, but as yet small, island market.

Puerto Rico, though blessed with a

This view of Gonzalez Chemical Industries' plant at Guanica shows foundation for work on ammonia synthesis unit . At ex­treme right background is filter structure. Tliis plant is being built by Lummus Co. In April it was about 7% complete

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Ε. Τ. El I en is first became interested in deve lop­ment of the chemical industry in Puerto Rico when he wrote a feature story on the island's plastics fabrication industry in 1954 for t h e New York Journal of Commerce. In 1955 h e joined the Puerto Rico News Service at t h e Economic Development Administration. He joined the Journal of Commerce in 1951 as editorial assis tant on t he chemical news desk, later became fats and oils editor. In 1953 he was named plastics editor. He keeps chemical interest in t h e family—his wife Jean works for Chas. Pfizer & Co .

year-round sunny, mild climate where temperatures average 75° to 80° F. , and cooled b y gentle t rade winds, has run into tough luck in respect to most other na tu ra l resources.

The island lacks coal, sulfur, phos­phate rock. No oil deposits have been uncovered to da te , though there is now wildcat prospect ing under way. Salt deposits are adequate and if exploited more could hike salt output over the 15,000 tons now delivered each year.

Most other chemical staples, caustic soda, chlorine, phosphates, are im­ported from the mainland. The soil is far from fertile, half of it is arable as a result of Puerto Rico*s being volcanic in origin; this lack of fertility is the chief reason tha t the Commonwealth has turned to industrialization under a free enterprise system, as a means to support its overcrowded population.

This paucity in natural resources has turned Puer to Rico in the direction of economic resources: strategic location, a large pool of labor eager for work, and industrial incentives. The last, for U . S. chemical firms, includes a "10-year tax holiday" from local corporate income taxes, plus technical aid, assist­ance in screening and training of workers, multipurpose factory buildings a t reasonable leasing rates, and other help. There are no federal taxes since Puerto Rico has no vote in the U. S. Congress.

These benefits, however, do not apply to chemical firms which close existing mainland facilities t o "run away" to Puer to Rico. The work of assisting qualified U. S. chemical com­panies interested in Puerto Rico is carried on b y t h e Economic Develop­ment Administration from offices in New York, Chicago, and Los Angeles.

Puerto Rico, b y being in the middle of the Western Hemisphere, has easy access to prospering Atlantic and Gulf Coast ports as well as West Coast mar­kets. At t h e same time, it is close to Caribbean and South American mar­

kets. I t is cheaper in many instances to ship products from Puerto Rico, using inexpensive northbound ocean freighter, than to ship them overland b y rail between distant points in the Continental U. S.

From Oil ίο Intermediates Puerto Rico's two oil refineries rep­

resent the island's biggest new in­dustry (second largest is t h e Gonzalez ammonia p l an t ) . Their construction has started a rash of enthusiasm among Puerto Rico's industrialists t h a t the oil units could be t h e harbinger of chemi­cal intermediate manufacturing. Re­ports that mainland companies have been scouting the island as a potential site for sebacic acid, capryl alcohol, oxalic acid, and gum dextran produc­tion have further raised the i r hopes. Most realistically concede,, however, that more refineries will have to come to Puerto Rico before intermediate production can begin.

This first integrated ammonia plant for Puerto Rico should have far reach­ing effects on both over-all industrial­ization and chemical indus try growth on the island. Since most of ammonia output will be sold to Puer to Rico's fertilizer mixing plants, a n estimated $6 million will be p u m p e d into the insular economy each year instead of leaving the island to pay for imported raw materials.

Secondly, in being the first all Puerto Rican sponsored industrial project t o be partly financed by mainland insurance companies, the Gonzalez p lan t may be setting a precedent which could spur further capital investment projects in Puerto Rico.

The ammonia plant is t h e brainchild of Luis R. Gonzalez, president of Puer to Rico's largest chemical company—Gon­zalez Chemical Industries, and once i t whips into production trim later this year will be producing 42,000 tons of anhydrous ammonia and 130,000 tons

of ammonium sulfate annually. Some of this will be sold to near-by Latin American consumers.

Sulfuric acid is now produced in small quantities by another Gonzalez enterprise, Ochoa Fertilizer, whose three plants distribute 5 0 % of the ferti­lizer consumed on the island. The picture will change this December, however, when the new Gonzalez plant also initiates production of sulfuric acid to the tune of 128,000 tons annually. This means that there will be plenty of the acid available for such island consumers as galvanized wire producers and distilleries that now will have ample supplies available—at mainland prices and with no shipping delays. The volume is big enough, in the opinion of Gonzalez spokesmen, to attract n e w integrated consumers to Puerto Rico.

With oil refineries and a large basic chemical plant now on the Puerto Rican scene, island manufacturers privately are not dismissing nylon, rayon, and other synthetic fiber production as feasi­ble in Puerto Rico. They note that ammonia, which will b e produced by the new Gonzalez plant, is a material used in rayon manufacture. And one of the plant 's waste materials will be caustic solution—used to make paper-board.

Raising their hopes still higher, though i t may be exhuberance, are new MIT findings which indicate Puerto Rico to be the most economic plant site location for synthetic fiber plants compared to six mainland textile cities.

For r a w material, the Gonzalez plant will use Venezuelan fuel oil, transform it into ammonia by the Texaco Oxida­tion Process at its Guanica site on Puerto Rico's south coast. Eventually, the near-by refinery in Ponce may supply t h e raw material.

Chemicals from Sugar Wastes Puerto Rico is now exploring ways to

develop useful chemicals from its sugar waste materials. Two local companies are making paper and paperboard ex­perimentally from one of these w a s t e s -bagasse. Now believed practical, also, are such sugar-based intermediates as polyhydric alcohols, higher alcohols, and esters.

Other experiments, if successful, could make bagasse a prized commod­ity overnight according to Henry Hass, president of the Sugar Research Foun­dation, who recently stated that a very cheap b u t excellent cattle feed possibly

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could be m a d e from bagasse. Cornell University a n d the University of Florida plan actual feeding tests, Hass says.

Should these tests prove positive, fîass predicts: 1) Protein deficient areas, such as the Caribbean (where meat is n o w hard to get) could well become beef exporters and 2 ) Puerto Rico's economy along with other major sugar cane exporters, would prosper .

Progress to da te : Sugar chemists have already ammoniated beet sugar into a cheap, surprisingly efficient cattle feed, according to Hass. Bagasse got the same t reatment , was found accept­able as cattle feed, now everything depends on Cornell's and the Univer­sity of Florida's findings. Beet feed, Hass says, proved superior t o regular feed in tests: Catt le fed a d ie t of the new feed gained 2.52 pounds daily; a second group fed the ordinary feed only 2.09 pounds daily.

Production of chemical intermediates may be just a hope at this point for Puerto Rico, but production of drugs, assorted chemicals, and plastics prod­ucts is already here, and growing by leaps and bounds . These include: syn­thetic hormones, paints, insecticides, chlorine derivatives, detergents, scour­ing compounds, antacid tablets, pain relievers, analgesics—plus such plastic products as toys, combs, housewares, electric shave housings, pens, sprayers, vaporizers, cigarette holders, spectacle frames, polyethylene bags, buttons, and electric soldering guns.

Among t h e leaders in the $ 8 million 25-plant plastics industry are Reming­ton Rand, National Moldite, Frawley Corp., maker of the Paper Mate pen, and Yardley Plastics. Frawley recently was acquired by Gillette.

Chemical and d rug manufacturing pace-setters include: Sterling Drug, American Steroids, Diamond Chemi­cals of Puerto Rico, an affiliate of Dia­mond Alkali which makes detergents and scouring compounds. In addition to attracting new chemical manufac­turing, Puerto Rico is n o w emerging as the Caribbean area's d r u g distribution center for t h e top U . S. companies, in­cluding Chas. Pfizer & Co., Parke-Davis, and Merck.

American Steroids, for example, started with a pilot plant in 1949, now ships $5 million worth of hormones and related products to the main land yearly. Another, Sterling Drug , recently ex­panded its analgesic operat ion into a brand new ul t ramodern $275,000 plant—a move which represents a space expansion of more than 150 %—and now expects to expand again in 1956.

One of the latest mainland com­panies to expand to Puer to Rico is Yardley Plastics whose affiliate is pro­ducing 10,000 square feet of plastic wall tile a day. Another is Latex & Chemical Co. , whose branch plant will soon manufacture rubber , latex, and chemical products, including asphalt, and protective coatings. More than 909k of the total chemical and plastics output goes back to the mainland for marketing. Air freight is gaining since a shipment can leave San Juan in the morning, b e in New York by la te after­noon ready for sale. T h e r e are excep­tions, however; Diamond Alkali's affili­ate sells its entire output locally and has intentions of market ing in other Caribbean areas in the near future.

Puerto Rico's plastics molding in­dustry consists of six independent mold­ing operations, one laminating plant,

Puer to Rico's biggest new industry is oil refining. This $11 million refinery owned by Car ibbean Oil is loca ted on a 175 acre t rac t across San Juan harbor

and 14 assemblers a n d fabricators. Four companies, including Remington Rand and Frawley, which turns out more than 50,000 plastic pens a day, maintain separate integrated plastics departments. Dow Chemical, Mon­santo, and Koppers each maintain a 1 million pound inventory of plastic resins on t h e island—at mainland prices.

Production of these basic materials for plastics manufacture in Puerto Rico may still be far off, but industry spokes­men nevertheless are beginning to speak out loud.

Says Edwin Singer, president of Caribbean Refining, the first oil refinery to go up in Puer to Rico:

"Our $11 million oil refinery which began operations near San Juan this June (1955) is a great step forward . . . in paving the way for island self-sufficiency in petroleum products . . . and in setting the stage for further de­velopment of petrochemicals and heavy chemical industry." Singer is also president of Pontiac Refining, Corpus Christi, Tex . .

Before Caribbean Refining began operations, the Commonwealth had been importing petroleum products to the tune of $20 million yearly. Now available at the rate of 13,500 barrels per clay are fuel oil, diesel oil, high octane gasoline, and liquefied petro­leum gas.

In addition, most of the fuel needed by t h e Puerto Rico Water Resources Authority for the production of elec­tricity now comes from Caribbean Re­fining. ( P R W R A produces 1 billion kw.-hr. of electrical energy a year, and currently is spending $108 million to double this by 1960) .

Commonwealth Refining has just completed an even bigger installation, one that costs $25 million, turns out 21,770 barrels per day. About a year from now, this second oil com­pany in Puerto Rico will have tacked on a $18 million wing, thus have doubled its productive rate to 55,000 barrels per day.

T h e first lap is just about over and the pace could pick up even faster in the near future as Government in­centives and natural advantages spur further expansion. As one island in­dustrialist put it:

"Anything is possible. If New Eng­land tobacco can be shipped to Puerto Rico to be m a d e into cigars, then shipped right back to the mainland, why not import crude chemicals from Latin America, process them, ship them to t h e mainland for sale?" •

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