Mr. ROOSEVELT. Yes; because this supposedly would come under the report required of the Secretary of Labor, under section 4(d) of

the act.

I would be a little interested in this, and so would our good friend, Mr. Myers, who represents the Department here, and the Wage and Hour Administrator, to get an analysis of the Department's views as well as the views of the Economic Development Admministrator, to this matter.

Mr. CALDERÓN. It is very funny and I professionally question some types of reports. The reasons for this report are marketing difficulties, 30 percent; obsolete equipment, so much of a percentage; and very few are shown as an impact on minimum wages.

They have labor problems and whatever, but I question obsolete equipment when these plants were financed by the Government. The results of the list of how much money was loaned to each one by the Puerto Rican company and by the governmental bank. I question the point on obsolete equipment.

I question the point of marketing because feasibility studies were made and nobody came to Puerto Rico to manufacture a product without knowing the market. I question those two points.

That is why, in my opinion and in the opinion of the manufacturers, the closings have been due to the impact of the increase in minimum wages.

Mr. ROOSEVELT. Of the total, roughly 11 years, these figures cover, how many new industries were started during those same years? Mr. CALDERÓN. The total in operation now is 847 plants.

Mr. ROOSEVELT. For those same 11 years?

Mr. CALDERÓN. For those same 11 years. According to Hugh Barton, they claim 55,000 jobs have been lost with the closing of these plants. We have gained with the new plants.

Mr. ROOSEVELT. You have gained with the new plants, have you not?

Mr. CALDERÓN. Right.

Mr. ROOSEVELT. Is it not also true that in any country the number of failures can probably be computed on various, differing bases? I think probably it would be interesting to compare the now defunct operations. Most of them were because of bankruptcy?

Mr. CALDERÓN. I would not say bankruptcy. I would say the difficulties of those plants were to be competitive with a product in the United States market.

Mr. ROOSEVELT. Have you ever noticed in the weekly summary of business in the States they list the number of bankruptcies that occur? Usually it varies between 250 to well over 300 every week. I think it would be somewhat interesting to see whether this figure is out of line with comparable figures generally in industry.

Mr. CALDERÓN. No, sir. Bankruptcy in industry is very meaningless. That is, bankruptcies in Puerto Rico are very small businesses, and I would say there are about five cases only in industry.

Mr. ROOSEVELT. Most of these were really closed down by the parent plant outside of Puerto Rico itself?

Mr. CALDERÓN. Right.

Mr. ROOSEVELT. Were most of these what you might call integrated plants, plants not just Puerto Rico owned but also

Mr. CALDERÓN. I would say the big percentage of them were branch operations or U.S. capital. Very few of them Puerto Rican.

Mr. ROOSEVELT. In your opinion, how different is the Federal minimum wage that is set, as compared to the local minimum wage? In other words, suppose for a moment we said we would eliminate the Federal minimum wage law? What real difference would it make to industry in Puerto Rico?

Mr. CALDERÓN. To some industry it would be a big help and to other industries, with the new situation in the picture now of $1.50 minimum wage, it is a 50-50 proposition. I do not know how to answer it.

Mr. ROOSEVELT. Is not the honest answer that there is not very much difference?

If we took out the Federal minimum wage law, the Commonwealth minimum wage law would remain in operation and be just as effective as the Federal law is?

Mr. CALDERÓN. That is correct. Yes, sir.

Mr. ROOSEVELT. Is that correct?

Mr. CALDERÓN. Yes, sir.

Mr. ROOSEVELT. Mr. Calderón, do you have any comment with respect to the suggested application of the law to hotels, motels, restaurants, and laundries?

Mr. CALDERÓN. I concur 100 percent with the statements made by the honorable Secretary of Labor of Puerto Rico. They are not giving any competition whatsoever to U.S. hotels, and they need a breath and they should be left until some future time. I concur 100 percent with the Secretary of Labor.

Mr. ROOSEVELT. You think the hotel operators in Florida are going to agree with that statement?

Mr. CALDERÓN. I know they will not agree, sir.

Mr. ROOSEVELT. I would agree, and I am glad you brought up the fact that a staff committee member would be appointed.

I would ask my good chairman if he would not agree that where a member of the staff, or an individual, is appointed, such as an economist, to a board meeting here, he should not also become a witness and a sort of special counsel for the committee. I think it is very difficult to limit the committee's assistants, but I do not think they should also come forward as witnesses before the board. They are in a position to influence the board as a member of the staff of the board, and it would seem to me that that is not quite proper.

I think the committee will certainly, with the help of our good chairman, look into this matter.

Mr. CALDERÓN. Manufacturers are more afraid of questioning by the U.S. economists than by the Labor representative.

Mr. ROOSEVELT. I think that is an interesting point. Do you have a recollection of how Mr. Canudo voted on the matter in which he was a member of the board?

Mr. CALDERÓN. He was a member of three committees. In the first two committees he voted with the public and the industry. In the one he was interested in-sweaters-he caught our neck.

Mr. POWELL. The International Ladies' Garment Workers?
Mr. CALDERÓN. Correct.

Mr. ROOSEVELT. Who would be the beneficiary and financially in line when he ran for office?

Mr. CALDERÓN. Yes, sir.

He came for that specific committee for the sweaters. That was the third one.

Mr. ROOSEVELT. Suppose we did change the law and give a better balance? I think, in all fairness, it is a little unrealistic to say that all of the members should come from Puerto Rico. While we would like to agree with this, the point of the board, as the secretary of labor for Commonwealth pointed out, is because of the conflict in the interstate commerce aspect and the competition of goods made here. Would you think it was a good step forward if we got a better balance?

Mr. CALDERÓN. I agree with you.

Mr. ROOSEVELT. Better representation of the public members, as the chairman said?

Mr. CALDERÓN. Yes, sir.

Mr. ROOSEVELT. Certainly we would have to agree no public member should have any interest whatsoever in the matter under discussion.

Mr. CALDERÓN. We would also like to have more members of the public at large. In Puerto Rico this is mostly confined to government officials and professors of the University of Puerto Rico.

Mr. ROOSEVELT. Public members?

Mr. CALDERÓN. We would like the public members to be at large. Mr. POWELL. The professors at Puerto Rico University are paid by the government, are they not?

Mr. CALDERÓN. Yes, sir.

Mr. ROOSEVELT. In other words, your position, and I think it is quite understandable, is that nobody paid by the government, or a former member of the government, should really be a public member, because he has already taken a position?

Mr. CALDERÓN. If he is on the government public payroll, he is not public in regard to this.

Mr. ROOSEVELT. Mr. Chairman, I would have to agree with that, would you not?

Mr. POWELL. 100 percent.

Mr. ROOSEVELT. Thank you, sir.

Now, if I may, I will pass on to my colleagues.

Mr. Hawkins?

Mr. HAWKINS. Just one question.

Getting back to the labor members of this tripartite committee, do I understand that three labor members are always from the mainland? Are they representatives of labor?

Mr. CALDERÓN. They were from the United States.

Mr. HAWKINS. What was your answer?

Mr. CALDERÓN. I have the figures here. The exact figure for 35 committees.

In 30 of the committees, there was only 1 Puerto Rican labor member, in 3 committees there were 2 labor members from Puerto Rico, and in 2 committees, no labor people from Puerto Rico whatsoever.

Mr. ROOSEVELT. Would my colleague yield for a minute?
Mr. HAWKINS. Yes, sir.

Mr. ROOSEVELT. Is part of the reason for that that in some areas there is no labor organization in Puerto Rico representing the workers in that particular matter?

Mr. CALDERÓN. In 26 unions-international-we have 387 affiliated and we have 293 independent.

Mr. ROOSEVELT. Again, if my colleague would yield, I would think it would be a fair thing to write into the law that the Secretary of Labor should choose labor representatives from labor in Puerto Rico where they existed within reason, and should not go outside of Puerto Rico to select those representatives of workers unless there was no organization in the instance where the matter was under discussion.

We will certainly take that up, and it may present possibly a little difficulty. I should think where there was interest in labor and unions, that would be affected on the continent, and that maybe in those situations perhaps one member should be allowed to be drawn from the international ranks or from labor of that particular area from the States.

Similarly, it seems to me the same ratio could reasonably apply to manufacturers. Two should be from the industry here locally, and one should represent the affected industry in the States in order that the point of view might be considered.

As you point out, then the question comes up of the so-called public members and, again, I think the public representation should be somewhat along the same lines.

I think we will certainly ask the administration for comments on this, that we have it under active consideration to write it into the law or remove it from administrative control or make it a part of the basic law.

Mr. Hawkins?

Mr. HAWKINS. Could I say that I agree with the chairman of our subcommittee and the chairman of our full committee. I think you have developed the point sufficiently.

Mr. CALDERÓN. Thank you, sir.

Mr. HAWKINS. Thank you.

Mr. ROOSEVELT. Mr. Gill?

Mr. GILL. How many manufacturing groups did you say you had down here?

Mr. CALDERÓN. We have close to 1,000 manufacturing firms-heavy, medium, and light and real light.

Mr. GILL. Close to 1,000 in round figures?

Mr. CALDERÓN. Right.

Mr. GILL. How many of those are branch offices of mainland firms? Mr. CALDERÓN. Of the 847, 623, according to my last study, were branch operations of the United States.

Mr. GILL. Out of the 1,000, 623 would be branches?

Mr. CALDERÓN. Yes, sir.

Mr. GILL. What inducements, other than a very low wage, are given to bring these branch plants into Puerto Rico?

Mr. CALDERÓN. Low wages are not offered as an inducement by us. Mr. GILL. Maybe not offered, but I think it is probably understood by the people who come in.

What other inducements are there?

Mr. CALDERÓN. A 17-year tax exemption; 13 and 10, according to the area. The metropolitan area is 10 and in the western part, 12, and 17 in other areas.

Mr. ROOSEVELT. Seventeen is the maximum?

Mr. CALDERÓN. Yes, sir.

Mr. GILL. What kind of tax exemption is this?

Mr. CALDERÓN. It is a "no tax" for the period involved.

Mr. ROOSEVELT. Does the tax apply to realty or income taxes? Mr. CALDERÓN. Income taxes, and then we have it for dividends and for property. I could give you a copy of the law with the act of 1963-the new one.

Mr. GILL. I would like to see that. All taxes that are normally applied to corporations are not applied here?

Mr. CALDERÓN. Yes, sir; not applied here.

Mr. GILL. This runs for 10 years in the metropolitan area?
Mr. CALDERÓN. Yes, sir.

Mr. GILL. How long has this been in effect now?

Mr. CALDERÓN. 1952. Our first incentive act was approved in 1952. The maximum was 10 years, but it was amended in 1963 and extended to 12 and 17.

Mr. GILL. How many of these 386 industrial plants that were forced to cease operations in Puerto Rico did so because of their tax exemption running out or their feeling that it was

Mr. CALDERÓN. Very, very few of them. I will give you a copy of the report tomorrow, but very, very few of them.

Mr. GILL. In other words, it had nothing to do with their closing? Mr. CALDERÓN. No, sir. In fact, it is not listed as a cause. The termination of tax exemption is not listed as a cause.

Mr. GILL. Was tax exemption terminated in any of these cases that showed where they did close?

Mr. CALDERÓN. I do not think so.

Mr. POWELL. May I correct you there? Papermate.

Mr. CALDERÓN. Tax exemption was not the cause there.

Mr. POWELL. Are you sure?

Mr. CALDERÓN. Yes, sir.

Mr. GILL. I am not saying we can determine what the cause is because the cause depends on who is describing the closing, usually. I am wondering how many of these firms received tax exemptions and reached the end of their tax exemption.

Mr. CALDERÓN. There was a group of them very close in the 8- and 9-year bracket, 2 or 3 years ago.

Mr. GILL. This is the group that went out, you say?

Mr. CALDERÓN. Yes, sir.

Mr. GILL. Do you know how many of the 386 were getting up to 7 and 8 years tax exemption?

Mr. CALDERÓN. No, but I will have the story for you.

Mr. GILL. Do you imagine that that condition might have had something to do with their attitude of continuing in Puerto Rico?

Mr. CALDERÓN. It might be so.

Mr. GILL. It might conceivably enter into their decision?

Mr. CALDERÓN. Yes, sir.

Mr. GILL. On page 3, you mention the productivity of labor has not increased at the same rate as the increase in the minimum wage in Puerto Rico.