In an industrial park, circled by flowering bougainvillea and banana trees, the technicians of Waters Associates, a $100 million multinational corporation, work in the air-conditioned quiet of a new factory.
Rows of white-jacketed Puerto Ricans fashion scientific instruments. They earn an average of $14,000 a year, plus medical, dental, life insurance, profit-sharing and tuition assistance benefits.
The Waters plant, one of 32 built in this rural mountain town, is part of what government officials here call an "economic miracle." Puerto Rico, for decades a forgotten colony of the United States, is poorer than Mississippi, the poorest American state.
But with $21 billion in U.S. investment, this tropical island has achieved a per-capita income higher than any Latin nation except Venezuela, which is rich in oil. Today Puerto Rico touts itself as a triumph of exuberant, capitalism, a model for underdeveloped countries everywhere.
Down the road from the Waters factory, however, beyond a Pepsi plant and a Smith, Kline & French pharmaceutical complex, the underside of this economic miracle is obvious to any passerby.
On a steep hill, Antonio Melendez Caraquillo, 41, shouts guttural endearments to a pair of oxen as his rusty plow lurches unevenly through a tobacco field. On another section of the 10-acre farm, Melendez' three brothers, sweating under the blazing sky, are sowing bean seeds by hand.
"Sometimes, I make $1,000 a year," said Melendez, who has seen the number of local farmers dwindle from about 3,000 to about 200. Now he and his wife and four children survive on $232 a month in U.S. food stamps.
Melendez wishes the government would help him irrigate his land, or lend him money for a tractor. But the government, he says, "only helps the rich."
Puerto Rico is an investment paradise for U.S. corporations. American firms get a 100 percent tax exemption from the U.S. Congress for subsidiaries here. The program, which began in 1948 as "Operation Bootstrap," is an effort to make this impoverished American territory "a showcase for democracy."
Today, a lively debate is flourishing as many Puerto Ricans begin to reassess that development scheme critically, questioning whether the benefits have "trickled down" from the companies to the island or instead have trickled disproportionately across to the mainland.
In the past three decades, as farmers went to work in factories, the island's agricultural base evaporated, making it dependent upon imported food, despite an ideal climate and rich soil.
The promise of plentiful employment never materialized as more agricultural jobs were wiped out than the new, largely capital-intensive industries could provide. During the 1950's and 1960's, some 700,000 islanders, nearly a third of the population, migrated to the mainland.
Of those who remain, 30 to 40 percent are unemployed or have given up looking for work. The Puerto Rican government is deeply in debt -- it owes $7 billion to mainland banks -- and almost a third of the work force is on the public payroll.
Meanwhile, 55 percent of Puerto Ricans collect food stamps, a situation many people say has created a pervasive mentality of dependency.
Politicians here tend to look at the bright side. "Our island stands in dramatic contrast to Cuba as a model for developing countires throughout the Caribbean and Latin Amnerica," Gov. Carlos Romero Barcelo told a Senate committee recently.
"Less than 50 years ago, Puerto Rico was known as the 'poorhouse of the Caribbean.' The level of poverty was shocking. Today we have the highest standard of living south of the Rio Grande."
Puerto Rico's industrial roster is a who's who of American companies, from Allied Chemical, Anaconda and Avon Products to U.S. Steel, Wang Laboratores and Westinghouse.
Per-capita income grew from $278 in 1948 to $2,934 in 1979. Life expectancy rose from 46 to 74 years, slightly above the U.S. average. Until the oil embargo and the 1974 recession, the growth rate was one of the highest in the world, 6.1 percent a year.
However, Jaime Santiago, former director of the budget here and a respected University of Puerto Rico economist, said, "Puerto Rico is living today under a mirage of economic affluence [while] its real economic sectors are in deep trouble."
Only U.S. federal funds, he says, have "prevented the collaspe of the island economy . . . . A new economic strategy is badly needed to put the economy on the path of a strong self-sustained growth. This will require a substantial change in the economic and political relations between the island and U.S."
In what critics call "growth without development," the 2,500 U.S. factories here import raw materials, export the manufactured products and transfer profits to the mainland, providing little long-term investment in Puerto Rico's internal economy.
Until two years ago, American companies received 100 percent exemption not only from federal taxes, but from Puerto Rican taxes. Now Puerto Rico gives 75 to 90 percent exemption on local taxes.
The story of the Waters plant and, more broadly, the effect of industrialization on the town of Cidra, is the story of Puerto Rico in microcosm.
Cidra, once one of the poorest town on the island, is now among its fastest growing. A 45-minute drive from San Juan along a six-lane highway, its population of 30,000 is nestled in green hills where coconut palms grow wild and tropical flowers line the roadsides.
The main plaza, lined with giant laurel trees, was a picture of modest prosperity on a recent Sunday. Women in designer jeans and stiletto heels, men with open-collared shirts and children in white patent-leather shoes spilled out of the doorways of the packed church, as the priest said mass over a microphone.
The aisles of the Super Farmaci San Jose were stuffed with Pampers, Gillette shaving cream and comic books entitled "Popeye El Marino." Across the street, the Supermercado Miguel Self Service advertised "Queso Borden" and "Spaguetti Boy Ar Dee" in its window next to a sign saying "Aceptamos Cupones" (We accept food stamps).
A funeral procession of emerald-green Cadillacs loaded with flowers wound through the narrow streets of brightly painted houses to the plaza where, in the usual weekend ritual, carloads of teen-agers circled, listening to loud rock music.
A few blocks away, teams of blue and yellow uniformed men played the Puerto Rican national sport, baseball.
Marcola Colon, 63, remembers how it used to be in Cidra. Thirty years ago, this was sugar-cane country. Men worked from 6 to 6 for $2 a day. Children died from rickets and worms.
When people went to the doctor, they paid with an egg or a bunch of plantains. If the doctor operated, they gave him a chicken. If he saved a life, he might get a pig.
"Life was very bad in those days," said Colon, a small, brown-skinned grandmother who lives a mile from town. "We went without shoes. We had no electricity. It took a day to get to San Juan by bus" on winding mountain roads.
Colon lives on the same patch of land where she was born. But her old wooden dwelling has been replaced with a neat concrete house, complete with a television, a washing machine, hanging plants, live chickens and a pet peacock.
The sign over the door says "God Bless Our Home." A daughter lives in New Jersey, but six of Colon's children live nearby with their families.
"Everything is better now," she said. Her husband, a retired cashier, is ill, but the $116 a month they receive in Social Security, plus $122 in food stamps, means "we have peace of mind," she said.
The Waters plant is part of Cidra's new prosperity. Built in 1978, its work force of 90 is expected to reach 250.
But it will hardly help Puerto Rico's unskilled unemployed. Waters workers, who make liquid chromatography instruments to analyze and purify chemicals, average two years of college. Most are bilingual, able to follow complex instructions in English. Even the janitor has three years of college accounting.
Nonetheless, the firm illustrates the progress Puerto Rico has made in training a technical and managerial class.
"Puerto Ricans used to be second-class citizens," said general manager Diego Loinaz, a mechanical engineering graduate of the University of Puerto Rico. "Now you have guys like me in charge of sophisticated companies."
The Waters plant represents a new phase in Operation Bootstrap, which began wwith a tide of low-wage, low-capital textile and underwear factories. As Puerto Rico phased in the U.S. minimum wage, however, these plants fled during the 1960s and early '70s to Haiti, Taiwan and other Third-World nations.
The government turned to capital-intensive petrochemical plants, a venture that failed to bring the expected employment and caused massive pollution problems.
Now Puerto Rico's sophisticated recruiting apparatus, the Economic Development Administration, with 700 employees and offices from Boston to Tokyo, is focusing on high-technology electronic, computer and precision instrument firms.
Two hundred forty of these high-growth, reession-resistent companies have moved here, producing high-speed printers, magnetic core memories, cathode ray tubes and other space-age materials.
The island is also known as "the nation's pharmaceutical capital," with 85 plants of multinationals such as F. Hoffmann-LaRoche, whose subsidiary here makes all the Librium tranquilizers used in the United States.
Officials from Watgers, a Massachusetts-based company, traveled to Texas, North Carolina and Ireland before settling on Puerto Rico for their new plant. "A lot of businessmen still think Puerto Rico is a banana republic," Loinaz said. But Waters realized it could get an excellent deal here, he added.
The subsidies were far beyond what Antonio Melendez or any local farmer could dream of: a prime piece of land in one of the government's 96 industrial parks, complete with a ready-made building shell (a $900,000 capital investment for which Waters pays rent), and a $1.5 million-a-year tax break which enables the plant here to make a 23 percent annual profit. while Waters' mainland factories average about 10 percent.
The Internal Revenue Sevice has questioned the federal exemption program and has taken several firms to court, including the pharmaceutical giants Ely Lilly and Warner-Lambert, for allegedly using Puerto Rican subsidiaries to evade mainland taxes. Warner-Lambert was forced to pay $44.2 million in back taxes last year.
Even some businessmen feel that the island's development program is unbalanced.
"The answer to any developing country is agriculture," Loinaz said. "Wehave the land, the sun, the water, the East Coast markets; we could be better than Florida. With agriculture, we wouldn't have to be beggars."
Before working for Waters, Loinaz spent four years trying to set up a business to grow high-value medical plants which pharmaceutical outfits here import from as far away as the Himalayas. But the government refused to help.
"I was talking about advanced agriculture and they were talking about machetes with motors," he said. "We never communicated."
During the rapid industrialization, farmland, which once covered 90 percent of the island, dropped to under 60 percent. Although farm workers here now receive the minimum wage, they make up 4.8 percent of the labor force, compared with 36 percent in 1950.
Employment grew at only 1 percent a year in the last three decades, as 176,000 agricultural jobs and 50,000 home needlework jobs were lost. The 140,000 new manufacturing positions only partly replaced them, and a large population increase contributed to massive unemployment.
Today, Puerto Rico imports $1.2 billion worth of food, mainly from the United States, including rice from California, oranges from Florida and even sugar, which can be produced more cheaply abroad because of mechanization.
The government has recognized the absurdity of paying high prices for imports that could be grown here. Past governments "failed to pay enough attention to agriculture," Gov. Romero said in an interview.
"In the 1940s, when the share of industrial income became larger than agricultural income, it was almost a celebration. When the economic development administration promoted an industry, it didn't matter much it contaminated the environment, disrupted the community or destroyed agriculture."
Romero has undertaken a 12-year agricultural development plan. However, resources devoted to the endeavor are limited, and the first step, a project to plant rice, a principal staple here, has been plagued by improper site preparation, inadequate equipment and inaccurate cost estimates.
Ruben Berrios, head of the Puerto Rican Independence Party, calls the current economic system colonialist, and predicts that it will produce even greater dependence on food stamps and other federal funds, which now add up to a third of the island's gross product.
"Puerto Rico is on the way to becoming a stagnant, totally dependent, mortgaged society, subsisting on the dole," he wrote in a Foreign Affairs article. Berrios said Puerto Ricans must stop living "as welfare recipients in an artificial economic structure designed for the benefit of U.S. corporations."
Benjamin Ortiz of Mision Industrial, a local environmental group, speaks of "an illusion of prosperity." It is, he has said, "prosperity based upon dependency and a very fragile economic structure which has 20 percent unemployment, which is not exploding because of food stamps and all the other federal aid programs.
"Capital circulates but never accumulates . . . . If there is no accumulation of that capital for the future of the Puerto Rican nation, there is no development."