CHAPTER SIX

CONCLUSIONS

The Environmental-Economic Interactions in Puerto Rico

    This study looked at relations between development strategies, industrialization programs, and their repercussions on the natural resources, productivity, quality of the environment, and employment, emphasizing PR's case. The goal was to examine the environmental and social costs of the development path followed by reviewing economic-environmental interactions, and to assess these from a sustainable development perspective.

    The idea of sustainable development served as a theoretical framework. Based on the analysis and the theory reviewed, in this chapter I draw conclusions about the sustainability of economic-environmental relations in the context of the Puerto Rico, and in general on the applications of the sustainable development idea.

    In the case of Puerto Rico, emphasis was placed in the description and analysis of the relation between manufacturing activities that replaced agriculture as the main economic activity and it's overall impact in employment and toxic waste release. A major conclusion is that the type of manufacturing activity that replaced agriculture and subsistence activities in the economy has had an impact in the natural capacity of the island to sustain long term development. This conclusion is based on toxic chemical release and reduction in agricultural land as aggregated indicators of impact. At the same time a description of the patterns of employment as an indicator of a social benefit derived from development strategies shows that although this has been one of the major objectives of the industrialization programs since the 1940's, these have not been effective in significantly reducing unemployment.

    However, development in the manufacturing sector has been capable of extending natural carrying capacity of the system. It has also allowed for improvements in living standards. Since what is described in this study as natural carrying capacity in Puerto Rico has been surpassed, a conclusion of this study is that the economy depends on this sector to extend its productive capacity to substitute for limited natural production potential.

    I considered several factors that illustrate the natural limits of the system to satisfy multiple objectives. The first is the relation between energy use and economic productivity,  second is production in the manufacturing sector, employment and toxic waste released by this sector, and third is the relation  between population growth, land use change, and agricultural productivity.

    The study identified three major factors related to environmental and natural resource disruption. First, rapid land use transformation from non-permanent, agriculture and forest uses to developed-permanent uses that diminished the natural food production capacity of the system. Second, is the dependence on manufacturing activities that release high amounts of toxic chemicals and therefore has an impact on vital resources and natural ecosystems. And third, there is a pattern of increase in energy consumption that is an aggregate measurement of environmental impact.

LAND USE

    The land use change analysis and projections show a pattern of reduction in farmland that occurs concurrently with the reduction in the agricultural sector participation on the island economy since the 1950s. Low to medium density residential expansion has replaced agricultural land. A positive aspect of the land use change pattern is an increase in total forested land. However, most of the land has been transformed to permanent non-forest uses.

    Projections to the year 2015 show the gravity of this situation. Food production capacity will be significantly reduced. If agricultural land could be frozen in other uses, natural reduction in carrying capacity would result from population growth. Results of this analysis also stress the significance of the management of available land in determining the biological carrying capacity of land due to the topographical and climatological characteristics of the island.

    A reduction in farmland during the last 40 years of approximately 47 percent of total farmland in 1950 illustrates the significance of this shift in an island with limited land resources and high population density. The impact on agricultural productivity is greater than described in projections of farmland change since transformation from agricultural to permanent uses mostly occurred in the more productive and best suited arable lands of the coastal plains. Most of the shift from farmland to forestland occurred in the mountainous interior.

    The lack of explicit policies and programs to protect agricultural lands resulted in a significant reduction in agricultural production capacity. Still, agricultural land is being underutilized. Sixteen percent of the increase in forestland is the result of the development of secondary growth from fallow farmland. Although land use change from agriculture to forest maintained its primary production capacity, most of this land is on the mountains. Therefore, if some of the remaining forestland is transformed back to agricultural use, there could be high losses of soil due to erosion. By 1982, around 30 percent of total land had been transformed to non-forest or farmland uses that can be considered permanent development or irreversible uses in terms of agricultural use.

    The continuation of the pattern of reduction observed between 1950-1987, an average annual reduction of about 9,700 hectares per year, will result in a reduction by 2015 of 39 of the 43 percent of total land remaining as farmland in 1987. At other rates representative of average annual farmland reduction rates in specific four year census periods, this will be a reduction to 29 and 21 percent of total land. In the three cases, including the lowest annual rate of reduction scenario, there is a significant reduction in land resources and therefore carrying capacity. This assumes that farmland is a representative indicator of existing agricultural land.

    The rapid shift from an agricultural based economy to a manufacturing base, creates the illusion of independence from an agricultural production capacity. Loss of agricultural land to permanent uses represents a significant reduction in primary productivity, and agricultural production, and therefore a reduction in the sustainability potential of the system.

    Land use change is a most important factor for the conservation of the biological carrying capacity on any small island particularly under conditions of high population density. Effective policies and planning must be implemented to protect this important resource. In Puerto Rico this option will require accurate inventories and description of land use change and demands.

    The assessment of the positive aspects of the reforestation process that resulted from land use change, must be evaluated together with the impacts on the environment and the vital resources, of activities that replaced agriculture in the economy and which also have an indirect impact on the long term carrying capacity of the system. One of this impacts is toxic chemical releases by the manufacturing sector.

TOXIC CHEMICAL RELEASE

    This study shows that toxic waste releases in Puerto Rico is a function of the rate of economic activity, structure of the economy and the sectorial composition of the manufacturing sector. Toxic waste generation and release on the island indirectly results in extending the system's natural carrying capacity. The extension is achieved by increasing rates of economic productivity in the manufacturing and other sector. However, the major activities by which this occurs on the manufacturing sector have an impact that, in this study, was described by the toxic waste releases by the manufacturing sector as an aggregated indicator.

    The Chemical and Allied Products sector (SIC 28) is the main releaser of toxic waste in PR. This is also the main economic sector in terms of value added. Other manufacturing activities with significant rates of pollution generation per value added are the Petroleum and Refining (SIC 29) and the Rubber and Miscellaneous Plastics sector (SIC 30).

    The export oriented manufacturing activities that replaced traditional manufacturing have been characterized by toxic and hazardous pollution generation. There is a trade-off to the economic benefit derived by this activity, a cost that is not internalized.

    Based on the ratio of toxic waste release per value added I conclude that the Electronic and Electric Equipment and Food and Kindred Products Sectors are the sectors with the lowest impact in terms of aggregated toxic waste release per value added followed by the Instruments and Related Products sector. These six sectors release 94 percent of the total toxic chemicals released by manufacturing activities and are responsible for 58 percent of total value added by manufacturing.

    These figures show that the other manufacturing activities that account for 42 percent of the total value added release only 6 percent of total toxic waste on the island. This relation shows the unbalanced impact of those six sectors in reference to total production by the manufacturing sector and suggest the need for strategies that promote diversification of the manufacturing sector to those less polluting activities. A description in more detail of those activities would be needed to evaluate their potential impact in other aspects of the carrying capacity and environmental sustainability potential of the island.

    Most of the toxic waste release reported during the 1987, 1988 and 1989, Toxic Waste Release Inventory by the Environmental Protection Agency has been reported in the fugitive emissions category. One of the main environmental problems on the island is the contamination of water bodies, both surface and underground, with toxic and hazardous pollutants. Although this study did not describe this in detail, the volume of toxic waste releases serves as an aggregated indicator of potential impact. This together with the reduction in farmland are major factors that undermine the island's ability to sustain human activity at adequate levels of health and quality of life.

    In this study employment was used as an indicator of social welfare. The analysis shows that industrialization strategies have not been effective in reducing the chronic unemployment problems existent since the late 1960s. This was one of the major objectives of the industrialization strategies. In part this has resulted from the priorities of the programs. The major industrial activities in PR measured in terms of value added are low in labor demand when compared with their volume of production. At the same time the toxic waste per employee ratio shows that two of the main industrial activities, the Chemical and Allied Products and the Rubber and Miscellaneous Plastics industry, produce vast quantities of toxic waste per person employed. Projections on manufacturing employment show that these industries have not solved the unemployment problem. The dependence on these to fulfill the objective of full employment would require significant growth in this sector. That would increase impact due to toxic chemical releases significantly.

    Evidence suggests the need to examine industrialization policies, programs and strategies since these do not seem to be successful in achieving the immediate objectives. This evaluation has to be offered in the context of dependence on a limited group of manufacturing activities with the characteristics previously mentioned.

    If the current economic structure and growth rates could be sustained, labor demand would increase and full employment could be reached by the end of the century. Due to the low labor absorption of the manufacturing sector in Puerto Rico, that would require a significant increase in manufacturing production. Due to the composition of the manufacturing industry, increased activity would increase the environmental impact as hazardous and toxic chemical releases significantly.

    The projections of growth in the manufacturing sector to reduce labor surplus show that if 1987 toxic waste release rates remains constant, release levels could increase from 31,189,519 pounds to 46,924,959 if current rates of growth in manufacturing GNP are maintained or to 88,630,464 pounds if manufacturing sector grows annually at a 6.99 percent rate to year 2015. Dependence on this sector to satisfy labor demand will require high rates of growth in the manufacturing sector of around 4.45 percent annually and 6.99 percent to achieve full employment by year 2001 or 2012 respectively (assuming rates of growth of 3.03 and 2.15 in the other sectors).

    The extension of carrying capacity can be successful only if appropriate measures of social welfare are considered priorities. This objective then becomes a limit itself to the strategies followed in structuring development alternatives.

ENERGY

    In Puerto Rico, where most production systems are dependent on imports, there is a highly unbalanced flow of materials. Analogous to the negative impact of unbalanced trade measured by monetary units, there is a negative environmental impact in a system where this unbalanced flow of materials and energy exists.

    There was a significant increase in energy use in Puerto Rico in the last 25 years. Available data show a 250 percent increase in use between 1960 and 1980. Around 95 percent of that energy comes from oil. Dependence of the island economy on imported oil for 95 percent of its high energy demand makes the system very vulnerable to changes in international markets. Energy consumption during this period increased at faster rates than population or aggregated economic indicators, suggesting there is not a close relation between these factors.

    Increase in energy use resulted from changes such as a transformation of the manufacturing sector to high capital and energy demanding activities during the 1960s, and change in lifestyles including a huge increase in energy used in transportation.

    The close relation between aggregate indicators of economic production and energy use is not apparent in the case of Puerto Rico. One reason for a lower correlation between these indicators is the composition of the manufacturing sector between the 1960s and 1980s, reflecting the high participation of the refining activities in the economy. Other related factors are the high rates of external investments and the lack of backward and forward linkages between the major manufacturing activities and other activities in the economy. Many manufacturing activities in Puerto Rico are enclaves of production, importing energy, raw materials and sometimes services, and do not generate a spillover and indirect job generation effect.

    A conclusion of the study is that due to the high rates of external investment, part of the energy used in Puerto Rico is applied to serving external profits and interests on investments.

    This description clarifies the relation between economic activities and beneficiaries and impact on resources and carrying capacity on the island. The major manufacturing producers, in value added, are externally-owned industries and therefore the ones exporting the difference between GNP and GDP. These are also energy and capital intensive activities, those as described by Alameda et al. (1984) that have replaced labor by energy and capital and therefore have high demands of energy. Manufacturing activities which export part of their income in the form of profits and interests are also those that have higher rates of energy use and some of the highest rates of toxic chemical releases. I estimated that approximately 10 percent of total energy use on the island is used to pay profits and interests on capital investments in the manufacturing sector.

    This is confirmed by the difference in coefficient of determination for the regression of energy use and GNP-GDP between the different periods that represent the shift to the Chemical and Electronic sectors. The period after 1975, when participation of export oriented manufacturing industries in the Chemical and Electronic sectors increased, had a lower correlation between energy use and GNP-GDP than the correlation when that includes the 1960s. This shows a tendency toward exporting benefits of production. The difference in correlation when GNP and GDP are used also confirms the effects of change in composition of the manufacturing sector, in the distribution of benefits of those activities.

    The divergence between GNP and GDP increased significantly since 1970 when it was 7.4 percent of GNP and reached a maximum of 37 percent in 1988. In both cases erratic trends indicate shifts in energy use due to changes in sector composition. Energy use has not been an automatic catalyzer of economic growth. Flow of profits on capital investments partly explains  the increase in energy use since the seventies. Flow of profits reached 28 percent of the total GDP in 1988.

    The ratios of energy per value added show that the Apparel, Electric, Food, and Chemical sectors in this order have the higher rates of energy use per value added of the major industrial activities. The Chemical, Electric, Food and Machinery sectors have the higher ratios of energy used per person employed in that order, the same as in the case of value added per employee ratio.

    The substitution of labor by energy and capital has been one of the main reasons for the increase in fossil fuel demand and high rates of unemployment. Major manufacturing activities, such as Chemical and Electric sectors are labor saving and energy and capital intensive. These two accounted in 1982 for 56.4 percent of total value added and 32 percent of employment in the manufacturing sector. This represents 5.8 of total employment (4.8 of labor force), and 6.7 of total energy use.

    Therefore there is a relation between the demand in energy, capital intensiveness, and labor in the manufacturing sector that has an indirect impact in the carrying capacity of the island. If employment is used as an indicator of the ability of socioeconomic arrangements to extend the natural carrying capacity in modern societies, industrial activities on the island have not been effective in achieving this extension.

Other considerations in the case of Puerto Rico

    The change in orientation from the first phases of the Puerto Rican development programs in the fifties, based on the utilization of local natural resources, created the illusion of independence of economic system from the local resources. This condition was the basis for the development of an institutional framework that did not integrate the physical base on which economic and social realities occur on the policy and planning process, weakening the system's self-adjustment ability, and long term sustainable carrying capacity. The economic development strategies promoted by the Economic Development Administration, institutionalized the dependent and unsustainable mode of development that now prevails.

    The economic arrangements and policies determine the intensity of production activity. The increase in productive intensity increases their environmental impact at a higher rate than the benefits derived. This was, in this study, exemplified through the use of energy consumption rates as a macroindicator of environmental impact, and their comparison with the effect on aggregated indicators of production.

    Puerto Rico must diversify its manufacturing sector, and improve infrastructure to manage waste releases and their reduction through incentives and policy implementation and enforcement. It must develop mechanisms to preserve its resources' long term capacity. To achieve this, development programs must be based on the island's physical and social conditions. These must look inwards to balance fifty years of "successful" but highly dependent and unsustainable development activities.

    Based on the carrying capacity idea an open system has natural limits within which it can developed. These limits are extended by the arrangements through which production systems are structured. The use of local resources and the institutional frameworks of the island are oriented to these export production activities. The high dependence on imports of external materials, and the highly contaminant nature of the export- oriented production activities have an impact on the environment that diminishes its long term sustainability and carrying capacity.

    The condition of an economic system which relies on exporting production, carries the burden of assimilating byproducts of production processes. This condition is worsened in PR and other small islands by strong dependence on imports to satisfy high consumption rates, and the dependence on imports of raw materials and energy for the production processes.

    The island's economic structure, export-oriented in production and import-oriented in consumption, has characteristics common of peripheral areas. Environmental and other social costs of production coexist with the benefits derived from these arrangements. Strong dependency on of imports for consumption goods and external capital investment develops. In general, this has been a common trend through the developing world. In Puerto Rico and other small islands with a high population density, large urban population, import oriented consumption patterns, and limited natural resources, this pattern of development is highly unsustainable.

Evaluating Development-Environment Relations

    There are many limits in the methods used for the description of environmental and socioeconomic interactions. I have mentioned limitations in the description of indicators of sustainable development. Some of these are related to the multidimensional nature of the indicators, and the epistemological basis of the different disciplines involved. Most methods are limited in their capacity to integrate information. The attempt of describing interactions between natural and social components of systems has the inherent limitation in the representation of complex interactions and sociopolitical and cultural factors for which previous descriptions do not exist. The idea of characterizing a dynamic system for policy analysis and evaluation cannot take a static form since that denies the dynamic principles that drives the system itself. In this sense carrying capacity is a malleable reference that at the same time offers a coherence in the analysis of individual parts.

    The idea of carrying capacity provides a theoretical framework for the description of natural limits to population growth through the description of individual demand-productive capacity. In the description of the extension of natural limits through social mechanisms, the idea of sustainable carrying capacity is limited to providing a conceptual framework of checks and balances between the activities that allow the extension in contrast to the impacts on the natural capacity that maintains those activities, either directly or indirectly. Therefore, it serves to structure a description of constraints or conditions under which the alternatives to extend the natural capacity can be analyzed.

    A benefit of the use of the sustainability potential is that it forces the description of the limited physical ability to sustain economic activities and the identification and description of their interactions to those physical limits. That because the concept of limits is intrinsic to the carrying capacity idea. Some of these limits cannot be quantitatively described and become relative rather than absolute limits to actions. In this study, for example, toxic waste release represents a limit to the extension or increase in intensity of some of the main manufacturing sectors on the island. Their impact cannot be directly described in terms of assimilative capacity. However, an indirect description and association of impacts can be used as reference in a political decision and planning process. Therefore, the utility of any concept in the analysis of environmental-socioeconomic interactions depend on the objectives of the analysis itself, which are in essence based on the ideological framework of the study.

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