1 An Ecologist’s Perspective on Sustainable Socioeconomic Development In Puerto Rico Fred C. Schaffner, Ph.D. Universidad del Turabo CIEMADeS, Santo Domingo, August, 2005

2 Percepciones Mitológicas Cuatro Mentiras Tradicionales 1. Desarrollo Económico es sinónimo con Crecimiento. La creación de empleos nuevos es lo único que importa. Calidad de vida es irrelevante. 2. Puerto Rico está experimentando una explosión demográfica (poblacional). 3. La gente no tiene donde vivir -- hay que convertir las áreas verdes en áreas de vivienda. 4. El turismo y la construcción son los sectores económicos mas importantes para la economía de Puerto Rico.

3 Sustainable Development - “meeting the needs of the present without compromising the ability of future generations to meet their own needs. Fuente: “Our Common Future”. Report by the World Commission on Sustainable Development (UN), 1987 (GH Brundtland et al). Desarrollo – Capacitación – (Capacity Building) mejorar la calidad de vida de la gente. Desarrollo Sostenible – extender el progreso sin exhaustar los recursos ni perjudicar la capacidad de las generaciones futuras para atender sus propias necesidades. Sostenibilidad vs. Capacidad Acarreadora: consideraciones de escala, en sistemas cerrados y sistemas abiertos -- local, isla, región, continente, hemisferio, planeta. No significa ajustarse a la capacidad acarreadora necesariamente.

4 El desarrollo (calidad de vida) no se debe confundir con crecimiento (aumento de tamaño o número). “Even a trash heap can grow...”, Peter Drucker, 1996). Sustainable Economic Development requires a long term commitment towards improving the quality of life of the population. No heredamos la Tierra de nuestros padres La tomamos prestada de nuestros hijos proverbio indígena No es ecoturismo, ni geoturismo, ni recreo, ni agricultura, necesariamente… “Rational men accept limitations on their ability to make short-run gains in order to procure greater gains in the long run.” Anthony Down, 1957 An Economic Theory of Democracy

5 Indicadores de Calidad de Vida en los Diez Países más Ricos y los Diez Países más Pobres del Mundo … y para la mayoría de la población mundial “Calidad de Vida” no significa monumentos ni arte en la ciudad, y es mas que solamente empleo. Metrics for Quality of Life, such as physical, mental a and emotional health, should be included in the definition of “Economic Development”

6 Most of the World’s most prosperous economies have slow-growing, stable or declining population growth (post industrial, steady-state economies), while most of the world’s least prosperous economies and most volatile political environments are trapped in accelerated pre-industrial to industrial population growth. Transition Towards Prosperity - a process of succession that can be directed and managed, given sufficient will.

7 The French- and Spanish-speaking Greater Antilles. Three islands, four countries – Unique challenges in education and population. Doubling times: Haiti = 30 yrs; RD = 54 yrs, PR = 119 yrs; Cu = 209 yrs.

8 Puerto Rico In Perspective With a GNI (Gross National Income) of $10,950, Puerto Rico is ranked by the World Bank as 53 rd of the 56 “high income” economies – below Singapore ($21,230), Hong Kong ($25,430) and Ireland ($25,960).

9 Puerto Rico: land = 8,959 sq km; people = 3,957,988 (2002 estimate) Ireland: land = 68,890 sq km; people = 3,883,159 (2002 estimate) Singapore: land = sq km; people = 4,452,732 (2002 estimate) Ireland: land = 68,890 sq km; people = 3,883,159 (2002 estimate) Singapore: land = sq km; people = 4,452,732 (2002 estimate) Hong Kong: land = 1,042 sq km; people = 7,303,334 (2002 estimate) Japan: land = 374,774 sq km; people = 126,974,682 (2002 estimate) Source - CIA World Factbook 2002 Japón ha implantado leyes para proteger el suplido de agua = proteger las áreas verdes y limitar la expansión horizontal de sus áreas urbanas. Singapur y Hong Kong importan su agua por un tubo. ¿Cuál estrategia promueve más seguridad e independencia?

10 fuentes: Departamento de Salud de Puerto Rico, ; - CIA World Factbook, Aunque la densidad poblacional es alta, la tasa de crecimiento poblacional es moderada y lineal. Sin embargo, desde la Segunda Guerra Mundial, la expansión horizontal de hormigón se ha procedido dos a tres veces mas rápido que el crecimiento poblacional, con muchos edificios abandonados.

11 La velocidad del incremento en Puerto Rico está en declive.

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14 Contrario a lo que muchos piensan, el sector económico de mayor importancia para Puerto Rico es la Manufactura. Construcción, Turismo y Servicios en combinación no aportan ni la mitad de lo que aporta la Manufactura. Existe la necesidad de apoyar la Manufactura y convertirla en un sector mayormente local – dueños locales – exportaciones – capital del exterior. Tourism and All Services (<13%) Construction and Mining <3% Manufacturing (=43%) fuente: “Puerto Rico en Cifras” Banco Gubernamental de Fomento, 2005.

15 Linking sustainable development and business [El Rol de los Empresarios]: Capital - 1. Financial 2.Manufactured 3.Natural (organisms, water, space, air, minerals, soil, etc.) 4.Human. All forms of financial and manufactured capital are based on human capital and natural capital. Given its high population density and lack of minerals and land, Puerto Rico’s primary natural capital is it’s water supply, but it’s cost is skyrocketing and the supply is increasingly endangered - due to poor planning and the accelerated increase in HARDSCAPE (impermabilización y erosión).

16 La vegetación, hasta una maleza de plantas exóticas, provee los siguientes servicios de importancia inmediata, entre otros: - Reduce la Erosión del Terreno - Evita Inundaciones - Reduce la Contaminación del Agua - Ayuda a Recargar los Acuíferos - Modifica Positivamente el Clima Local - Fomenta la Biodiversidad Watershed and Wetland Management, Protection, Research

17 C C C For oceanic islands, raw materials can be imported and finished products can be exported, but potable and industrial WATER must be conserved and recycled locally. Desalination remains prohibitively costly. El sector manufacturero y los ambientalistas son aliados naturales ? Puerto Rico has not yet learned these lessons and quality of life is deteriorating… Mejor para la industria Produces Water, Industry, and Financial Capital Consumes water

18 Figure 14. High population density does not have to be accompanied by the complete destruction of greenspace. Preserving this greenspace is essential for preserving industrial water supplies. Source: Diamond, 2005.

19 Achieving the UN’s Milennium Development Goals for the year 2015 (para combatir la pobreza): How do you know what you’ve got? The current trends towards real-cost pricing; the elimination of subsidies and the internalization of costs (user pays, polluter pays), especially in industry, help identify those industries that benefit the economy versus those that drag it down (World Business Council for Sustainable Development, World Bank, Pigou 1932, Coase 1960 ). Especially Important for: - Optimizing energy supplies and efficiency - Optimizing potable and industrial water - Wastewater treatment

20 Education, Innovation, Ideation and Independence. For financial capital to flow in, products must flow out. This can only happen in economies with an adequately trained and trainable work force. Pollution control and prevention, and adequate health care are requirements for economic prosperity. Public investments in these areas are generally compensated by a ratio of about 1.5 to 3.0 : 1 in increased national economic performance over time. Human Capital Development

21 Developing a Culture of Quality -- Access to Markets and Participation in the Global Economy are essential Current trends suggest that Europe will be the Caribbean’s most lucrative trading partner (a pesar de CAFTA) but access to European markets will require compliance with European Quality and Environmental Standards. This means compliance with ISO (Quality Management and Conformity Assessment) and ISO 14000/14001 (Environmental Management Systems), and other standards will be necessary. Example: Coca-Cola recently announced that it will no longer do business with partners that do not meet ISO standards.

22 If Puerto Rico can optimize the cultivation of its human capital (education, quality of life and the environment), protect and conserve its water supply, and generate additional internal efficiencies in its economy (e.g., reduce the cost electricity) its socioeconomic development and future will be positive. For the Region, Sustainable Economic Development planning should be based on the following “Pillars”: 1. Policy - establishing appropriate public policy. 2. Institutional Strengthening. 3. Developing Partnerships. 4. Maintaining Productivity and Competitiveness.

23 finí

24 Rapa Nui, …the flesh of your mother sticks between my teeth.

25 “Systematic innovation therefore consists in the purposeful and organized search for changes, and in the systematic analysis of the opportunities such changes might offer for economic or social innovation.” Peter Drucker, Innovation - The Purposeful Response to Change. Opportunities for Adaptation Four Sources of Change within an Enterprise - The unexpected - the unexpected success, the unexpected failure, the unexpected outside event; - The incongruity – between reality as it actually is and reality as it is assumed to be or as it “ought to be”; - Innovation based on process need; - Changes in industry structure or market structure that catch everyone unaware. Four Sources of Change from outside an Enterprise - Demographics (population changes); - Changes in perception, mood, and meaning; - New knowledge, both scientific and nonscientific.

26 ISO Certifications

27 The Social Costs of Externalization (Rights and Ownership). If one assumes, or assigns, to the community the right to clean air (or water), then the pollution emitted by an operator is a violation of the rights of the community that should be penalized and the community compensate Pigou (1932) - the community the right to clean air (or water). According to Coase (1960), we must establish property rights to the environment so that anyone wanting to dump wastes into it must first purchase that right from the owner (us, the community).

28 Adequate non-market institutions are needed to mediate between society, markets, and the environment. Non-market institutions respond to environmental conditions and needs and influence them directly, or indirectly through adjustments to markets, prices, production and consumption to improve human welfare and economic capacity building, in a manner analogous to the Federal Reserve Bank’s influence on interest rates or NGO’s organizing against the marketing of genetically modified crops in Europe (purposeful, and both direct and indirect), or by direct regulation. The governing authority (non-market institution) responds to the environment (biosphere) and influences markets, prices, production, consumption and welfare (= quality of life) (Coase 1960).

29 Puerto Rico’s Economic Evolution ’s, 1950’s  mid 1960’s. Low-cost labor-driven economy (Operation Bootstrap”, etc.). 2. Late 1960’s to mid 1970’s. US Petroleum import quotas drive economic growth in PR (chemical, petrochemical industries) Federal tax incentive-driven economy  ? Knowledge-based and Innovation-driven economy  ? Next steps? Towards economic and environmental sustainability, diversification and global competitiveness. “Four Pillars” 1. Policy - establishing appropriate public policy. 2. Institutional Strengthening. 3. Developing Partnerships. 4. Maintaining Productivity and Competitiveness.

30 “Systematic innovation therefore consists in the purposeful and organized search for changes, and in the systematic analysis of the opportunities such changes might offer for economic or social innovation.” Peter Drucker, 1993 A Purposeful Response to a Changing World Four Sources of Change within and Enterprise - The unexpected - the unexpected success, the unexpected failure, the unexpected outside event; - The incongruity – between reality as it actually is and reality as it is assumed to be or as it “ought to be”; - Innovation based on process need; - Changes in industry structure or market structure that catch everyone unaware. Four Sources of Change within and Enterprise - Demographics (population changes); - Changes in perception, mood, and meaning; - New knowledge, both scientific and nonscientific.

31 “Rational men accept limitations on their ability to make short-run gains in order to procure greater gains in the long run.” Anthony Down, 1957 An Economic Theory of Democracy “If economic development means using more stuff, then those who argue that growth and environmental sustainability are incompatible are right. And if we grow by using more stuff, then I’m afraid we’d better start looking for another planet.” Monsanto CEO Robert B. Shapiro Further, the economist Robert Heilbroner (1994, 1999) has observed: “There is a limit beyond which acquisitiveness no longer serves, and may well disserve, the adaptability of order.” “I know not why it should be a matter of congratulation that persons who are already richer than anyone needs to be, should have doubled their means of consuming things which give little or no pleasure except as a representative of wealth.It is only in the backward countries of the world that increased production is still an important object: in those most advanced, what is economically needed is a better distribution, of which one indispensable means is a stricter restraint on population.” John Stuart Mill, Principles of Political Economy, 1848

32 Areas of Emphasis for the Greater Antillies: 1.Education. 2.Science and Technology. 3.The Environment. Puerto Rico’s Economic Evolution ’s, 1950’s  mid 1960’s. Low-cost labor-driven economy (Operation Bootstrap”, etc.). 2. Late 1960’s to mid 1970’s. US Petroleum import quotas drive economic growth in PR (chemical, petrochemical industries) Federal tax incentive-driven economy  (Goal?) Knowledge-based and Innovation-driven economy  (Goal?) Next steps? Towards economic and environmental sustainability, diversification and global competitiveness.

33 “No hay buena obra que pueda hacerse si la calidad de las costumbres y los métodos no alcanzan a aparejarse a la calidad de la obra en sí. Todo momento de gran transición histórica es propicio a echar la raíz de mejores tradiciones. Llevar acabo la obra y perfeccionar las costumbres que son instrumentos para llevarla a cabo, es responsabilidad que el pueblo ha puesto conjuntamente en nosotros. Este es el momento para coger todo mal hábito que el atisbo más claro de nuestra conciencia alcance a ver, y voluntariamente extirparlo.” “No Puede Haber Programa Grande Con Actitud Pequeña…” Mensaje I, miércoles, 23 de febrero de 1949 Luis Muñoz Marín

34 APPENDIX 1. World Bank appraisal of the 56 “High Income” economies, Many of these countries are in the 4 th stage (post-industrialization) of demographic transition or transitioning from the industrial (3 rd ) to the post-industrial (4 th ) stage of demographic transition. For an appraisal of the climate for doing business in Puerto Rico see Economies/BusinessClimateSnapshot.aspx?ec onomyid=156