EXHIBIT H. TRANSCRIPT OF THE FINAL HEARINGS BY THE TUGWELL GROUP HELD AT SAN JUAN, P. R., ON MAY 26, 27, 28, AND 29, 1941, RELATIVE TO THE ENFORCEMENT OF THE SO-CALLED 500-ACRE LAW AS RECENTLY VALIDATED TESTIMONY OF JOSE ACOSTA VELARDE, GEneral SuperINTENDENT OF Sugar MILLS, FOR 30 YEARS The CHAIRMAN. Have you a statement which you are ready to give us, Mr. Acosta Velarde? Mr. ACOSTA. No, I have no statement whatsoever. I am here at the suggestion, we might say, of our friend Rafael Menéndez Ramos. The CHAIRMAN. Would you prefer that we should ask you questions? The CHAIRMAN. Well, we have developed in the course of these hearings a number of issues which seem to be the central ones. The first issue, of course, is that, perhaps, that has to do with the utility of the 500-acre law and how it can be made to serve the uses of the Puerto Rican people. If you have any thoughts on that we will be glad to have them. However, in that question, we have sort of passed that point. We admit that we have the law and we are asking now how it can best be enforced to gain the objects which we all share, which is to do something of value for the people of Puerto Rico. In that question itself a number of new issues have developed which are crucial, and we are uncertain how to answer them. One of them is this question of the size of the unit to be developed; also as to the kind of organization which that unit ought to have; also whether the units ought to be uniform or diversified. Mr. ACOSTA. When you say "units" you mean farms? The CHAIRMAN. Yes. Then follow, of course, the relationship of farm with the colono, and the variety of relationships there seem to be crucial. If you have some light, which I am sure you have out of your 30 years of experience, I am sure we will be very glad to have it. Mr. ACOSTA. Well, I am certainly glad to give you anything that I can tell you. In the first place, I believe that the 500-acre restriction is a good law. It has been stated here that the island has progressed under the violation of the law. I say, rather, that the island has progressed in spite of the violation of the law, that the island would have progressed even more if the law had been complied with. More of the benefits of the industry would have remained in the island. Large benefits and even money which was deducted for depreciation on factory equipment was devoted to buy land. The very industry was injured by this; I mean the industry itself. We have now a group of factories inefficiently situated, many of them with old equipment, things which would not have happened if the law had been enforced; instead of going to seek sources of profit by going into the culture, the growing of the cane itself, they would have devoted more to the factories themselves. Then it has been stated here also that a lot of progressI mean, now, agricultural progress; well, even that must be corrected; I mean progress in the culture of the cane-has been made. Personally, I don't consider monoculture as agriculture; I mean the cultivation of one crop, no matter how scientific and technical that is. They forget that most of the progress in the agriculture of cane is in the creation of new varieties. I remember the days when a 10-percent yield on cane, or 101⁄2, was a common thing in Puerto Rico. We are now getting 12 and 13 in places which did not get more than 10 or 10% before, and there are several instances of that, and that is due to the new cane varieties. Of course, I am not a field man, but everybody here knows how the tonnage of cane per acre has been increased by new varieties and, gentlemen, these new varieties were the work of experimental stations, and none of them was created by a single corporation in Puerto Rico. They were created by stations in Barbados, St. Croix, and Mayaguez. The CHAIRMAN. All supported by the Government? Mr. ACOSTA. All supported by the Government. On the good properties of these new varieties depends much of the success made by the corporations in the growing of sugarcane in their large land holdings, of course, but those who had more land profited most from it. The CHAIRMAN. I do not mean to interrupt you, but we do particularly want to get your views as to whether centrals can run without owning more than 500 acres of land. We have had some testimony on that subject. Mr. ACOSTA. I think so. It has been said that 50 percent is the minimum. Admitting that, it means that they have gone quite a distance. There was a time long ago when they wouldn't even admit it. Throughout 29 years of experience of making sugar in factories in Puerto Rico The CHAIRMAN. You have some experience in other countries too? Mr. ACOSTA. Yes; in Cuba and Santo Domingo. I was 1 year in Cuba and 2 in Santo Domingo. I have been in places where they could get all the cane they wanted to get to go at capacity, and in other places where the largest proportion of cane was the company's own cane, and they barely were able to keep the mill going 51⁄2 days, at best, and other times under capacity. The whole question comes down to an economic one, that is, paying for the cane what the cane really is worth. We have a law here, which was the first attempt in Puerto Rico to regulate the paying of cane to colonos. Well, I think that law has got to be revised if the centrals are going to operate with colonos' canes, The CHAIRMAN. Excuse me again, but I am so interested I have some questions I'd like to ask. Have you any views on the significance of such law, not the specific law, but some such law as was passed by the legislature this year? I believe it was vetoed by the Governor. Mr. ACOSTA. No, I have not. The CHAIRMAN. Well, the intent was to make the centrals public utilities so that their relations with the colonos could be regulated. Mr. ACOSTA. I believe in that. I believe in that as a protection for the central itself; if we are going to protect the central from destructive competition, we have to give it the monopoly of a certain area, and if we are to give a monopoly to anybody the Government has got to regulate it. Mr. MENENDEZ RAMOS. We are highly concerned, Mr. Acosta, Velarde, with the enforcement of this 500-acre law, and at the same time keeping alive and as healthy as possibly our sugar industry. That is, I think we all agree that the sugar industry is vital to Puerto Rico? Mr. ACOSTA. Oh, yes, it is our very life. Mr. MENENDEZ RAMOS. And that any program to be adopted must be predicated on the maintenance of a prosperous and successful industry. There is no quarrel with that? Mr. ACOSTA. No. Mr. MENENDEZ RAMOS. Well, if the centrals are regulated in the ownership of the land and the payment of so much sugar per ton of cane to the colono, there may be a point where the limit of diminishing returns to the centrals would be dangerous, and, of course, if the centrals lose money they cannot operate? Mr. ACOSTA. Of course. Mr. MENENDEZ RAMOS. The question of declaring the sugar mills public utilities would be to protect the profits of these mills so that they would be kept in operation, otherwise you think that the mills could not continue to operate? Mr. ACOSTA. Of course; exactly. Mr. MENENDEZ RAMOS. Have you had any personal experience with mills grinding, say, 75 or 80 percent colono cane and the rest administration cane? Mr. ACOSTA. Well, I have had experience with factories grinding large quanties of colonos' cane, but not as much as that; pretty near that, about 70 percent, or anywhere from 65 to 70 percent, and from my experience I don't see any reason why the central could not profitably operate on 100 percent colonos' cane, if we pay for it what the cane is really worth. Now we have a law, as I was starting to say, that first attempted to regulate in Puerto Rico the payment colonos' canes. This law establishes that 63 percent of the yield of the cane should be paid to the colono when the yield of the mill is below 12, and 65 percent of it is above 12. Well, cane should be paid for on the basis of what it yields, not on what the mill yields, and then 63 percent may be a large share for the colono with poor canes, while 65 payment may be a small payment for the colono. Now as the yield of sugar per hundredweight of cane goes down, the production of sugar, of course, goes down; the expenses of running the mill are practically the same, so the cost of producing 1 ton of sugar then goes up. Now if we grind cane, say 1,000 tons with a yield of 10, and we get 100 tons of sugar, and we grind 1,000 tons with a yield of 11, and get 110 tons of sugar, with the same operating expenses in the mill, we have increased our output by 10 percent just by improving the quality of the cane. The central cannot afford to pay as much for a low yielding cane as it does for a high yielding cane. That's a matter that is plain to everybody. The_law_should be revised to provide for fair payments for the cane, and when I say fair I mean fair for everybody. The CHAIRMAN. Mr. Acosta, in that same connection, it would be useful for another purpose, would it not, that is, for assuring the central that it had a uniform supply of cane, which is one of the things which they always say is the reason for owning land of their own? Mr. ACOSTA. I don't quite get that. Mr. MENENDEZ RAMOS. He means assuring themselves of a steady supply so that there would be no shut-down. Mr. ACOSTA. You mean whether a certain percentage of owned cane is needed to insure a steady supply? I don't think so. In fact, my experience is that centrals that have more cane than the colonos have not been able to operate as steadily as others where the situation is the reverse. The CHAIRMAN. Well, my question, Mr. Acosta, is whether a law of that sort would not be useful in this connection, too, if there was not a steady supply of cane? Mr. ACOSTA. Of course. Dr. MITCHELL. In other words, it was stated that the reason for having a large proportion of administrative cane was that the colonos would not deliver cane early in the season, when the sucrose content was low, but would prefer to hold it until midseason or late season when it was high, and that the mill had to have administracion cane to feed itself early in the season. If the cane were paid for to each colono on the sucrose content of the cane at the time of grinding, when it was delivered, what incentive would there be for the colono to deliver cane early in the season? Mr. ACOSTA. There really would not be an incentive for that, but if we are going to distribute the cane among the colonos, everybody would have to share the pros and contras. The harvesting of the cane should be in proportion to the whole crop. Dr. MITCHELL. I can see no solution within that, but how can it be worked? Mr. ACOSTA. It is being worked now. We hold them from delivering more cane than they should. That is my own experience. Dr. MITCHELL. Your proposal was that the colono be paid at the time of delivery, for the sucrose content of the cane which he delivers, and it was repeatedly said earlier that the cane early in the season is worth less because of low sucrose content. Mr. ACOSTA. All cane is, whether it is colono or administration cane, and it goes up as the crop advances and then, it starts to go down again as you get to the end of the crop. Dr. MITCHELL. Your solution would be that the colonos deliver cane at certain times, whether the sucrose content was high or low? Mr. ACOSTA. No, my solution would be that you prorate the cane so that all colonos share in the good seasons, and in the poor seasons also. Dr. MITCHELL. How could that be worked? How could you work that out? Mr. ACOSTA. Well, I have never had much experience with the actual handling of colonos. I am a factory man. But I think that is a plain, common sense matter. Mr. MITCHELL. In other words, some of the payment which might have gone to the colono who delivered cane in midseason when the sucrose content is higher, would be withheld by the central and would be paid to the colono who delivered cane earlier in the season with a lower sucrose content? Mr. ACOSTA. Oh, no; no, that is not my idea. My idea is that if a certain colono has, say, 1,000 tons of cane and the length of the crop is estimated at 100 days, it is a simple matter to give him 1,000 divided by 100. Of course, there are perhaps colonos that have a larger proportion of gran cultura canes, but even that can be taken care of. Dr. MITCHELL. What about the colono with only 10 acres? You are not going to take one one-hundredth of his cane, are you? Mr. ACOSTA. There are not so many of those. Dr. MITCHELL. Well, the small fellow, you are not going to proportion his delivery, surely? Mr. ACOSTA. No, of course not. In that case we will have to assign a share, say 1 or 2 or 3 weeks. Dr. MITCHELL. But it is very important to him whether he gets paid early in the season or late in the season? Mr. ACOSTA. Well, those are details that-there are some people that would be injured by that, but it is inevitable. Dr. MITCHELL. Well, I am asking you if your ingenuity would give an answer to that. Mr. ACOSTA. My idea would be to divide that as much as practicable. Mr. MENENDEZ RAMOS. Mr. Acosta Velarde, is there such a thing as the practice of a colono having in his farm say in Bayamón, near Central Juanita, to send his cane to Central San Vicente, just because San Vicente is a better mill and gets a bigger yield, and it may be necessary to send it there for that reason? Mr. ACOSTA. Yes, there is something in that, but that is part of the inefficiency that we should correct. A lot of money is wasted in unnecessary transportation of cane over long distances. I am speaking of the industry as a whole, not of the special problem of any individual factory, now. The CHAIRMAN. I can speak, Mr. Acosta, from personal experience of the difficulties caused by cane trucks in your cities. Mr. MENENDEZ RAMOS. Years ago, more than 20 or 25 years when we started the sugar cane industry, the truck for transportation of cane was unknown? Mr. ACOSTA. Yes. Mr. MENENDEZ RAMOS. And most of the transportation was done through the railroad, and the mill that was not on the rilroad line was out of luck. Now I see hundreds of trucks on the road from here to Mayaguez every week. Do you think that the adoption of transportation by means of trucks has helped to solve the question of delivery of cane by the colono? Has it been a help? Mr. ACOSTA. I think so. I think it is cheaper to transport cane by trucks than by company railroads, unless it is a big company that owns large tonnages of cane. Of course, there are some companies operating inefficient railroads yet, but most of them are being scrapped out and giving way to the truck. Mr. MENENDEZ RAMOS. But my idea is that it would be important to find out whether the truck is a factor against the colono operated mill? Mr. ACOSTA. Oh, no; I think it is a help to the colono, the truck transportation. The truck can go almost anywhere. It is the same old question of the truck and the railroad; it is the same old problem. The CHAIRMAN. Thank you very much, Mr. Acosta Velarde. Mr. ACOSTA. There was one thing I wanted to say first. Arriving at a point where it seems that a certain minimum wants to be established for owned cane, well, the colonos might be interested in that themselves. They are being paid for their cane, most of them, so well right now they may be glad to keep conditions as they are. In other words, they could rather have a system in which they are sure to get for their cane very often a lot more than it is worth, and let that question of the land tenure go. Mr. MENENDEZ RAMOS. That is because of the special law which forces the sugar mills to pay 63 to 65 percent? Mr. ACOSTA. Regardless of any other limitation than the 12 percent yield. If it goes up, it is 65 percent. If it goes down, it is 63 percent. That's very rough. Mr. MENENDEZ RAMOS. Isn't it true that in some cases some actual colonos may be getting more for their cane than the central can pay? Mr. ACOSTA. I know of many cases of that kind. In fact, there has been none of this colono exploitation by sugar mills, but my own experience is that a large amount of cane has been ground in this island which did not produce more than 10 percent yield, and transportation charges have been paid for that cane besides. The CHAIRMAN. One or two questions. In your opinion is the operation of centrals in Puerto Rico as efficient as it is in other sugar-producing areas? Mr. ACOSTA. Yes, I think so. The CHAIRMAN. Well, that's the whole answer to the question. Thank you very much. EXHIBIT I Mr. JOSE ACOSTA VELARDE, LAND AUTHORITY OF PUERTO RICO, Executive Director, Land Authority of Puerto Rico. SIR: I am inclosing an advanced report of the financial operations of the land authority for the fiscal year ending on June 30, 1943. This report consists of the following exhibits: Exhibit A. Balance sheet as of June 30, 1943. Exhibit B. Cash statement for the period from October 14, 1941, to June 30, 1943. Exhibit C. List of farms acquired and paid as of June 30, 1943. Exhibit D. List of farms acquired in process of survey, subdivision and clearance of title as of June 30, 1943. Exhibit E. List of bills payable as of June 30, 1943. Exhibit F. Income and expense statement for the fiscal year ending on June 30, 1943. Exhibit G. Analysis of expenditures for the period from October 14, 1941, to June 30, 1943. Exhibit H. Analysis of the equity of the land authority account for the period from October 14, 1941, to June 30, 1943. According to the balance sheet submitted the total assets of the land authority as of June 30, 1943, amount to $7,084,616.55. Of the total assets owned, $1,956,878.46 represent creditor's interests, thus leaving a balance of $5,127,738.09 which represents the equity of the land authority in those assets. I wish to call your attention to the fact that no depreciation has been computed on the fixed assets owned. The cash statement for the period from October 14, 1941, to June 30, 1943, gives you an idea of the total amount disbursed up to June 30, 1943. As disclosed by this statement a total of $779,952.67 has been disbursed of which $60,543.45 was paid from the "contingent expenses" appropriation for the fiscal year 1941-42, $314,601.96 was paid from "general funds" and $404,807.26 was disbursed from the "Fund for the cession of land and houses to agregados." In other words, from the total amount of $5,366,000 which constitutes all the appropriations made to the land authority so far, $163,674.18 were expended during the fiscal year 1941-42 and $614,649.25 were the expenditures actually paid during the fiscal year 1942-43 and as $5,456.55 of the "contingent expenses" appropriations for the fiscal year 1941-42 was lost because it was not used prior to June 30, 1942, the net cash balance on June 30, 1943, is $4,582,220.02. However, as there are outstanding liabilities amounting to $1,956,878.46, once the liabilities are paid the cash balance will be reduced to $2,625,341.56 of which $1,482,833.62 will be the balance of "general funds" and $1,142,507.94 the balance of "Fund for the cession of land and houses to agregados.' The exhibits C and D give you a detail of the farms which have been acquired up to June 30, 1943. According to these exhibits the land authority is in possession of approximately 17,071.2251 cuerdas having a value of $2,353,567.37 (cost of improvements included). Exhibit E is a schedule of the liabilities outstanding as of June 30, 1943. As disclosed by this schedule of the total liabilities amounting to $1,956,878.46, the sum of $1,602,565.42 is to be paid from the "general funds" and $354,313.04 constitute commitments against the "Fund for the cession of land and houses to agregados.' Exhibit F accounts for the net decrease in the equity of the land authority for the fiscal year ending on June 30, 1943. According to this statement the total expenses for the fiscal year amounted to $180,299.19 but as the land authority derived revenues during that year amounting to $1,876.06 the net decrease was only $178,423.13. In order that you may have an idea of how moneys have been expended by the land authority up to June 30, 1943, I have prepared exhibit G which analyzes expenditures made. As portrait by this exhibit of a total expenditure of $2,736,830.13, the amount of $2,501,347.26 constitutes an investment. In other words 91.39 percent of the total expenditures up to June 30, 1943, is capital expenditure, of which 85.99 percent constitutes investment in land and improvements. The actual expenses of the land authority up to June 30, 1943, amount to $235,482.87 which is 8.61 percent of the total expenditures. I have considered advisable to include in this report exhibit H which accounts for the reduction in the equity of the land authority account from $5,366,000 to $5,127,738.09. Respectfully submitted, ANGEL E. MARICHAL, EXHIBIT A. Land Authority of Puerto Rico-Balance sheet as of June 30, 1943 Fund for the cession of land and construction materials to agregados---- 3, 085, 399. 04 1, 496, 820. 98 Total funds... 88301-44- -20 4, 582, 220. 02 |