Puerto Rico to New York: The Profit Shuttle
NACLA
Puerto Rico was, until recently, Chase's leading profit center in the world.' Now it is threatening to become the bank's leading loss center. The bank plays a significant role in the island's...
...SeeMoody's Government Manual...
...It's not only an issue of South Africa but...
...The Ferres' Puerto Rico Cement Co...
...construction permits for new projects fell almost 30 percent in 1975.29 The island's deformed colonial economy, highly dependent on imports, has been particularly hard hit by the increased cost of oil and the mainland inflation...
...As the largest per capita purchaser of U.S...
...NYT, November 7, 1975...
...9 and, not surprisingly, the bank has financed several, including, for example, a $12.7 million credit for the Mayaguez Mall...
...3 ' In September, a group of five U.S...
...During this period of Operation Bootstrap's "economic miracle" there was high demand for industrial plants and commercial buildings...
...WP, January 1, 1975...
...WSJ, September 28, 1967...
...Ibid...
...Tanganyika Concessions, and thus the Rockefellers, have an interest in Aluminio Portugues, an aluminum producer...
...Washington Post (WP), January 1, 1975...
...corporate presence, Chase and the Rockefellers along with many other U.S., European, and South African interests have played a pervasive role in the Angolan economy...
...TOURISM AND INDUSTRY The bank and the Rockefeller family also have a considerable stake in the tourism business, which accounts for some 5 percent of the GNP...
...2. Manchester Guardian-Le Monde (weekly English edition), January 18, 1976...
...All except one of the branches (Ponce) are located in the San Juan area, the island's government and commercial center...
...913 Chase's Puerto Rico headquarters rise above waterfront slums in San Juan...
...As of October 1972, COFAN had some 700 employees and the project's estimated total cost is $63 million.10 * The Rockefellers reportedly have other Angolan joint ventures with the Espirito Santo group...
...On the contrary, in its attempt to prevent further losses, it must take a more direct role in the territory's administration...
...Upon return from his five-week tour of southern Africa in 1959, David Rockefeller was confident about the economic and political progress of the continent, saying, "The nationalist movement is perhaps the most important single fact in Africa today...
...It also manufactures concrete structural elements and owns 31 percent of a Puerto Rican mortgage banking company, International Charter Mortgage Corp., whose portfolio in early 1975 was worth $157 million...
...The Rockefellers are now represented by the Clark Canadian Exploration Co...
...9. UN Assembly, A/9623 (Part V), p. 48...
...4 In debt-ridden Zaire, Chase was, until recently, syndicating a proposed $227 million loan for the Tenke-Fungurume copper project, "one of the richest unexploited deposits in the world...
...Chase leads a 39-member group of banks providing a $300 million loan to Eastern...
...4. NYT, November 6, 1975...
...He added that it need not affect U.S...
...In 1950 construction accounted for only 4 percent of the GNP, but by 1960 it had soared to over 20 percent and continued to grow until the early 1970s...
...JC, October 2, 1972 and September 27, 1973 (IBEC advertisement...
...20, 1975, Jan...
...July 15, 1971...
...and seven Puerto Rican banks (with Chase as a major participant) provided the government with a temporary breathing space by purchasing $612 million in four-year notes...
...also of the less developed country...
...9. JC, October 2, 1972...
...ANOTHER NEW YORK CITY...
...IBEC 10K report, 1974...
...to build its new Canovanas track, a few miles from its existing El Comandante track...
...INFRASTRUCTURE BONDS All this construction requires roads, sewers, water, telephone and electric services which are provided by state-owned entities...
...The community, known as Rio Mar, is 22 miles east of San Juan and will cover 523 acres, including a mile on the ocean...
...for more on the Ferre family, see Stu Bishop, "The Ferre's," NACLA's Latin America & Empire Report, July-August 1972...
...Chase also has close ties to several of the major companies in the construction industry...
...2 7 * First Boston also arranged the financing for the Commonwealth Oil Refining Co...
...The company's main activity on the island is general contracting and real estate development...
...capital has at stake...
...The bank, for example, provided a $4.2 million loan for the Cooley Farms Turnkey Project in Rio Piedras in which IBEC, as a member of a joint venture, built 1,200 units in a multi-building high-rise project.' 3 IBEC also manages and owns a minority interest in six shopping centers and is a partner (with Arlen Realty) in the 75 acre Plaza Carolina, a $40 million shopping center in suburban San Juan...
...9 * COFAN, which holds a phosphate concession covering most of the Cabinda enclave, was set up in 1969 by the Rockefellers, the Espirito Santo group of Portugal and I. M. Cheney of Britain...
...8. Kwame Nkrumah, Challenge of the Congo (New York: International Publishers, 1967), p. 12...
...Class 10 shares are the same as common shares except for two features: (1) when voting for directors, each share of class 10 has 10 votes...
...CORCO), which operates the island's main refinery, and intervened to restructure it in 1956 when it was floundering...
...On the other hand, the bankers have the advantage of working through a colonial structure on the island...
...Chase recruited the group's Portuguese bank into the Libra consortium bank which makes large loans to Latin America (see "Living with Nationalism" article...
...4 * Operation Bootstrap, an economic development program launched in 1947, has lured over 2,000 firms to the island by offering 10-25 year tax holidays and a cheap labor force...
...6 The apparel industry, which includes several other Chase clients, is the largest industrial employer, accounting for about a quarter of the manufacturing labor force...
...5. New York Times (NYT), March 23, 1969...
...imperialism and its European allies constitute the major threat to black Africa...
...3 For Chase all these statistics add more instability to its already shaky loan portfolio...
...However, Chase's caution in southern Africa does not affect its policy in other parts of the continent...
...When Rockefeller visited South Africa on his 1959 trip, there were 128 U.S...
...The Rockefellers own all 429,000 shares of IBEC common stock-class 10 as well as 65% of all IBEC common stock...
...Instead the Puerto Rican government relies heavily on private borrowing through bond issues...
...The owners are the holders of Chase Trust shares, which were first offered to the public in 1970...
...These tacts illustrate clearly that U.S...
...we can therefore expect the future U.S...
...The bank, for example, provided a multi-million dollar loan in 1950 which financed the Ferre family's acquisition of cement, glass and paper pulp companies (from the Munoz Marin government) and allowed the family to consolidate a cement monopoly on the island...
...3 Chase has been one of the main beneficiaries of the commercial banking boom in Puerto Rico, as the combined assets of all banks there have grown more than fifteenfold in two decades...
...In 1974 the bank arranged a $45 million credit for this company, which was founded and is controlled by the Rockefeller family...
...JC, January 23, 1976...
...It will also reveal how the bank's lending policies and priorities bear little relation to the pressing needs of the vast majority of the Puerto Rican people...
...IBEC annual report 1966, p. 15...
...IBEC) purchased 600,000 shares of Tanganyika Concessions, the company which has controlled the Benguela Railway since its construction in 1902.8 * IBEC itself has a 22 percent interest in the Angolan poultry producer Companhia de Produtos A vicolas., through its Arbor Acres Farm subsidiary in Rhodesia...
...and European capital, and Chase may now decide to wait on the sidelines until conditions are stabilized...
...7 The 800-mile Benguela Railway, which was closed during the recent war, is the strategic transportation system not only for Angola but also for copper shipped from Zambia and Zaire...
...This loan is Chase Trust's largest loan, representing 7.7 percent of its total portfolio, and is currently considered, according to the New York Times, "nonearning...
...In the 1960s it accounted for some 10 percent of all housing constructed on the island - mainly middle income units...
...PUERTO RICO 1. Interview with former Chase employee...
...3 3 In February 1976, Time magazine estimated unemployment at 35 percent, with 70 percent of the island's entire population on food stamps...
...2. American Banker, May 14, 1975...
...Wall Street Journal (WSJ), May 28, 1974...
...The major bond underwriter, having underwritten over $1 billion worth of Puerto Rican government bonds since 1952, is First Boston Corp...
...UN Assembly, A/9023 (Part III), pp...
...4. JC, September 27, 1973...
...25-26...
...How direct this role will be remains to be seen...
...In Angola, Espirito Santo owns large plantations (including coffee, the country's second ranking export after oil), has an interest in PETRANGOL (oil), operates a paper pulp company and produces soft drinks.' * Other companies with close ties to the Rockefellers have also moved into Angola...
...In 1970, credits from Chase helped finance a Spanish project to extract phosphates, which makes this territory the world's fourth largest phosphate producer...
...October 31, 1971...
...The bank plays a significant role in the island's economy and is one of the leading actors in the growing political struggle currently unfolding on the island...
...In the aftermath of a violent strike by water workers," reported Baromn's in February 1975, "the legislature was forced to raise the interest ceiling on [Puerto Rican government bond] issues to 9.5 percent from 8 percent...
...goods in the world, it has not only been a major importer of U.S...
...6. JC, October 2, 1972...
...According to the London Sunday Times (February 29, 1976) three Swiss banks have already pulled out of South Africa because of the "uncertain" situation in southern Africa...
...De Jesus' brother, Roberto, heads the third largest local bank, the Banco de Ponce...
...The Rockefellers, in fact, have a direct interest in the Benguela line...
...It financed, for example, such luxury condominium projects as the 22-story 321 unit Hato Rey Plaza, the 298 unit Los Pinos Condominium in Isla Verde, and the Garden Hills Estates, a 259 unit complex of homes, townhouses and apartments in a twin-towered high-rise in Guayabo...
...See NYT, October 27, 1974 and October 28, 1975...
...Laurence Rockefeller organized the island's major tourist and air freight carrier, Eastern Airlines, and is its single largest stockholder...
...IBEC...
...Chase has been active in financing IBEC construction...
...We don't have any presence in any sense now without the Standard thing...
...Together these four banks account for over a third of all the territory's banking assets...
...Moreover, these same economic interests are present throughout southern Africa...
...Chase was doing a profitable business as the single largest stockholder in the Standard group when, in 1971, the Federal Reserve Board discovered that Standard Bank had a branch in San Francisco...
...Phosphates are used primarily in the manufacture of fertilizers...
...Ibid...
...subsidiary...
...WSJ, September 12, 1975, Business Week, October 20, 1975 33...
...While Gulf Oil has been the focus of attention in terms of U.S...
...2 4 Chase also lends to a host of the manufacturing companies which have established operations on the island to take advantage of the low wages and tax incentives...
...This placed Chase in violation of the law against interstate banking...
...We've got a merchant bank in Nigeria now...
...1972), p. 461...
...The public resistance on the island to a direct intervention by U.S...
...The bank acquired a 14.5 percent interest in the Standard-Charter Bank of London which had 1,400 offices in 25 countries (of which over 1,200 were in sub-Sahara Africa...
...Chase's plan was to utilize South Africa as a base for expansion...
...Chase plays one or both of these roles for the Highway Authority, the Telephone Authority, the Water Resources Authority (which provides all the island's electricity) and the Aqueduct and Sewer Authority bonds...
...As of September 1975 it had written off nearly $4 million in losses as the major creditor to the bankrupt (and apparently fraud-ridden) First Conventional Investment Corp., a San Juan mortgage bank organized by three Cuban exiles.' 5 In another example, the bank-managed Chase Manhattan Mortgage and Realty Trust, the nation's largest real estate investment trust (REIT)* is absorbing a loss on its $70 million loan to the plush 2,700 acre Palmas del Mar resort development...
...territory into a cheap labor and tax haven for U.S...
...capital will take in its attempt to preserve its interests on the island is still unclear...
...Today it has 700 employees working at nine branches...
...2 IBEC built over 16,000 housing units in Puerto Rico between 1957-73...
...Justice (ILGWU), April 1, 1967...
...Exxon's subsidiary, Esso International, received a 7,700 square-mile offshore oil concession in 1974 for $1.7 million...
...Ibid...
...s The People's Republic of Angola has been the most recent center of anti-imperialist struggle...
...Amoco Cuanza Petroleum Co., a subsidiary of Standard Oil (Indiana) is also exploring offshore concessions...
...3 However, it seems quite probable that in the not too distant future these attacks will appear as minor irritations compared to the full scale confrontation Chase and other representatives of foreign capital will face on the island.14 .--......----- Superbank Out of Angola...
...However, an examination of its activities in the real estate and construction sector gives a partial picture of its role in the economy...
...The bank's operations are coordinated from its 14 story office tower in Hato Rey by vice president Francisco de Jesus Toro, member of a prominent local banking family...
...And, as reported by the New York Times, "The new commercial and manufacturing elite created the demand for expensive suburban dwellings and luxury high-rise apartments in San Juan . . ." In a country where the majority of the people lack the rudiments of decent housing, Chase has chosen to concentrate its lending activities on financing this suburban and luxury construction...
...21 and 26, 1976...
...WSJ, September 16, 1975...
...We are therefore going ahead on an overall African strategy fairly aggressively, setting up representative offices...
...Thanks to Reed Kramer of Africa News Service, Durham, NC for research assistance...
...7. Miami Herald (MH), December 17, 1972...
...As of December 1975, 71 percent of the trust's loan portfolio was not earning interest...
...Symbolic of the transformation of the island from a plantation colonial economy to an industrial colonial economy, this giant shopping center is being built on the site of the old Victoria Sugar mill which was purchased by IBEC for real estate development in the '60s.' While Chase has long been a major beneficiary of the island's real estate and construction boom, with the collapse of the economy and the bust in the Puerto Rican real estate market, the bank is now sustaining significant losses...
...Chase tried for four years to work out an acceptable arrangement, but finally was forced to divest its $90 million of Standard-Charter stock, a major setback for Chase's African operation...
...In 1972, Chase and the U.S...
...NYT, October 15, 1975...
...Rockresorts, owned by the Rockefeller family, operates the resorts...
...Exactly what form the intervention of U.S...
...The Puerto Rican economy is in bad shape...
...Chase is the trust's largest single lender, holding some $150 million of the trust's $800 million revolving credit agreements...
...It is advised and sponsored, but not owned, by the Chase Manhattan Bank...
...3. Interview, March 20, 1975...
...However, this advantage could be reversed when the colonial government attempts to enforce the bankers' dictates...
...Its 600 apartments are priced from $30,000 to $45,000...
...5. Wall Street Journal (WSJ), Oct...
...bankers, or their representatives, would be much greater than what they faced during their initial intervention in New York...
...Chase opened its first branch in Puerto Rico in 1933...
...However, in 1965 Chase adopted a lower profile strategy which at the same time gave it an immediate presence throughout Africa...
...In 1950, the Rockefeller family's International Basic Economy Corp...
...4 In 1974, for the first time, Puerto Rico had to resort to short-term borrowing to balance its budget...
...6 Chase's Housing Investment Corp., a Puerto Rican mortgage banking firm acquired in 1968, is financing the Mundo Feliz condominium complex in San Juan's hotel-resort area...
...WSJ, April 17, 1973...
...MH, January 23, 1971...
...It is thus a major contributor to the loss problems plaguing Chase's REIT...
...3. Journal of Commerce (JC), October 1, 1973...
...They would be publicly identified as, and would bear the disadvantages of acting as, foreign agents...
...and (2) class 10 shares may only be transferred to descendants of John D. Rockefeller, Jr...
...The bank proceeded to open offices in the key cities of Durban, Port Elizabeth, Capetown and Johannesburg, and from here Chase planned to expand to Rhodesia...
...2 3 When the luxury oceanside (with casino) San Jeronimo Hilton Hotel went bankrupt in 1971, Chase emerged holding a $2 million mortgage...
...foreign policy to defend these interests...
...2 0 The bank keeps track of who owns the bonds and pays out the interest on them and redeems them when they mature...
...labor militancy is rising and the revolutionary left, calling for independence and socialism, is gaining...
...Most recently, however, the independence struggles have been victorious-led by the MPLA in Angola, FRELIMO in Mozambique, and the PAIGC in Guinea-Bissau...
...March 31, 1971;MH...
...6, Chase Manhattan Multinational Banking Directory, 1974...
...The last 20 years have seen "Operation Bootstrap"* transform this U.S...
...See Fred Goff, "Fruits of the Invasion,"NACLA'sLLAER, April 1975, p. 9. 27...
...2 But Chase's loss in Standard-Charter may be a blessing in disguise...
...WSJ, September 22, 1972...
...The lucrative bond trustee and fiscal agent business is divided among the major New York banks and the Bank of America...
...The statistics in the commercial press paint part of the picture: hotel registrations by tourists are falling and five luxury hotels are reportedly on the verge of folding...
...See IBEC proxy statement, April 30, 1975, p. 5, and Moody's Industrial Manual...
...corporate profits from direct investments in Puerto Rico amounted to more than the total profit from U.S...
...In 1973, for example, the bank increased its line of credit to Caribbean Leasurewear by $4.1 million, allowing it to acquire a competing firm and expand its existing operations...
...ANGOLA 1. New York Times (NYT), March 12, 1959...
...With its holdings of millions of dollars of Puerto Rican loans and bonds, the bank is very concerned about the crisis on the island...
...Eastern Airlines annual report 1974, p. 9. 23...
...I Puerto Rico accounted for one fifth of IBEC's $216 million assets in 1975...
...16 corporate tax haven are not sufficient to finance this infrastructure expansion...
...to cover 90 percent of the purchase of 10 locomotives from General Electric...
...for more on IBEC see NACLA Newsletter, October 1971, and April-May-June 1969...
...In Puerto Rico the bank's options seem to lie somewhere between those it has in the fiscal crises of New York City and the Third World (see articles elsewhere in this issue...
...However, a look at just part of Chase's (and the Rockefellers') operations in Puerto Rico will give an indication of how much one powerful sector of U.S...
...In the last 18 months alone it suffered four separate bombings at its offices on the mainland and the island...
...IBEC also built 3,000 units for the International Ladies Garment Workers Union...
...However, the tax revenues in this * Chase Trust is the largest of the nation's REITs, which make their money by borrowing from others and relending at higher interest rates...
...accounts for some 90 percent of the cement used in construction.' 0 T P rofit -- S huttl12 Another Chase client with a major participation in the real estate and construction market is the International Basic Economy Corp...
...3 Chase is also involved in the hotly contested Spanish Sahara...
...direct investments in all the European Common Market countries combined...
...The bank is so deeply involved in the island's economy that it cannot withdraw from the crisis...
...The villas for sale will range from $39,000 to $120,000.8 As Chase manager de Jesus observed, "most high-rises will, of course, be constructed in and around urban areas which should lead to more urban shopping centers...
...2 s Caribbean Leisurewear is a highly profitable company in the apparel industry, which exploits the vast pool of cheap labor -primarily female -- on the island (and which recently set up a shop to exploit even cheaper Dominican labor...
...In addition, they would have to face a more militant working class - one whose leadership has a clearer analysis of the irreconcilable interests of labor and capital, then did the labor leaders in New York...
...interests in Angola, are a primary reason for the Ford administration's support of anti-MPLA forces...
...It's a pretty delicate issue and I think it's best not to discuss that...
...As Vice President Rockefeller and Secretary of State Kissinger were vacationing at the Eastern Airlines-Rockresorts Dorado Beach Hotel, bomb blasts caused extensive damage to Chase's suburban Bayamon and Rio Piedras branches...
...industry...
...2 Now, however, the island's dependent economy has entered its deepest recession in history...
...IBEC annual report 1966, p. 15...
...Jacques Baraldi, "The Economic Interests to Protect," Tricontinental: Especial (Havana, 1975), p. 17...
...3 5 One of the more widely reported incidents occurred in January 1975...
...investments in Angola exceed $300 million...
...1 2 These Rockefeller investments, as well as other U.S...
...Cited as its reasons were a high unemployment rate, the general effects of the recession on the island and two years of deficit financing through short term notes...
...However, Standard Oil (Indiana) and other project participants have temporarily delayed the project due to increased costs ($900 million) and "current international conditions...
...2 ' Eastern also owns the island's two most exclusive resort complexes, the Cerromar and the Dorado Beach Hotels, as well as the 1,500 acres surrounding them...
...Chase is one of four non-Puerto Rican banks allowed to operate on the island (along with Citibank, Royal Bank of Canada and Bank of Nova Scotia...
...18 Chase is a leading participant in most of the banking syndications organized to buy the Puerto Rican bonds, and its vaults hold a significant share of the island's $5.6 bilion public debt...
...WSJ, September 19, 1975...
...underwriters of government debt, was created in 1933 through the merger of Harris Forbes and the securities affiliates of the First National Bank of Boston and Chase (and later of the Mellons' underwriting arm, Mellon Securities Corp...
...interests adversely.' At the time, Africa was in the throes of an anti-colonialist upsurge, which was met by violent repression for example, the U.S.-sponsored assassination of Patrice Lumumba in the Congo, the brutal Sharpesville massacre that shook South Africa...
...THE CONSTRUCTION INDUSTRY The bank does not disclose its Puerto Rican loan portfolio or give a breakdown of earnings from its various operations on the island...
...2 2 Chase is also a leading creditor to one of the big tourist attractions on the island, the race tracks...
...In 1974 U.S...
...Robert Sheehan, "First Man at First Boston," Fortune, June 1959...
...goods but also of its inflation...
...Barron's, February 17, 1975, p. 14...
...8. MH, June 23, 1974...
...We've had branches in Liberia for some time...
...Unemployment is now higher than it was when the program began...
...7 But even these prices pale when compared to those in the $160 million residential-resort community Hyatt International Corporation is building with Chase financing (through its Housing Investment Corp...
...We've actually put representative offices into the Sudan, the Ivory Coast and we're looking at other countries as well...
...Already Chase has become a symbolic target of nationalist groups...
...First Boston, one of the major U.S...
...7. United Nations (UN) Assembly Report on Granting of Independence to Colonial Countries (Sept...
...In 1971 it loaned $20 million of the $23 million needed by the San Juan Racing Assn...
...3 In January 1976, Moody's Investors' Service, which grades the soundness of securities issues, added to the island's fiscal crisis by lowering its rating on a Puerto Rican bond issue...
...Time, February 16, 1976, p. 16...
...Chase's and the Rockefeller Angolan interests include: * Until losing its interest in the Standard-Charter Bank, Chase was active in An olan banking through the 48 offices of Banco Totta-Standard...
...When a Chase official was asked about a possible new African strategy to replace the loss of its interest in Standard-Charter he replied, I can't make any specific mention of what we're doing in any country because it really does become proprietary...
...firms already staking their claim in this bastion of apartheid...
...The situation in southern Africa is anything but safe for U.S...
...Export-Import Bank each granted $1.6 million loans to the Benguela Railway Co...
Vol. 10 • April 1976 • No. 4
