Título en español.

Abstract

State intervention during World War II created a number of institutions which had a long term developmental impact on Puerto Rico. This paper examines the financing of electric utilities in Puerto Rico in relation to the newly created Development Bank (DB) in the context of federal law of June 25, 1938 authorizing public corporations of Puerto Rico to emit debt without affecting the Island‘s borrowing capability. Although there were important institutional changes in Puerto Rico which created the context for the subsequent industrialization of the Island, this paper finds that: (1) the initiative for the process originated with federal legislation, (2) institutional innovation took place in the context of the war emergency, justifying a level of state involvement in the economy which would have previously met the resistance of private capital, (3) institutional innovation was sanctioned by the Federal Government and expropriation of private utilities was arried out through presidential initiative, (4) the role of the DB in the bonds emissions was combined with incentives to local banks who profited from the emissions. The DB was, therefore, not seen as a competitor, but rather as collaborator and generator of subsidies to local banking. All these reasons lead us to question local PPD initiatives as the primary driving force behind the innovation and to question the "radical" nature of the interventions. Instead, change came from above (Federal Government) and with the collaboration of local capital in the process, contrary to previous analysis, who have posited the existence of a radical period of "state capitalism" during the war and a great turnaround in 1947.