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By Root 962 0

Puerto Rico. Puerto Rico was an attractive market for U.S. ship lines. The economy was growing by leaps and bounds under the commonwealth government’s economic development program, Operation Bootstrap. The program, featuring generous tax incentives, lured hundreds of U.S.-based manufacturers to what in the 1950s had been an impoverished and heavily agricultural island. They would import their raw materials from the U.S. mainland, use cheap Puerto Rican labor for assembly, and ship their products back to the United States. Private fixed investment in Puerto Rico had more than doubled between 1953 and 1958, and the island’s economic output was growing 8 to 10 percent per year. This boom meant rapidly rising demand for shipping—and, thanks to complex U.S. laws governing the maritime sector, only U.S. domestic ship lines could handle the trade. Foreign-owned companies and the U.S. companies subsidized to sail international routes were ineligible.29

Sea-Land had been sailing to San Juan since 1958, but its service was less than exemplary. It owned no terminal. Incoming containers with freight for multiple customers were unstuffed in old aluminum warehouses near the dock, where the contents often sat for months because there was no system for notifying customers that their freight had arrived. Containers trucked elsewhere on the island tended to disappear, to be converted into shops, storage sheds, or homes. “It was chaotic,” recalled an executive in the Puerto Rico operation. Sea-Land’s efforts to gain market share in Puerto Rico had made little headway. Bull Insular Line, the dominant carrier, controlled more than half the shipments from the mainland to Puerto Rico and 90 percent of the freight headed north.30

In March 1961, McLean Industries made a surprise offer to buy Bull Line. The $10 million bid was an enormous stretch for a company that was at the limit of its resources. McLean Industries’ huge loss in 1960 had wiped out all of its retained earnings. Sea-Land had negative net worth of $1.1 million, although McLean’s accounting made the company’s situation look worse than it really was. Bull Line was heavily indebted as well, having lost money in the two prior years trying to compete with Sea-Land. Its owners were eager to sell out. The attraction for McLean was that the deal would give Sea-Land a near-monopoly in the Puerto Rico trade—which is exactly why federal antitrust authorities opposed it. Bull’s directors received government telegrams advising them not to proceed with the sale to McLean, and they quickly found another buyer. McLean was left to seek revenge by trying to block Bull’s efforts to acquire two used ships from the navy.31

Then came a remarkable stroke of good fortune: the company that purchased Bull Line, a privately owned maritime conglomerate, had expanded its way into financial trouble. It first stopped reconstruction on the two ships it had acquired for Bull Line, and then, in June 1962, stopped sailing altogether. As Bull Line collapsed into bankruptcy, McLean was able to grab the two ships. Overnight, Sea-Land became the dominant carrier to an island that was almost totally dependent upon U.S. shipping. Before new competitors could move in, it quickly consolidated its position, scheduling containerships from Newark to San Juan every two days and adding sailings from the West Coast and Baltimore. Sea-Land spent more than $2 million on two new terminals in San Juan in 1962 and 1963. In a politically deft move, it also opened routes to the Puerto Rican ports of Ponce and Mayaguez. Neither city had much besides canned tuna to ship out in containers, but providing container service earned McLean the goodwill of Teodoro Moscoso, the creator of Operation Bootstrap and a powerful figure in Puerto Rico’s economic development.32

The expansion of Sea-Land’s Puerto Rico service coincided with a remarkable flourishing of the island’s economy. In the 1950s, Operation Bootstrap had attracted mainly small, labor-intensive factories to Puerto Rico. Many workers gained regular wage employment for the first time,