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TWENTIHH-ANNIVËRSARY .

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WASHINGTON DATELINE

.' FRONT PAGE

S j 0 R Y

The governor's Washington strategy, as explained by Laureano, is clear cut. The prior-

Ity at this early stage is to quietly but.surely build bridges in Congress and make as many friends as

possible, particularly with the new Republican

leadership in both houses.

Little purpose is yet served," he adds, by launching a major high-profile battle against cut- backs in federal funds to the island or to avert the

elimination of Section 936 of the U.S. Internal Revenue Code.

"It is better towait for an actu~1 bill to be sub-

mitted and then react accordingly," he said. "Right

now, no bill has been filed on 936. We have noth- ing to fight against. The situation is very fluid."

Loud lobbying, he added, would only serve to . .

draw more attention to Puerto Rico and 936 than would perhaps be in the island's best interest.

When a 936 bill is filed, which is not expected

to occur until after the House of Representatives

concludes its work on the Contract With America in April or May, "the governor has indicated that

we wi!! be ready to respond in 48 hours if neces-

sary, and that is what we intend to do."

The administration is busy, while preparing for

any attack on 936, atteriding to proposals in the

House to cut back federal spending which will affect the island. "Every state expects cuts. We are

"

not alone. What we're trying to do is !jmit the damage," said Laureano.

So far, he is pleased with the results. The single

biggest program,. food checks (PAN, by its Spanish

acronym), ra.ther than being cut, has been capped at the present rate

and wìIl continue to increasel lim- ited to the inflation rate for the

next five years. The welfare reform bill that passed the House last

week, while cutting some funding

that affects Puerto Rico, did not go

as deep as had been -feared. Laureano believes the more moder- ate Senate will roll hack some of the House's cuts and approve a. more favorable bill.

''It is important to understand -that the House ìs very radical right

now. But all of the provisions it is

adopting will have to go through the Senate process where the chairs of the committees that have

c'~urisdicti()n over these issues are

yery moderate, II said Laureano, cit-

ing as an example Sen. Nancy Kassebaum (R-Kan.J, who chairs the committee in charge of welfare and who has

'already expressed re~ervations about the House version of welfare reform.

MAKING FRIENDS

While that drama plays itself out, the Rossello

administration "will continue to make as many friends as possible and to establish links and con-

26 CARIBBEAN BUSINESS THURSDAY, MARCH 30, 1995

tacts with the new Republican leadership," added

Laureano. Puerto Rico historically has had

stronger ties to the Democratic leadership in

Congress and the White House. A program already has been developèd to bring

members of Congress, both Democrats and

Republicans, to Puerto Rico as

well as .officials

of the Clinton administration, llta impress upon

them what Puerto Rico is

doing, has done and the chal-

lenges and opportunities to be faced. We want them to be

much more awár:e

of the important role of federal funds to the

economy of Puerto Rico."

Laureanocau-

tioned against getting carried away by all the headlines. "We

cannot allow ourselves to become caught in the

.rumor mill and to react to the daily barrage of innuendoes and speculation. IT

an issue and wishes to lobby the Congress. When

.-an actual issue or bill does come to the fore, we. are confident that the committee chairman with jurisdiction will seek and listen to the Governor as

the official voice of the Commonwealth govern- ment,lI

There is no lack of coordination,

he insisted, within the group desig-

nated by the Governor to represent

the Commonwealth government. That group is led by Laureano, and includes Economic Development &

Commerce Secretary Luis Fortuño,

Economic Development Administrator Jaime Morgan-Stubbe, and Government Development Bank

President Màrcos Rodriguez-Ema. "We all work very closely together."

IT'S 936, PENDINC SUITABLE SUB-

STITUTE

On 936 in particular, L~ureano :3 asserted that Rossello has been c1èar .. r in his support of the Section until a

suitable replacement can be found. The principal substitute mentioned at

the moment - to include Puerto Rico

in the empowerment zone program proposed by President Clinton - has

been described repeatedly by Fortuño and Morgan-Stubbe as inadequate. .

Rep. Don Young (R-Alash), chairman of the

House Committee on Resources with jurisdiction

over Puerto Rico, is preparing a

package which includes the empow- erment zones. They would phase out Section 936 in ten years, substituting

tax credits of up to ,$3,000 per employee for businesses in selected

towns throughout the island. His proposal also will give the island an

option of paying federal taxes for fulI

federal funding. ~

Laureano indicated the adminis-

tration undersfands the reasons behind doubts over Section 936 in

Congress. Even members of the administration are concern.ed that jobs generated by 936 corporations

operating plants on the island have

remained reiative'ly stagnant for 20

years, and particularly during the last

five years.

"These companies, especialIy the pharmaceuticals, are getting big tax breaks and they have not created a

single net new job in the last five

years, II stated Laureano. tlAt [he same timet prices

of prescription drugs keep increasing and this

draws increasing attention from decision and opin-

ion-makers in Washington and elsewhere in the

nation to the pharmaceutical industry in general

and to their plants in Puerto Rico in particular."

Laureano: "No bill hos been filed on 936. We have nothing to fight against."

DISCRETIONAR1;"lliFEDERAL FUNDS W,';'F n*~

APPROVED F.,llè ERTO RICO <;'"i;"

.

199

% CHANGE

tMìiHiHmX4kiiltHttW11X11Yl;i#Vamrt1U;ili;)>'jifi/;t '/''''

When asked about the appearance of lack of

coordìnation in the lobby effort in Washington,

given the disparate groups whò have been meeting

with members of Congress, Laureano stated that "this is a free country. We cannot possibly control the actions òf everyone who feels strongly about

o ï;i o

"'

o

;g 00 u

WASHINGTON DATELINE 27 CARIBBEAN BUSINESS THURSDAY,MARCH 30, 1995

1994

ible fbr emergency funding in nutritional ass is,

tance should those needs arise.

.

Laureano said that in addition, the impact of

nutritionál assistance. on Puerto RiCo's population

and economy is reflected in these statistics, 1 A

million recipients in 500,500 households or 43%

of the population with an average $59.76 received

per person. The House, he added, has "decided to cap

,

Aid to Families with Depenejent Children at $82 million," an amoúnt equal to the block

grant which Puerto Rico has received since

1988. A CAREER OF PUBLIC SERVICE

Prior to joining Rosello as his Advisor

on Federal Affairs, LaureanO served On the staff of then Mayor of San Juan Baltasa!"

Corrada del Rio( 1985-89) as an advisor on public policy, and then was an aide to for-

mer Governor Luis A. Ferre for four years.

He has a master's degree in philosophy from

Sacred Heart University and has taught at that

institution. He was born in San Juan, the scion of

a prominent Morovis family. His father served as a

Popular Democratic Party mayor of Morovis for 16 years during the administration of LuisMuñoz

.

'Marin. -

FEDERAL FUNDS

While' Rossello's team.awaits Congressional

action .on Section 936, they are busy dealing with

action already taking place with federal funds des-

tined to the'island. Laureano has been busy for

over two years, traveling every two weeks to Washington, to increase the amount of federal funds in Puerto Rico through another avenue of his office at La Fortaleza. That job'is rhainlyto' channel information to the rest of the goverh-

ment agencies and to the private sector on available discretionary funds.

.

These funds have increased under his stewardship from $347 million in 1992 to $437.5 million last year. (See related story below. )

Regarding the appropriated funds,

Laureano views the House action on the

food stamp program as indicative that charges of wholesale cuts are being bal-.

.

anced by Republican efforts to be fair while

at the same time they confront the massive

dèficit in the federal budget. .

"We receive $1. 13 billion in nutritionalassis-

tance annually," said Laureano. "It will bedaþped at the inflation rate for the next five years. Thère

won't be any cutbacks,"

. Laureano recalled that nutritional assistance

was capped in Puerto Rico from 1983 to 1987.. "[

didn't see any problem with that then," he said. .

He indicated that under the House plan, Puerto

Rico would côntinue

to be elig-

FILED PER SECTOR

.

. 1993

.1992

~ ": ,..,'.': .' .. .-

SourcEl:'FËÖFAèTSof Fiscal Planning Inc.

PRIVATE

SECTflR ,

CENTRAL

GOVERNMENT MYNICIPÀLlTIES

-"

".

f

lINGTON DATELINE

Forbes chairman hails regional trade "

28

Caspar Weinberger says island offers broad spectrum of assets to investors besides Section 936 benefits

OLLINS

Magazine Board Chairman Caspar erger is convince'd Latin Åmerica IJis a

ice for Americans to invest:' in spite of the 1 peso crisis, and believes "capital from lere will .continue to be attracted to the

,....,

"-.Jonceding936 Jlhas been

~portant, ff Weinberger said:

All oj the other advantages ;hould not be overlooked. ff

re is convinced Puerto Rico

ifers particular advantages

Jor investment in tourism.

,erger was in Puerto Rico for a brief visit en o Brazil, accompanied by Forbes Vice an Christopher Forbes. He was joined in

, by President and Editor in Chief Malcolm .es Jr. and Catherine, one òf the latter's

ers. Malcòlm Forbes arrived from Nevis, ,e spoke to a meeting of Nissan dealers at T Seasòns Resort. berger and Christopher Forbes met with Rico Economic Development & Commerce

ry Luis Fortuño, Government Development 'resident .Marcos Rodriguez-Ema, and

lIic. Development Administrator Jaime , Stubbe, among others. In the evening, the

hosted a reception at the Caribe Hilton for

,ends in the government and private sectors.

PRAISE FOR SALINAs

ened by the events that engulfed former

New CPAs receive certificates

,eheadquarters of the Association of =e~tified Public Accountants in Hato Rey

buzzing with activity the week of Marèh

.s executive director Edna ]ìmenez pre- :! for a seminar for about j 75 new pracli.- fS and reCiprocity CPAs. The seminar cov-. a series' of matters, including professional

cs. Later in the week, the new CPAs lved the highly valued, hard-earned certifi-

; to practice in Puerto Rico. .

Mexico's President Carlos Salinas de Gortari, Weinberger said, "His poliCies should not be changed simply because SOme people think he has

had personal problems. He did a terrific job."

An ~dvocate of free trade, Weinberger said .he hopes the plans to. expand the North American

Free Trade Agreement to Chile "are not derailed."

He also would like Nafta opened to include Japan

and other countries outside the hemisphere' 'That would benefit the United States and'Puerto Rico, also," he said.

Describing Salinas as the best candidate to head

the new World Trade Organization, Weinberger said, "I'm sorry he pulled out because nothing has

changed and i was

not prepared to abandon him."

The primary goals

of trade pacts should

be "to lower tariffs and make trade freer," Weinberger said, bùt the problem

with Naha aod the General Agreement

on Tariffs & Trade negotiations was that

some I uinoT.der' to achieve their. own. agendas, mix up social policy, con- SUmer protection and.

labor and environ- mental concerns, which only serves to

complicate the prosj)ects./r

BELIEVES IN PUERTO RICO

Asked about the

CARIBBEAN BUSINESS THURSDAY, MARCH 30,1995

He is concerned abouLthe rhetoric that has sur-

rounded the conJroversy over block grants, which he personally favors. He recalls the concept under

former President Richard Nixon was called "rev-

enue sharing."

FORBES NOVEL HEALlli PLAN

Pointing to the escalating costs of health care naÍionally, Weinberger said Forbes had recognized for several years' that the price tag of its corporate. health plan also was rising. He said Forbes had

deCided to institute a system "under which we reward people who don't use it by giving a dollar

to them for every dollar they don't use, up to $1,000." The cap has now been increaseóto $1,500. "The number of claims wentdowndramati-

'cally, and' we've had 25% 'savings over the past

three years."

controversy sur- rounding Section 936 of' the US Internal Revenue Code and the future of the tax

incentive, Weinberger said Gov. Pedro Rossello "has recognized that .936 won't be around fòrever."

He described Puerto Rico's 'assets to attract invest-

ment as "incredibly good" and ticked off a number of them - "bilingual, educated workforce, lower

wage differential, strategic location, climate, same

time .zone as the US" Conceding 936 "has ,been

important," he- said, "All of the other advantages_

should not be overlooked." He is convinced Puerto Rico offers particular advantages for investment in

tourism.

OPPOSED TO TROOPS IN HAITI Weinberger said

the foreign policy of

President Bill

Clinton is "inept" and continues to be

opposed to the use of U.S. troops in Haiti. "I hope we get

out of there without too much trouMe."

SUPPORTS HELMS RECOMMENDATION

In support of the proposal of Sen. Jesse Helms (R- N.C) to merge sev- eral agencies, includ-

ing the Agency for

In te rn a t i on a I

Development, .intoc, the U.S. Department of State, Weinberger said, "It would strengthen State and

basically makes a lot

ôfsense." -He' pre- dicted it would

encounter opposition .in the agencies involved. Befo~e joining Forbes in 1989, Weinberger was a

distinguished public servant, holding the posts of

secretary of Defense under President Ronald Reagan and secretary of HeàIth, Education &

. Welfare under presidents Richard Nixon arid

Gerald Ford. His former corporate directorships

inè\ude the Bechtel Group of Cos., PepsiCo Inc. and Quaker Oats Co. .

Forbes Chairman. Caspar Weinber9er

Upset.with the manner in which Democrats are

reacting to Republican efforts to downsize govern-

ment and reduce the deficit, Weinberger said, "The

Democrats are going to run a class warfare bàsed

on rich against poor but simply because there are. 'more poor voters than rich on~s.1I

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EDITORIAL 18 CARIBBEAN BUSINESS "THURSDAY, MARCH 30, 1995

Ml:lch ado about nothing .' Çliches galore seelll to fit Puerto Rico's unOfficial 936 lobbyists, such as

"tempests in teapots" and "mountains out of molehills", while at the center

there exists a vacuum.Thereisnoêqngressional action and,no bill to war- rant either the confusion orlobbyiIlg. Unfqrtunately, the. confusion and accompanying noisecoul~be detrimental tq Pùerto Rico.

.. ......

,. ....... Meanwhile and to his credit, Cov. Rossello mainlains a low'profile .

despite negative criticism from some of these mnge sources ashe and his

group of advisors bUild a base for the time when effective battle must be

joined.

.. .

Two years ago, when the medicaldoctor became governor, there was a

bill in Congress that would do away with Section 936 completely and replace it with wage credits imd other substitutions. The situation required

time for Rossello to adjust to becoming govérnor; to organize and arrive at a positive position, then go to Washington to fight. And those were the

days of Democratic mends such as Dan Rostenkowski and Tom Foley. ...,. Today is different. There are few mendsm the new Republican. regime

and among the mass of newCongresSlUenand Senators who are~ply .

involved in their Contract With Am.erica, There probably are fewqrnone .

who entertain even a passing thoughtabout this little Caribbean isla'1d.

,There is.no bill, neither on the floqr 'of Congress nor even in cOlÌlmittee.

As we said:so far as PuertO Rico is col)cerned; there is a vacuunl. '.

." .... But this time Gov. Rossello intends to be well prepared, accordingto his

. chief advisor on federal affairs, the talented Ecluardo Laureano; He. insists.

they have a strategy, "and it is working".

That strategy is to build bridges in Congress, to make as many mends as

possible in the House and Senàte, particularly among the leadership.. He said in essence, "We do not pay attention to rumors or innuendos, and we

.

db not intend to discuss 936 until there is some specific move in Congress '. on which we can base reaction."

According to our front pag~ sI01Y, the governor obviously does not feel

he êân go to Washington and take any position to lobby -versus what? .

.

Of course, therearepeopiefrornPùerto Rico in and out ofgovernrnent

who are lobbying, such'as Carlos Romero Barcelo and Myriam Ramirez de

Ferrer, and many at cross purposes or pushing particular political ideàls,

Laurean!Í dismisses all but the official government. posture, but.with resig-

nation that this is a free country and anyone can speak his piece with

impunity. He is concerned however, as to how the confusion is received elsewhere.

If something isa.non-issue, why try to make something out of it?

As far as the Republican Contract With America is concerned and how it rnight affect Puerto Rico, there is nothing being done thai is even remotely

aimed at Puerto Rico. But we will be part of whatever changes affect all of the.states.

We can and should be pleased, as is seen i.n our front page story, that all

major grant programs that are important to Pùerto Rièo, such as the sup-

plementary food program, are not being cùt back. They are being capped

at. the present level and allowing foradjuslll1ents to inflation over the next fiye years, and for that we,can be grateful. It is a big relief. -

þ'

CARIBBEANIBUSINESS

UowDunlaptevitalized ailing ScoUPaper Co.

By JAMES FLANIGAN

.

"]3usiÍ1essi'snot isodal experiment(says

Albert J Dunlap, who came to Scott Paper .

Co, as chairman and chief executive last

April ánd since then has cut One-third of the

employees - 11,200 people - sold assets.

worth more than$f billion and boostêd the

115-y"ar-oldcompany's stock price from $37.25 share to $84.25:

"Dunlap should be cloned," says one of the ll..5.'s forernost experts on corporations and shareholder value.

'. _

But should he really? Is Al Dunlap, West Point graduate and'rovi~g executive with

years of restructuring under his belt, a new- style cOrporate hero fOr the '90s, or just an old,(ashioned hatchet man who built a rising stqckpriçe on swelling jobless ranks?

The a'1swer is more hero than hangman,.a

blunt-spoken tough guy who. says, "I know

what unemployment is like - my father

worked for Todd. Shipyards in Hoboken [N.].] and WaS laid off a lot. And let me. tell

you one thirig,lhave never been willing to

sacrifice 100% of thépeople to save 25%."

Dunlap was hired by Scott's boaro of direc-

tors to revitalize.a company that was mired

in. more than $2 .1:Üllion of debt, had lost almost $300 million the previous year and, in the words of a Philadelphia investment ban}<.ert Uwasgoing-ño~r.ere:butdown.'1

.

He. tore into the job,fired 71% of the headquarters staff, 50% of the management.

.

He also cut 20% of the hourly labor force,

sold forest products and other businesses and

bmughtthe company back to its original tis-

sue, paper towel and nàpkin business Scott,

with more than $4 billion in annual sales, is

the worlds largest fTlakeiof toilet tissue;

And. Dunlap sold Scott's _

opulent Philadelphia headquarters. "We had a 55-acre site with three buildings, 700,ÖOO square feet," Dunlap saÿs. "We had walking paths,

we had geese. Quite; quite an idyllic place.

V()I.UME23, No. 13 THURSDAY, MARCH 30,1995

ÉdôtorÙlChief

Managing. Editor:

ExecuØveEditor Suprlements Editor

Specia Projects Ecr_ Spec;ol Sections Ecr_

Associate Editors

ManuelA-Casiano Jr: Adve.,;.;ng Manager Account Managers Account Executives Alexander F. Díaz

Meriemil Rodriguez .

Mart McHale Woad RosciFiel Anne W.Chevako

Pablo.J. Trinidad, Angeles-Alvarado, Frances Ryan_ Uda EsÏêlo Ruaño, John Collins

TelI}'Chevako

J. MicheileKantrow,

RobertO.Johnston

Blcine Mclane Evangeli.na.Mercado

Production Maoager .

ArtDirildor Art and PÍvdudiôn,Staff

Edõtoriol Depor1mentTeieflhone

Ed_I Deportment Fox

Advertiting Soles Tel.

Jll!verlis;ng Soles fcD<.

5Iaff W"- ,

~.EdiIar Assistant to the' Eådor

MonolyPo~e Vivian Bird,J>9rothyBosSo. .

RobertOSottó, Ivan Olmeda José AnlciniOYriarte

. Nora'A. Cciiianò' Vice President

Business Manoger

E~ceptnothing ever happened there."

His thou~htson corporate management aren't merely irreverent, they're contemptu-

ous. The added pointis íhat Dunlap's barbs

andcorporåteactions contain lessons for many US. <companies. Investors and employ-

eês~verywhere, take note. .

"Theyear béfore I arrived at Scott they spent.$30 million for consultants. This year, we'll spend nothing.! don't know what the hell they were. consulting for because their

recòrd was so bad.,"

I-Ie'srightthere. 'The company was a typi" c~lblu~"b]ood company that had long ago"

lost the spark that built it," says Thorn Br()~n,of Rutherford, BroWn &. Catherwood,

a Philadelphia inveslll1ent bank:

T:hecornpany invented the paper towel in 1907,but Procter &.G~mbletook over mar- ket leadership in recent decades. Scott still

s~llslllore toilet tissue,han p&G, making

m.... a.ny. o. .f.th.e. su..permarkets' ow. n.....labels.But .".:...,.....,....::.., ....:.: :..,':...,.... ....::.

....:,. :. ...

the company hadJostffiol)ey as often as not

i'1reçent years, <\od Dunlap's predecessor as

cb.è.irm<\'1had .beguna three-year restmctur- in~ that "'quld have' cut 8, 300èmployees.

Butto Dunlàp, multiyeatprogramsguaran-

teeparafloia and paralysis. 'Why do execu- 'iv~s~othat? Because no one. likes criticism,"

he~ays'Farbetter to do it quickly 'There are

morethån 20,000 people with a more secure

future at .scott today because we did the res~ructurin~properlyand it's over."own

money whell he joined Scott, and $2 million

more somemontl}s later when the stoèk had risellpast$50 a share.

Dunlap's management cr~do Ïs. more West

PoinUhan business schoo], "You take the

tough decisiÓns and ultimàtely you get .respect. And the most important thing in

. business is respect," he says. Màkes you think

West Point isn't a bad-business school. -

@199"Los Angeles TImes

,CASIANO COMMUNICATIONS

u_'. ManUel A.'

Casiano Jr.' thòirmcin-ofthë BcXiidand EdilcidnChief .

IGmbérly A. Casiano Presldentand

Chief Operafing'Officer

Potri<.. EaveS Vice President

Directorof"SáleS

BlanC(lSanliago James .Rõdrlguez

.., ': Vicente !ol'edo,J9fge González, Luis Rafciel Vázquez,

Maria Donis

Alberto _ Subirá Marketing Director

GIodys Garcia Vice PTésident

Direct ResPonse Telemarketing

;,.;.g.ArveIo Comptroller

1809) 728-9300 -

1809) :<68-1626

1809) 728J000j3005 1809) 268-;5058

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