A Look at Puerto Rico and an International Draft

Yesterday the New York Times took a look at amateur player market in Puerto Rico and how it has changed since Puerto Rico was annexed into MLB’s Rule 4 Draft. There have been quite a few reactions to the article around the baseball blogosphere, including one by EJ at the Yankee Analysts arguing that Puerto Rico’s situation is not necessarily indicative of potential problems that would be encountered in an international draft. While he is correct that “there isn’t anything uniquely talent-destroying about an international draft,” if not implemented correctly an international draft does have the potential to function in a way that is incredibly harmful to amateur player markets in Latin America. Full disclosure: I spent a semester researching and writing a 40-page paper on what I believe to be MLB’s need for an international draft governed by an independent transnational organization, so I’m a bit opinionated on the subject. For what it’s worth, here’s my take:

Puerto Rico was initially an ideal target for MLB scouts because it provided both cheap labor and the US system of laws and regulations. However, while Puerto Rico was subject to the laws of the United States, it was not subject to the rules and regulations of MLB until it was annexed into the draft in 1989. Before this time, Puerto Rican players could be signed by any MLB team as free agents (just was players from the Dominican Republic, Venezuela, and every other unregulated Latin American baseball market are today). As had previously happened in the United States, the unrestrained player market in Puerto Rico led to bidding wars among teams, and the draft was instituted as a matter of cost control.

While Puerto Rico was once a major exporter of talented Major League players, the number of Puerto Rican players entering MLB through the draft has steadily decreased over the past two decades. In 2009, only 3.5 percent of position players in Major League Baseball came from Puerto Rico, marking a 24-year low. In contrast, ten times as many players from the Dominican Republic were signed that same year, and the Dominican Republic and Venezuela continue to be fertile ground for young, promising, inexpensive talent. None of these Latin American player markets can be properly analyzed without taking into account socioeconomic conditions, and many attribute the decline in Puerto Rican amateur signings to the fact that Puerto Rico does not have an organized high school baseball system or the extensive developmental leagues that are available to teens in the United States. As a result of the implementation of the draft, the baseball academies on the island dried up and Puerto Rican prospects were forced to compete against American players who have access to better coaches, competition, and facilities.

The problem has gotten so bad over the last two decades that the Department of Sports and Recreation of Puerto Rico has asked MLB to take action by altering the current draft policy to once again exclude Puerto Rico, or at least aid the government in establishing baseball academies sanctioned by MLB. So far no action has been taken, and the market for Puerto Rican players continues to languish.

It’s not surprising, then, that those who oppose the adoption a worldwide draft point to the Puerto Rican baseball market as a cautionary tale. Remember that MLB is a multi-billion dollar business, and there are strategic reasons why teams have dumped their scouting money into countries like Venezuela and the Dominican Republic after moving away from Puerto Rico. In the unregulated Latin American markets, teams are still free to create baseball academies and have a direct role in developing prospects from the age of sixteen. It also creates a situation where independent agents are able to market prospects in a way that creates a bidding war among the MLB teams, which is the exact evil that MLB was trying to prevent by making US, Canadian, and Puerto Rican players subject to the draft in the first place. Essentially, the current system creates an every man for himself mentality among teams, with those who commit the most resources and scouts (or simply able to commit the most money to the international free agent du jour) able to reap the greatest return on players.

After 20 years of the draft in Puerto Rico, we can develop a pretty good comparison of the baseball markets in Puerto Rico, the Dominican Republic, and Venezuela. In doing so, a clear argument can be made that implementing the draft on a country by country basis is ineffective, and can indeed be harmful to the amateur player market in a given country.

The current market in the Dominican Republic is an example of the mixed results that arise subsequent to regulations that fall short of a draft. While the Dominican Republic remains one of the largest importers of baseball talent, over the past few years there has been a decrease in demand for Dominican players and signing bonuses for these players have decreased. While there has been some improvement in the conditions of the Dominican player market, the MLB-imposed regulations have effectively begun to shifted the market to Venezuela, where there is less oversight. In Venezuela, teams see a market that is essentially comparable to the one that flourished in Puerto Rico before the implementation of the draft, and in the Dominican Republic until very recently. The increased demand for Venezuelan players is not only seen in the number of Venezuelans on MLB rosters (62 of 846 players on 2011 Opening Day rosters), but also in the increased signing bonuses, which most recently averaged about $292,000 (up nearly $100,000 from 2009). This is significant because the lucrative signing bonuses that incentivized independent Dominican scouts to find and develop talent is now incentivizing independent Venezuelan agents.

The cycle of strong foreign baseball markets shifting from Puerto Rico to the Dominican Republic to Venezuela as a result of MLB regulations suggests that MLB is fighting an uphill battle by implementing regulations on a country by country basis. An examination of the baseball markets in these countries over the last two decades shows that where one corrupt, unregulated market is quashed another will pop up and be ripe for fresh abuses by enterprising agents and trainers. If MLB truly wants to protect its teams —not to mention the young international prospects hoping to make it big in baseball—it needs to get serious about an international draft, and come up with a thorough plan for implementing it. And since MLB has another four and half years before the next CBA rolls around, now would be a good time to start.

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