In Puerto Rico, less than 2 percent of commercial banks loans go to small businesses. Seed money funds, such as those granted by the U.S. Small Business Administration, sometimes require some assessment not available on the island or they are simply not accessible for local entrepreneurs due to a bureaucratic o legal requirement.
The Clinton Foundation hold an event on post-disaster recovery in the Caribbean, at the Puerto Rico Convention Center in San Juan, last Tuesday and Wednesday. The general consensus regarding financing new businesses was that the system on the island and in the United States does not boost opportunities for developing new small businesses.
Laura Cantero, executive director at Grupo Guayacán, an organization that promotes the development of new businesses on the island, asked for funds to find confidence to invest in Puerto Rico.
Traditional financing through banks is limited, partly due to capital problems that banks have locally experienced in the last decade.
Meanwhile, for participants at the Innovative Financing for Small Businesses and Entrepreneur, for market investors, the Puerto Rican economy poses risks and that limits their investment on the island, what hinders the efforts to promote new local businesses that can generate new economic activities aimed at achieving sustained growth, as participants at the Innovative Financing for Small Businesses and Entrepreneurs session described.
“We have very limited resources,” said Miguel Estien, from the Power PR organization, to questions from Luis A. Ferré Rangel, Chief Social Innovation Officer of Grupo Ferré Rangel and moderator of the panel, who focused his questions not only on economic dynamics and their reasons but on other issues that influence on governmental problems.
For example, limited economic or social data about Puerto Rico also represent obstacles for investment or business proposals. Fiscal problems also breed uncertainty in the markets. James Connor, form Acrecent Financial Corporation, any business proposal that depends on government services is considered to be a high-risk investment.
Participants discussed solutions such as crowdsourcing as a tool for financing; the creation of organizations or investment mechanisms for Puerto Ricans to make small contributions to local companies; including cooperatives in efforts and easing investment programs in Puerto Rico.
Nathalie Molina Niño, from Brava Investments, noted that those with private retirement plans can, for example, demand to have their money invested in companies that benefit local communities.
“Invest in people like you,” she said.
Problems in the region
Financing problems are not unique to Puerto Rico. Right after the Financing session concluded, President Clinton moderated a plenary where Barbados and U.S. Virgin Island government representatives as well as leaders from the financial and business sector discussed recovery in the region, the threat of climate change and difficulties in investment to strengthen the economy and infrastructure in the area.
Banker Richard Carrión said that cultural and historical nuances, many associated to the colonial period, led the Caribbean islands to work separately and remain isolated even though they share some problems and solutions.
Barbados Prime Minister Mia Mottley called the countries and the islands to talk more.
She said that they could find a way for insurance companies to diversify risk and thus, reduce premiums if they can do business in a region typically affected by hurricanes.
To this end, Clinton said a dialogue between the islands and other jurisdictions to harmonize the rules -which may require international cooperation since there are many countries involved- will be necessary.
The U.S. Virgin Islands governor, Albert Bryan, highlighted the importance of moving toward renewable energy production for homes and redirect funds for fuel to other issues aimed at boosting the economy in the region. He also suggested interconnecting the islands power grids as a tool to improve system resilience or stability.
To achieve this and create new businesses in the region, they need investment that is not precisely available for entrepreneurs or governments. Mottley noted that there is a disruption between talent, needs and investment.
Opportunities that governments can promote are also limited. Barbados Prime Minister said that since they are listed as a country with moderate income and under a fiscal restructuring process they don´t have access to the World Bank loans. The same happens with the much-needed investment to fuel the economy and develop new businesses to rebuild the Antilles with technology and structures that can withstand natural disasters.
Clinton said that the World Bank should be able to provide financing to capitalize banks in the region and in turn, these banks could provide loans to local initiatives intended to boost the economy.
“They surely want to, but they can´t,” said Carrión regarding legal and political limitations.
Clinton objected those restrictions by saying that it does not make sense that the World Bank, who are the ones that can act the fastest, cannot do it because of policies made in the Middle Ages.
Participants also discussed the fact that population loss in many Caribbean islands also limits investment since estimates may show low returns.
Clinton stressed that the population issue is significant for the economy. He said thatU.S. Anglo-Saxon population shows birth rates that are below the viable replacement rate, which would have serious consequences in the economy if it weren´t for immigrants. He said he does not understand “people who don´t want more immigrants,” in the United States.
He closed the event recalling that Caribbean islands, despite their cultural and historic differences, share a geographic space and are facing the same climate change threat. He also said that now the islands have an opportunity to improve their situation and work for a future resistant to disasters with a healthy economy.
He recalled that scientists who closely monitor climate change estimate that the areas most affected by this phenomenon are those with drought patterns and islands in tropical areas such as the Caribbean.
Clinton concluded by stressing that all these issues demand strong collaboration.