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Latin America | April 30, 2024


IN PUERTO RICO, MOBILIZING BILLIONS FOR ECONOMIC MOBILITY WITH CAPITAL FROM
ACROSS THE SPECTRUM

Dennis Price
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Eduardo Carrera of Platform for Social Impact showcases the Oasis development in
San Juan | Photo credit: PSI

IMPACTALPHA EDITOR

DENNIS PRICE


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Puerto Rico has a window in which to turn disaster recovery into economic
revival.

“We didn’t choose it, but this is our time,” declares Eduardo Carrera, founder
of Platform for Social Impact, which aims to steer capital to Puerto Rico’s
social infrastructure. In front of hundreds of social innovators and financial
engineers in downtown San Juan earlier this month, Carrera unveiled a clock that
is counting down to a 10-year deadline for progress. 

The urgency is a response to the frustration around the Caribbean island’s
lingering economic woes, years after 2017’s Hurricane Maria and other disasters.
Some $85 billion in US federal aid and recovery funds remain on the sidelines,
even as nearly 60% of children live in poverty. Many proponents of a Puerto Rico
with good jobs, safe neighborhoods and strong role models, Carrera says “have
left intentionality to chance.”

> The impact investing opportunity in Puerto Rico’s economic comeback

“We need to have this countdown in our head,” says Carrera. “If we’re not making
an effort to move that capital with intentionality, we’re wasting precious
time.”

Carrera grew up in public housing before joining, and eventually leading, the
Boys and Girls Club of Puerto Rico. At the Platform for Social Impact’s Nexa
Summit, Carrera laid out an economic agenda that centers children and builds
pathways to economic mobility to end intergeneral poverty on the island. 

“When children bloom, everybody benefits,” he says. 


STACKING CAPITAL

Among the pillars of the economic agenda: Economic growth, good jobs, upskilling
opportunities, supportive policy and sufficient capital. Impact investments that
can help unlock the federal funds and bring in commercial capital are key to
building a more inclusive economy. Carrera is calling for a surge in credit
enhancement and first-loss capital, bridge loans, venture and working capital. 

“If we are really going to do this at scale, it’s the whole spectrum of
finance,” Carrera said, from philanthropy to commercial capital.

Entrepreneurs like Nichole Columna are returning to Puerto Rico to start tech
companies and create jobs. Columna’s company, Piezas Rush, connects appliance
technicians to repair jobs. With no outside funding, she has helped technicians
complete over 1400 jobs, while saving cash-strapped customers thousands of
dollars.

Imagine if startup capital was more abundant. 

One reason tens of billions in US aid remains undeployed is that the release of
much of the funding comes only as reimbursements. That means organizations,
businesses and projects must front their investments and expenditures for months
before they receive the promised funding. The lack of startup, equity, bridge
loans and working capital on the island makes such arrangements even more
burdensome.

To overcome the challenge, Carrera and the Platform for Social Impact are
blending public, private and philanthropic capital to crowd in more financing of
all kinds.

The PSI team is demonstrating the model in Oasis, a six-acre development project
in San Juan’s Villa Prades public housing community. The campus will include
Vidalus, a healthcare clinic; Vimenti, a two-generation public charter school;
and Project Makers, a social impact incubator and accelerator. The capital will
also support Boys and Girls Club of Puerto Rico, whose strong balance sheet was
critical to securing the funding.

To raise $43 million, the team stacked their own seed capital, along with
philanthropic dollars, New Markets Tax Credits, low-income investment funds, and
a bridge loan. The effort unlocked nearly $30 million in federal aid. 

“Most people think about reconstruction in terms of bridges and roads,” Carrera
told ImpactAlpha. “Human infrastructure needs to be part of these investments.” 

In San Juan, Unicef’s Cristina Shapiro said she sees synergies in Platform for
Social Impact’s approach with Unicef’s “child lens investing” framework. That
is, says Shapiro, “to make sure that all those vast pools of capital are
considering children.”


GOOD JOBS AND AFFORDABLE HOUSING

To get smart on workforce development, Platform for Social Impact is bringing in
seasoned organizations like Jobs for the Future and OIC of South Florida, part
of Opportunities Industrialization Centers of America. Jobs for the Future, for
example, will pilot its work at Oasis by offering career navigation services,
credentials access, and access to startup capital and hope to eventually reach
10,000 families in Puerto Rico.

“This is not just about quality jobs,” said Kristina Francis of Jobs for the
Future. “This is about a quality life.”

> JFF Ventures aligns venture capital with a national nonprofit to invest in the
> future of work

Other models are also emerging. To return many of the hundreds of thousands of
abandoned homes back to the market as affordable housing, the Center for Habitat
Reconstruction is helping municipalities set up community land banks to acquire
homes and finance their rehabilitation. Each home requires only $15 to $20,000
in repairs.

The Center for Habitat Reconstruction estimates that between 60,000 and 90,000
working families have an urgent need for modestly priced homes. “We do have an
affordable housing crisis, but we also have a big market of possible buyers,”
said the center’s Edgar Gomez Cintron. 

The land bank structure, gaining popularity in the US and now Puerto Rico,
provides a pathway for localities to repossess blighted homes, fix them up, and
sell them at below-market rates to preserve affordability. Oakland-based
PolicyLink has provided anchor funding for that Center for Habitat
Reconstruction’s loan fund to help rehabilitate housing across the island. 


DEPLOYMENT INFRASTRUCTURE 

During COVID, local community development financial institutions, or CDFIs,
served as essential capillaries for deploying federal aid to local businesses.
Puerto Rico’s reconstruction will draw heavily on such CDFIs, which have grown
15-fold on the island over the last decade. As many as 86 cooperative lending
institutions in Puerto Rico qualify as CDFIs. 

Puerto Rico’s underdeveloped capital infrastructure is slowing the deployment of
federal funds. Max Trujillo of the USDA’s Rural Development initiative says it’s
time to get creative. 

Trujillo says private philanthropy can stand up institutions to provide the
matching funds needed to unlock federal aid. Though the government can’t match
its own funds, programs such as USDA’s intermediary lending program provides
zero-interest loans for institutions to onlend to organizations, businesses and
projects. 

“You match all those things together and you create a new environment,” said
Trujillo.

The Community Energy Resilience Initiative, a partnership between Fundación
Comunitaria de Puerto Rico, Global Energy Alliance for People and Planet, and
Rocky Mountain Institute, blends grants and loans to finance the development of
microgrids and storage systems in communities, while leaving ownership with
communities. Pilots are underway at vocational schools, gas stations and
pharmacies, with plans to expand to 350 locations. 

> Three ways impact investors can help CDFIs provide stability in a high-cost
> environment  

Joan Larrea of blended finance network Convergence says stacking capital around
specific projects or fundraises is good thinking. The next step: “Put some
institutions behind those thoughts,” Larrea said in San Juan. “Institutions and
processes matter more than individual transactions.”

In Rwanda, for example, a development bank was able to issue a bond with a B+
Fitch rating by securing a guarantee from the federal government. The bank
invested at least part of the $24 million raised in The Rwanda Green Fund to
stock the pipeline of investable enterprises. 

In Puerto Rico, the hardest part may be to get investors and citizens, as well
as leaders and policymakers, to  believe in the possibilities. 

The funding for the Oasis project demonstrates more than the effective stacking
of capital.

“What it showcases is that you can, and that’s the hardest thing,” Ramphis
Castro of the Platform for Social Impact said in San Juan. “Now they don’t have
to believe. Because they can see.”




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