COMMITMENT TO ACTION

Investing $100 Million in Puerto Rico

Commitment by Community Development Venture Capital Alliance

In 2020, the Community Development Venture Capital Alliance (CDVCA) committed to investing $100 million to contribute to a thriving business finance ecosystem and grow the economy in Puerto Rico. Even prior to the devastating hurricane season of 2017, the median income in Puerto Rico was half that of Mississippi, the poorest state in the continental United States. Following more than a decade of serious economic challenges, the investment capital necessary to create a new, thriving business community, and necessary for the creation of good jobs, has fled the island. Through the investment of the funds by the CDVCA, 615 businesses will be supported, grown, or created in Puerto Rico, and, as a result, 12,000 jobs will be added to the economy, the vast majority of which will be in new small and medium enterprises and entrepreneurial ventures.



Overview
Summary

Commitment

Investing $100 Million in Puerto Rico

Launched

2020

Est. Duration

5 Years

Estimated Total Value

$100,000,000

Region

Latin America & Caribbean

Countries

PUERTO RICO

Commitment by

Community Development Venture Capital Alliance

Partner(s) of the Commitment Maker(s)

Details

The Community Development Venture Capital Alliance (CDVCA) commits to investing $100 million to contribute to a thriving business finance ecosystem and grow the economy in Puerto Rico. CDVCA will invest the funds in Puerto Rican venture capital, private equity, and mezzanine debt funds, as well as directly into Puerto Rican Businesses.

Through the investment of the funds, 615 businesses will be supported, grown, or created, and, as a result, 12,000 jobs (10,000 full-time jobs and 2,000 part-time jobs) will be added to the economy, the vast majority of which will be in new small and medium enterprises and entrepreneurial ventures. To support local investment opportunities, the CDVCA is hiring a new senior CDVCA staff member to open the first CDVCA office in Puerto Rico.

2020 Q2: Investment of initial funds begins.
2020 Q3 – 2025 Q3: Continue to meet incremental investment targets.
2025 Q4: Achieve $100 million investment target.

Background

In recent years, Puerto Rico has faced hurricanes, earthquakes, and government bankruptcy. Even prior to the devastating hurricane season of 2017, the median income in Puerto Rico was 50% that of Mississippi, the poorest state in the continental United States. The investment capital necessary to create a new, thriving business community and necessary for the creation of good jobs has fled the island.

In particular, Puerto Rico suffers from a general lack of financing options for local businesses, who have traditionally relied solely on the commercial banks. From 2013-2016, Commercial Bank’s loan and leases in Puerto Rico decreased 20.9%, from $44.8 to $35.4 billion. In addition, US based funding sources have reduced their Puerto Rico risk, likely influenced by the negative coverage resulting from the local government’s debt crisis and eventual bankruptcy filing.
The prolonged economic recession has also severely impacted real estate values in the island. This has had a ripple effect in the financing market, as banks have increasingly looked to unload credits with collateral deficiencies. Post-hurricane, the above referenced lack of options has been exacerbated as banks have reduced their risk appetite while they assess the impact on their portfolio. However, it is particularly at this moment that the need for capital is at its greatest, as local businesses look to rebuild and grow again.
The business environment in Puerto Rico has been extremely challenging. Beginning with the exit of most of the pharmaceutical industry, and the subsequent 11 year ongoing recession that followed, and the 2008-10 global financial crisis which decimated the PR banking sector, the ongoing Puerto Rican debt crisis from the government default on its debt obligations and most recently, the devastation brought by Hurricane Maria in September 2017, the Puerto Rican economy has never recovered.

Partnership Opportunities

We are a 501(c)(3) organization and would be very happy to have grant capital to support our broader capacity building activities in Puerto Rico. We are offering $100 million in risk capital to Puerto Rican funds and businesses. We are also offering technical assistance, as well as data gathering and analysis regarding financial and social impacts of the funds.

Progress Reports