In the spring of 2004, the Latino Community Foundation and the San Francisco Hispanic Chamber of Commerce, working with scholars at the Milken Institute, launched the Isabela Project, an ambitious initiative to help close the Latino capital parity and procurement gap in the Bay Area. The project will assess the feasibility of a) raising $75 million to $100 million for an investment pool, and b) significantly bolstering the corporate procurement opportunities available to Latino suppliers. Together, these efforts will help build, grow and sustain Bay Area Latino businesses.
Latino entrepreneurs traditionally have been underserved by financial markets and corporate contracts. Both the pilot small-business loan securitization and procurement "boot camp" envisioned by the Isabela Project aim to redress this imbalance in the Bay Area. The work is part of the Milken Institute's extensive research in the area of how to increase capital to overlooked markets, communities and business owners, through our Center for Emerging Domestic Markets.
This report is a concept paper for the Isabela Project that was presented at the initial meeting of San Francisco Bay Area entrepreneurs, financial executives and nonprofit leaders on June 20, 2004. Hard copies of the report are available through the Latino Community Foundation by calling (415) 733-8591.
At the heart of any economy is the allocation of capital among disparate users. Capital formation and accumulation - the ability to control it and the corresponding power to calibrate its uses, for profit or civic purpose - inform the heart of entrepreneurship and business creation. And the struggle to control markets and their revenue sources to ensure a free flow of market opportunity is the classic capitalist oxymoron. Too often, entrenched market players use their political or financial muscle to undermine or eliminate emerging markets because they fear the competition created by open access to capital. In other words, the problem with capitalism is that, too often, the capitalists don't share it.
This is the present circumstance in which the Latino business community finds itself. In the midst of unprecedented growth, consumer spending and economic expansion generated solely by one ethnic population - the U.S. Latino community - financing channels to Latino business remain mired within the control of incumbent market players who will liberalize the flow of capital only under opportunistic circumstances that they can control such as the emergence of new technology.
At the same time, market incumbents now realize the huge opportunities that the rise of the Latino demographic brings and are poised to ride the coattails of Latino population growth by their ability to be first to market with newly translated services and goods. The liberalization of capital flow into Latino businesses is the goal, then, of the capital formation initiative proposed by this white paper. This is a pilot for the democratization of capital within a specific region of Latino diversity - the San Francisco Bay Area. It seeks to provide three important benefits:
1. an innovative source of financing for Latino business owners;
2. increased capacity to successfully execute real-time procurement opportunities; and
3. increased job growth and career opportunities for Latinos.
This proposal is a conversation informed by many voices - organizations and individuals - who have thoughtfully considered the impact of marginalized business formation not only on the prosperity of underserved communities, but also on the overall national economy. In a sense, it is a conversation that has been going on for many years, in different languages - the languages of English and Spanish, of politics and theory, of advocacy and reality, of optimism and disillusionment. This point in the conversation is an affirmative attempt to revisit a perennial problem of creating economic empowerment by suggesting new ideas for the use of old methodologies - in this case small-business loan financing and training programs. The framework is a regional pilot program that seeks to achieve the twin objectives of any investment, social or commercial - both a sustainable and scalable return.
The very act of presenting this "affirmative revisionism" may be viewed as placing greater stock on the power of ideas than is practicable. But even if the return on this particular investment may be measured only by increased awareness of a critical issue confronting Latinos, it underscores the truth, perhaps, of Keynes's famous maxim: "The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else."
Of course, the possibility of a greater return is underscored by the famous dictum of another pioneer in the democratization of market economies: "Si se puede."