2101 L Street, N.W., Suite 916, Washington, D.C. 20037 202/466-3430 Cable Ovation Telex 440357 IMPACT AND EFFECTIVENESS OF THE CARIBBEAN BASIN INITIATIVE Hearings held on February 25 and 27, 1986 Statement by OEF International Women and Small Business Participation On behalf of the entire Board and staff of OEF International, we take this opportunity to congratulate the Subcommittee on Oversight for its timely interest and foresight in holding this hearing on the impact of the Caribbean Basin Initiative, (CBI). We are convinced that this legislation was an important response by the Administration and by Congress to the crushing economic problems faced by a region of enormous strategic importance to our country. However, based on our first-hand experience and close observation of the CBI in operation, we have grave concerns about its effectiveness, particularly as an instrument to stimulate the overall economic development of the region. OEF International is the leading, U.S. based, private nonprofit organization dedicated to providing Third World women with the training and technical assistance needed to improve their entrepreneurial abilities and economic conditions. Founded orginally by the League of Women Voters, and independent since 1961, OEF has almost 40 years of experience working with Third World women and their communities. In 1981, OEF established a U.S. National Businesswomen's Committee, made up of some 80 senior level corporate executive and entrepreneurs interested in supporting the efforts of businesswomen in the Third World. A delegation of Committee members made a working tour of Honduras, Costa Rica and Panama in 1984, thanks to a grant to OEF from USIA. These executives studied the incipient Caribbean Basin Initiative (CBI) from all vantage points--U.S. Embassies, host country leaders and potential beneficiaries. Their findings (i.e. that the overwhelming majority of women entrepreneurs were being bypassed by the CBI), led OEF to design a regional program aimed at permitting a permanent exchange of information and technical assistance while providing support for Central American women business owners. Through funding appropiated by Congress in response to the recommendations of the Bi-Partisan Commission on Central America, from in March 1985 OEF was awarded a grant the Agency for International Development to foster the growth of women-owned businesses in Costa Rica and Honduras over a period of three years. After almost one year of on-site operations, OEF's understanding of the CBI, and our opinion of its repercussions, have become very clear. In a word, the CBI and its benefits simply do not reach female Central American entrepreneurs, who are for the most part, running small- and medium-sized businesses. Businesswomen in Central America share a common frustration, they micro-, are on the periphery of the business world and lack access to sources that could provide them with valuable information. Women are under- represented in the formal organizations through which CBI information has been regularly channeled and they are therefore unable to lobby for CBI benefits. In general, it is the chambers of commerce and the national industrial organizations that receive and respond to such information. This is not a case of discrimination, it is a matter of misdirected or underdirected efforts. It is the representatives of large companies that sit on the boards of chambers of commerce; women are concentrated overwhelmingly in micro-, smalland medium-sized businesses. Women do not necessarily face different problems from men. Rather, they face the same problems more acutely. products. The CBI stresses the export of non-traditional For most countries, these product lines are not well developed nor adapted to the U.S. market. Businesses need training and specific technical assistance to be able to produce goods that can meet all the U.S. government import regulations and also appeal to U.S. consumer tastes. To our knowledge, OEF is the only organization directly addressing the needs of female entrepreneurs in Central America. We have a program that provides training, credit, technical assistance, and information sources to women-owned businesses. Small businesses need more incentives to participate in the CBI; they need an integrated package of assistance that includes technical expertise and credit. We have established a computerized data bank between the U.S., Honduras, and Costa Rica to share information on specific technical assistance, financing, and marketing opportunities, but we are only scraping the surface. For example, in the Department of Cartago in Costa Rica, a preliminary OEF study shows that more than 800 women business Owners have no access to technical or financial resources. Through the current OEF program, during the course of a year, with limited project funds, we can only hope to reach a fraction of these women. If these numbers are extrapolated and projected on a national scale, in Costa Rica alone more than 10,000 female business owners have no access to information on the CBI or to resources in general. As part of this Central American program, OEF is also forming businesswomen's committee in each country, made up of the few female owners of larger businesses together with many small entrepreneurs. The goal of these committees is to leverage, through public awareness and advocacy efforts, specific support for women-owned enterprises, based on the problems they have encountered. Research shows that a large number of female small business owners operate in the informal, or "underground," economy. Because they are confronted by enormous government barriers in defining legal status, obtaining needed licenses, and meeting legislated payroll requirements, women tend to create businesses that operate outside the formal structure. Estimates countries identify women as many 70% of this informal economy. Their ability to attain any benefit at all from the CBI is extremely limited. in CBI efforts to date have emphasized large-scale, highly visible ventures, while the backbone of Central American economies is the small entrepreneur. While the CBI was designed originally to provide economic incentives to Central American businesses, the opportunities it currently provides go mostly to North American businesses. Rigid U.S. import requirements and the high cost of shipping drastically restrict the access of the small entrepreneur to the benefits of the CBI. In addition, the CBI encourages dependence on the capriciousness of the North American marketplace, instead of promoting self-sufficiency based on national and regional market demands. OEF In support of the program operations described earlier, has initiated a dialogue between businesswomen in the U.S. and Central America. (See attached articles for sample outreach efforts.) With a heavy focus on women in agriculture and agricultural processing, Central American project beneficiaries raise pigs, chickens, and cows, plant flowers, corn, carrots, figs and potatoes and transform primary and secondary products into cheese, sweets, and sausage. In addition to their role in production and marketing, these women are acquiring vital leadership and business management skills through the training and technical assistance provided by this AID-funded project. OEF is convinced that efforts such as this, though only a small beginning, are imperative if the needs of the private sector in the Caribbean basin are to be fully and efficiently met. Further, we believe that financial incentives should stimulate greater self-sufficiency by increasing the skill level of the small entrepreneur if the majority of private enterprises are to benefit from the CBI. To achieve America through Adjust the CBI significant economic improvement in Central the CBI we see two major policy options: 1) so that it reaches down to small and medium businesses or, 2) create an ancillary mechanism through which small and medium businesses can "scale up and thus become candidates for CBI benefits. The AID grant to OEF described here may be a model for such a scaling-up mechanism since technical assistance, training and credit are crucial in promoting small business growth. the In addition, OEF recommends that Congress request from AID a report on programs they support through the CBI, focusing on models that reach small and medium businesses and examining possibility of expanding on successful programs to reach a larger percentage of the private sector. (Attachments to the statement have been retained in committee files.) TESTIMONY OF THE PUERTO RICO BANKERS ASSOCIATION The Puerto Rico Bankers Association, which represents the Island's seventeen commercial banks, would like to express its appreciation for the opportunity to state its views regarding the impact of the Caribbean Basin Initiative ("CBI") upon the financial community of Puerto Rico and upon the Caribbean region as a whole. This testimony also will set forth some suggestions for promoting financial activity in the crucial Caribbean Basin area by increasing the participation therein of the commercial banking community of Puerto Rico. The Caribbean Basin Initiative The Caribbean Basin Initiative was enacted to promote economic revitalization and facilitate expansion of economic opportunities in the Caribbean Basin region. The program consists of a series of preferential trade, economic, and tax measures to help Caribbean countries and territories increase employment and raise their economic standards. The bedrock of the program is the authority granted to the President under the Caribbean Economic Recovery Act to provide unilateral duty-free treatment on United States imports of eligible articles from designated Caribbean Basin participants. In addition, another provision intended to aid tourism allows tax deductions for the cost of attending business conventions in eligible countries. The Puerto Rico Bankers Association has supported the CBI since its genesis. This support stems from our recognition of the importance of the economic development and political stability of this region to the shared national interests of the United States and Puerto Rico. Indeed, the Initiative has been viewed as a promising effort to prevent unrest and political instability in the region. Puerto Rico, which during the past 50 years has experienced great socioeconomic progress, is well aware of the need for material development in its neighboring regions. Increased economic activity in the Caribbean basin will reflect itself similarly in Puerto Rico, which because of its infrastructure and strategic location could become a significant trade and transportation center for the whole region. At the present time the first stage of the International Trade Center is being constructed in the port area of San Juan. This Center will provide much needed shipping facilities for the Caribbean region, moving large ships to unload smaller cargos in San Juan to be transported in small vessels to our Basin neighbors. Further, Puerto Rico has the human and educational resources necessary to assume a leadership role with respect to the implementation of economic, social, educational and health programs. For instance, higher education institutions in Puerto Rico can offer specialized training and sophisticated medical facilities can be provided to the Basin region. Evidently, this would help to alleviate unemployment on the Island, which according to official statistics was at 19.7% in December 1985. In the long run, as a result of the increase in purchasing power of Puerto Rico's neighbors, our Island could develop more trade and exports in the area. In sum, the improvement of socioeconomic conditions in the Caribbean Basin region will work to Puerto Rico's advantage. The Role of the Puerto Rico Banking Community The Caribbean Basin Initiative embodies the concept that business investment overseas can assist in the economic |