One-third of the funds have gone to El Paso County, Texas.
By MARIA LUISA TUCKERof Southwest Texas State University
EL PASO, Texas — El Paso businessman Fred Solis lost 50 percent of his customers a few years ago due to shifting trade patterns brought on by the North American Free Trade Agreement.
"It was scary. We didn't think we were going to survive," Solis said.
Now, Solis is convinced that NAFTA actually has helped him build a stronger business with clients pouring in from the very high-tech industries that are replacing the Mexican trade lost to NAFTA.
As part owner of a company called Hy-Density Imaging, Solis received a $73,000 loan with the help of the Community Adjustment and Investment Program (CAIP), designed to help areas hurt by NAFTA. Hy-Density used the money to hire two employees and move to a larger store in a more competitive area.
Solis is one of several small-business owners who have received CAIP loans in El Paso County, the county most severely hit by NAFTA. So far, 49 CAIP loans worth a total of $9.8 million have been distributed — almost half of the more than $21 million made available to businesses in Texas.
Texas border regions account for nearly half and El Paso businesses nearly one-third of all loan money distributed nationwide.
CAIP, created by Congress and coordinated by the North American Development Bank (NADBank), is designed to promote economic growth in hard-hit communities mainly through guaranteeing small-business loans administered through the U.S. Small Business Administration and the Department of Agriculture.
The goal of CAIP is to save and create jobs in the 65 eligible communities it serves. Applicants must be able to prove that at least one job will be created or preserved for every $70,000 loaned.
CAIP, which did not make its first loan until September 1997, has been criticized by legislators and the media for its slow start. In fact, CAIP received a grade of F last year when the William C. Velasquez Institute, a nonprofit Latino public policy organization, scored NAFTA-related programs.
"Much of the criticism does not reflect the reality," CAIP director Hugh Loftus said, noting that most community development programs do not make a loan within the first year.
Raul Hinojosa-Ojeda, a professor at UCLA and one of the founders of NADBank, agreed, calling the slow start a "natural delay" in such programs.
"Development banking is a relatively new concept in the U.S.," he said. "We needed to convince people in the U.S. Treasury Department that the need was not going to go away."
The program also has had difficulty finding applicants that meet the criteria, Loftus said. One criterion is that the business must not be able to get a loan through other means. During a time of economic boon, that's rare, Loftus said.
"There's tons of money out there," he said.
Hinojosa-Ojeda said the initial criticism may have forced the U.S. Treasury Department to pay attention to a program that had "really failed" in the early stages.
"There has definitely been a major change in attitude of the Treasury," Hinojosa-Ojeda said. Both men agreed there is room for improvement.
"The intent of the NADBank was to have a $40 billion bank, but we got a $3 billion bank," Hinojosa-Ojeda said. "But even with $3 billion there is a lot more that could be done."
El Paso's severe NAFTA troubles stemmed primarily from the closing of apparel plants that moved to Mexico, leaving thousands jobless, but the first CAIP loan in the country went to an El Paso tortilla distributor in September 1997. Since then, loans have gone to businesses ranging from coffee shops and gift stores to trucking and computer companies.
The current appropriations bill gave NADBank $10 million to fund CAIP, not as much as sought, but Hinojosa-Ojeda says he hopes the program will outlast its designation as a transitional program.
"There will be demonstrated growth in lending this year," he said. "I think it's going to last a lot longer than expected and grow. The need is going to continue there."
Loftus is a bit more pessimistic, saying CAIP "will last as long as the money lasts" — at least the next two or three years.
