Special Coverage Vision Quest CARIBBEAN BUSINESS.PDF Book
1. CARIBBEAN BUSINESS THURSDAY, JUNE 23, 201132
BY ANGELA VARGAS
angelav@caribbeanbusinesspr.com
The benefits of the recently en-
acted Film Industry Economic
Incentives Law, which allows for
generous tax credits for productions
with budgets upwards of $100,000
for feature-length films and $50,000
forshortfilms,aremostlyoutofreach
for local productions, which can’t
raise the hefty funds needed to meet
the law’s budget requirements.
Nonetheless, a new generation of
local filmmakers is looking beyond
the incentives to its own talent pool
to realize their vision—affordably—
through technology.
There is little doubt that the new
law, which expands the definition
of eligible projects to include docu-
mentaries, short films, music videos,
video games and live shows, among
other types of productions, repre-
sents a significant contribution to
the island’s economy. The numbers
are there: 2010 investments doubled
from $32 million in 2009 to $65
million, and 19,841 local jobs were
created during 2010, with 11 films
produced on the island.
Sources at the Puerto Rico Film
Commission say there is no way to
track in what stage of production
these jobs were created, however.
The commission’s code of ethics al-
lows it to provide consulting only in
choosing locations, not in choosing
personnel, creative or otherwise.
As reported March 5 in
CARIBBEAN BUSINESS’ online
edition (www.caribbeanbusinesspr.
com), Gov. Luis Fortuño dedicated
the signing event for the law to film-
makers and students at the College of
Cinematography, Arts & Television
(CCAT) in Bayamón by saying:
“This is for you, so Puerto Rico can
do it better in the realm of film.”
Since CCAT offers programs in
editing, sound, illumination, camera-
work and general production, with-
out delving into visual effects at all,
the governor’s blessing raises certain
questions in the local film commu-
nity, including:What “realm” is that,
exactly? Will the law be viable for
local productions? Do the incentives
cover the entire film-production pro-
cess, or just parts of it?
Meanwhile, celebrities support-
ing the law—most prominently
Hollywood power couple Jennifer
López and Marc Anthony—speak
of plans to establish state-of-the-
art soundstages and studios to at-
tract more A-list movies and TV-
production projects to Puerto Rico.
However, discussion of local pro-
ductions has been absent, and out-
sourcing of big-budget films’ post-
production services to local firms
appears to have not even been fath-
omed during the drafting of the law.
In the latter case, the reason should
be clear: post-production in Puerto
Rico is considered sub par.
VISUAL EFFECTS EXIST!
Enter professionals like Jorge
Castillo López, a visual-effects su-
pervisor based in Puerto Rico who
creates animated scenes and graphics
you have probably seen, but wouldn’t
have believed were made here.
“The comment I usually get is:
‘That wasn’t made here.’Well it was,
and we’re right here,” Castillo said
defiantly.With his specialty, Castillo
is one of the scant few individuals
who tend to the visual-effects niche
in the local film industry.
A chemical engineer by training,
Castillo is currently a professor of
animation & video-game design at
Atlantic College, and has created
visualeffectsfortwofull-lengthmov-
ies that have yet to be released. One
of the films, “Barricada,” launched
the 3D artist into a small but signifi-
cant island film community.
Through this first project, Castillo
met another self-taught artist, Kaell
Matías, a peculiar brand of director
who creates his own visual effects.
“When I started all those years ago,
I wished for a Castillo,” Matías said
jokingly. “I wanted that ‘Pixar but-
ton’ that would make what I saw in
my head possible. It wasn’t happen-
ing, so I started experimenting.”
Matías’short films include “Guerra
mia,” which he directed and co-
wrote, and “Cuarto oscuro,” on which
he functioned as both director and
writer. He also has directed music
videos for such bands as Plaza 5 and
Eva Cautiva. To all of these projects
Matías added his special knowledge
of quality post-production.
In an exclusive interview with
CARIBBEAN BUSINESS, both art-
ists talked about the challenges and
rewards of creating art in a neglected,
and often misunderstood, segment of
local moviemaking.
“To this day, what I see most are
Continued on next page
Puerto Rico-based visual-effects specialists aim to
re-animate a struggling local movie industry largely passed
over by new Film Industry Economic Incentives Law
Vision quest
For his newest short film to be released in 2012, Juanchi
González directs actor Rafa Álvarez for virtual settings.An establishing-shot concept image by William Núñez portrays the first minutes of González’s short film.
and it is well known that much of the
money was spent on cars, vacations
and other expenses unrelated to
business development.
Currently, 70% of these loans are
either in default or uncollectible, a
great disservice to the borrowers,
since they didn’t develop the skills
to operate a business and ended up
losing money and ruining their credit
rating.
In addition to the irregularities
in loan disbursements, the process
was long and tedious, often taking
as long as a year or a year and a half
to obtain loan approval.
Following recent improvements,
completed applications are reviewed
in an average of 38 days. The EDB
receives more than 1,000 completed
applications for financing every year,
of which some 60% are approved.
“Llave para tu negocio” morphed
into the new Development for the
People program (“Desarrollo para
tu pueblo,” or DPP). Final approval
of funding now takes an average of
only 20 days.
Minimizing administrative expens-
es is another target for reform, and
the bank already has reduced oper-
ating expenses by more than 30%,
which liberates funds to make ad-
ditional loans.
The timing couldn’t be better. As
the Puerto Rican economy begins
to show signs of recovery, the EDB
has become a significant piece of
the government’s overall strategy to
encourage the creation and growth
of small and midsize companies and
stimulate entrepreneurship.
Otero, formerly vice president of
finance & operations at the EDB,
replaced Lizzie Rosso, who resigned
as president to return to the private
sector, after taking the first steps
toward the professionalization of
the bank.
Otero plans to step up the process
and make it permanent, building on
her studies in finance and banking
at the University of Puerto Rico and
more than 20 years in the banking
industry, most notably at Citibank.
It is a record that has earned her
strong backing from her new direct
supervisor.
“As a member of the EDB team for
the past two years, Otero has been
key to the bank’s success during
this administration in helping small
businesses in Puerto Rico,” Gov.
Luis Fortuño said in a statement.
“I have no doubt that as president,
Ivonne will continue to apply her
vast experience in the financial
sector toward better economic
development and job creation for
all Puerto Ricans.”
PRIMARY LENDING PROGRAMS
One of the steps taken by Otero
was to eliminate outmoded loan
programs, keep those that still work
and launch new ones to fill additional
niches.
“We have to evolve with the times,”
she said.
Created under Law 22, which took
effect on July 24, 1985—in an effort
to develop innovative financing
strategies for small and midsize
businesses—the EDB provides
financial support through asset-
based loans and participation loans
with private financial institutions
or under the U.S. Small Business
Administration (SBA) 504 loan-
guarantee program.
The bank also provides mezzanine
financing (a hybrid of debt and equity
financing often used to finance the
expansion of an existing company)
or capitalization loans, offers
financing for tourism projects, and
encourages entrepreneurship and
self-employment through a variety
of financial programs.
The EDB’s principal financing
programs are:
EDB-Direct Loan Program:
Up to $5 million for small and
midsize companies
For real estate, a maximum of
80% of the value of the property
can be financed. For machinery and
equipment, the rate is 75%, 60% of
the appraised value of the equipment
if it is used. The bank may require
collateral. Operating capital must
be paid back in a maximum of five
years. Purchases of machinery and
equipment have a maximum seven-
year duration on the term of the loan.
Permanent improvements to real
property are capped at 10 years, and
the purchase and/or construction of
real property can be financed for a
period of up to 30 years.
An example of this program’s
benefits is Automeca Technical
College, with campuses in Bayamón,
Aguadilla, Caguas and Ponce. It
was founded with the mission of
developing mechanics capable
of finding employment in the
automobile industry. The 30-plus-
year-old company recently received
a $500,000 EDB loan to expand its
operations, which currently employ
170 people.
New Entrepreneur Program:
Up to $500,000 for start-ups
The entrepreneur is required to
contribute at least 10% of the total
cost of the project, and the EDB may
require additional loan guarantees
from state and federal agencies such
as the SBA and the Department
of Economic Development &
Commerce (DDEC by its Spanish
acronym).
Las Flores Metalarte in Coamo
was founded in an effort to create job
opportunities for unemployed young
people. Today the company is one of
the largest furniture manufacturers
on the island, employing 140 people.
The company was recently provided
a $725,000 loan and has converted
into a cooperative whose employee-
owners all have a personal stake in
its success.
Female Entrepreneur Program:
Up to $500,000 for Pymes owned
by women
The EDB is focusing on women,
since this segment of the population
has demonstrated significant interest
in self-employment.
According to the U.S. Census
Bureau, Puerto Rico is the only U.S.
state or territory where women earn
more that men. Women in Puerto
Rico make 103% of what men earn
on the island, and their income is
growing at a faster rate than men’s.
The EDB’s Female Entrepreneur
loan requires a 10% commitment
on the part of the borrower and
covers operating capital for five
years, the purchase of machinery
and equipment for up to seven years,
permanent improvements up to 10
years, and real property up to 30
years.
This program can be combined
with other EDB programs like DPP
and loan guarantees from the SBA.
“Female entrepreneurship can be
demonstrated by the Development
for the People program, where a
considerable number of applicants
are women,” Otero said.
The bank also provides a variety of
targeted loans aimed at stimulating
entrepreneurial activity in a variety
of areas. These loans include:
TOURISM IN VIEQUES, CULEBRA
In an effort to stimulate economic
activity in the island municipalities
ofVieques and Culebra, the EDB has
committed $2 million in loans not to
exceed $25,000 each.
Thus far, 50 loans have been
issued inVieques and 15 in Culebra.
The loans have been taken by
entrepreneurs seeking to provide
goods and services directed at
encouraging tourism activity.
However, this doesn’t imply the
loans are exclusively for kayak
rentals, guided tours, scuba diving
and the like. Loans have been issued
for auto-parts distributors, plumbers,
electricians, small restaurants and
other businesses that complement
Continued from previous page
17 CARIBBEAN BUSINESS THURSDAY, JUNE 23, 2011FRONT PAGE
Continued on page 18
“We have completely
re-engineered and
restructured our
procedures.”
—Ivonne Otero, president of the
Economic Development Bank
2. BY ALEXANDER LÓPEZ
alopez@caribbeanbusinesspr.com
It has long been an article of faith
in the banking industry that sound
credit analysis begins and ends with
management. If business’ owners
can’t demonstrate that they know
what they’re doing, don’t make the
loan.
Provided the credit risk is good and
the loan is made, the second article
of faith is to keep track of the client
to make sure the loan doesn’t go
bad, and if it does, deploy a strong
collection effort.
Historically, the Economic Devel-
opment Bank for Puerto Rico (EDB)
has had a spotty, on-again, off-again
record of following these precepts.
Ivonne Otero Guzmán wants to
change that.
It’spartoftherenewedprofessional-
management effort the recently
named president of the institution has
initiated to ensure industry-standard
best practices at the bank far into
the future—practices the seasoned
veteran of the banking industry hopes
will keep the EDB from committing
many of the mistakes that have
plagued it in the past.
“We have completely re-engineered
and restructured our procedures
to speed up the cycle time,” Otero
noted. “Our staff had to be properly
trained for them to be effective in
their output.”
Thebigwake-upcallcamefollowing
the “Llave para tu negocio” (Key to
Your Business) program in the mid-
to-late 2000s. Approximately 1,000
loans were issued, and regardless of
the business, the loan amount was
$50,000.
The loans were loosely monitored,
16 CARIBBEAN BUSINESS THURSDAY, JUNE 23, 2011
Continued on next page
Economic Development
Bank steps up changes
to reduce delinquency,
improve efficiency and
expand loans, right on
time for the recovery
The timing could
not be better
local directors who are extremely ap-
prehensive about telling me what they
want to see on the screen,” Castillo
explained. “They are used to toning
down their vision to fit budget and
time constraints.”
Matías agreed, adding that local di-
rectors’ self-imposed limitations—
justified or not—are a big impedi-
ment to the artistic and commercial
growth of Puerto Rican cinema.
“There are directors who shudder
at the mere mention of green screens,
but the reality is we must deal with
this fear if quality productions are
ever to come out of the island,” he
said.
MONEY IN THE WRONG HANDS
Castillo describes the local film-
making industry as a polarized gath-
ering of haves and have-nots.
“On one side you have people who
have no idea what they’re doing
with all the resources and investors
at their disposal, which makes them
sell their equipment as if it were abil-
ity,” Castillo said. “And on the other
side, you have people who have the
technical know-how who are basi-
cally paralyzed.”
“You either keep your day job or
you hunt for contacts, and in these
economic times, you need your day
job,” added Matías, who happens to
be a government employee.
For Castillo and Matías, the long
and short of it is: garbage in, garbage
out. No matter the equipment—if the
footage wasn’t filmed correctly, no
manner of post-production will make
the finished product anything but
substandard.
“The Red cam is not a silver bul-
let, and expensive gadgets will never
mask bad filmmaking and worse ani-
mations,” Castillo said. “The problem
is that with every botched island pro-
duction, the less likely it is that inves-
tors will come out of the woodwork
to support local projects.”
It is no secret that advertising agen-
cies and the who’s who wishing to in-
vest in 2D and 3D animation usually
outsource these types of projects to
Latin America or North America.
Havinghadfirsthandexperiencewith
localartists’migration,Castillofrowns
on the whole practice and believes
that this segment of island filmmak-
ing is grossly underrepresented—and
ripe for cultivation.
“There is always a lot of talk [from
the government] about what an as-
set island talent is, but in reality we
have to wave a flag and say, ‘Hey, we
do visual effects, too,’” Castillo said.
“It’s an industry that would bring
money into the island and create jobs
for a whole generation of artists who
are migrating to the outside to find
employment.
“Everywhere, big productions look
to outsource smaller projects, so why
not here? If we have a film industry
that’s basically in diapers, why are we
looking to take away the few jobs that
can actually be done here?”
A DIRECTOR’S DREAM:
PREVISUALIZATIONS
As a director, imagine being able
to experiment with your film’s look,
camera movement, pacing and edit-
ing without actually incurring any
production costs. This is what previ-
sualizations are for.
Also known in the industry as
“previz,” the term encompasses all
techniques aimed at visualizing the
scenes of a movie before actual film-
ing. Storyboards are considered part
of a movie’s previz, but what Castillo
advocates, and what big-production
films now practice, is full-on digital
previsualization.
Juanchi González, a locally ac-
claimed director, acknowledges hav-
ing only recently lost his longstand-
ing fear of visual effects.
“They [visual effects] have always
fascinated me, but I have kept them
at a distance because I respect them
greatly,” González told CARIBBEAN
BUSINESS. “After ‘Los unos y los
otros’ [2009], I met Castillo in be-
tween jobs and the chance encounter
opened my mind to a number of pos-
sibilities, a visual world that can be
totally controlled within an affordable
price range.”
Known in the local independent-
film circle as a true “actor’s director,”
González awed Puerto Rican critics
with his short film “Los unos y los
otros,” a psychological thriller with
powerful performances and an im-
pressive arsenal of cinematographic
tricks that challenge the viewer.
“Los unos y los otros,” which was
made with a $5,000 budget raised
within the production group, has
been shown in Chicago, Italy and
Madagascar, where it was interpreted
in a political context.Aris Mejías won
Best Actress honors and González
was named Best Director at Cine
Fiesta in 2009, among other awards
and selections garnered by the film.
In conjunction with Work in
Motion, Castillo’s digital production
and multimedia studio, González and
his team are currently immersed in
post-production for a new short film,
scheduled to be released in 2012.And
this time, previz was the norm.
“This time around, the process has
been remarkably efficient; I have
hardly changed a thing while film-
ing,” González said. “Concept draw-
ings and 3D visualizations have made
it possible to clearly imagine the
film’s pace and mise-en-scène.”
Work in Motion focuses on the cre-
ation of groundbreaking visual effects
and 3D animation for the feature-film,
advertising, architectural, previsual-
ization and video-game sectors.
FREEING A FILM’S VISION AND
PRODUCTION VALUE
“You say ‘visual effects’and people
automaticallypicture“Transformers”
and Michael Bay’s 360-degree shots,
but this is the last thing I’m referring
to,” Castillo explained. “I’m talking
about, for example, a director imag-
ining a cottage somewhere in the
background and someone saying,
‘Yes, we can do that digitally.’ It is
about freeing the director’s vision.”
Matías, with singular experience
on both fronts, added, “When used
correctly, these visual techniques
become essential to storytelling and
can transcend all types of limitations
that can unhinge a director’s style,
such as budget, locations, equipment,
etc.”
Given the film-industry’s adrena-
line-infused bias recently, Castillo
follows Matías’thought with a state-
ment that might seem paradoxical to
many of today’s moviegoers.
“The best special effect is the one
you can’t spot,” he said. “The one
that’s there for the story and is mostly
invisible, that’s what we should ulti-
mately strive for.”
Castillo and his team of local pro-
grammers, 3D artists, concept artists
and designers are leading the way
in high-end visual effects on the is-
land in terms of their complexity and
quality. Steadily, with what he has
accomplished so far, and with what
he is currently working on, he is add-
ing value to local productions and
reawakening an independent-film
community that could very well be
described as “down on its luck.”
“The projects we are working on
now are designed to make a state-
ment,” Castillo said. “We want to
prove we can create visual effects of
the same caliber as big productions
with a fraction of the resources these
companies have.
“The pitch is, ‘We created this with
next to nothing, now give us support
and let’s see what we are capable
of.’” Ⅲ
CARIBBEAN BUSINESS THURSDAY, JUNE 23, 201133
Continued from previous page
Castillo production team on the set
“Everywhere, big
productions look to
outsource smaller
projects, so why
not here? If we have a
film industry that’s
basically in diapers, why
are we looking to take
away the few jobs that
can actually be done
here?”
—Jorge Castillo López