Fostering entrepreneurship and job creation in Latin America
Emilio Zevallos V.
The challenge of Developing Countries from the Bottom-up
Institute for the Study of International Development (ISID)
McGill University , Montreal March 21-22,2013
1
Index
•
•
•
•
•
Latin and Central American context
Employment situation
Worker or entrepreneur
Why be an entrepreneur?
Entrepreneurship features (in Central
America)
• Entrepreneurship and innovation
• Conclusions
2
Latin American context
• The world has about 7,025 billion inhabitants
– Latin America contributes to that number with approximately
600 millions (less than 9%)
• The World´s average life expectancy of birth in 2011 was 69.8 years
old, in 1997 was 66.7 years old
– In 2011, in Latin America´s life expectancy was 74.4 years old,
and in 1997 it was 69.5
• World adult alphabethism rate was in 2007 83.9% for people with
15 years old or more, in 1997 was 78%
– Latin America adult alphabethism rate was in 2007 91.2%, in
1997 was 87.2%
• Between 1997 and 2003 World per-cápita real GDP growth was
29.9%
– Between 1997 and 2003 Latin America per-cápita real GDP
growth was only 12.2%
Source: UNDP, Human Development Report 2013, 2009, 2005 and 1999
3
Central America 2010:
almost 50 million inhabitants
(including DR)
Rep.Domincana
Panamá
9899
3508
Nicaragua
5822
Honduras
7621
Guatemala
14376
El Salvador
6192
Costa Rica
4639
Source: ECLAC
4
Laboring population in
Central America
Population of 12 years old or more by activity condition 2008
In Central America and DR
Informal workers:
11.7 mililon
Employed:
19.9 mililon
Labor force :
Population
20.7 million
8.2 million
Unemployed:
in age of labor:
36.3 million
Formal workers
0.8 million
Inactive:
16.8 million
Source: OIT (2010). Panorama Laboral en América Latina. Pag.63
5
¿Worker or entrepreneur?
Latin America 2011: Occupied
population by labor category (%)
Domestic
service
7%
Nonsalaried:
independ
ent
22%
Nonsalaried:
owner
4%
Others
2%
Public
salaried
13%
• Paid workers represent
65% of the total
• Non-salaried:
– Owner : 4%
– Independent: 22%
• No existence of an
“entrepreneurship
culture”
• Majority of the
population think in a
“salary”
Private
salaried
52%
Source: OIT (2012) Panorama Laboral 2012, América Latina y el Caribe.
Lima. pág. 82
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SMEs in Latin America (%)
7
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





Several criteria to define SME
Features of enterprises…
such as: labor, sales, assets, etc.,
LABOR is the most commonly
used variable to describe the SME
0.25
Enterprises
32
• Micro : 5 or less workers
Big
60 Labor
• Small: between 5 to 50
50
Investment
• Medium: 50 to 100
6.75
GDP
38
Exist around 20 millions of
SME
28
enterprises with a certain degree
30
of formality (In Central America
93
around 2 millions)
Micro
12 30
93% are micro (in Central America
20
near 95%)
Less than 7% are SMEs (in Central
0
50
100
America less than 5%)
Source: Zevallos (2007). Restricciones del Entorno
Average workers by enterprise:
a la Competitividad Empresarial en A.L. y actualización
Less than 2 workers
Less than 5% of SMEs export
An Example:
The informal sector
throughout Central America
El Salvador
635175
Guatemala
Formal Enterprises:
2 millions
880102
(1) Owners: 332,650
Honduras
781308
Nicaragua
Panama
634593
189973
Dom. Republic
909629
Source: OLACD, based in House surveys in all Central America countries
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(2) Independents: 3,998,473
Informal Enterprises
TOTAL: (1)+(2)
4,331,123
Latin America SMEs today
Tailor made
Specialized goods
A few SMEs producing for
Specialized / tailor made
Markets
Standarized goods
Medium and big
enterprises
Big
Integrated
enterprises
vertically
Most of SMEs competing
in standarized goods
A few SMEs as providers
Source: Altenburg, T. Hacia una Política para la Empresa Media,
FUNDES México, 1999
9
Other problems
• Competition oriented by price
• Lack of equivalent relations between big
and small business
• Lack of access to the financial and nonfinancial services (business development
services)
• Informality:
– Low quality inputs and non-skilled labor
– Lack of social rights for workers
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Diagnosis
• The problem is not only the informal
economic activity as well as the informal
labor
• Low wages, labor instability
• Low productivity and competitiveness
• Bad quality jobs
• Entrepreneurs “by necessity”
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Latin America competitiveness 2011-12
142
countries
115
Global Competitiveness Index
1
2
3
4
5
91
67
68
84
85
86
131 121 111 101 91
81
71
61
51
41
31
Increasing competitiveness
Fuente: World Economic Forum, 2011-2012
12
Chile
Panama
Brasil
Costa Rica
Peru
Colombia
Guatemala
Argentina
Honduras
El Salvador
Nicaragua
31
49
53
61
Switzerland
Singapore
Sweden
Finland
USA
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11
1
Fostering entrepreneurship
in Latin America
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The challenge is foster entrepreneurship
increasing income
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Entrepreneurs
in Latin America
• Entrepreneur “by
necessity”
• Poverty, lack of
opportunities for new
business
• Business in traditional
sectors (retail,
services)
• Low productivity
• Low added value
• Low innovation
• Entrepreneur “by
opportunity”
• Improve the business
enabling conditions
• Promoting a new vision
about innovation in this
(or other) sectors
• Increasing productivity,
added value
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Characteristics of the
Entrepreneurs
•More than 40 years old
•Women in smallest
business, not in bigger ones,
or more sophisticated
– 25% of entrepreneurs
are women
•Why be an entrepreneur
1. Being independent
2. complement the
family income
•Entrepreneurs previously
were workers and leave it
Entrepreneurial Features in Central America
Flexibility
100
80
Sociable
60
62
29
65
30
20
Austere
Responsible
86
64
41
53 57
Fearless
Purposeful
Source: Obando , Rojas, Zevallos (2008). Características de los Microempresarios
y sus necesidades de formación en Centroamérica y República Dominicana. OIT AECID
16
57
24
0
53
Persistent
Leadership
43
40
Dominant
Disciplined
Modern
71
Visionary
Independent
Updated
Profile of a Small business in C.A.
Workers by
business in C.A. (%)
6
workers
5%
5
workers
10%
Economic Sectors (%)
8
7 workers
workers 4%
2%
4
workers
21%
Manuf.
13%
Hotels &
Rest.
25%
Services
19%
3
workers
58%
Retail
43%
Source: Obando , Rojas, Zevallos (2008).
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You introduce entrepreneurial
innovations in C.A.? (%)
YES
Dom.Republic
Panama
10.3
89.9
13.3
Costa Rica
Nicaragua
NO
86.7
41.7
58.3
17.6
82.4
Honduras
23.3
76.7
El Salvador
21.5
78.5
Guatemala
TOTAL
26.7
73.3
22
78
Source: Obando, Rojas, Zevallos (2008).
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Kind of entrepreneurial
innovation in C.A. (%)
Others
9.6
Incentive systems
4.8
ICT Improvements
7.9
Strategic alliances
7.9
Improve distribution channels
7.9
Changes in providers relations
7.9
Production / retail new products
25.4
New production process
28.6
0
Source: Obando, Rojas, Zevallos (2008).
19
10
20
30
40
Innovation in Small business (%)
Innovation by Size of the
Enterprise
NO
6-8 Workers
Innovation by Sector
YES
YES
Services
67,2
32,8
Hotels & Rest.
4-5 Workers
3 Workers
NO
24,1
75,9
15
85
75,6
24,4
Manufacture
81,5
Retail
18,5
Source: Obando, Rojas, Zevallos (2008)..
20
23,4
76,6
24,7
75,3
Source: http://www.edgegrowth.com
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Latin America SMEs in the future
Tailor made
Specialized goods
Standarized goods
Medium and big enterprises
Oriented to “outsourcing”
A lot of SMEs
producing
specializing goods /
tailor made markets
A few SMEs
competing in
standarized goods
A lot of SMEs as providers
Source: Altenburg, T. Hacia una Política
para la Empresa Media, FUNDES México, 1999
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Conclusions
 Fostering entrepreneurship as
an alternative to salaried way
 SMEs will be competing in
relevant markets (specialized
goods and tailor made)
 Innovation in Latin America
small business are oriented to a
business models and process
 Improve distribution channels
 Changing relations with providers
 Promoting “other kind of
innovations” is possible
increase income and improve
labor conditions for a “decent
work”
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Thank you!
For more information contact with Emilio Zevallos:
ezevallos@pymescopio.org
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