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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
Index • Latin and Central American context • Employment situation • Worker or entrepreneur • Why be an entrepreneur? • Entrepreneurship features (in Central America) • Entrepreneurship and innovation • Conclusions
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, HumanDevelopmentReport2013, 2009, 2005 and 1999
Central America 2010: almost 50 million inhabitants (including DR) Source: ECLAC
Laboring population in Central America Population of 12 years old or more by activity condition 2008 In Central America and DR Source: OIT (2010). Panorama Laboral en América Latina. Pag.63
¿Workerorentrepreneur? Latin America 2011: Occupiedpopulationby labor category (%) 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” Source: OIT (2012) Panorama Laboral 2012, América Latina y el Caribe. Lima. pág. 82
SMEs in LatinAmerica(%) Features of enterprises… • Several criteria to define SME such as: labor, sales, assets, etc., • LABOR is the most commonly used variable to describe the SME • Micro : 5 or less workers • Small: between 5 to 50 • Medium: 50 to 100 • Exist around 20 millions of enterprises with a certain degree of formality (In Central America around 2 millions) • 93% are micro (in Central America near 95%) • Lessthan 7% are SMEs (in Central America lessthan 5%) • Averageworkersbyenterprise: Lessthan 2 workers • Lessthan 5% of SMEsexportdirectly Source: Zevallos(2007). Restricciones del Entorno a la Competitividad Empresarial en A.L. y actualización
An Example: The informal sector throughout Central America Formal Enterprises: 2 millions (1) Owners: 332,650 (2) Independents: 3,998,473 Informal Enterprises TOTAL: (1)+(2) 4,331,123 Source: OLACD, based in Housesurveys in all Central America countries
Medium and big enterprises Integrated vertically Big enterprises Tailormade Specializedgoods Standarizedgoods A fewSMEsproducingfor Specialized / tailormade Markets Most of SMEscompeting in standarizedgoods A fewSMEs as providers Latin America SMEstoday Source: Altenburg, T. Hacia una Política para la Empresa Media, FUNDES México, 1999
Otherproblems • Competition oriented by price • Lack of equivalent relations between big and small business • Lack of access to the financial and non-financial services (business development services) • Informality: • Low quality inputs and non-skilled labor • Lack of social rights for workers
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”
LatinAmericacompetitiveness 2011-12 Increasingcompetitiveness Fuente: WorldEconomicForum, 2011-2012
Entrepreneursin 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
Characteristics of theEntrepreneurs Source: Obando , Rojas, Zevallos (2008). Características de los Microempresarios y sus necesidades de formación en Centroamérica y República Dominicana. OIT AECID • 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 • Being independent • complement the family income • Entrepreneurs previously were workers and leave it
Profile of a Small business in C.A. Workers by business in C.A. (%) EconomicSectors (%) Source: Obando , Rojas, Zevallos (2008).
You introduce entrepreneurialinnovations in C.A.? (%) Source: Obando, Rojas, Zevallos (2008).
Kind of entrepreneurialinnovation in C.A. (%) Source: Obando, Rojas, Zevallos (2008).
Innovation in Small business (%) Source: Obando, Rojas, Zevallos (2008)..
Medium and big enterprises Oriented to “outsourcing” Tailor made Specialized goods Standarized goods A lot of SMEs producing specializing goods / tailor made markets A few SMEs competing in standarized goods A lot of SMEs as providers Latin America SMEs in the future Source: Altenburg, T. Hacia una Política para la Empresa Media, FUNDES México, 1999
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”
Thank you! For more information contact with Emilio Zevallos: email@example.com