fostering entrepreneurship and job creation in latin america emilio zevallos v
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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 - PowerPoint PPT PresentationTRANSCRIPT
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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
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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
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Central America 2010: almost 50 million inhabitants
(including DR)
Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Panamá
Rep.Domincana
4639
6192
14376
7621
5822
3508
9899
Source: ECLAC
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Laboring population in Central America
Population in age of labor:
36.3 million
Labor force : 20.7 million
Employed: 19.9 mililon
Informal workers: 11.7 mililon
Formal workers 8.2 million
Unemployed: 0.8 million
Inactive: 16.8 million
Source: OIT (2010). Panorama Laboral en América Latina. Pag.63
Population of 12 years old or more by activity condition 2008In Central America and DR
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¿Worker or entrepreneur?Latin America 2011: Occupied
population by labor category (%)
Public sala-ried13%
Private sa-laried 52%Non-
sala-ried:
owner4%
Non-sala-ried: in-de-
pen-dent22%
Domestic service7%
Others2%
• 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
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SMEs in Latin America (%) 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%)
Less than 7% are SMEs (in Central America less than 5%)
Average workers by enterprise: Less than 2 workers
Less than 5% of SMEs export directly
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Source: Zevallos (2007). Restricciones del Entorno a la Competitividad Empresarial en A.L. y actualización
Micro
SME
Big
20
30
50
12
28
60
30
38
32
93
6.75
0.25Enterprises
Labor
Investment
GDP
Features of enterprises…
An Example: The informal sector
throughout Central America
Dom. Republic
Panama
Nicaragua
Honduras
Guatemala
El Salvador
909629
189973
634593
781308
880102
635175
(1) Owners: 332,650
(2) Independents: 3,998,473
Informal EnterprisesTOTAL: (1)+(2)
4,331,123
Formal Enterprises:2 millions
Source: OLACD, based in House surveys in all Central America countries
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Tailor made Specialized goods Standarized goods
Bigenterprise
sA few SMEs producing for Specialized / tailor made
Markets
Medium and big enterprisesIntegrated 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
Latin America SMEs today
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Other problems
• 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
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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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NicaraguaEl SalvadorHondurasArgentinaGuatemala Colombia PeruCosta RicaBrasilPanamaChile USAFinlandSwedenSingaporeSwitzerland
1112131415161718191101111121131115
91868584
6867
6153
4931
5432
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Global Competitiveness Index142 coun-tries
Latin America competitiveness 2011-12
Fuente: World Economic Forum, 2011-2012
Increasing competitiveness
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Fostering entrepreneurshipin Latin America
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The challenge is foster entrepreneurshipincreasing 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
FlexibilityModern
Leadership
Austere
Responsible
Visionary
Independent
UpdatedPurposeful
Fearless
Persistent
Disciplined
Dominant
Sociable
0
50
100
4330
57
24
86
64
7157534165
53
29
62
Entrepreneurial Features in Central America
Source: Obando , Rojas, Zevallos (2008). Características de los Microempresarios y sus necesidades de formación en Centroamérica y República Dominicana. OIT AECID
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Profile of a Small business in C.A.
Workers by business in C.A. (%)
3 workers58%4 workers
21%
5 workers
10%
6 workers5%
7 workers2%
8 workers4%
Economic Sectors (%)
Hotels & Rest.25%
Retail43%
Services19%
Manuf.13%
Source: Obando , Rojas, Zevallos (2008).
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You introduce entrepreneurial innovations in C.A.? (%)
TOTAL
Guatemala
El Salvador
Honduras
Nicaragua
Costa Rica
Panama
Dom.Republic
22
26.7
21.5
23.3
17.6
41.7
13.3
10.3
78
73.3
78.5
76.7
82.4
58.3
86.7
89.9
YES NO
Source: Obando, Rojas, Zevallos (2008).
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Kind of entrepreneurial innovation in C.A. (%)
New production process
Production / retail new products
Changes in providers relations
Improve distribution channels
Strategic alliances
ICT Improvements
Incentive systems
Others
0 5 10 15 20 25 30 35
28.6
25.4
7.9
7.9
7.9
7.9
4.8
9.6
Source: Obando, Rojas, Zevallos (2008).
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Innovation in Small business (%)
75,3
76,6
85
75,9
24,7
23,4
15
24,1
Retail
Manufacture
Hotels & Rest.
Services
Innovation by Sector
YES NO
18,5
24,4
32,8
81,5
75,6
67,2
3 Workers
4-5 Workers
6-8 Workers
Innovation by Size of the Enterprise
NO YES
Source: Obando, Rojas, Zevallos (2008)..
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Source: http://www.edgegrowth.com21
Tailor made Specialized goods Standarized goods
A lot of SMEs producing
specializing goods /tailor made markets
Medium and big enterprises Oriented to “outsourcing”
A few SMEs competing in
standarized goods
A lot of SMEs as providersSource: Altenburg, T. Hacia una Política para la Empresa Media, FUNDES México, 1999
Latin America SMEs in the future
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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:
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