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Commentary: Profits to Be Had From Hispanic Entrepreneurs Venturing South of the Border Commentary: Profits to Be Had From Hispanic Entrepreneurs Venturing So...

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Economy

Commentary: Profits to Be Had From Hispanic Entrepreneurs Venturing South of the Border

One of the world’s most exciting emerging markets, a region with fast-growing economies and a rapidly expanding middle class, speaks the same language as millions of U.S. business people. And it is literally right next door to the United States. In the new global marketplace, smart entrepreneurs are rediscovering Latin America.

Relations between the United States and its southern neighbors have long focused on problems such as drug trafficking and illegal immigration. Although these issues are very real, they often obscure the dramatic changes that are quietly shaping Latin America’s prospects of prosperity.

 

Bouncing back quickly from the global economic crisis, Latin America saw its gross domestic product grow more than 6 percent last year and stands poised to expand by 5 percent this year. If its governments maintain prudent policies and continue to work on boosting productivity, the region could double its per capita income over the next 15 years. Poverty, which now afflicts one in three Latin Americans, would drop to levels similar to those in developed nations.

At a time when both U.S. political parties are vying to attract Latino voters but cannot agree on how to resolve the immigration issue, the promising new economic panorama in the region opens the door for fast, tangible, politically sustainable action that would have positive results on both sides of the border.

An increasingly affluent Latin America represents a unique opportunity for Hispanic entrepreneurs in the United States. According to the U.S. Census Bureau, in 2007 there were 2.3 million Hispanic-owned businesses in this country. Nearly 250,000 of them had paid employees, generating 1.9 million jobs and nearly $275 billion in revenues.

 

While an overwhelming majority of these companies are small and medium-size enterprises (only 1,906 had 100 or more employees), many of their owners could profit from prospecting in Latin America. Like the Chinese and Indian expatriates around the world who have built thriving businesses based on their strong links with their homelands, Hispanic entrepreneurs in the United States can leverage their cultural advantages to operate in the lands of their forbears.

That is exactly what Brightstar did. Founded 15 years ago in Miami by Marcelo Claure, a Bolivian entrepreneur who had come to the United States to attend college, the company seized an opportunity arising from the explosive of mobile communications in Latin America, providing solutions to global corporations unfamiliar with its markets.

The fledgling business quickly built a model based on activities outsourced by manufacturers, distributors, retailers, and operators of wireless devices. Last year, Brightstar booked $4.6 billion in revenues. Today, it employs 3,500 people and operates in 50 countries around the world – including the United States, one of its fastest-growing markets.

Like Brightstar, other Hispanic entrepreneurs can profitably apply knowledge, experience, and contacts gained in the United States to expand their businesses in their homelands. They will need some help, though.

 

Small- and medium-sized enterprises typically face numerous hurdles to entering new markets. Beyond financing – a frequent concern for most business people – they require adequate hedging mechanisms, such as political risk insurance. They also need accurate information about potential markets and simplified procedures to start doing business abroad.

The United States has a clear interest in the proliferation of successful Hispanic entrepreneurs, who could generate wealth and jobs at home by tapping opportunities in Latin America’s fast-growing economies. This, in turn, would help advance the development in their countries of origin that is needed to help stem emigration in the first place.

From the Latin American standpoint, the 50 million-strong Hispanic community in the United States represents an enormous and growing potential market. At $1.3 trillion a year, the purchasing power of Latinos in the U.S. is greater than the GDP of every Latin American country but Brazil.

To foster more Brightstars, governments should work with private enterprise to favor the emergence of dynamic commercial ties across borders. In this case, the Small Business Administration could enter into a partnership with the Inter-American Development Bank, a Washington-based multilateral lender with a strong presence and deep roots in every country between the Rio Grande and the Straits of Magellan.

Working with chambers of commerce in U.S. cities and states where most Hispanic-owned companies are located, the SBA and the IDB can provide valuable information and leads about potential deals in Latin America, connecting businesses in this country with new markets in a region whose middle class could double to 500 million people over the next two decades.

Backed by financing from other federal agencies such as the Overseas Private Investment Corp. and the Export-Import Bank, Hispanic entrepreneurs could gain a firm foothold in Latin America, where rising aspirations encompass everything from improved housing to entertainment.

The IDB, in turn, can provide technical assistance and financing for enterprises in the region to deepen their integration with companies owned by Hispanics in the U.S.

Trade missions, investment conferences, and new forums for networking can also help business people make productive contacts. The IDB regularly organizes a business fair that brings Latin American food-and-drink producers in contact with potential distributors. Hispanic-owned businesses could become leaders in the so-called nostalgia trade, supplying U.S. Hispanics with the products they most miss from their ancestral lands.

Latin America has learned from its past and stands poised to seize this promising moment. The U.S. can share in our bonanza. Hispanic-owned businesses could play a key role if they look toward their own roots. Their success would benefit everyone, on both sides of the hemisphere.

Luis Alberto Moreno is president of the Inter-American Development Bank.

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