In Latin America, there are few business men who generate employment. They continue being small, even after decades of operation. Promising developments.

By Hasan Tuluy, Vicepresident of World Bank for Latin America and Caribe

Source: www.estrategiaynegocios.net

 Creative businessmen are not a sub product of the development. They are employment generators and a critical component of it. In Latin America, where the growth of productivity went on being lagged even, recently, when the raw material are booming, encouraging the emergence of dynamic business is essential for the preservation and widening of economic and social advances achieved in the last decade.

It is a region of entrepreneurs, employers and formal businesses is higher than in other regions with a similar level of income. One out of three workers in Latin America is autonomous or a small employer and even the proportion of registered firms is also comparatively big.

But not ll the entrepreneurs were created in the same way. According to a new report of the World Bank, “Entrepreurship in Latin America: several companies and little innovation”, the fact that there are so many small companies could be symptom of a harmful lack of equilibrium the entrepreneurs do no generate enough quality job.

In Latin America, there are few entrepreneurs who generate employment. They continue being small, even after decades of operation. The companies with 40 or more years of activity employ about 110 people, while East Asia, more than 170, in East Europe about 220 and in countries of high income 250 people.

The successful entrepreneurs are those which transform ideas in profitable commercial companies, a process which requires the capacity to innovate and introduce new products and to explore new market.

To have success, the innovative entrepreneurs require an economic and institutional favourable environment, which stress the expected results from their innovative ideas. However, the low innovation is characteristic of the regional business reality.

Except for Brazil, which invests 1% of its GDP in research and development, the region invests much less (less than 0.5%) that is to say a third of the level of China and a fourth of the level of countries with a high income.

Besides, formal companies in Latin America launch new products in a slower pace than in other developing regions.

It is not surprising, that in Bolivia, Honduras, El Salvador, Guatemala, Paraguay and Peru the number of patents per million inhabitants given in the U.S.A is lower to one, far below from what it should be if we consider the level of development.

A new research endorsed by the World Bank proved that the companies with more than 100 employees do not use the updated systems of talent management based on performance.

The research revealed that the proportion of family companies practically doubled the one in the U.S.A.

The number of firms which enter the export market is also low. In Chile, Colombia, Mexico, the percentage of companies who choose to export is much lower than in countries such as Bangladesh, Pakistan or Tanzania.

Even the outstanding multilatins of the manufacturer sector invest on average, only USDo.o6 per each USD1000 of income in I+D. Meanwhile the multinational ones invest USD 2 per each USD1000 in China and USD2.6 per each USD1000 in countries of high income.

For the last years, Latin-American policies focused on the assistance to small and middle-sized companies. But this effort must be also given to new companies. The young companies are the ones who usually grow. Strengthening the human capital, encourage competence and improve intellectual property rights can also help to tip the balance.

But there are promising developments. Export promotion agencies are increasing the number of export companies in several countries; meanwhile, scientific advances have positively changed the agriculture in other countries.

Nowadays, the ones who made decisions have better possibilities to focus their efforts and resources to encourage growth. After years of struggling with macro financial weaknesses, they can now focus on the construction of the basis to increase productivity. The innovative entrepreneurs will be crucial in this effort, and even though, there are not an ideal number of these, the truth is, that the future of Latin America will depend on having much more.