Entrepreneurship in Latin America: From Subsistence to Productive Change

(Caracas, July 9, 2013).-"The region must develop strong competitive advantages on top of its comparative advantages to promote more productive economic transformation that brings about lasting social equity. In that sense it should adopt policies that allow us to take advantage - in a sustainable manner - of the abundance of certain assets such as Latin America's vast natural resources to help bring about a more productive economic transformation process," said CAF Executive President Enrique García at the unveiling of the Ninth Edition of the Economic and Development Report (RED) entitled "Entrepreneurship in Latin America: From Subsistence to Productive Change." 

"RED 2013 aims to contribute to the understanding and implementation of policies that create jobs and boost productivity within the region's economies," García added.

The study analyzes how low productivity in the region is often the product of an overwhelming number of one-person enterprises and micro-businesses as well as a shortage of medium-sized and larger establishments capable of generating quality jobs and productivity gains. 

"The report serves as evidence of the relationship that exists between the growth restrictions facing larger companies and the abundance of subsistence entrepreneurs. Both are directly linked and recognizing this correlation is crucial to designing pro-entrepreneurship public policies," García added. 

Too many entrepreneurs, too little productivity 

Latin America may boast a high rate of entrepreneurship among its workforce, but 75 percent of the region's entrepreneurs are actually micro-entrepreneurs (those who manage businesses with less than five employees) who employ nearly 40 percent of the private sector's salaried workers.

In other words, there are many micro-businesses that employee a very large portion of the region's workers although most of whom remain in the informal economy. This situation illustrates the contrast between Latin America and more developed countries: in the region, companies tend to be smaller and too few enjoy the potential to become higher-growth entities. 

A survey carried out by CAF-Development Bank of Latin America-, that served as an input for the RED 2013 findings, suggests that this phenomenon is not due to a limited economic capacity that would otherwise stifle the launch of entrepreneurships in Latin America, but more often than not, the creation of start-ups stems from demand by those seeking a way out of unemployment and less by a need to spearhead true growth-oriented and productive companies. 

The entire report stresses the need to foster productive entrepreneurships and sustainable public policies that take into account the diversity of the entrepreneurial community and adopt a multidimensional approach that integrates entrepreneurial talent, job training, innovation and financing. 

RED 2013 Chapters Include: 

• Entrepreneurship as a motor for development
• Who are Latin America's entrepreneurs?
• Micro-business: A source of growth or a refuge for the unemployed?
• Productive transformation and high-quality companies
• Policies for entrepreneurship, jobs and productivity 

To view RED 2013, click here. 

To view the Focus Latin America summary, click here.