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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

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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
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
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

laboring population in central america
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

worker or entrepreneur
¿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 latin america
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
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

latin america smes today

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

other problems
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
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”
latin america competitiveness 2011 12
LatinAmericacompetitiveness 2011-12

Increasingcompetitiveness

Fuente: WorldEconomicForum, 2011-2012

entrepreneurs in latin america
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 the entrepreneurs
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
Profile of a Small business in C.A.

Workers by

business in C.A. (%)

EconomicSectors (%)

Source: Obando , Rojas, Zevallos (2008).

you introduce entrepreneurial innovations in c a
You introduce entrepreneurialinnovations in C.A.? (%)

Source: Obando, Rojas, Zevallos (2008).

kind of entrepreneurial innovation in c a
Kind of entrepreneurialinnovation in C.A. (%)

Source: Obando, Rojas, Zevallos (2008).

innovation in small business
Innovation in Small business (%)

Source: Obando, Rojas, Zevallos (2008)..

latin america smes in the future

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
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
Thank you!

For more information contact with Emilio Zevallos:

ezevallos@pymescopio.org