“The Hispanic community in the United States has contributed significantly to US economic growth in recent decades and will continue to do so over the next 10 to 20 years”, according to researchers at the Peterson Institution for International Economics (PIIE).
The report, The Economic Benefits of Latino Immigration: How the Migrant Hispanic Population’s Demographic Characteristics Contribute to US Growth found “The contribution of Hispanic immigrants to US economic growth results from the quality of the workforce, not just quantity.”
Latinos who live and work in the U.S. were responsible for $2.13 trillion of gross domestic product in 2015, almost 12 percent of the country’s $18.04 trillion GDP, reports The Dallas Morning News.
And the projections for 2020 are even higher: Latino GDP will account for almost 25 percent of the nation’s economic growth, according to David E. Hayes-Bautista, director of the Center for the Study of Latino Health and Culture at the University of California at Los Angeles.
Hispanic, Latinos represent 15 percent of Connecticut’s population, many own one of more than 300,000 small businesses driving the state’s economy.
Latino Entrepreneurs Optimistic and Gearing Up To Achieve Their Potential
Latinos are expected to fill a major role in expanding and sustaining the U.S. economy during the remainder of the 21st century, both in terms of business ownership and as a rising market sector.
Nationally and in Connecticut, there is evidence these aspirations for Latino-owned businesses (LOB) are being achieved, particularly in regard to the number of their businesses and their entrepreneurial enthusiasm.
The stereotypical image of Latino small businesses being primarily a family-run construction firm or a ethnic restaurant or urban food trucks serving tacos or Cubano sandwiches, does not match the current reality.
“There are a lot of strong [Hispanic] entrepreneurs,” said Moraima Guttierrez, assistant Connecticut district director for the Small Business Administration which has its office in Hartford and a branch in Bridgeport.
The Hispanic-owned businesses that the U.S. Small Business Administration has helped in recent years include landscapers, plumbers and food-oriented companies but also financial and health care services, an iron foundry in Bridgeport and a softball complex in Windsor.
Last year, the SBA helped 52 Hispanic-owned businesses in Connecticut borrow $9,741,000. This represents a tripling of the number of Hispanic enterprises accommodated and a 155 percent increase in the total amount borrowed compared to 2009. This money was as used to launch new businesses as well as for expansions, capital fixtures, equipment and for lines of credit, Guttierrez said.
Nationally, the U.S. Census in 2016 tagged the number of Hispanic businesses at 3.3 million or about 12 percent of all businesses. This number could now be as high as 5 million, according to the U.S. Hispanic Chamber of Commerce.
Moreover, while the total number of businesses in the U.S. declined from 2007 to 2012, the number of Latino-owned businesses grew by 46 percent.
The U.S. Census reported in 2002 that there were 9,408 Hispanic-owned businesses in the state. Ten years later, the number of Hispanic firms was about 24,000, a 156 percent increase, and sales revenue and value of shipments had doubled to $2.9 billion.
Nearly half of the Latino firms tallied in 2012 were headed by women, which represented a 188 percent increase in ten years. Latina leadership has shown up in projects as varied as a commercial bakery, health care services, media marketing and website development.
As for the current overall size of the state’s Latino business community, numbers are more elusive. The Connecticut Secretary of the State’s office, which handles the licensing of new businesses, said it could not provide this information because it doesn’t track any demographic information about the principals. Still there is an expectations that when numbers from 2017 are released there will be around 35,000 Latino businesses, according to one SBA executive.
The U.S. Hispanic Chamber of Commerce observed in 2016 that Hispanics have been starting businesses at a pace 15 times the national average over the previous decade and that in 2016 there were more than four million Hispanic-owned businesses throughout the U.S., and their revenues were more than $660 billion.
In addition, the 2019 Bank of America Small Business Spotlight reported that Hispanic small business owners have demonstrated stronger confidence in the economy than their non-Hispanic peers even though they are more concerned with economic issues such as health care costs.
This optimistic outlook has been offset by what economists at Stanford University’s Latino Entrepreneurship Initiative (LEI) describe as a disconnect between the goal of Latino business owners and reality, with their focus being more internal, creating something they can pass down to their children and retaining family control, and less on external marketplace opportunities.
A recent survey by Stanford University found that 67 percent of Latino entrepreneurs were concerned about losing control if they sold shares or brought in non-family partners.
Moreover, Latino businesses still tend to start small and stay small, according to the 2018 survey and report of the Latino Entrepreneurship Initiative, an offshoot of Stanford University’s nationally recognize business school.
A LEI study in 2016 found that only 3 percent of the Latino-owned firms in the United States surpassed a $1 million in annual gross revenue. Also, Hispanic businesses averaged $155,806 in annual sales or about one third of non-Latino businesses and this figure had not risen much from 2002 to 2012.
Even though Connecticut’s Latino entrepreneurial community has provided evidence that they are becoming more attuned to utilization of outside capital, there is significant room for improvement.
For example, SBA’s Hispanic loan recipients comprise just 6.4 percent of the 811 firms aided in 2018 and an even smaller portion of the state’s estimated 24,000 Hispanic-owned businesses.
In addition, the dollar amount of the loans was less than four percent of the more the $254 million dollars of the loans handled through the Connecticut district which has its main office in Hartford and a branch in Bridgeport. Still, this is a marked improvement from a decade ago when they received three percent of the loans and 2.9 percent of the dollars.
The Hispanic-owned businesses that the U.S. Small Business Administration has helped in recent years include landscapers, plumbers and food-oriented companies but also health care services, an iron foundry in Bridgeport and a softball complex in Windsor. This trend toward greater diversity, according to Clodomiro Falcone, a Trumbull-based business consultant, has become particularly strong.
The Latino Entrepreneurship Initiative reported recently that newer Latino enterprises are more likely to be concentrated in industries with the highest growth rate such as professional and business services, finance, education and health oriented fields.
An example of this trend is The Latino Way, a Hartford-based Hispanic-oriented marketing and media agency, that was launched in 2012 by Carlos Macias, a Peruvian, and Maria Lino, who is from Colombia.
Lino and Macias initially started with some advertising and marketing clients drawn from their background with Spanish-language media, and through reputation and referrals have steadily attracted a wide array of customers such as the Hartford Yard Goats minor league baseball team who want to tap the huge potential of the the Latino marketplace
“We created a network by good work client by client, Lino said, and today The Latino Way became an “ambassador” to the Latino market.
With this growth, Lino said, has become increased responsibilities, new projects and adding more staff, Lino said. The company currently has seven employees.
One of the areas that have become a major focus for The Latino Way is meeting an increased client demand for a greater presence in the digital world and to reach the Hispanic market online. Lino said, adding that clients want integrated content.” Lino said, and “we have needed to create new platforms for them.”
The Latino Way recently launched CT en Vivo, a Spanish-language news and media website that several times a day goes live on social media such as Facebook to report breaking news or to present topical features from various sites in Connecticut.
Another change that is reshaping and driving the Latino business sector relates to the retirement of people, often immigrants, who launched and sustained, for example, construction companies and ethnic restaurants. However, their children are not interested in these business. In this way, Hispanic millennials are very much like others of their generation, the Stanford study found.
Meanwhile, many Latinos are becoming involved in online business ventures and other enterprises linked to social media.
In Connecticut, an example of this trend is Eva Perello, a bilingual Venezuelan and former engineer who eleven years ago founded TheEvaSite, a full-service digital agency based in Stamford that specializes in “beautiful and easy-to-use” digital design and Web development service.
“The growth of the technology (specially on smart mobile devices) has changed the game in all type of businesses about how to market,” Perello said. “Likewise the social platforms are definitely a preference among millennials users, so it has become imperative to market there too.”
Although Perello moved to Oregon two years ago, she maintains a strong presence in Connecticut and serves as the marketing director of the Norwalk Hispanic Chamber and the manager and designer of that organization’s website.
Falcone, an immigrant from Venezuela, said that many businesses who were clients 20 years ago when he also operated the Hispanic Yellow Pages and as well as those he has helped through his involvement with the Spanish American Merchants Association (SAMA), have been successful and are growing.
Many of the startups with whom Falcone works are lead by Hispanic migrants. These people are hardworking, Falcone said, but need to learn how to manage a business in this country.
In Latin America starting a business is less formal, he said, “The government usually does not pay much attention. Here, these Latino business owners need to be aware of licensing with the Connecticut Secretary of the State, and about taxes regulations.
“Organizations like SAMA help them overcome those weaknesses,” Falcone said, as does his consulting firm. “When I am teaching, my clients call me ‘professor,’” he added.
The Latino Entrepreneurship Initiative found that 22 percent of Hispanic business people were unaware of the SBA. In addition, less than half knew about the privately owned small business investment companies (SBIC) licensed by the SBA and the Small Business Innovation Research (SBIR), a competitive program that encourages domestic small businesses to engage in federal research and development that has the potential for commercialization.
Another barrier is that many Latino entrepreneurs not only rely on personal credit ratings rather than use business credit ratings but often do not know the latter exists, economists said.
Essentially, what needs to happening is that reliance on personal credit and loans from friends and family will have to be supplanted by tapping venture capital, which economists say is almost totally absent now for Latino business startups and expansions, and moving toward a greater awareness and use of government funding programs.
Recognizing and investing in these changes could pay big dividends to the Latino population and to the nation’s future prosperity.
A salient point gleaned from the Stanford LEI research is that in 2012 if all LOBs averaged the same yearly sales per firm as all non-LOBs, $1.38 trillion would have been added to the U.S. economy or about three times what was actually generated, according to the study.
Publisher’s Note: Watch for Hispanic Heritage Month (9/15 – 10/15) special reports focused on community, arts & culture, education, economy, and politics.