Alexandra Starr is a fellow at the New America Foundation and the author of a recent Council on Foreign Relations report on Latin-American entrepreneurs.
Ray Suarez (RS): Startups, new businesses are at the heart of efforts to revive the American economy and odds are good that if you know someone who owns their own business, they are an immigrant. In fact, over 10% of immigrants in the workforce own a business, a higher rate than the non-immigrant population. But there are significant hurdles, from language to visa policies, that immigrant entrepreneurs face in the United States, even if they manage to gather enough capital to get their idea off the ground. One particular group of immigrant entrepreneurs could gain big, ones from Latin America. Taking advantage of the sizable Hispanic population and geographic proximity, investors and entrepreneurs from Latin America could provide the economic jolt the American economy has been looking for if the U.S. can reform its policies. Here to discuss these issues, Alexandra Starr, who recently published a report for the Council on Foreign Relations about Latin-American entrepreneurs and how the United States can take better advantage of them. She is also a fellow at the New America Foundation. Welcome to the program.
Alexandra Starr (AS): Thanks, Ray. Glad to be here.
RS: Well, let’s start with the basics. How many American entrepreneurs are immigrants and of that proportion, how many of them are Latinos?
AS: As you mentioned, immigrants are more likely as a group to be engaged in entrepreneurship than the native born and if you look at cities where [immigrants] are particularly concentrated, like New York City, slightly under half - I think it’s 47% of small business owners were born abroad - which is kind of a staggering figure. What’s interesting is that within that broad group of immigrants you see a lot of variation. Koreans, about 25% of them own their own business, which is pretty stunning. The rate amongst Indians is 10%. The rate amongst Latinos is less than that. The latest figures I saw were 8.7%, but there is a lot of variation within that. One reason that number is comparatively low is because the rate of entrepreneurship among Mexican Americans lags that of say, immigrants from Colombia or Cuba and Mexican Americans compromise almost half of Latino immigrants in the United States. But as I say in the report, there is a lot of potential there that we could have, that would not only help the Latino community, but help or economy in a broader sense as well.
RS: Building on what foundation? Are there advantages and disadvantages immigrants from Latin America possess that maybe an Indian born or a Korean born entrepreneur might not?
AS: Absolutely and there were two major issues. One is the fact that the [the United States'] Latino population has grown so impressively. [Latino] kids in particular are becoming real consumers of technology. Latino entrepreneurs in particular seem to be well positioned to identify products and also methods of marketing those products to this population that might go over the head of native born U.S. entrepreneurs. So, one example is "Lulu’s Desserts" in Los Angeles. This is a woman probably named Lulu, who started selling gelatin desserts in the 1980s. At first she was selling on consignment in Mexican grocery stores. Now, she is marketing her products in 1,500 Wal-Marts across the country. And why is that? You know the majority of her consumers are Latino immigrants. Now, there is also a broader appeal, it is not just Latinos buying her products, but she was able to identify something that you know, someone who grew up in Nebraska just would not have entered his or her head. So, there is that issue. The other is Latin America is very close to the United States, so when we talk about outsourcing you don’t have to deal with the same kind of travel distances and time differences. An entrepreneur I spoke with in Dallas, Texas - his name is Andres Frutzo - and I think across 13 countries in Latin America. He now has call centers and IT support and it is very smart what he has done. He realizes that in a lot of cases if we call for customer service support, it’s “press 1 for help in Spanish.” Who better to look for workers that can serve that need than in Latin America.
RS: We have already talked about the stunning numbers of people who moved to this country from somewhere else in the world and own their own business. What are the challenges for Latin immigrant entrepreneurs, but also entrepreneurs more broadly, immigrants who want to start a business, what are they up against?
AS: Quite a lot. Small business owners of an immigrant background are significantly more likely to see their businesses fail within 22 months then the native born. It is not easy for anyone to get it off the ground. That said, imagine if you don’t speak English -- it’s even harder for you to acquire loans. You know it was interesting for me: I spoke with the New York Commissioner for Immigration and one of the points she said that came up a lot, even with Korean entrepreneurs, who already have very high rates of business ownership is that they were befuddled by city regulations from anything from recycling, how to hang there sign. A problem is that a lot of them are constantly dealing with fines, which is the last thing you need when you are trying to move your business off of the ground.
RS: Is this a net plus for the United States, both bringing in people from everywhere and then setting them loose to start businesses?
AS: Absolutely. Robert Guest who is the Washington correspondent for the Economist magazine recently published a book. One of the points he makes over and over again is that it is an increasingly competitive global market place, but the United States is so much better positioned to come out ahead, in large part because we have so many people from around the world who can serve as our bridges to developing economies abroad. One of the more interesting people I spoke with is Marcelo Claure who is the CEO of Brightstar. He got his start by doing cell phone distribution in Latin America. One of his first customers was Motorola and within a year, I think he had doubled their market share in Latin America and that just seem like such a good example of someone who had a unique background who could perform a role that not only grew his company, but also served as a bridge for U.S. companies that want to expand their marketing abroad.
RS: Capital is increasingly borderless, but there are still borders, passports, visas, and regulations. Are there are people who had the right stuff, but found it too difficult to navigate the immigration laws or the investment laws or the capital laws?
AS: One of the issues that came up over and over again was the issue of visas. What I found very revealing, Marcelo Claure and virtually every other business person I spoke to with one exception, had become U.S. citizens through marriage. We don’t have an entrepreneur visa in the U.S., so it makes it very difficult for people who don’t have an employer in the position to sponsor them to enter the U.S. and there was one very talented Argentinean I met who had participated in a very prestigious U.S. incubator business program. Those are programs where they get a lot of intensive mentoring to get their business idea off of the ground, so he went through that process and then when he started to try to raise money the question came up of how are you going to stay in the U.S. and he could not provide a good answer. So he ended up moving to Chile and there he has raised several hundred thousand dollars and I think five employees at this point, so obviously someone we would want in the United States. But, because of our messed up visa policies, we lost him.