Latino immigrants open fewer small businesses than other groups. Here's how we can close the gap.
If there’s any issue in the immigration debate on which there is a broad consensus, it is that everyone wins when immigrants come to the United States and start new businesses. Successful entrepreneurialism cuts through all the convoluted debates over whether immigrants are taking jobs that might otherwise be done by Americans. Come to America, build a business, hire employees, and everyone is happy.
In the new Renewing America Working Paper, “Latino Immigrant Entrepreneurs: How to Capitalize on Their Economic Potential,” Alexandra Starr – a journalist and Emerson Fellow at the New America Foundation — looks at how Latino entrepreneurs are building big businesses that are capturing export opportunities in Latin America and smaller businesses that are serving the growing Latino consumer market in the United States.
The paper is an important addition to a literature that has been dominated by research on Asian immigrant entrepreneurs, led by the excellent work of AnnaLee Saxenian and Vivek Wadhwa documenting the contributions of the immigrants in Silicon Valley.
It is true that, in percentage terms, Latino immigrants to the United States generally own fewer businesses than Asian immigrants. Measured broadly, for example, just 6.5 percent of Mexican immigrants own businesses, compared with roughly 10 percent of Indians and Chinese and over 22 percent of Koreans (though immigrants from some Latin American countries, like Cuba and Colombia, have business ownership rates of more than 10 percent).
But the potential for growth in business start-ups and ownership among Latino immigrants is huge, and the benefits to the United States would be enormous. Immigrants from Latin America account for just over 53 percent of the total U.S. immigrant population, and nearly half of new legal permanent residents each year come from the region. The Latino population is by far the fastest growing ethnic group in the United States, with a population expected to top 125 million by 2050. And many economies in Latin America are booming, creating new and lucrative export markets right next to the United States.
Starr documents how Latino immigrant entrepreneurs in the United States are taking advantage of these trends. Brightstar, the Miami-based cell phone distributor launched by Bolivian-born Marcelo Claure, has become dominant in several South American markets. ITS Infocom, a brain child of Peruvian-born Andres Ruzo, provides IT and customer service support for U.S. multinationals operating across Latin America. Closer to home, Mexican-Japanese entrepreneur Alfonso Tomita has built a chain of sushi restaurants across Texas, while Jesus Sebastian moved from his avocado plantation in Mexico to San Antonio to launch the Ole Avocado brand of packaged guacamole products.
Starr’s policy recommendations are a case study of what economist Tyler Cowen has called "the low hanging fruit." There are fairly small changes that could produce big payoffs in making it easier for Latino immigrant entrepreneurs to establish and expand businesses in the United States. Among the suggestions:
- Visa reform. The U.S. visa system – at least for those without family connections – is set up with an eye towards employees, not entrepreneurs. That should change. Foreign students should be encouraged to stay and try their hand at starting businesses; threshold requirements for the investor visa should be lowered; and immigrants who start and run successful businesses should be able to petition for permanent residency.
- Open financing doors. Too many immigrant entrepreneurs are unable to access bank financing, and governments at the federal, state, and local levels should do more to encourage the availability and awareness of non-traditional financing, particularly for small, start-up businesses.
- Re-engage on trade with Latin America. The U.S. Latino immigrant population offers a big advantage for the United States in opening up market opportunities in Latin America. Yet the region has largely fallen off the U.S. radar in terms of trade expansion. Small-scale initiatives like the State Department’s International Diaspora Engagement Alliance (IDEA) for Latin America are encouraging, but a broader initiative to engage U.S. business with the region is needed.
Entrepreneurial immigrants have long been one of the great economic advantages enjoyed by the United States. And it is an advantage that has only begun to be tapped.
This post originally appeared on the Council on Foreign Relations Renewing America blog.