The Hot Spot for Latino Businesses--Southern California
Move over Miami. Los Angeles is rapidly becoming the hottest spot in the country for Latinos to do business. Hispanic Business Magazine recently rated the region No. 1 in its top-10 ranking of best cities for new Latino entrepreneurs. In the last two decades, the number of Latino-owned businesses in the L.A. area has grown three times faster than the Latino population itself, according to Census data.
A generation ago, many Latinos, as well as African Americans, saw public- sector employment as the most reliable and rapid route to the middle class. By 1990, 17% of middle-class U.S.-born Latinos and 28% of African Americans worked in the public sector. But the combination of structural changes in the economy, government downsizing and high-scale immigration has lead increasing numbers of Latinos to seek new routes to economic security.
Today, only 7% of the young and growing foreign-born Latino middle class are employed in the public sector. Younger, upwardly mobile U.S.-born Latinos have begun to look more to the private sector for economic opportunity than previous generations. Among Latino college students, fewer are social-science majors and more are studying in business-oriented fields. Many older Latinos in public-sector middle-manage- ment positions are also crossing over into the business world.
Heightened business interest in the region’s critical mass of Latino residents has created a ready-made niche for people who can help companies reach the $70-billion Latino consumer market. Many major companies--notably those in retail, health care, telecommunications, car sales and financial planning--are aggressively seeking a greater share of this market and hiring more and more Latino employees and consultants specializing in it.
Jose Legaspi, president of a marketing and realty-services company, has introduced hundreds of large mainstream businesses to the region’s fastest-growing consumer group. After explaining the differences in acculturation, language and class that can exist between, say, the 200,000 Latino readers of The Times and the 100,000 readers of La Opinion, he asks his clients which portion of the Latino population they’re trying to reach. The foreign-born, Spanish-speaking Latino market has been their first target, but efforts to reach the growing, more English-dominant Latino middle class are increasing. Blockbuster Video, Victoria’s Secret and May Department Stores are among the companies that have already discovered this latter sector.
The huge number of Latinos in the region has made it easier for Latinos themselves, particularly immigrants, to form and succeed in small and medium-size businesses. A recent USC study found that the self-employment rate of Latinos who arrived in the ‘70s had nearly quadrupled in the ‘80s. Immigrant businesses tend to be concentrated in retail, services and construction. Among smaller cities, more Latino companies do business in Santa Ana and South Gate, which have large foreign-born Latino populations, than anywhere else in the region. But Burbank, Glendale, Inglewood, Ontario and Santa Monica are experiencing the greatest rate of growth in Latino businesses. Huntington Beach has nearly as many such businesses as does heavily immigrant Huntington Park. With 47,673 firms, the city of Los Angeles has more Latino businesses than any place in the country, including Miami.
As with many small businesses, Latino-owned firms are often financed by borrowing money from family members, mortgaging homes or leveraging credit cards. Government assistance plays only a minuscule role. Because the number of small-business start-ups is increasing two to three times faster than the economy is growing, and because the bulk of California’s job growth now comes from small companies, more and more banks are looking to lend to these young firms. According to Carl Ballton of Union Bank of California, competition for the Latino lending market is becoming increasingly fierce.
Latino-owned companies are not confined to the Latino market. In Orange County, where a sizable portion of the economy is high technology, the largest Latino-owned companies are computer- and electronics-related. According to Frank Moran, president of the Latin Business Assn., a 700-member national organization based in Los Angeles, the trend among upscale Latino businesses is to search out new markets both in the United States and abroad. Earlier this month, the association hosted an official delegation from Jilin Province in Northern China interested in doing business with Latino firms. Some successful Latino business people feel they’ve gained enough revenue, experience and clout serving the Latino market to expand beyond it. A little over a year ago, Patricia Suarez, a 31-year-old Berkeley graduate, borrowed $1,000 to start her own advertising firm specializing in the Spanish-language market. Today, with a media budget of more than $1 million, she helps Iranian, Korean and Vietnamese small-business owners reach their desired markets.
Overall, Latino-owned businesses in Southern California, big and small, generate about $12 billion in annual revenues and provide about 110,000 jobs. Yet, the effects of all this business activity transcend economics. Linda Griego, president and CEO of RLA, believes that if the historical trend holds true, the children of these new entrepreneurs will drive up Latino education levels. Certainly, the growth of Latino businesses has important implications for public policy. Combating Latino poverty, for example, might best be achieved by encouraging the Latino entrepreneurial base to grow. If each Latino-owned firm in Southern California added just one employee, 168,000 new jobs would be created.
Although fewer in number, Miami’s Latino-owned businesses far exceed L.A.’s in total receipts. Miami remains the home of the big-ticket Latino media firms. Still, Miami’s Latino businesses started small in the 1960s and matured only after the huge influx of Cubans in the 1970s. The growth rate of Miami’s Latino businesses flattened in the 1980s, just when Southern California’s began to skyrocket. As the L.A. region’s Latino business base matures and expands, it should surpass South Florida as the Latino business capital of the United States by the end of the decade.
More important, though, even as many California Latinos, immigrants and U.S.-born alike, felt besieged by negative portrayals of them and their children, more people than ever before were realizing that recognition of Latinos as an integral part of American society would come not as a result of political clout, as so many activists long assumed, but through increased economic power. “It is business,” says Moran, “and not government that is punching holes in the walls for Latinos.”*
