The problem of youth entrepreneurship in Latin America
Authors: Uros Popadic and Dr. Laurence Hewick
Youth entrepreneurship is a vehicle for enhancing the employability and social mobility of young people, also allowing for social transformation. Latin America (LA) youth encounter many challenges that hinder their development and access to grow start-ups to mature firms. Reasons include a lack of quality education in practical entrepreneurship, mentorship and a mismatch between formal education and the skills demanded by supply chain managers and banks. Most markets for young entrepreneurs are informal, characterized by low wages, precarious conditions, and a lack of social protection. The absence of decent opportunities and limited prospects for economic growth perpetuate the cycle of poverty, exclusion and thus many must work in the ‘gray market’.
Youth entrepreneurs who start new enterprises are trying to create jobs for themselves and their families. However, lack of experience, mentorship and resources mean that a high percentage of these efforts fail during the first few months of operation. To reduce the failure rate of youth enterprises, the public, and private sectors are increasing their efforts to support young people by providing training, technical assistance, and small financial credits. To support these efforts, the InterAmerican Development Bank has carried out various studies to gain a better understanding of youth entrepreneurship, but more is needed by other private NGO’s.
Successful youth entrepreneurs do not only contribute to a more prosperous society, but to a more peaceful one. Economic opportunities are an important component of a successful ecosystem in society which can prevent the outbreak of violent civic conflict and proactively foster greater justice within the communities, greater overall economic progress, and better stewardship of the natural environment. In short successful young entrepreneurs are key to sustainable development.
The UN 2030 Agenda for Sustainable Development, states that Entrepreneurship, especially by youth, is critical to achieving Sustainable Development Goals related to decent work and economic growth and can also catalyze progress toward the twin goals of prosperity and peace. A generation of young people without the hope of a stable life is a burden for all Latin American countries both in the short and long term.
Attempts to solve the problem
To help alleviate this difficult problem several private organizations, like PAX’s Amazon Basin Academy and Nouveau Economia, are supporting youth entrepreneurship. The openness of a mixed market economy is also vital for youth entrepreneurship as it offers young people an open path into starting a business in a fair environment. In Latin America today, the public’s loss of confidence in authoritarian populists gives free-market democrats a chance to prove that economic and political freedom represent the only path to prosperity. However, government policymakers also must address the barriers to equitable growth, including less corruption and bureaucracy.
Innovation and education are fundamental building blocks of economic empowerment, wealth creation, and social mobility. Latin America has fallen far behind on these two important and interconnected fronts. To address these, educators and policymakers must encourage students to remain in school, increase the quality of practical entrepreneurial education, and foster private-sector economic growth opportunities.
Youth entrepreneurship programs for LA have focused on aspects linked to capacity building, entrepreneurial culture, and financing for young entrepreneurs, including training and apprenticeship schemes as well as mentorship and advisory services. Most of the interventions targeted socio-economically disadvantaged individuals to make the greatest impact and give opportunities to those who need them the most. Empirical assessment showed that most of these programs had a positive impact on the labor market. Further steps that can be taken are to allow easier access to financing and to increase the allowance for risk, to support business mentoring programs and connection to business networks, and to reduce bureaucratic barriers for the creation of new businesses.
Another positive trend is the practice of “nearshoring”, a different take on offshoring, and Latin America has seen a surge in youth entrepreneurship opportunities in the sector of Information and Communication Technology. Major companies from North America have become very interested in using the human resources of young and talented people from L.A. while being cost effective and keeping their business within the same time zones, as the region boasts a pool of experienced youth entrepreneurs who are more than eager for this opportunity.
The best suggested solution is to encourage technical and professional schools to join with private sector organizations, NGOs, the business sector, and government to develop programs to support young entrepreneurs with insights into opportunities, mentorship, and start-up capital to accomplish their goals of building their local economies and lives. And at the same time increase social inclusion and greater stewardship of the natural environment.