Volume 11, Number 1 – February 2014

Innovation & Entrepreneurship with a Latin Flavor

For the past six months or so, I’ve been engaged in a couple of projects examining innovation and entrepreneurship policies in Latin America.  This is a relatively new region of study for me, so I’ve been on quite an intensive research tour.  I’ve been impressed with what I’ve found—the majority of national, and many regional, governments are actively embracing new development strategies with a heavy emphasis on technology, creativity, innovation, and entrepreneurship.  Below, I share some of my impressions about these exciting developments.
While it’s difficult to generalize across Central and South America, it is safe to say that most national governments are seeking to support more innovation-friendly development strategies.  Some national governments, such as Bolivia, Nicaragua, Venezuela, are more pro-statist than pro-business.  But, even in some of these cases, interesting innovations are happening at the region or city level.  For example, Argentina’s national government operates with a fairly limited set of tools to support entrepreneurs and innovators, but the City of Buenos Aires has been quite active with a variety of programs to support high growth companies and recently released its own citywide entrepreneurship Master Plan.  Meanwhile, the region’s largest economies, such as Brazil, Chile, and Colombia are aggressively embracing new development strategies.

Here’s my take on some of the big picture trends underway:

Embracing Start-Ups

Start-Up Chile gets a lot of public attention here, with its offer of a temporary visa and funding to any start-up that relocates to Chile.  But, Chile is not alone in embracing start-ups.   As a recent OECD report, Start-Up Latin America, notes, Brazil, Colombia, Mexico, and Peru, have also introduced new start-up support efforts. 

These efforts are much needed, as Latin American start-ups face a tough road.   Access to capital is highly constrained, as new firms have limited access to loans or equity investments.  To give one example, anywhere from 15-30% of all US start-up capital comes from bank loans.   The average share in Brazil is 7%, and near zero in both Mexico and Chile.  Administrative and regulatory burdens are also higher, with most Latin American economies ranking below OECD averages on the annual Doing Business assessments from the World Bank.

Business Accelerators

Local leaders and entrepreneurs recognize that they must nurture start-ups and create fast-growing ventures as well.  So, like in many other regions of the world, business accelerator programs are hot in Latin America.  These programs differ slightly from their counterparts, such as TechStars and Y Combinator, in the US.  They are more likely to have government funding and other support; they tend to serve a more diverse mix of companies from different sectors and different stages of growth, and they tend to have a heavy emphasis on building stronger regional innovation ecosystems.   They embrace a dual mission:  nurture a small group of world class ventures, but seed other activities along the way.

Colombia’s Apps.co program, which focuses on information and communications technology (ICT) startups, is an interesting example.   Apps.co concludes with a business development and acceleration program that looks similar to programs in the US and elsewhere.  But, it begins with a massive effort to build a strong ICT innovation ecosystem and to spawn hundreds, if not thousands, of new ICT programmers, technicians, and entrepreneurs.   In its first year of activity, Apps.co provided workshops, boot camps, and training to 35,000 people.  Of this group, 1,500 people received formal Microsoft programming certifications, and 6,000 completed other graduation requirements.   More than 1500 business ideas were vetted via these activities, leading to further development on more than 500 projects.   This in turn produced 196 businesses, and, of this group, 26 firms were formally “enrolled” in the formal Apps.co business acceleration program.  As these numbers suggest, Colombia and its neighbors are seeking to develop on a massive scale.  While they want to help groom high quality global businesses, they also want to seed ideas, fuel new business concepts, and create more ICT talent at home.

Regional Development Strategies

A number of regions have also embraced innovation and entrepreneurship as core parts of their region-wide development strategies.  Mexico’s Jalisco state is a good case in point.   The region, centered on the city of Guadalajara, had long been a center for manufacturing, and is home to the foreign operations of many major multinationals.  In late 1990s and early 2000s, like many parts of the US, Jalisco was hard hit by the forces of globalization, and began to lose many jobs to overseas competitors. 

Regional leaders responded by embracing MexicoFirst, a national partnership of business leaders, universities, and government agencies focused on training local workers in ICT skills, innovation, and other key competencies.  Jalisco has developed regional expertise in key sectors such as microelectronic design, multimedia, and embedded systems.  Local firms also support ICT developments in logistics, which ties into Jalisco’s still strong manufacturing clusters.  With its strong base of both talent and company connections, Jalisco is now considered one of Mexico’s leading centers of innovation.

Smart Cities and Beyond

Latin America might be considered ground zero for the Smart Cities movement.   Numerous communities across the region have developed global recognition for the effective use of ICT to better manage cities and to provide needed services to local residents.  In fact, Medellin, Colombia, was selected as the 2013 Citi/Wall Street Journal/Urban Land Institute’s  “Most Innovative City of the Year.”  This award recognizes good urban planning, smart, environmental policies, and effective innovation policies, such as Medellin’s Ruta N business accelerator.

When it comes to being smart, Rio de Janeiro is not to be outdone and can boast its own award as the World Smart Cities Award’s “2013 Best Smart City.”  Rio has been among the most aggressive adopters of the smart city concept.  Rio is probably best known for its central command operations center which receives data from sensors around the city and is used to deal with a mix of issues including crime control and emergency response.  The center is likely to receive some tough tests at this summer’s World Cup and the upcoming Summer Olympics.

Ensuring Access 

While Latin American governments are pushing state of the art approaches to innovation, they are also seeking to combat poverty and promote economic development for their poorest citizens.  Most of these countries still face persistent digital divides, and continued investment in access programs are needed.   The old concept of “One Laptop per Child” is now evolving to mean “One Tablet per Child” or even “One Smartphone per Child.”  Argentina, Brazil, Colombia, Peru and Uruguay have all made massive investments to ensure that students have access to new technologies. 

Uruguay’s Plan CEIBAL has received perhaps the most attention outside of the region.  The project has been highly successful, as nearly every Uruguayan student, teacher, and school now has access to ICT.  Some important economic development ripple effects, such as the emergence of a strong local electronic game design sector, have also occurred.  The next phase of Plan CEIBAL is moving beyond access, and other national initiatives are pursuing a similar shift in direction.  It is no longer sufficient to provide access to ICT.  This access must be accompanied by other supports, such as training in programming and Spanish/English proficiency, to help ensure that youth can use their ICT skills to pursue attractive careers or business opportunities. 

This is just a brief personal take on exciting new developments.   If you’re interested in tracking future trends, the OECD’s Development Center, the Inter-American Development Bank, the World Bank, and the U.N.’s Economic Commission for Latin America and the Caribbean are regularly publishing updates on new economic trends in the region.

What’s New at EntreWorks Consulting?

We have added one new document to the EntreWorks library page.  The report below is a mini-guide version of a similar report we posted to the Library last year.

 Business Transitions:  A Local Officials Guide to Defense Industry Adjustment, OEA Quick Guide — Prepared for the U.S. Department of Defense, Office of Economic Adjustment, 2013. 

Erik Pages of EntreWorks will be hitting the road again this spring.  He will be teaching the International Economic Development Council’s (IEDC) Small Business and Entrepreneurship course in Madison, WI, on May 8, and will also be participating in the Global Entrepreneurship Congress in Moscow in March.  EntreWorks Consulting has also kicked off new consulting engagements in early 2014 in Vermont, and on behalf of the Pew Trusts and the OECD.

We continue to provide more regular news and updates at the EntreWorks blog at http://entreworks.net/blog.  Recent postings have discussed the prospects for reshoring of manufacturing, small business credit programs, and state of economic security in America. You can also access blog updates at our Facebook page.