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11.6.98  
Pushing Hispanic Business Into the Mainstream
A top business leader says big companies aren't doing enough to help

Hispanics are America's fastest-growing ethnic group. But is their economic clout keeping pace? It's George Herrera's job to see that it does. The 41-year-old is the new president of the 500,000-member U.S. Hispanic Chamber of Commerce. Herrera, the former president of a financial-services firm in New York, cites such successes as the diverse industries of the Hispanic Business 500, Hispanic Business magazine's ranking of the top businesses. Their revenues are $17 billion, out of the $200 billion that the Chamber estimates for all Hispanic businesses. But, says Herrera, there is no shortage of challenges -- moving Hispanic entrepreneurs beyond "mom and pop" storefronts and into high-tech industries, combating discrimination, and improving their access to capital, market intelligence, and foreign-trade expertise. Business Week Frontier Online's Dennis Berman spoke to Herrera by telephone. Here is an edited transcript of their conversation:

Q: Where is the growth in Hispanic business coming from?
A: It's not "mom and pop" retail stores anymore. Take a look at the Hispanic Business 500 and the categories they are in. Automotive, construction, finance, manufacturing. Retail has the next to last number of companies in the top 500 businesses. The service industry has the most participation, followed by construction and the wholesale industries. The smallest firm goes from $5 million in revenues up to $980 million. These are very diverse businesses that perform outside of their ethnic community.

Q: There's still a perception, however, that by sheer numbers, Hispanic businesses are mainly small, retail establishments in Hispanic neighborhoods.
A:
Yes, for a majority of Hispanics in the retail business, their market sector is primarily Hispanics. But if you get away from the retail sector and look at the other areas, they are not dependent on the Hispanic market. Look again at the Hispanic Business 500, and only 4.7% of revenues are generated from the retail sector, 23.5% are generated from the service sector, and 16% from the automotive sector.

Q: Do you consider Corporate America a competitor or an ally in your efforts to develop the Hispanic community economically?
A:
I'm spending $348 billion on Corporate America. I need to see $348 billion coming back into the community. We're demonstrating loyalty without asking for anything in return. We need to change that and say the only way we'll stay loyal is...if they're loyal to us.

Q: How exactly can they be more loyal?
A:
Contracting and procurement opportunities. And employment opportunities. My point: Take the Philip Morrises of the world, the Coca-Colas. These are major businesses where we spend a lot of money, but there's not a reciprocal ratio in the amount of dollars they're spending on Hispanic vendors. If they increase procurement dollars, I see that as strengthening Hispanic entrepreneurs, allowing them to employ more people in their community and creating a bigger tax base.

Q: Entrepreneurship has been an historic part of the Hispanic community. Is that trend continuing -- or are promising young people moving into the corporate world?
A:
There are more than 1.3 million Hispanic-owned businesses in the U.S., and it's moving at a very rapid pace. We're seeing the biggest increase in the number of Hispanic, women-owned businesses. They are the leaders in this surge of entrepreneurship. Look at the gains Hispanic businesses made between 1987 and 1993. Sales went up 194%, from $35 billion to $72 billion. And there's more diversity, too. Of those 1.3 million businesses, about 300,000 are service firms and 100,000 are in construction.

Q: What are the barriers for Hispanic companies? Is it historic discrimination, or something else?
A:
There are the standard impediments, mainly access to capital. And it's really access to equity and venture capital as opposed to debt capital. There are lots of resources, however: The Small Business Administration, for one. And we started an initiative with Wells Fargo Bank, which committed to making $1 billion in loans to Hispanic businesses over the next six years. In the first six months, loans totaled $100 million.

There is also the lack of access to the markets, in both public and private sectors. There are impediments to information, learning about contract opportunities and public and private sector opportunities. We're always behind the curve. And we're very far behind in utilization of the Internet and understanding what E-commerce is all about.

Q: Why are Hispanic companies so far behind in technology?
A:
They're behind the curve because the community has a low per-capita income. A new study found that 20% of Hispanic households have computers. As computer costs lower, that will help dramatically. But simply, Hispanic households don't have the money to put a PC in their home. The resources for schools and Hispanic businesses are not the same for non-Hispanics.

Q: Affirmative action has been under attack lately, especially in California. Is that a big setback for Hispanic economic growth?
A:
Yes, it does hurt. It reduces the alternatives we have and provides us with fewer educational opportunities. We need to understand the direct correlation between political empowerment and economic empowerment. Economic empowerment cannot be derived unless we have political clout and elect more Hispanics into office.

Q: How is the global economic crisis, particularly in Latin America, threatening Hispanic businesses? And what's happening to the largest Hispanic-owned businesses?
A:
A lot of these bigger companies are not active in the international arena. They don't derive their revenues from the international marketplace -- 80% to 85% of the Hispanic 500 derive only from the domestic economy. This is not an area Hispanic entrepreneurs have been actively involved in. It's a matter of understanding the market, knowing how, for instance, to use letters of credit and get insurance. As an organization, we're trying to capitalize on the resources of larger Hispanic firms and provide them with information that will be the basis for entry into these global markets. But it's still very foreign to them.

Q: You're the first non-Mexican to lead this group. How well are businesspeople from different backgrounds getting along?
A:
What you're seeing is the third generation -- the third generation who have assimilated into this country, who have now become successful entrepreneurs, who understand the economy of this country, and understand that the time of divisiveness is gone. The only color they're concerned about is the color green.

You would now have a Mexican-American entrepreneur who would have more in common with a Puerto Rican born and raised in New York than he would with a brother down in Mexico. He's been here 20 years, assimilated to the culture here. They do not come to the table with preconceived prejudices within the Hispanic community. Their only concern is economics.

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