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COVER STORY : 'By the Sweat of Their Brow' : Latino Companies Have Increased in the County Over the Past Decade to Make Up One-Third of All Businesses. But Experts Say That Without Loans or Training in Basic Skills, Many Won't Survive.

April 11, 1993|ROBERT J. LOPEZ | TIMES STAFF WRITER

In an old building in South-Central, Trinidad Dumas and his employees piece together fabric in his clothing manufacturing company. And in their way, they also add pieces to the fast-growing fabric of Latino-owned businesses in Los Angeles County.

Dumas has struggled to keep his small company afloat on sheer entrepreneurial instinct, with no formal business training and little help from city government or financial institutions. Unable to qualify for bank loans, he has relied on friends from his native village in Mexico for business loans.

Despite these obstacles, Dumas and tens of thousands of entrepreneurs like him have helped the number of Latino-owned businesses increase more than threefold in the last decade, faster than those of other ethnic groups in Los Angeles County.

As their European counterparts did in Eastern cities at the turn of the century, Latinos throughout the Los Angeles area are quickly establishing a variety of small businesses in their quest for a better life. Indeed, some experts say, as those businesses go, so goes the future of the county's economy.

For now, the future looks cloudy.

Without loans or training in marketing, bookkeeping and other basic business skills, many of these companies will not be able to grow or create jobs, the experts say.

"These small enterprises are the backbone of the business community," said Jon Goodman, a jobs creation expert and head of the USC Business School's entrepreneur program. "(But) without technical skills and access to capital, they're going to fail."

From 1982 to 1992, the number of licensed Latino-owned companies in the county grew from 29,900 to an estimated 103,000, or about one-third of the county's businesses. The number of these companies grew at three times the rate of the county's Latino population, according to a recent analysis of 1990 U.S. Census data by the Latino Futures Research Group, a Los Angeles think tank that studies Latino policy issues nationwide.

In contrast, the number of Asian-owned businesses swelled from 38,300 to about 117,900 during the same period, while Anglo companies increased from about 68,000 to an estimated 72,000. Black-owned businesses increased slightly, from 23,500 to about 23,900, according to the analysis.

"People don't realize how entrepreneurial the Hispanic community is," said Jack Kyser, chief economist for the Economic Development Corp. of Los Angeles. "They create businesses literally by the sweat of their brow."

However, an overwhelming majority of those businesses are small and struggling. In 1987, the most recent year for which figures are available, 84% of Latino businesses had no paid workers, with most relying on family members for help, according to the data from the Latino think tank.

Those with paid staff employed an average of just 3.5 people, down from 5.7 five years earlier. They accounted for only $6.6 billion in county revenues last year, or just 3% of the county's $220-billion gross product. These figures reflect only licensed business. Unlicensed companies run by owners of any ethnicity are estimated to account for an additional $10 billion to $15 billion in revenues annually in Los Angeles County.

For every two licensed Latino-owned firms, there is at least one operating without a license, according to UCLA Prof. David Hayes-Bautista, head of the Latino Futures Research Group and a leading expert on Latino demographics. That estimate was made from observations by research teams.

Hayes-Bautista's findings were published in a recent report by the nonprofit Latino Coalition for a New Los Angeles. Members of the coalition, made up of more than 30 business and social service organizations, believe Latino businesses are a key to the region's economic development.

But skeptics question whether small Latino businesses can create sufficient job growth. Given the sweeping poverty in the Latino community, they say, larger companies that pay higher wages and provide greater benefits could prove more attractive to job-seekers. In Central Los Angeles, the annual per-capita income of Latinos was about $4,400, compared to the citywide average of $22,191 for Anglos, the 1990 Census showed. The citywide figure for blacks was $11,257 and $13,875 for Asians.

"I think if you look to these small businesses to solve the economic problem, you're not going to get anywhere because they do not have that great of a potential," said Mary Salinas Duron, a vice president and manager of community reinvestment at First Interstate Bank.

Others question whether many Latino-owned businesses can survive long enough to create jobs. In 1992, the number of businesses that failed in the city of Los Angeles increased by 73% over the previous year, according to data by Dun & Bradstreet Corp., a business information company. Experts said the decline in business failures should moderate by year's end.

Still, with the odds seemingly stacked against them, Latino entrepreneurs are determined to succeed.

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