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The Hot Spot for Latino Businesses--Southern California

July 21, 1996|David E. Hayes-Bautista and Gregory Rodriguez | David E. Hayes-Bautista is executive director of the Alta California Research Center. Gregory Rodriguez is a fellow at the Pepperdine Institute for Public Policy and author of an upcoming study on the Latino middle class. They are associate editors at Pacific News Service

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.

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