Latin American countries, including Ecuador, looking for more entrepreneurs; look to streamline start-up process

Jan 12, 2014

By Gideon Long

For generations, the countries of Latin America have relied on the export of raw materials for their wealth.

From Venezuela’s oil, to copper from Chile, Argentinean soybeans, bananas from Ecuador, Mexican silver, and timber from Brazil — the vast region is blessed with a fabulous array of commodities the world wants and needs.chl entrepeuners

But Latin America has been less good at exporting ideas. When it comes to entrepreneurship and innovation, the region has a poor record.

While the countries of the Organisation of Economic Co-operation and Development (OECD) spend an average of 2.4% of their gross domestic product (GDP) on research and development, in Chile and Mexico – the only two Latin American members of the club – the figure is 0.4%. In other countries of the region it’s even less.

Latin Americans just don’t invent much. The region is home to 8% of the global population and yet, in 2010, just 2.6% of the world’s applications for patent registration were filed from here.

Changing culture
But this is all starting to change.

“Until recently, entrepreneurship in Peru was a question of survival,” says Gary Urteaga, a Peruvian entrepreneur. “People started their own businesses because they couldn’t get a job. They’d sell sandwiches in the streets and wash cars. “But now, for the first time, people are choosing to be entrepreneurs.”

Mr Urteaga is the co-founder of Cinepapaya.com, an online platform that allows people to buy cinema tickets from their smartphones and tablets. “We started about two years ago with the financing of an innovation fund of the government of Peru. We didn’t know what the word ‘start-up’ was two years ago. I didn’t know anything about it.”

And Mr Urteaga is not alone. Across the region, Latin Americans are starting to get to grips with concepts that have been commonplace in Silicon Valley for years.

In Colombia, a medical start-up called Keraderm has won state funding to develop a new technology for skin grafts.

When a patient is brought in to hospital with serious burns or wounds, Keraderm takes a tiny sample of their skin, grows it in a laboratory and within five days produces several sheets of collagen implanted with the patient’s cells. The sheets are used to treat the injury and because they are made from the patient’s own skin, the risk of immunological rejection is low.

“Looking at a country like Colombia, which had several problems in terms of violence and security and all that, we have changed a lot in the past 10 years,” says Jorge Soto, Keraderm’s chief executive. “Now, developed countries are going to have to start looking at us as a source of new ideas and new companies.”

Tough lesson

In Brazil, Danilo Leao learned about entrepreneurship the hard way.

He was brought up on a ranch and at the age of 15 made the mistake of selling pregnant cows at market. His father explained to him that he had effectively sold a cow and a calf for the price of each cow. Mr Leao said he had not known the cows had been pregnant and had realised he and his fellow ranchers had lacked reliable information about their herds. In response, he founded BovControl, a technology start-up that provides ranchers with detailed online data about the 200 million head of cattle on Brazil’s vast plains, and 40 billion animals worldwide.

The idea has generated interest among ranchers, slaughterhouses, commodity traders and retailers, not only in Brazil but in the United States and South Africa.

In Chile, the country’s out-going  billionaire President, Sebastian Pinera, declared 2012 “the year of entrepreneurship” and 2013 “the year of innovation”. His government has overseen the launch of Start-Up Chile, a programme that offers entrepreneurs from around the world $40,000 (£24,000) and a one-year work visa simply to come to Chile to develop their ideas. The idea is that the entrepreneurial spirit will rub off on Chileans.

Vivek Wadhwa, a U.S.-based technology entrepreneur who advised the Chilean government on Start-up Chile, says: “I came here a few years ago to look at the cluster development efforts of the Chilean government, and I told them they were destined to fail. “‘Braindead’ was the word I used.”

“Chile was wasting hundreds of millions of dollars on trying to create top-down industries. I said, ‘What you need is entrepreneurship. Chile needs to think of itself like other small population countries like Norway, Israel and Singapore.”

Start-Up Chile is now in its fourth year and has provided funding for about 1,500 entrepreneurs, both Chilean and foreign. It has inspired similar schemes in Brazil, Peru and elsewhere in the world. “The culture has changed,” says Mr Wadhwa.

In Ecuador, President Rafael Correa, a U.S.-educated economist, is pushing an overhaul of the country’s eduational system with an eye on creating a “generation of entrepreneurs.” The centerpiece of the president’s plan is a massive new university under construction north of Quito, part of what he calls the “City of Knowledge.” The project will include a large research and innovation park that Correa envisions as the “Silicon Valley of South America.”


Removing bureaucracy

The Chilean government has taken other measures to help by, for example, cutting red tape.

In 2010, it took an average of 27 days to set up a business in Chile. The government cut it to seven days and then to three days, following the lead of New Zealand.

Other Latin American countries are following Chile’s lead. Ecuador’s Correa has ordered federal and local government offices to make it easier and faster for businesses to become licensed. In an August news conference he presented a graphic contrasting the time required to open a business in Ecuador with that of Chile and Uruguay. The numbers: 56 days in Ecuador,  three days in Chile and seven in Uruguay.

“This is outrageous and needs to change quickly,” Correa said. “We need to get beyond the bureaucractic mentality and make it easier for new businesses to be established so they can create jobs for our people. We need to pay attention to how other countries are doing this.”

Carlos Honorato, director of ProChile, a state body charged with promoting Chile abroad, says the move to one day has “transformed the number of new companies being created” in the country. Chile recently hosted LAB 4+, a summit of entrepreneurs and government agencies from Chile, Colombia, Mexico and Peru. The four countries vowed to raise their spending on research and development to 1% of GDP by 2015.

However, there are still huge challenges.

Compared with Asia and Africa, relatively few people in Latin America speak English – the de facto language of entrepreneurship.

And many of the region’s governments are under pressure to spend money on primary healthcare and education rather than ploughing it in to schemes to promote technology and innovation.

But the signs are bright.

“Across the region, the culture is changing dramatically,” says Mr Soto.

Credit: BBC News, http://www.bbc.co.uk; Photo caption: Attendees at an entrepreneurship seminar in Santiago, Chile.

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