1. Archive

Latino businesses booming in Los Angeles

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 past two decades, the number of Latino-owned businesses in the Los Angeles area has grown three times faster than the Latino population itself, according to Census data.

A generation ago, many Latinos, as well as blacks, saw public sector employment as the most reliable and rapid route to the middle class. By 1990, 17 percent of middle-class U.S.-born Latinos and 28 percent of blacks 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 percent 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-management positions also are 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 are 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 Los Angeles 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 the 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 University of Southern California 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 California 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 businesses. According to Carl Ballton of Union Bank of California, competition for the Latino lending market is becoming increasingly fierce.

Although fewer in number, Miami's Latino-owned businesses far exceed those in Los Angeles in total receipts. Miami remains the home of the big-ticket Latino media firms. Still, Miami's Latino businesses started small in the 1960s and matured only after the huge influx of Cubans in the 1970s. The growth rate of Miami's Latino businesses flattened in the 1980s, just when Southern California's began to skyrocket. As the Los Angeles region's Latino business base matures and expands, it should surpass South Florida as the Latino business capital of the United States by the end of the decade.

David E. Hayes-Bautista is director of the Alta California Research Center. Gregory Rodriguez is a fellow at the Pepperdine Public Policy Institute.

Special to the Los Angeles Times