More Aid for Latino Firms Called Critical

Businesses owned by Latinos are a key component in the recovery of Los Angeles from the lingering effects of both recession and last year’s rioting, but government agencies and financial institutions must do more to aid such businesses, Latino business experts say.

“A good piece of the answer to rebuilding Los Angeles lies in the growth of Latino-owned businesses, and with the right conditions they could create quite a few jobs,” said David Hayes-Bautista, director of UCLA’s Center for the Study of Latino Health.

“It probably is the critical element . . . and yet when people have been speaking about rebuilding Los Angeles, that component has been curiously absent,” he said.

In the 12 months since the riots, entrepreneurship has been touted as a cornerstone in the plans to rejuvenate Los Angeles. Politicians have hailed the formation of small businesses and their expansion as an alternative to government handouts.

Although Latino businesses are not the biggest part of the region’s small-business sector, they are the fastest growing segment of it. “Latino business is concentrated in the small-business category, and there’s no question that that’s going to be the driving force for the recovery,” said Tony M. Salazar, co-chairman of Rebuild L.A. “Job creation is a lot easier if you expand existing businesses than if you’re trying to create new ones.”

But obstacles remain for anyone who wants to start or expand a small business: getting financing, finding insurance, obtaining the management expertise to survive and grow. The failure rate for small businesses is staggeringly high, and the task is even tougher for minorities.

And then there is the region’s economic ill health. Southern California and the state as a whole continue to trail the nation, reporting significantly higher unemployment rates. The area has been hit hard by cuts in the defense budget and by continuing upheaval in several industries, including financial services, real estate and retail.

Because large corporations continue to lay people off, economists have placed great faith in small and mid-size businesses as the job-making engine that will help drive California to economic recovery.

“You have to encourage entrepreneurs” as part of a multilayered effort to stimulate the economy, said Jack Kyser, chief economist for the Economic Development Corp. of Los Angeles County.

“I think people underestimate the entrepreneurial spirit of the Latino community,” Kyser said. “Its rapid growth in terms of numbers and that entrepreneurial spirit--that’s going to be very powerful in the future.”

About 10,000 businesses were damaged or destroyed in the riots. Hayes-Bautista has estimated that one-third to one-half of those looted were owned by Latinos. Many were uninsured or underinsured.

Government assistance was not the balm many thought it would be. Loans from the Federal Emergency Management Agency and the Small Business Administration have been hard to get and slow in coming--when such aid is available, many in the Latino business community complained. In other cases, government help simply did not fit the needs of the business owner, they said.

Spokesmen for the Union of Latino and Affiliated Merchants say few of their 200 members have received aid to help them recover from riot losses.

“We’ve suffered a lot, and the government has hardly done anything for us,” said Juan Zamora, a Salvadoran shoe salesman whose MacArthur Park-area store was sacked in the riots, costing him $85,000 in inventory. “I lost eight years of work in one day.”

Said Margarito Juarez, whose South-Central Los Angeles electronics store and adjoining home went up in flames: “Where is the help that was promised us?”

Despite the difficulties, there is optimism among some Latino business leaders.

“I really believe that we are going to be the first ones to bounce back,” said David Lizarraga, president and chief executive of the East Los Angeles Community Union, a private economic development corporation commonly called TELACU.

Many Latino businesses started with virtually nothing and the riots returned them to that point, Lizarraga said. He is also a member of the Latino Coalition for a New Los Angeles, an advocacy group formed after the riots that has complained that Latino victims have not gotten their share of attention.

“Our community has always been in some sort of depression. We have had to learn to do more with less,” Lizarraga said.

A recent study by Hayes-Bautista, commissioned by the Latino Coalition, estimates that 100,000 Latino-owned firms operate in Los Angeles County. The largest number are in the retail trade, services and construction. In the last decade, Hayes-Bautista concluded, Latinos started businesses at a faster rate than any other group--Anglos, African-Americans or Asian-Americans.

“Inner-city policy has too often focused on the needs of the dysfunctional, ignoring the strengths offered by the majority of inner-city residents who are highly functional, although operating under tremendous obstacles,” the study noted. “Thus, the fact of tremendous growth in Latino businesses will come as a surprise to many who tend to see Latinos in terms of drugs, gangs and crime.”

Many of these businesses are small, with few or no employees. But with what the study characterized as “modest growth,” they could provide up to 37,000 to 68,000 new jobs, it said.

“Granted, they’re not the spiffiest jobs in the world . . . but they are jobs,” Hayes-Bautista said. “They are adding something to the economy.”

Planting the seed of that growth is the tricky part. The Latino Coalition has called for the formation of the Blue-Ribbon Latino Business Council to develop a plan of legislative and private sector action to foster Latino business growth.

Lizarraga said the group would like to see some type of micro-lending program that would provide loans of between $2,000 and $20,000--an area banks have difficulty addressing.

“What they need is money for their inventory. What they need is that head start, that push, and it’s very risky,” Lizarraga said. “In most cases, it’s worth the risk.”

Rebuild L.A., which has been widely criticized for moving too slowly, plans to set up a separate nonprofit corporation to provide equity funding so that small companies can expand, co-chairman Salazar said. Rebuild L.A. also plans other efforts to help start small firms and to provide technical assistance, he said.

Beyond that, successful Latino businesses must reach out to smaller, struggling companies, perhaps by providing management help or joint ventures, Salazar told the audience at a recent awards banquet of the 1,000-member Latin Business Assn. The trade group provides technical help as well as networking and minority contracting opportunities.

“We know the pain and frustration of never having been included in the bountiful feast of democracy,” Salazar said. “We know the feeling of being shut out of business.”

Those hurt by the riots “don’t want a handout. They just want a chance to start their businesses again,” Salazar said.