An Economic Power On The Rise
By Bernardo Altamirano Rodriguez and Luis Melgar
A growing number of Latino business leaders and consumers are driving marketplace changes.
As the fastest-growing sector of sellers and consumers in the United States, Latinos are leading a new era of entrepreneurship and consumerism.
To better understand what that means for the marketplace, though, you must understand the complex history that has shaped many Latino cultures and the factors that are driving changes today. Latinos are a crossroad of cultures. Both Spanish colonization and the ancestral civilizations in the Americas have had a structural impact on our economic vision.
On one hand, Spanish commerce was bureaucratized and based on extraction and monopolies. On the other, civilizations such as the Mayans, Incas, and Aztecs were impressive merchants. At the height of the Aztec Empire, the cities of Tlatelolco and Tenochtitlan (present-day Mexico City) were among the largest marketplaces on earth. Due to their high consumption levels, they fostered channels of production and distribution of both local and foreign goods. This open market environment helped commerce and trade flourish and allowed important dispute resolution and enforcement mechanisms to develop.
This history explains why Latinos have an inherited tendency to trade and an entrepreneurial spirit. Both aspects are boosted nowadays by two engines: economic liberalization and migration. Economic liberalization in many Latin American countries is opening new horizons for their markets. Mexico is one of the best examples. Over the past four decades, Mexican businesses and consumers have experienced a transformation thanks to more than 40 trade agreements. This transformation has pushed industries to compete, make technological advances, embrace innovation, and connect with the largest markets in the world.
Trade with the U.S. has influenced Mexican businesses to develop better communication tools and to build trust with a commercial environment that responds to another language and set of regulations. The free trade movement has allowed Mexican businesses to become more productive, build better commercial practices, and become attractive to highly demanding consumers.
Today, according to the World Bank’s most recent gross domestic product (GDP) data, Mexico is the second-largest economy in Latin America and the 15th in the world (2017). Many Mexican companies are among the most important global corporations.
Like economic liberalization, Latino migration has also had a profound economic and social impact. In the U.S., for example, Mexican migration has had an evolving and transformative impact since World War II. At the beginning of this process, migrants connected to highly intensive labor markets, including agriculture and service industries such as hospitality. Gradually, their descendants, through education and training, began participating in many other professions and advancing in their business ambitions.
Today, Mexicans are part of a strong and relevant Latino community. In 2016, Hispanics represented 18 percent of the total U.S. population (Flores, 2017). Nearly 75 percent of U.S.-born Latinos were millennials or younger in 2016 (Patten, 2016), which suggests that their economic and social impact will continue to play an ever-growing part in the U.S. and global markets.
Latinos are the fastest-growing ethnic group in the U.S., and with our incomes also rising, we wield significant buying power (Eisenach, 2016). “Data from the Bureau of Labor Statistics show that Hispanics make up a growing proportion of total U.S. consumer spending, and Hispanic spending is increasing at a faster rate than other ethnic groups and the U.S. as a whole” (Eisenach, 2016).
Business ownership among Latinos also is growing rapidly. From 2012 to 2017, the number of Hispanic-owned businesses in the U.S. grew by 31.6 percent — more than double the 13.8 percent growth rate of all U.S. businesses (Geoscape, 2017). In 2017, Hispanics owned and led 4.37 million U.S. businesses that generated more than $700 billion in revenue (Geoscape, 2017). The economic power of U.S. Latinos can be better understood by comparing it to other economies: If U.S. Latinos had our own economy, we would have the seventh-largest GDP in the world (Latino Donor Collaborative, 2017).
All this data shows that Latino entrepreneurs adapt and thrive in functional channels of commerce and trade, where we all can compete and contribute to the development and progress of our communities. Like the Aztecs, today’s Latino business leaders know that relationships and trust are critical to succeeding in the marketplace.
On the consumer side, Latinos’ purchasing power implies that we are becoming leaders in the marketplace, and hence, businesses will have to better understand our values and preferences. As the Latino market continues to grow and increase its buying power, corporations must focus their efforts on multicultural outreach, branding, and organizing to avoid losing market shares and to remain current and relevant.
Better Business Bureau has two major challenges and opportunities: help strengthen the Latino businesses and consumers in the U.S. with our vision and mission and connect with the growing economy, companies, and consumers of Mexico.
Eisenach, J. (2016, December). Making America rich again: The Latino effect on economic growth. Retrieved from NERA Economic Consulting website: http://www.nera.com/content/dam/nera/publications/2016/PUB_LDC_Prosperity_1216.pdf
Flores, A. (2017, September 18). How the U.S. Hispanic population is changing. Retrieved from Pew Research Center website: http://www.pewresearch.org/fact-tank/2017/09/18/how- the-u-s-hispanic-population-is-changing
Geoscape. (2017). Hispanic businesses & entrepreneurs drive growth in the new economy. Retrieved from http://geoscape.com/wp-content/uploads/2017/09/HBR-Final- Report_2017.pdf
Latino Donor Collaborative. (2017, June). Latino gross domestic product (GDP) report. Retrieved from http://latinodonorcollaborative.org/latino-gdp-report
Patten, E. (2016, April 20). The nation’s Latino population is defined by its youth. Retrieved from Pew Research Center Hispanic Trends website: http://www.pewhispanic.org/2016/04/20/the-nations-latino-population-is-defined-by-its-youth
World Bank. (December 15 2017). Gross domestic product 2016. Retrieved from https://databank.worldbank.org/data/download/GDP.pdf
Bernardo Altamirano Rodríguez is the Co-founder and CEO of BBB Mexico. Previously, Altamirano Rodríguez was the Federal Attorney for Consumer Protection in Mexico. He is also a speaker in domestic and international fora and lectures at the ITAM Law Department. He is an Eisenhower Fellow (2016).
Luis Melgar is the Strategic Marketing Specialist at Council of Better Business Bureaus, where he focuses on brand development,
recognition, and expansion. He has over 10 years of experience in operations, business development, marketing, management, and business strategy within the environmental, nonprofit, and corporate sectors.
Images Contribution Richard I’Anson, Murals by Diego Rivera in the National Palace in New Mexico City. Getty.