Why Mexico struggles with entrepreneurship
While undertaking my thesis investigation of entrepreneurial activities in Mexico, I discovered something quite odd with figures presented by the OECD — Organization for Economic Cooperation and Development, that I just could not ignore.
Once a year the organization releases a report “Entrepreneurship at a glance” , which contains a comprehensive analysis of the entrepreneurship sector in all OECD countries (here is the list) that draws statistics and information from sources like the World Bank, reports from the World Economic Forum and the IMD World Competitiveness Yearbook.
This publication presents cases where Mexico seems to crush the rest of the world in certain categories. In 2008 Mexico had the highest employer enterprise birth rate in both the manufacturing and the service industry when the employer staffed between 1–4 employees. Emprendedores are not afraid of venturing into uncertain territory and Mexico’s youth population is very active and motivated to succeed no matter the numerous barriers that are in place.
Note that information reported on Mexico is only for 2008. The lack of data suggests something foul.
But Mexico crushes it again, with the most self-employed women in the world which is a key source of employment creation and innovation and for addressing inequalities.
Yet it feels like there is no real progress being made, at least from an outsider’s perspective. The attitude towards entrepreneurship in Mexico is that it is not a very safe career option, if a good one at all. We have many high-profile entrepreneurs like Carlos Slim, but the reality is that he is considered more an outlier; with the popular knowledge that he got handed all of his businesses via shady transactions with the government. If you are an entrepreneur in Mexico, in most cases you are probably counting pennies to achieve modest growth.
In the other side of the same coin of “attitudes and perceptions” towards entrepreneurship, Mexico’s perceived opportunities and capabilities to be an entrepreneur are surpassing those of developed economies like Germany, United Kingdom and Israel.
Mexicans do not fear failure, they see themselves able to tackle on entrepreneurial challenges even possessing the knowledge that high barriers to trade and investment are in place.
The truth is that Mexico is still a land of giants, where big enterprises (250+ employees) have the upper hand regarding policies and facilitation. As you can see in this graph the share of exports by enterprise size is clearly lopsided towards Big Business. Not surprisingly, the US is right next on the list since it is another popular belief that Mexico tends to imitate “successful” business models from its neighbor.
Yet the share of men and women that works on his/her own account is the biggest for any country in the world.
How can we expect entrepreneurs to succeed if the playing field is uneven towards mature corporations?
Well, one of the measures of a prosperous entrepreneurship sector is the relationship between education and innovation, which Mexico does not even register a blip. There was no trace of information where Mexico relates education with entrepreneurship. There are always significant differences in people’s perceptions about the role of education in developing an entrepreneurial attitude and a sense of initiative but it seems to be unimportant in Mexico.
Nevertheless, the data shows that fast-growth economies like India and China agree that education helps them build this attitude and sense of initiative. Only when you dive deep into the literature available and gain a solid database of knowledge, that you start building skills and know-hows to enable you to run a business. It also crafts a vision in society of how an entrepreneur should look like. The outcome of Mexico’s not paying attention to the alarming lack of quality entrepreneurial education is that the likelihood of someone choosing entrepreneurship as a career is very low.
You need the ambition to succeed, to start again from failure and the sense of duty to support family, friends and relatives planning to set up a business.
Another alarming figure shows that Mexico has second highest share of unpaid persons employed in micro-enterprises in the manufacturing sector. Meaning, people are actually working for $0 pesos.The OECD divides this subset of persons employed into working family members and working proprietors. Sometimes there is no other choice than to ask someone; usually a close relative, to do you a favor and cover your shift.
Lastly, the value added by an enterprise in relation to the economy’s total business economy is a miserable last place in Mexico’s case. With 5.79% for businesses with 0–9 employees and dropping to 2.65% in the next category of 10–19 employees, both dead last worldwide. This implies that Mexican entrepreneurs which represent over 20% of the total population are not productive at all. They have far too many cash leaks with legal hurdles and unexpected events which hampers growth and puts any future at a disadvantage. Larger enterprises tend to have higher productivity because they have established infrastructure to jump bureaucratic hurdles more easily and enjoy the benefit of friendlier legal frameworks, without forgetting that a high level of government corruption is always lurking in the background.
In conclusion, this is why Mexico struggles with entrepreneurship.
All sources for this article were found here.
