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Bolivia: Advancing a Nascent Entrepreneurial Ecosystem

Jonathan Ortmans on September 20, 2010 Source: Policy Dialogue on Entrepreneurship

Jonathan OrtmansLike many developing countries, Bolivia has a nascent, but promising entrepreneurial environment. The country has a good number of institutions that offer financial and technical services that network the country’s millions of micro-entrepreneurs. However, as readers of this blog are well aware, data has confirmed time and again that it is young firms that grow that provide the most benefits to society in terms of job and wealth creation and innovation. Thus, the challenge ahead for Bolivia is to enable more growth entrepreneurs.

The current interest in entrepreneurship, even if focused on micro-entrepreneurs, is good news for at least two reasons. First, international organizations like the World Bank and the Andean Development Corporation have supported programs undertaken by the institutions helping micro-entrepreneurs because entrepreneurship, even at that scale, has proven to be a good way to lift people further from the poverty line. The United Nations estimates that 90% of the three million Bolivian rural inhabitants are living in conditions of poverty and marginalization, and entrepreneurship is a useful tool to palliate this human crisis. Second, as Miguel Hoyos from Red Bolivia Emprendedora (RBE - Bolivian Entrepreneurship Network) which hosts Global Entrepreneurship Week in Bolivia pointed out to me, these institutions could adjust their methodologies as the country’s entrepreneurial environment evolves to support growth entrepreneurs.

In Bolivia, the government would have a big role to play in such a transition. Bolivia is the country in Latin America with one of the largest percentages of informal businesses. Entrepreneur.com reported that informal businesses employ around 80 percent of Bolivia’s working population and the World Bank’s Doing Business Indicators ranks the country 161th among 183 economies in terms of the overall ease of doing business. Clearly, reforms are needed in many areas from registering a business to paying taxes. And, according to the 2010 International Property Rights Index from the Property Rights Alliance, Bolivia has the second-worst property rights climate in Latin America. It ranks similarly in indicators of ease of employing workers and getting credit.

How important these factors are though to seeding new entrepreneurs is a matter of some debate.  For example, some argue that the messy entrepreneurial process flourishes in an informal economy and that it only really matters whether new entrepreneurs find any benefit to formalization once they gain their footing.  Unfortunately, the current government is implementing a model that does not encourage the organic nature of new firm formation and seems to discourage the participation of entrepreneurs in the economy.  The Government has also followed economic policies hostile towards local and foreign private investment. This is important to remember, for while government is not necessary to drive entrepreneurship, it sets the incentives that promote or discourage it.

The good news is that Bolivia’s young view entrepreneurship positively. As the wide participation in Global Entrepreneurship Week Bolivia’s 114 activities last year shows, they are open to explore it as a career path. These young Bolivians understand that they can create a “new” breed of enterprise, different from the micro-businesses that have flourished in Bolivia due to necessity. They envision enterprises that capture opportunities for innovation and that generate more employment, more wealth and improved social conditions for everyone in the process. As Hoyos remarked in an email exchange, government promotion of “inclusive businesses”, that is, businesses with a high social responsibility could be a new pathway that supporters of entrepreneurship could follow to win the full support of the government.  The task for the organizers of these activities is now to develop educational approaches and methodologies, so that these young potential entrepreneurs are equipped to launch successful businesses. I applaud RBE’s efforts in this regard. This organization is working on developing public policy proposals, programs, instruments and any other mechanism that will allow the government to promote entrepreneurship education in the country.

Bolivia has a long way to go to become a startup economy. Yet Bolivians are increasingly more aware of the power of entrepreneurship as a path to do well and to do good. They must engage Bolivia’s political environment as allies for progress, showing its leaders that generating new businesses is a key factor to improving the lives of Bolivians, incentivizing them into the formal economy and to winning the fight against poverty.

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Jonathan Ortmans is president of the Public Forum Institute, a non-partisan organization dedicated to fostering dialogue on important policy issues. In this capacity, he leads the Policy Dialogue on Entrepreneurship, focused on public policies to promote entrepreneurship in the U.S. and around the world. In addition, he serves as a senior fellow at the Kauffman Foundation.

Category:  Global  Growth & Poverty  Tags:  economy, Bolivia

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