November 8, 2010 | Des Moines Register | Original Article

Boldness, discipline get Hispanics' firms rolling in Iowa

The number of Hispanic-owned businesses in Iowa grew 60 percent before the recession hit, the 19th-fastest growth rate in the nation, new census data show.

"Anything that shows us in the top half in business growth is good, especially given Iowa's lackluster entrepreneurial growth," said Liesl Eathington, an economist at Iowa State University.

Hispanic businesses are growing despite lacking the capital and connections entrepreneurs need, Eathington and others say. Iowa's growth in Hispanic businesses outpaced:

- The 44 percent spike in the number of Latino businesses nationally from 2002 to 2007, census data show.

- The 10 percent growth seen in the number of all Iowa businesses over those five years. All U.S. businesses grew 18 percent, the data show.

Statewide, Iowa had 260,199 businesses, both with and without paid employees.

Despite the increase, Hispanic-owned businesses in Iowa remain less than 1 percent of the state's total. Only 10 other states nationally have fewer Hispanic-owned businesses than Iowa, data show.

Eathington said that's disappointing, since Hispanics make up about 4.5 percent of Iowa's population. It's also the fastest-growing segment of Iowa's population, climbing nearly 63 percent to 134,402 from 2000 to 2009. Iowa's overall population is about 3 million.

Census data don't identify the counties where the largest groupings of Hispanic businesses are, but Iowa's largest concentration of Latinos is in Polk County, with nearly 30,000 people, followed by Woodbury County, with nearly 13,000 residents.

The highest percentage population of Hispanic residents is in Buena Vista County, which includes Storm Lake, and Crawford County, home to Denison. Both counties have Latino populations of around 22 percent.

One reason Hispanic businesses are a small part of all Iowa businesses, Eathington said, is because Iowa's Hispanic population is young, with a median age of 23, and young workers often lack the connections needed to begin businesses.

"Entrepreneurial activity occurs when you have more of a support system," such as bank backing, mentoring and other services, said Eathington. "It takes time."

Warren Morrow, a Hispanic business owner, said Latinos often tap savings or borrow money from friends and families to open businesses, lacking relationships with traditional banks.

"We're starting businesses, but it's mostly through accumulated savings. That takes a lot of discipline," said Morrow, whose Coopera Consulting in Des Moines works with credit unions to develop services for Hispanic markets.

Hispanic businesses had receipts of $457 million in 2007, a 58 percent increase over 2002. Iowa business receipts climbed 34 percent to $313 billion over those five years, data show.

Betty Garcia, whose family owns Tortilleria Sonora, a Des Moines tortilla factory, said the company is weighing whether it should add equipment so it can expand its products and markets. The decision is difficult, especially during the recovery from the recession that hit Iowa in the fall of 2008. The national recession began in December 2007.

"We're fortunate. We're above water. But we know of tortilla makers who have closed their doors," said Garcia, who runs the business with her parents, Esther and Oswaldo Barcelo. Her parents started the business a dozen years ago in a storefront before opening their factory in north Des Moines.

"To acquire new accounts and grow in a recession is challenging," said Garcia, whose parents asked her to run the business after her former employer, Nationwide Insurance, dissolved the unit where she worked.

The company sells its tortillas to local restaurants and in Hy-Vee, Fareway, Dahl's and Mexican grocery stores. Garcia is working to get Sonora's products included in large food service lines.

"I wear a lot of hats. I'm sales, the janitor, office, and on the line when someone is missing. And I'm trying to grow the business as well," said Garcia. The company produces tortillas as needed to fill orders, typically about every other week. "I'm not going to lie. There are some nights I don't sleep."

Himar Hernandez, an ISU Extension community and economic development specialist, said Latino communities can be leery of chamber and economic development agencies.

"Where they're from, they don't confide in government," said Hernandez. "Government isn't there to help you. It's often there to take advantage of you."

Mainstream groups may not take the time needed to build the trust that drives Hispanic business connections.

"If they don't know who you are, who your kids are, they won't do business with you," said Hernandez.

Eathington and Morrow said Hispanics are inclined to start businesses, having already shown an entrepreneurial spirit by migrating to a new country. "Many have risked everything already to move to a new country, so they're willing to overcome a lot" to reach their goals, said Morrow. "It creates a thick skin when it comes to starting a business."

Morrow said Hispanic families often migrate to Iowa from "gateway cities" like Los Angeles, New York and Phoenix because they want better schools, safer neighborhoods and good jobs. Hernandez said many immigrants like Iowa because they also come from rural communities.

Garcia said her mother visited an aunt in Iowa when she was young. "She fell in love with the place and didn't want to go back" to Mexico, said Garcia, who grew up mostly in Iowa.

Morrow said Hispanic business owners typically identify services lacking in their communities and seek to fulfill those first - such as restaurants, grocery and retail shops, construction and health care. Service businesses also can carry a lower entry cost than manufacturing, he said.

Hernandez said the number of Hispanic businesses in Iowa may be small, but they can have a big impact. He said Hispanic business owners are helping revitalize rural downtowns that have been dying in recent decades with the arrival of malls and big-box stores.

"Many of these buildings have been empty for years," he said. "It's a domino effect. One person decides to take a risk and open a business, and shoppers start coming downtown. Pretty soon, you have clothing stores, bakeries, grocery stores - businesses people haven't seen in many years.

"It's a small but good trend," he said.