Small Business Hurdles in Ecuador

As suggested in earlier issues of this journal, small business is especially important in developing countries, where large manufacturing or service organizations seldom produce a significant portion of the GNP. For these nations, an efficient small business sector is very important. This situation holds true for many Latin American nations-including Ecuador, a country of nine million people. Eleven percent of the work force in Ecuador is reported to be engaged in commerce," with an additional 47 percent engaged in agriculture, forestry, and fishing. (Many of the Indians fall within this 47 percent.) Overall, the economy is underdeveloped. Still, the weekly market days in many towns play a significant role in local commerce, and opportunities for small business improvements abound. Under the sponsorship of the Kentucky-Ecuador section of Partners of the Americas, a non-profit organization, the author and the director of the Western Kentucky University Small Business Institute consulted with small businesses in Quito-the capital, the second largest population center, and the commercial hub of Ecuador's interior. In making specific recommendations, we were somewhat handicapped by lack of close familiarity with the state of the economy, laws and regulations, customs, and specifics about individual firms. Nevertheless, the businesses studied had some obvious weaknesses for which we were able to recommend remedies. The businesses with which we consulted may be described fairly as a convenience sample. Their owner/ managers, all members of a "small industries chamber," welcome outsiders and willingly provide them with information. They recognized that they had some difficulties and were willing to listen to suggestions. It is likely that these owner/managers were relatively progressive and therefore probably had fewer problems than many of their small business colleagues. Problems of Small Business in Ecuador Outlined below are several problems faced by small business owner/managers in Ecuador. 1. Ecuador lacks a large number of educated and trained personnel. An attache at the U.S. embassy reported the existence of a "top cadre" of trained personnel comprising, perhaps, twelve thousand college graduates. Few below this core group are particularly well-trained or educated. There appears to be a need for trained technicians in all areas, from machinery repair to computer operations. Ecuador's status thus sharply contrasts with that of India, another developing country which has more college graduates than it can effectively use under existing circumstances. Ecuador suffers from a shortage of managerial talent which cannot be corrected without spending large sums for training and education-sums the country does not have at present. Even if the necessary money becomes available, it will require years for the newly educated to gain the experience required for effective management. 2. Many small business owners have apparently reached the conclusion that non-family members cannot be trusted. This attitude, justified or not, considerably decreases the pool of potential managers. A few management recruiting firms are available to help locate managers, but their record is spotty, so this resource, so useful in the United States, is often viewed with skepticism. 3. Another complaint applied to both managerial and non-managerial employees is that employees cannot be relied upon to follow directions. Clear explanations about how quality depends on exacting production standards often go unheeded. This problem may stem from a culture which does not value quality. In a relatively poor country, unused to high standards, mediocre products are acceptable among a high percentage of the population. A wealthy nation accustomed to high quality would not even consider production by guesswork-through a lifetime of acculturation, employees know that rigid standards must be applied. …