Job shortages motivate new ventures

Thirty-seven of 150 Ecuadorian businesses closed during the months of the health emergency. The main reasons were the restrictive measures and the drastic decrease in the demand for goods and services in recent months.

Job shortages motivate new ventures

This is one of the results of the Global Entrepernuship Monitor (GEM) 2019 – 2020 released by the Espol Business School (Spain), which in this edition included an analysis of the impact of the pandemic on business, mostly small and medium.

69% of those surveyed indicated having suffered a negative effect from the pandemic, and in relation to it, 23% stated that they had been strongly affected by the crisis, with the risk of their businesses closing.

Likewise, they stated that they had achieved a recovery of their portfolio of 47.89% between March-May 2020, a proportion that decreased 20% compared to the same period in 2019.

Similarly, approximately 30% of the firms indicated that, if they continue with isolation and social distancing, they could survive up to three months.

What happened before the covid-19?
The international report indicates that in 2019, 3.6 million people started in the country, that is, more than one in three adults.

One of the main indicators of the GEM is the Early Entrepreneurial Activity Rate (TEA), which includes all adults who are in the process of starting a business, or have started one that does not exceed the 42-month threshold.

This year, the TEA of Ecuador is 36.2%, surpassed only by Chile with 36.7%.

The TEA of Ecuador rose 6.58 percentage points compared to 2017 “because there are more people, emerging entrepreneurs, taking actions to start a business, which is not yet operational,” says the report.

This year, Ecuador is the second country in the region with the highest TEA, but it persists in the first place with the business closure rate (9.3%).

The professor of Spain and co-author of the study, Virginia Lasio, explains that the main reason for entrepreneurship in Ecuador is the lack of employment (4 out of 5 entrepreneurs do so for this reason), followed by the desire to make a difference, accumulate wealth or family tradition.

While the causes of closure are: personal problems (32.7%), lack of profitability (25.2%) and lack of financing (16.6%).

The report identifies some strengths and weaknesses of the Ecuadorian entrepreneurial environment. The pluses are: physical infrastructure, social and cultural norms and education in postsecondary entrepreneurship. Weaknesses focus on: tax and bureaucracy public policies, financing for entrepreneurs and the transfer of research and development.

In this sense, and in the face of the challenges that covid-19 brings, experts consulted for the preparation of the GEM point out that the massification of digital services is needed; continuously implement new technologies; develop new sectors, such as health, telecommuting, online education, among others. (I)