The Organization for Economic Cooperation and Development (OECD) is of the opinion that startups are becoming a “reality” in Latin America as public policies are playing an important role in supporting their creation and expansion.
In the past few years, people’s mindsets have shifted and the region is now perceived as a place for innovative entrepreneurship, according to a new OECD report, entitled Start-Up Latin America 2016: Building an Innovative Future.
The report assesses the progress made since 2010 in the implementation of programs supporting startups in Chile, Colombia, México, and Peru.
“All four countries have strengthened the institutional framework for supporting startups, prioritized social and regional inclusion, modernized their support instruments, increased awareness in development banks to finance startups and streamlined legislation to ease the creation of new firms,” the report states.
The report shows that Brazil has the largest number of startups in Latin America, but Mexico comes first when it comes to accelerating the growth of young enterprises. In addition, Mexico has the most even distribution of startups across the country: 32% are located in Mexico City, 10% in Guadalajara, and 8% in Monterrey.
Another noteworthy factor with regard to Mexico is that the country has the region’s second most active venture capital industry after Brazil. Easy availability of seed capital to finance enterprises in early stages of growth and the creation of the National Institute of Entrepreneurship (INADEM) are the factors fueling the startup ecosystem in the country.
Chile is known for startup incubation programs, but young enterprises are scarce beyond the country’s bustling capital Santiago, where 80% of the country’s startups are based.
The Colombian government’s effort to promote private investments in startups is yielding good results, with Bogotá and Medellin growing into hubs for innovative startups, according to the report.
Peru has increased its budget for startup companies, introducing new funds for seed capital and support for angel investors. But it may take a little more time for the country to see the results of its effort.
Even if startup companies are emerging and venture capital investments are growing, getting better innovation systems is still a challenge for the region, says the report. That’s largely because the regional countries are yet to pour more money into R&D centers, and average broadband download speed is almost five times lower than in OECD countries.
“For startups to flourish in the region, simplifying the policy mix for them and increasing coordination between startup promotion and production transformation strategies are paramount. Increased private investment and strengthening of domestic scientific and technological capabilities are also pivotal,” the report added.