Latinos make up the fastest growing segment of the US Gross Domestic Product, and if we consider Latinos as a country, they would rank third after China and India. However, they are lagging behind in terms of investment, poorly represented on the boards of large corporations, and the products offered to them do not meet their needs.
During the Economic Mobility Summit of the Latinos y Sociedad program of the Aspen Institute that brought together in Los Angeles more than 281 leaders from the public, private and civic sectors, McKinsey & Company presented the second annual report “The Economic State of the United States: Determined to Prosper,” which indicates that in today’s times of economic uncertainty and concern about a possible recession, Hispanic consumers are looking for additional support.
“Our research estimates that Latino consumers have unmet needs of more than $150 billion, and this could be multiplied by up to $660 billion if we address the parity gap between Latinos and non-Latino whites based on the proportion of the population,” the report states.
During the last decade, Latinos have increased consumption in their homes to reach a cumulative market of $1trillion in 1920, which represents an annual growth rate of 6% over the last decade.
Their household spending, the report notes, is higher compared to other groups with similar income levels, but spending on marketing to Latinos probably does not reflect this.
However, the study reports that Latino consumers are often highly dissatisfied with the products offered to them, especially when compared to their non-Latino white counterparts. This dissatisfaction ranges from food and beverages to financial products, which may indicate unresolved needs that impact their daily lives.
“We have brought together a large group of leaders to discuss the issues, examine the social and economic statistics, and develop a plan in more detail as well as to Inform a wider audience about the enormous potential of Hispanics in the economy and work”, said Gaddi Vázquez, president of the Latinos and Society program of the Aspen Institute.
He said that the important thing is that this information from the report on the great potential of the Latino community, the economic institutions, the funds that make the investments and the government leaders know about it.
“What we have lacked is investment in Latino companies that have not achieved it due to typical methods; and even if they are small, they have an impact.”
Ramiro Cavazos, President of the United States Hispanic Chamber of Commerce and Domenika Lynch, Director of the Aspen Institute Latinos and Society. (Courtesy) Poor representation in directives
The report found that Latino voices continue to be underrepresented in the highest-ranking positions of US corporations where decisions are made capital allocation and product offering.
As a result, they indicate, that companies often do not recognize Latinos as a priority demographic group.
And they add that less than 5% of the senior positions and in the boards of directors of the list of 500 largest corporations are occupied by Latinos despite the fact that this community represents the 000% of the population of USA
While Latina women occupy 1% of the directives of large companies. This is the lowest percentage compared to any racial or ethnic demographic in the United States.
From right to left, Nelly Galán, Lucy Pérez, Domenika Lynch, Michelle Sobrino and Jacqueline Martínez. (Courtesy) Close the wealth gap
The report indicates that employers and society in general have a lot to gain by providing Latinos with better jobs that are offered to them opportunities for advancement and leadership.
On the other hand, they point out that Latinos increased their participation in professional roles in 23%, an increase of five percentage points in the last decade, but they still face barriers in the workplace, through discrimination, implicit bias, or a lack of opportunities to advance into new roles.
In fact, they stress that if Latinos were represented at job levels commensurate with their share of the population and were paid same as non-Latino whites, would receive $210 An additional billion in annual income that could be used to fuel economic growth.
They underscore that Latino savers have only one-fifth of the median wealth of their non-Latino white counterparts, and today , nearly half of Latinos have little or no retirement savings.
“Only the 23% of Latinos consider themselves financially healthy in 2022 compared to 30% of Non-Latino Whites.”
Despite all these challenges, the report maintains that the net wealth of Latinos is increasing at a rate of 9 % vs. 4% for non-Latino whites; and if the trend continues, Latino households could reach a median net worth of $38,11 this year.
And although, show that Latinos have approximately half the debt of their non-Latino white counterparts, this may be because it is difficult for them to access appropriate financial products.
“Latinos are 1.7 times more likely than non-Latino whites to be turned down for a loan, and the 23% does not have access to banking services or does not have an account with sufficient banking services compared to 11% of their non-Latino white counterparts.
The report emphasizes that for financial institutions, this is an important opportunity to address an underserved consumer market.
Invest in companies
The report reveals that Latinos are the most entrepreneurial group in the US economy, but face significant barriers in accessing capital, including taxes lower approval rates for home loans and lack of private equity financing than non-Latino owned businesses. But in addition, less than 5% of the venture capital is directed to Latino entrepreneurs.
These obstacles, together with the lower representation of Latino companies in fast-growing economic sectors, limit their expansion and their opportunity to contribute to a more diversified product offering that meets the needs of US consumers.
In total, the 60% of Latino-owned businesses had to scale back or modify their operations during the pandemic, to the point that some could not survive without government help.
Participation increased
The report indicates that the year In the past, Latinos have increased their participation in professional occupations, their net worth faster than their non-Latino white counterparts, and have proven their worth as the fastest growing minority business group.
As consumers, Latinos already represent a $1 trillion market and their purchasing power is increasing.
The report concludes that Latinos have made significant progress during the last decade, even after the interruption caused by the covid-23.
And highlights the importance of companies, investors, organizations without organizations, philanthropists, and legislators to act and address the barriers that prevent the full economic participation of Latinos.
“Action is needed in several key areas: improving Latino representation and inclusion in decision-making bodies; expand product portfolios, optimize value propositions, and focus marketing and sales strategies for Latino consumers.”
But they also advise increasing access to capital for Latino entrepreneurs; improve access to education, training opportunities, and better jobs for Latino workers; and eliminate and discrimination.
Reactions
Ramiro A. Cavazos, president of the United States Hispanic Chamber of Commerce, said that the company’s second report shows that the Latino business community continues to grow although the environment is not so positive to help them, after the pandemic and inflation.
“We have had many obstacles to grow our companies. For the report, more than 4 were interviewed, 11 people, and it was found that despite the obstacles the positive community continues, growing rapidly.”
He considered that the economic report is not negative but rather shows the motivation that exists to advance among Latinos.
What do to grow?
“Latinos are from all countries, and there are also those who were born and raised in the United States, and have been there for 7 to 8 generations. What we have to do is unite, be very proud of our Hispanicity, and obtain the tools to obtain capital and contracts for our companies.”
He pointed out that the number one need that the Hispanic Chamber of Commerce in the country has detected among Latino companies is investment and capital from banks, financial centers, unions, credit unions and philanthropy to help companies continue to grow.
He cited as an example that philanthropy allocates less than 2% of the money to programs to increase the economic strength of the Hispanic community when we are the 11 %.