Article in Focus: The young entrepreneur in Brazil: the search to achieve something or an escape from exclusion?
In 2008, for the first time in nine years, the participation of entrepreneurs between 18 and 24 years of age in Brazil exceeded that of other age bands, according to data from the Global Entrepreneurship Monitor (GEM). A quarter of young Brazilians in this age band call themselves entrepreneurs, which represents the highest rate in countries in Latin America and the BRIS (Brazil, Russia, India and South Africa). Of the 42 countries that participated in the GEM survey in 2008, Brazil held third place (25%), behind only Iran and Jamaica (28%).
This high rate of entrepreneurship among young people does not reflect an economic, social or cultural advance of this section of the Brazilian population, however, according to a study by Sergio Bulgacov, a professor from FGV-EAESP. The study was carried out jointly with Yára Lúcia M. Bulgacov, Sieglinde Kindl da Cunha, Denise de Camargo and Maria Lucia Meza. “On the contrary, this particular brand of entrepreneurship is associated with precarious working conditions,” the study’s authors explain. Their paper entitled “The young entrepreneur in Brazil: the search to achieve something or an escape from exclusion?” was published in the Revista de Administração Pública in 2011.
There are signs that young people are finding it increasingly difficult to enter the labor market, and that consequently, they have no alternative but to become entrepreneurs. According to data from COPAL/Pun/Obit, the rate of unemployment among young people in Brazil was 3.2 times greater than that among adults, considering changes in the labor market between 1992 and 2006. Moreover, in the same period, 59% of professionals between 16 and 24 years of age did not have an employment contract, compared with 51% of adults. According to the researchers, “This reality shows that work opportunities for this age band are restricted, and this is one of the factors that explains the increase in the position of young people in the panorama of entrepreneurship in Brazil.”
Most young entrepreneurs are poorly educated and have low incomes. During the period between 2002 and 2008, only 17% of young entrepreneurs had more than 11 years of formal education and 80% earned less than six minimum salaries. In the authors’ analysis, the low level of education is reflected in the reduced possibility of success for the young entrepreneurs’ undertakings. More than 50% of these young people are involved in consumer-oriented service undertakings, which are considered to be low in productivity and to demand little in terms of qualifications and experience. Included in this activity classification are personal services, street vending and cleaning and conservation services.
These young entrepreneurs are mainly “entrepreneurs by necessity”: they drop out of formal schooling before completing junior high school and establish a business because they lack other options. The survey shows that 73% of the young entrepreneurs earn less than three minimum salaries, which calls into question both their capacity to survive and their possibility of training and developing to become autonomous and successful entrepreneurs. Young people from this group have a greater likelihood of failing in their undertaking; thus, it is difficult for them to break from the cycle of problems of the homes from which they come. In 2008, this group represented 28% of all Brazilian entrepreneurs, an increase from the average of 20.6% in the period between 2001 and 2008. Such findings suggest that the proportion of young people among Brazilian entrepreneurs is growing.
There is a positive finding among the GEM data. In 2008, the so-called “entrepreneurs by opportunity”, or those young people who had completed higher education courses and established a company to gain greater independence or an increase in income, also represented 28% of all Brazilian entrepreneurs, i.e., the same proportion as “entrepreneurs by necessity.” The “entrepreneurs by opportunity” are differentiated from “entrepreneurs by necessity” in that they have higher incomes and more schooling and usually establish businesses that require more specialized activities. These businesses include company-oriented services, such as consulting companies; technology-based businesses; and specific services, such as accounting, legal support and IT.
Although not particularly representative, the proportion of company-oriented services doubled between 2001 and 2008. “This increase may show a trend of young people moving towards more activities requiring better qualifications because of an improvement in education over the last few years,” the study’s authors note. However, the researchers emphasize that even though the young “entrepreneurs by opportunity” are at a relative advantage, a lack of experience and funds for use in the undertaking also lead to a high percentage of failures, which occur in the first few months of the operation.