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Latino-owned businesses on the rise

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Archives - August 2006
Tuesday, August 01, 2006

s_August06Cover The new entrepreneurs

Across Oregon, Latino-owned small businesses are growing as fast as the ambition that drives them.

By Oakley Brooks

Driving around the city of Medford with banker Susana Montalvo, one begins to see the jumbled commercial landscape of malls, orchards and corrugated steel with a new set of eyes. First, there are the big employers, including sawmills and fruit packers. For example, there’s Harry and David. It’s more than a pear and goodie basket company to Montalvo: It’s an employer of thousands of Latinos.

Then she begins to point out selected small shops and businesses. Each one has a Latino owner.

Over there is the Mexican-themed restaurant, run by the cousin of a restaurateur across town. See the café, tucked behind the house? Hispanic-owned. And the curio shop in the next block. And the body shop down an alley. “Some of these places are known only to other Latinos,” says Montalvo, a Wells Fargo business specialist who moved to Southern Oregon from the Mexican state of Guanajuato seven years ago.

Making her way into the heart of the Westside, she passes a small grocery store, taco truck, car wash and strip mall owned by the Castillos, a family with Mexican roots that moved into the area 10 years ago. They also own a taqueria a few miles away.

When the Castillos started, theirs was one of the early authentic taquerias in town. Now, they are far from alone. Montalvo counts as many as 50 Latino-owned restaurants and taco shops in the greater Medford region. The number of Hispanic-run landscaping businesses in the area has also mushroomed. And Montalvo figures Latino-owned reforestation and firefighting outfits — some of whom she serves — have doubled from around 20 to 40 in the last five years.

Across Oregon it’s the same story: A surge of Latino small businesses is changing the makeup of city landscapes and the state’s entrepreneurial ranks. Latinos have been starting businesses here for decades; some such as Don Pancho Authentic Mexican Foods in Salem have grown to national stature. But today, startups are more prolific.

Driven by an influx of immigrant laborers of Mexican descent, Latinos — who number 345,000 or 9% of total population — are the fastest-growing ethnic group in Oregon. Many of those new arrivals are now leaving wage-earning jobs for their own startups. They’re tapping into Latinos’ own buying power of more than $3 billion in Oregon and meeting the mainstream economy’s demand for service businesses, forming everything from mom-and-pop painting outfits and restaurants to graphic design firms and coffee import mercantiles.

“All it takes is a drive through our downtowns across the state to see the growth,” says Lydia Muniz, the governor’s advocate for minorities’ businesses.

Although the growth is undeniable, Muniz says it’s difficult for officials to quantify it. Neither the state nor local governments ask for ethnicity as part of business license applications or name registries. But four-year-old U.S. Census Bureau statistics hint at Latino businesses’ growth: They grew 6% between 1997 and 2002 to 6,300 total businesses, more than double the rate of growth of all businesses in the state. Small business experts say those statistics likely undercount Latino ownership, given what they are seeing in their communities around the state.

In Portland, the Hispanic Metropolitan Chamber of Commerce has helped 300 Latino businesses in the last 18 months with marketing, accounting expertise and business plans, according to Jonath Colón, the chamber’s business development specialist. “A lot of these people are in emerging markets. We see a lot of informal businesses — the volume is just huge,” Colón says.

Salem’s third annual Hispanic business conference last fall drew 400 people. Conference organizer Marin Arreola, who also trains and consults with growing businesses up and down the state, estimates there are now 1,000 Latino entrepreneurs up and running in the Salem area, where Latinos make up 15% of the population.

In Eugene, there’s a huge push among Latinos to get into the food service and contracting sectors, according to Shawn Winkler-Rios, director of the startup assistance agency Lane Microbusiness. Winkler-Rios has begun a business plan class in Spanish that’s attended by as many as two dozen entrepreneurs, many of them restaurant and bakery startups. He’s planning another Spanish course in contractor licensing. “We see a lot of Hispanics moving up from Los Angeles and I think there’s a lot of opportunity for them in the Eugene-Springfield area,” Winkler-Rios says.

Woodburn, where a majority of residents are Latino, now has a downtown blanketed with Mexican-themed restaurants and shops, earning it the nickname “Little Mexico.” Further afield in Pendleton, Blue Mountain Community College has responded to rising demand by starting a six-week Spanish-language business-plan class titled Empresario Latino  — Spanish for entrepreneur — which is being offered by community colleges statewide. Chambers of commerce in Medford, Eugene and Salem have all formed Latino business networks in recent years.

“We view it as part of our economic dev-elopment strategy,” says Dave Hauser, president of the Eugene chamber of commerce. “This is one of the fastest-growing segments of small business.”

Across the state, new Latino business owners are driven by universal motives: wealth, adventure and independence. “Everyone wants to work for themselves, that’s why they’re doing it,” says Martin Ochoa, president of Woodburn’s Downtown Business Association. But Latinos are also growing their small businesses in their own style. Many are exclusively using family networks for labor and startup capital. They’re reluctant to engage banks and are repeatedly tripped up by the intricacies of contracts and financial agreements. But they often manage to grow — even thrive — for years under the radar of public officials or the Anglo business community.

It’s a growing community hidden in plain view.


IN MEDFORD, THE CASTILLOS RUN their small El Gallo empire from the back of their store building, past compact rows and cases of piñatas, Jumex juice, pigs feet and Oaxaca cheese made in California — crooning mariachi singer Vincente Fernandez overhead — through a large room with an oven used to make pastries and El Gallo brand tortillas, and back to the windowless office stacked with file cabinets topped by TV monitors relaying security camera feeds.

From here, the family has inched toward success with a blend of determination, superstition, faith and familial consensus.

“We work seven days a week just doing our best and that’s how things came along,” says Margarita Castillo, 39, a small, strong woman who wears a rose-colored portrait of Jesus on a choker around her neck. “If you look for a good deal it will never come along. I pray for our business and we see what happens.”

Margarita’s 31-year-old brother, Carlo Castillo, helps manage the store along with a third brother and co-owner, Adrian. “We’re not lucky,” Carlo says. “When a decision comes up, we sit around and discuss it.” Even then, after 10 years’ experience, proficiency in English and a heightened profile around town, they sometimes struggle to keep equal footing with business partners. “People have come and offered us a star and a piece of sky and you realize the hard way it isn’t true,” says Margarita.

The family, 10 brothers and sisters in all, grew up in the city of Apatzingan in Michoacan, where their father, Camerino, owned a custom tailoring operation that outfitted the policemen and transit workers in town. The boys in the family worked in the cutting room floor from the age of 8, and at 10 began sewing buttons and zippers onto clothes.

By custom, Margarita did not work in Camerino’s factory, something she chafed at. But she says she picked up a manner of doing business from her father and others in Apatzingan before she left for California as a teenager. “Down there it’s a warm, welcoming relationship be-tween partners,” she says.    

In the early 1990s, her brother Adrian worked for a compost and fertilizer company in Medford and he found the area ripe for a taqueria. Margarita says she was looking to get out of the San Francisco Bay Area where, after 10 years in various jobs and courses at community colleges, she had worked her way up to a $13 per hour bookkeeper position at a pizza parlor in Mountain View. The Castillos also had an uncle in Medford, and it seemed to Margarita like a good place to raise her two young daughters.

Pooling their savings, Adrian and Mar-garita had about $80,000. They found an old video store half a mile from Medford’s city hall and a block from the town’s largest Catholic church. Their landlord thought a taco venture at the site was risky: “He was like ‘What are these crazy Mexicans doing?’” Margarita says.

The two dropped the ceiling in the long, narrow space, located a source for cow cabeza, lengua and tripitas (head, tongue and intestines), and opened up in August 1996.

With Adrian and Margarita doing all the work, she says the taqueria was profitable right away.

Two years later, they found a spot to lease for their grocery store in the heart of Medford’s growing Latino neighborhood on the Westside. Carlo and a fourth brother, Uriel, came to work for them.

Then in 1999, the store property came up for sale and the Castillos had their first brush with commercial banking. For the better part of four years, they went through the application processes at several local banks to get a loan and were denied each time. Margarita took it personally. “They didn’t believe in us,” she says. “They asked, ‘How am I going to give you a loan when you have no collateral?’” In 2003, the Castillos read about the nonprofit Cascadia Revolving Fund. A lender came to visit the store and agreed to finance the purchase at 15% interest. “We really never expected them to help us,” Margarita says, “I believe in miracles and that was one of them.”

Soon thereafter, with the property in the Castillos name, Susana Montalvo, who had befriended Margarita, arranged a refinancing.


THE EL GALLO NAME NOW pops up all over Medford. There’s a taco truck in the White City industrial area. Bags of El Gallo pastries in Sherm’s Food 4 Less on the Eastside. A stand at the Jackson County fair, where people have begun to recognize Margarita Castillo as the taco lady!

The company’s total employee count has grown to 30, and last year, with help from a friend from Montana, the Castillos purchased the strip mall and the house behind it where their parents now live.

“They know how to risk money,” Montalvo says, adding that they’ve also managed to corner a market on Hispanic cultural food items. “They knew the Hispanic community would need things. There’s no Costco for them, so to provide their own market was a smart move.”

Castillo won’t say how much money comes through the El Gallo ventures every year. She only says that “there’s enough left over to enjoy ourselves.”

Keeping up with demand for Hispanic grocery items has led the Castillos to pursue expansion. This spring, they looked at moving the store to a 28,000-square-foot grocery space vacated by Foodland in central Medford. The space was 10 times the size of the Castillos’ current one and the rent around $10,000 per month.

But just before they signed the contract an attorney found language which, according to the family, asked them to put all of their property up as collateral on the lease and required them to get grocery products through a specified distributor, which would have locked in higher prices. The Castillos backed out of the contract with a sour taste in their mouth.

“Taking people at their word — I think it’s a cultural thing,” Carlo Castillo says. “In Mexico, business is more than what’s on paper. But here I think you learn that there are times when you can’t take someone’s word for something.”


WHILE SOME OF THE STRUGGLES of Latino small-business owners can be chalked up to the naiveté any business owner brings to his first venture, business consultants across the state clearly identify some cultural gaps that hamper Latinos’ growth. The philosophy Latinos bring to business deals may hurt them initially.

“They’re too trusting,” Shawn Winkler-Rios says. “I’ve seen all kinds of problematic contracts.”

Winkler-Rios cites the example of a local Latino couple who put $40,000 into a restaurant with another partner but didn’t fully understand that he was the only one who had check-signing privileges on the company account. As the restaurant failed to produce profits this year, they ran out of money and couldn’t access savings in the company account.   

Because Mexican and other Latin American currencies fluctuate and local economies there tend to operate almost exclusively in cash, Latinos recently arrived in the United States are also distrustful of storing their money in banks. Many will spend decades in the country without engaging the banking system much. When it comes time to establish a business relationship with a bank, they have to start from scratch.

Large savings outside banks can also present a legal issue — for instance, if the money is being kept in Mexico.

“They’ll come in and say, ‘I have $120,000 to start a restaurant,’” Jonath Colón says. “Where is it? In Mexico. Well, have they thought about how they’re going to get it through customs?”

Banking relations with Latinos are starting to change with increased homeownership, bilingual tellers around the state and outreach efforts such as Wells Fargo’s in Southern Oregon and U.S. Bank’s in Salem.

But until there’s some hard evidence of the size of the Latino business market, financial and other business services geared toward Latinos may not grow.

“The stats aren’t there yet and banks aren’t attracted to it,” says Colón. “This is still an emerging market so we’re in a painful growth mode. We’re only just starting to see some movement.”


THE DIFFICULTIES OF A MORE FORMAL U.S. economy have led many newly arrived Latinos to build on existing businesses and industries, where friends and family have a foothold and an understanding of how to operate them. Susana Montalvo tells of how Latino-owned firefighting and reforestation companies tend to grow in Southern Oregon: Once they hit 100 employees, one employee will spin off and start a new business. Most of these outfits can trace their roots back to the Bencomo family, which owns Ponderosa Reforestation in Medford.

Oregon and the Northwest’s Mexican restaurants are similarly connected.

“Whatever Mexican restaurant you go to, you’re going to see a connection to someone else in the industry through blood or money,” says George Puentes, CEO of Don Pancho Authentic Mexican Foods in Salem. “Starting a business is a huge networking thing and these folks are helping each other out, giving loans.”

Puentes’ connections to the restaurant network are many, including employees who left to start outfits such as El Mirador restaurant and La Bonita Bakery in Salem. Sometimes he will give them a loan or extend several months credit on orders if they hit a dry sales patch.

Washington’s powerful restaurant families, most of who emigrated from the tiny Jaliscan town of Cuautla more than 30 years ago, have turned their networks into financial successes that reach into Oregon.

One Cuautlanese restaurateur, Gregorio Rodriguez, opened up his first Si, Casa Flores in Ashland 10 years ago. Rodriguez left a budding banking career in Mexico City in 1980 to join his brother’s Toreros restaurant in Renton, Wash. He struggled to learn English in between shifts at Toreros and dreaded the dark winters in Seattle. “I cried many times,” he says.

But he eventually opened up his own restaurant on Mercer Island in Washington before moving to Southern Oregon. He’s now on the verge of starting a fifth Si, Casa Flores around Medford, and he’s planning his retirement in Mazatlan. “I’ve always been a hard worker,” he says. “You have to fight.”

Marcos Ramos, who’s from another Cuautlanese family known for the Azteca restaurants, also set up shop in Southern Oregon. (Ramos employed the Castillos’ uncle and gave them some pointers and names of suppliers when they were first starting up.)

Rodriguez says the huge success of the Cuautlanese restaurateurs is now evident in the mansions they are erecting in the old Mexican hometown.


COUNTLESS YOUNG MEXICANS MAY HARBOR dreams of a new, lucrative life north of the border. But there’s a distinction in those who actually make it here, one that may explain the rise of Oregon’s Latino entrepreneurs and bear on the group’s future growth. Fernando Sánchez Ugarte, the Mexican consul general in Portland, suggests that those who land here are a more ambitious and driven slice of Mexican society. And they have a greater desire to start businesses of their own.

“For a given level of income and education, the people with more drive are the ones migrating,” says Ugarte, an economist by trade. “I think you see that in the entrepreneurial activity going on in Oregon. It’s really quite remarkable.”

Oscar Banuelos, 24, turned down several scholarship offers at Mexican high schools before coming to Medford six years ago. By 2003, he’d gotten his high school diploma from South Medford and secured a year-round job as one of the Castillos’ butchers at El Gallo market. Last summer, he and his brother, Gabriel, started a floor tiling business on weekends, working out of the city’s flea market. Then late this spring, they found a new showroom for The Brothers Tile in a mall less than a mile from El Gallo.

In some ways, The Brothers Tile resembles existing Latino startups — the Banuelos pooled their wage savings and tapped a cousin in L.A. for expertise and some tile samples.

But the Banuelos also show how younger Mexicans grow ever more adept at getting a foothold in Oregon and starting their own business. They are a glimpse of the next generation of Latino entrepreneurs. Adrian Castillo warned Oscar Banuelos that permitting and insurance regulations might trip the brothers up. “He said it was really hard,” Banuelos says. But they have figured out how to navigate local rules and procedures, even pushing a remodeling plan drawn up by a friend for free through the planning department.

Oscar, who sports a thin black mustache and grout-stained boots, has yet to secure a contractor’s license for commercial installations. But he is boning up on the rules using a thick licensing guide and he’ll soon take a crack at the English test.

He has big plans for the company: “We want franchises in Grants Pass, Eugene and eventually Portland,” he says.

If Gregorio Rodriquez and the Castillos reached a measure of success with a long and unsteady climb, Banuelos doesn’t have time for that.  He’s watched the Castillos and seen how it’s done. He’s ready to go
faster.


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