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LATIN AMERICA: Big Debates Over Small and Medium Enterprises

Humberto Márquez

CARACAS, May 12 2008 (IPS) - Microbusinesses and small and medium enterprises in Latin America remain a valid path for maintaining and improving economic growth and fighting poverty, while the spotlight in the region shines on summits, conflicts and major political problems such as integration or energy security.

The summit of European Union and Latin American and Caribbean (EU-LAC) heads of state and government, which opens in Lima, Peru on Wednesday, will debate a proposal for the formal recognition of the importance of micro, small and medium enterprises (MSMEs).

MSMEs “play a decisive role in strategies to combat poverty and inequality and in favour of social inclusion, economic development and technological advance,” says a document drafted by government officials responsible for MSMEs at a conference held in March in preparation for the Fifth EU-LAC Summit.

The millions of small businesses in the countries of this region “invariably make up more than 95 percent of the total number of businesses, and generate at least 70 percent of stable jobs,” Gonzalo Capriles, coordinator of the Ibero-American Programme for the Development of Small and Medium-sized Enterprises (IBERPYME), told IPS.

“Public policies to promote and strengthen MSMEs should be given a high degree of priority, not only within each country but also in cooperation programmes between the European Union and Latin America and the Caribbean,” continues the text that the regional MSMEs officials want the EU-LAC Summit to include in its final declaration.

To accomplish this, “a permanent Euro-Latin American-Caribbean platform should be established to exchange information and best practices, which should be institutionalised by means of an annual conference of government officials responsible for MSMEs,” it says.

The public policies that are sought “are those that encourage improvement in productivity and the establishment of production chains and clusters of similar businesses located in the same area, and that reinforce the potential for modernisation and access to markets,” said Capriles.

Chile is a good example of such policies, Capriles said, “because of the cooperation and synergy between public and private sectors, the transparency and strength of state institutions, and the promotion of productive activities, which improve competitiveness.”

MSMEs “are more flexible than big companies; they adjust more rapidly to the changing tastes of consumers, and generate new jobs,” Mariano Mastrángelo, of the Argentina-based export consultancy firm RGX, told IPS.

“What MSMEs need most is access to markets, skills training, incorporation of technology and innovation, and financing,” according to Capriles.

As for access to export markets, after studying 270 MSMEs with six-monthly shipments worth between 45,000 dollars and one million dollars in Argentina, Chile, Costa Rica, Mexico, Peru and Uruguay, Mastrángelo concluded that their main needs are consulting, skills upgrading and international promotion.

IBERPYME, based at the Latin American Economic System (SELA), to which 26 countries in the region belong, foments discussion of topics of interest to MSMEs, the sharing of experiences, and the spread of best practices. It also maintains a database of experts in specific fields that MSMEs need in order to modernise.

A new study by Juan Llisterri and Jaime García-Alba of the Inter-American Development Bank, “High Growth SMEs in Emerging Latin American Economies”, emphasised the advantages and achievements of small and medium businesses with good entrepreneurial and innovation practices in Brazil, Chile and Mexico.

The MSMEs studied were Biocáncer and TV Esporte Interactivo in Brazil, Movix and Akikb in Chile, and Alltournative and Interfactura in Mexico.

Biocáncer offers trials and development of new drugs for pharmaceutical companies. Its services can speed the market launch of new products.

TV Esporte Interativo is a channel broadcasting top-quality sports programmes, using the Internet as a platform which allows viewer interaction. Movix offers telephone ring tones to mobile phone users, and Akikb has developed warehousing and storage services in Chile.

Alltournative offers recreational adventures in conjunction with indigenous Maya communities in the southeastern Mexican peninsula of Yucatán, combining tourism with sustainable development and appreciation of local culture. Interfactura develops and applies tax software for businesses of all sizes in Mexico.

These businesses were set up with investments of less than 100,000 dollars in their first year, and had sales of over 800,000 dollars by the third year. They exploited niches alongside large companies and took advantage of the opportunities provided by technological innovation.

Capriles said that Latin American integration “must not only help expand markets, but also production chains, so that a product manufactured to a certain stage in one country can be finished in another, constantly bolstering added value and job creation. In order to reduce poverty, high-quality employment is needed.”

In Mastrángelo’s view, MSMEs benefit more from competitive economies than from those in which exports are heavily regulated. Capriles, in contrast, recommended avoiding extremes. “Within a general project, some controls can be helpful, but excessive regulation can make everything much more difficult,” he said.