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Latin America and the Caribbean 2019

Policies for Competitive SMEs in the Pacific Alliance and Participating South American countries

image of Latin America and the Caribbean 2019

The SME Policy Index is a benchmarking tool that assists emerging economies in monitoring and evaluating progress in policies that support small and medium-sized enterprises. This first application of the Index methodology in the Latin American and Caribbean region covers the four Pacific Alliance member countries (Chile, Colombia, Mexico, Peru) and three participating South American countries (Argentina, Ecuador, Uruguay). Divided into seven policy dimensions, this report assesses the strengths and weaknesses that exist in different areas of SME policy design, implementation, and monitoring and evaluation, and provides guidance to policy makers in identifying policy areas for future reform according to international good practices. This report is a joint effort between the Development Bank of Latin America (CAF) and the OECD through its Latin America and the Caribbean Regional Programme (LACRP), in co-operation with the Latin American and Caribbean Economic System (SELA) and the “Foundation for the Strategic Analysis and Development of the SME” (FAEDPYME).

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Executive Summary

SME development is a marked priority for policy makers across Latin America and the Caribbean, including the seven economies assessed within this study (Argentina, Chile, Colombia, Ecuador, Mexico, Peru and Uruguay). This is not surprising, as the vast majority (99.5%) of firms in the region are SMEs, with almost 9 out of 10 classified as micro-enterprises, and SMEs are important generators of regional employment (60% of formal productive employment). However, while it is a normal global phenomenon for SMEs to display lower productivity levels than large firms, Latin American SMEs have a particularly significant productivity gap, being responsible for only a quarter of the region’s total production value. This difference is particularly large for companies at the end of the size spectrum: Latin American microenterprises account for about 3.2% of production, while in Europe they contribute 6 times more (20% of GDP) even though they have a similar participation in the labour force. Furthermore, all countries covered in the report have to cope with the presence of a large informal sector as an integral part of the economic structure, and SME sector, with wide implications for the social and economic development of the region.

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