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Latin American Economic Outlook 2013

SME Policies for Structural Change

image of Latin American Economic Outlook 2013

Latin America has weathered the recent turbulence in the global economy with relative strength, but the region now faces – beyond the short-term global uncertainty -- important medium-term risks. Policy makers need to make use of the policy space at their disposal to lay the foundations for inclusive and sustainable growth.  

SMEs play a key role as they are an integral part of the economic fabric, comprising over 95% of firms in the region as well as providing employment for over 60% of the region’s inhabitants. Nevertheless, relative to SMEs in the OECD, on average SMEs in Latin America exhibit low levels of relative productivity and weak links with the rest of the economy. In light of several decades of blanket SME policies with limited impacts in the region, this report proposes a more integrated approach that caters to the productive context and firm specificities. SMEs are part of a greater productive structure, and productive development policies need to be designed to address the particularities of heterogeneous SMEs. These differences can be manifested in many ways including the markets they serve, the types of products they produce, the level of technological sophistication and use of human capital involved in production, as well as the productive links with other firms in the industry. Providing policies which are adapted to the productive context requires co-ordination between various policy areas and levels of government to ensure that interventions are complimentary and effective. With this perspective in mind, the report explores key policy areas that address some of the main challenges to SMEs in the region including access to finance, skill development, innovation, and productive development.

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Financing SMEs in Latin America

OECD Development Centre

In Latin America, SMEs still have poorer access to finance, less favourable conditions and higher costs than large firms, despite the major improvements in the region in recent years. This gap hinders a greater contribution to development by micro, small and medium-sized enterprises, i.e. most production units in the region. The changes experienced by the Latin American financial system, particularly the shift from relationship banking to multi-service banking, have contributed to limiting access to credit for small and medium-sized enterprises (SMEs). Public financial institutions have contributed greatly to narrowing the financing gap, and recently new tools have proliferated to meet the needs of SMEs. However, for smaller companies to live up to their full potential they need greater access to financial and non-financial resources. There is ample space for public action through instruments and services to support (SMEs), a task that must involve national governments and the private sector. The region needs flexible, comprehensive public policies to finance businesses, with options for training, production linkages and innovation.

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