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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Human capital and skills for SMEs

OECD Development Centre

Despite recent progress in the field of education and skills in Latin America, there are still challenges that should be confronted through careful analysis and new public policies. A relatively untrained workforce and management, a high dropout rate from school, and lowquality education stand in the way of increasing SMEs’ productivity. Another obstacle is the mismatch between the skills that the production sector demands and the training that the educational system provides. The technical education and vocational training systems are key factors to deal with this. These challenges have been responded to in this region through programmes that try to address the needs of the production sector and SMEs. However, many areas need government action to strengthen institutions and need policies to better align the education system with the needs of the job market, foster training paths that combine the classroom with the workplace, add new skills and abilities to training curricula, develop certification schemes for acquired skills and abilities, and establish institutional frameworks to encourage co-operation among SMEs.

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