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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Macroeconomic overview

OECD Development Centre

This chapter analyses the main macroeconomic trends in Latin America for the next few years. In the short term, Latin America will continue to witness moderate economic growth amid strong uncertainty worldwide. Countries in the region have some fiscal and monetary space they can use to deal with falls in aggregate demand. But current forecasts suggest that developed countries are on the verge of a long period of sluggish growth. In response, countries in the region would do well to make sure their policies to stabilise the economy are consistent with the actions they need to take to boost medium-term growth while transforming the production structure. Region-wide, greater trade integration could be an effective response to poor demand from developed countries and would at the same time allow non-traditional sectors and activities to boost their competitive advantages. Special attention should be paid to currency fluctuations, which in several countries could threaten the competitiveness of goods that are not linked to commodities. Identifying the causes of these fluctuations and using the appropriate instruments to mitigate them is one of the challenges faced by current macroeconomic policies.

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