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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Traits and policies of Latin American SMEs

OECD Development Centre

Given the right support policies, micro, small and medium-sized enterprises (SMEs) in Latin America can help raise productivity, complement the economies of scale of large firms, contribute to creating clusters in certain sectors and reduce social inequality and poverty. Over the past decade, the attention given to SMEs, a key component of the region’s business fabric, has grown. But efforts need to be redoubled to break the vicious cycle of low productivity and lack of competition among SMEs. Public policies need to be more mature so they will last longer, but also more flexible to the changing external environments that affect SMEs. Countries need to build the institutional capacities necessary to implement programmes and initiatives. In particular, policies need to be devised and implemented in a way that takes into account the full spectrum of SMEs, from subsistence-level microenterprises to fully modernised firms that supply large companies which export to foreign markets.

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