16 November 2012

OECD and ECLAC: Latin American Economic Outlook 2013

- New SME policies needed to boost Latin America's growth 
- SMEs account for 99% of businesses and employ 67% of employees 

16 November 2012 – After nearly a decade of continuous expansion, GDP growth in Latin America will slow from 4.4% in 2011 to 3.2% in 2012 and 4.0% in 2013. The outlook remains relatively positive, but is exposed to global uncertainty and volatility. Latin American governments must act now to strengthen growth and development and counter these risks, according to the 2013 Launch of Latin American Economic Outlook 2013, jointly produced by the OECD Development Centre and ECLAC. 

“Now is the time for Latin America to go structural, to build on previous reforms and make further progress to reduce inequality and strengthen economic growth. The global context calls for structural change to enhance productivity, to enhance productivity in the region.” said OECD Secretary-General Angel Gurría, launching the report at the XXII Iberoamerican Summit in Spain. “SMEs in Latin America have the potential to act as catalysts and help the region drive up productivity. Greater coordination is needed to help SMEs overcome obstacles in terms of access to financing, human capital and innovation.” 

Small and medium enterprises (SMEs) must play a central role in unleashing Latin America's growth potential and creating higher quality jobs. They represent an overwhelming majority of private enterprises in the region: SMEs account for 99% of businesses and employ 67% of employees. However, their contributions to GDP and overall productivity are low: whereas large firms in Latin America have productivity levels 6 times higher than those of SMEs, this difference is only 2.4 times in OECD countries. A common problem for SMEs is not so much their size, but their isolation in the productive structure, which makes them unable to scale up production and specialise. 

“Social progress is not limited to social policies. The structural heterogeneity and persistent productivity gaps, between and within sectors and enterprises, form a hard core from which inequality spreads throughout society, exacerbating capability and opportunity gaps”, underlined Alicia Bárcena Ibarra, Executive Secretary of ECLAC. 

New policies in the areas of finance, innovation and information and communication technologies (ICT) are needed, as well as increasing training for employees and reducing skills mismatches

Access to finance is one of the main obstacles faced by SMEs: only 12% of total credit in the region goes to these firms, compared to 25% in OECD countries. Meanwhile, 34% of small businesses in Latin America believe access to finance is a serious constraint. SMEs are often charged much higher interest rates than large firms by commercial banks, up to double the rate in several countries. 

The growing provision of financial services by development banks is making headway in the sector, such as Innovar by the Studies and Projects Funding Agency (FINEP) in Brazil, the Entrepreneurs Programme by Nacional Financiera (NAFIN) in Mexico and the Business Angels Network by the Production Development Corporation (CORFO) in Chile. More such programmes need to be developed and scaled up. 

Source: OECD