SMEs, the economic engine in the region in post-pandemic times

Small and medium-sized enterprises (SMEs) have become a major driving force as they create 60 million jobs in Latin America and the Caribbean, Ambassador Clarems Endara, Permanent Secretary of SELA, said.

SMEs account for 90% of Latin American enterprises; they create more than 50% of jobs and represent one fourth of the GDP. SMEs have a high profile in all productive sectors and a big clout on the social network. Data of CAF show that near 60% of Latin Americans work in enterprises of five or less employees.

“SMEs are among the most adversely affected areas in the whole region. Precisely in this sector we have witnessed the final shutdown of around 20% of them. Reference is made to family businesses. Interestingly, precisely this sector is restarting operations, helping domestic economies resume activities,” Ambassador Endara said.

Latin America has approximately 12.9 million SMEs, apportioned among 17 countries, including 91.2% of micro-enterprises, 6.3% of small enterprises and 1.6% of medium-sized enterprises. According to ECLAC, 2.7 million business shut down in 2020, amounting to 19% on aggregate in the region. As regards micro-enterprises, such a percentage could be as low as 21%. In terms of employment, this means the loss of about 8.5 million jobs.

“Forecast could lead us to 5.3% of GDP growth in the region in 2020, but we need to bear in mind that we will get back to normal only as long as there is massive immunization; then, a balance will be struck at 3.3% next year,” the Permanent Secretary of SELA specified.

Ambassador Endara added that economic recovery is experiencing a rebound effect and that normal conditions will return insofar as companies reach price stabilization and self-regulation. “Indeed, this has disrupted the region, in addition to logistic and freight transportation concerns,” he said.

To the mind of Ambassador Endara, we come from a hard-hit decade before the pandemic, with slowdown precisely in all that momentum in the region. “Regional growth slumped from 6% to 0.2%, that is, a lot, and the pandemic aggravated such economic crisis, resulting in multiple crises,” the official said.

“We are talking about economic crisis and political crisis, in addition to health crisis, and, now, social crisis. We have witnessed a badly hit economy in 2020. So, in 2021 we are still feeling the impact; there are some traces of economic growth, estimated by the IMF at 5.3% for the region. Still, we can note gaps and bridging them could take long,” the representative of SELA commented.

The Latin American and Caribbean Council (SELA) is working on a new agenda beyond 2022, in tandem with Member States. Such initiative has been useful to enliven SELA in its purpose of coordination of a regional and policy rostrum to bolster the economic and social agenda, to be implemented jointly by Member States.

Member States have identified multiple issues related to production diversification, competitiveness, entrepreneurship and definition of value chains. For this reason, steps have been taken to find a niche in foreign markets and for business promotion. SELA has been working on some of these topics, and it is set to develop a great hub on production articulation.

The next meeting of the Latin American Council is scheduled for November in order to approve a regional agenda in line with the needs of Member States.