Development Account Projects
Towards productivity convergence: Trade, financing and technology for small-scale enterprises
Low productivity levels of small- and medium-sized enterprises in Latin America and the Caribbean are a major source of the large and persistent economic and social inequalities in the region. Low-income employment is concentrated in these enterprises, compared to their counterparts in developed countries. Small- and medium-sized enterprises in Latin America and the Caribbean register particularly low levels of productivity and wages compared to large firms, as documented in the ECLAC document entitled Time for equality: closing gaps, opening trails, submitted at the thirty-third session of the Commission, held in Brasilia in 2010.
Strengthening the direct or indirect participation in international trade of small- and medium-sized enterprises can be a powerful tool to increase the productivity and wages of their employees. Exporting has many potential benefits, as such enterprises can learn more easily and adopt new technologies and production techniques from abroad, expand their market and customer base, diversify into related products and optimize their production capacity. However, the indirect participation in trade by selling products or services to other domestic companies that export may be easier than exporting directly because it does not require an export infrastructure, is less risky and demands less investment.
Various obstacles do, however, hold back the direct and indirect internationalization of small- and medium-sized enterprises in the region. One obstacle is the limited funds and lack of access to bank credit. Other factors include low productivity owing to inefficient production techniques, complicated formalities and paperwork required for export operations, difficulties in meeting quality standards, and non-tariff barriers to export to developed countries. As several case studies have illustrated, however, public policies may improve the enterprises’ success in exporting clusters or value chains.
In the region, the formulation, targeting, implementation, monitoring and evaluation of the policies of small- and medium-sized enterprises is hindered by the inefficient use or lack of data on the characteristics, productivity and international trade orientation of small firms. It is therefore essential to make better use of existing data and to design methods to evaluate the enterprises’ participation in outward-oriented value chains. Asia offers several examples of best practices in this area.
ECLAC has developed methodologies and databases to improve the evaluation of competitiveness of the small- and medium-sized enterprises; has worked on addressing their financing difficulties and organized training workshops in this area; and has provided technical assistance on assessing financing difficulties and on innovative forms of credit.
The ECLAC Division of International Trade and Integration will implement the project in collaboration with the Commission’s Division of Production, Productivity and Management and Development Studies Unit, and with the Commission’s subregional headquarters in Mexico. ESCAP, ILO and UNCTAD will also be invited to participate in the training workshops and two high-level subregional meetings.
To strengthen government capacities in participating countries to design and implement effective policies to promote SME internationalization, including access to credit and other financial services.
- Increased capacity of government authorities to measure SME internationalization performance.
- Improved capacity of government authorities to design and implement effective policies/programs to foster innovation among SMEs, in coordination with the private sector.
- Improved capacity of government authorities to design and implement effective policies/programs to address SME constraints regarding financial services, in coordination with the private sector.