June 6, 2023

The problem of MSMEs in Latin America and the Caribbean

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by Dennis Bedoya From Infosurhoy

One of the greatest efforts being made by the Latin American and Caribbean Economic System (SELA) is to help member states develop the best possible practices to strengthen the contribution of MSMEs (micro, small and medium-sized enterprises) in the economies of their countries, which results in the creation of new decent jobs.

It is a challenge for me as a permanent secretary, also from Peru, which has one of the highest levels of informality in its economy, to contribute to the efforts of the 26 member countries of the regional organization to generate in these entrepreneurs the vision not of an end, but of a means to continue growing in business development. not few are the examples of small businesses that over time evolve and provide greater generation of employment and wealth in favor of the population of their countries.

We must remember that in Latin America and the Caribbean (LAC), MSMEs account for 90% of enterprises, generate more than half of jobs and a quarter of GDP. They promote entrepreneurial activity, encourage innovation, diversification and stimulate employment growth. However, they contribute little to exports and tend to specialize in low-value-added products.

With regard to their contribution to international trade, MSMEs: (i) form part of the value chain of large local exporters; (ii) export products and services for more specialized market niches; (iii) import and distribute products from foreign MSMEs; and (iv) provide support services in the international trade transaction chain (logistics, dispatches, among others).

However, they face difficulties in accessing the financing system, given the informality in which many of them operate. Hence, some governments in the region have been concerned with designing public policies that promote their formalization. They must emphasize regulatory adequacy, incentives and improved enforcement capacity.

The formalization process is one of the major obstacles these companies face due to the transactional costs of the process, the absence of advice, traditional registration models, and the lack of incentives. An effective strategy to consolidate it must combine measures to reduce the regulatory burden, cost, as well as incentives and improvements in enforcement.

It has been established that an effective strategy for the formalization of these enterprises must include aspects such as economic growth with quality employment, improvement of the regulatory environment, promotion of social dialogue, organization and representation, promotion of equality and the fight against discrimination, support for entrepreneurship, development of professional skills and financing, expansion of social protection and local economic development, as established by the Regional Office of the International Labour Organization (ILO). Personally, we will continue to give our fullest cooperation so that our region advances efficiently on a subject so important for sustainable development, the generation of sustainable development.

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For more on this story go to; http://infosurhoy.com/cocoon/saii/xhtml/en_GB/top-stories/the-problem-of-msmes-in-latin-america-and-the-caribbean/

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