Changes in development policies

Over the past four decades, Latin American policies for SMEs have moved through various stages. In the 1970s, and to a certain extent in the 1980s, certain isolated measures were taken in a way that was not strategically tailored for this segment. Governments would generally intervene actively in the economy, but their actions would target specific sectors or groups of companies. Most countries had not yet begun structural reforms. In this context, SMEs were seen as economic agents that at best should be protected; they were not targeted by competitiveness policy3 or by economic development projects. The main form of intervention for SMEs at that time was through first-tier credit programmes.

Between the late 1980s and mid-1990s (possibly due to an extreme view of state neutrality but also due to the poor results achieved by previous action) Latin America adopted the view that “the best policy was no policy”. This viewpoint was reinforced in the early 1990s by the recommendations put forward by the Washington Consensus, which said that the market was the best co-ordinator and allocator of resources in the economy.

Paradoxically, the Washington Consensus helped bring about a resurgence of interest in SMEs. The scant success of the mid-1990s reforms sparked high unemployment in many countries in the region, among other consequences. The high unemployment gave rise to a change in mindset, with SMEs now seen as potential creators of jobs, thus renewing interest in these firms in both academic and political circles. During this period various institutions to promote SMEs sprang up: the SME Secretariat in Argentina (1997), the Undersecretariat for Small and Medium Industries and Crafts in Ecuador (1999) and the National Micro and Small Enterprise Commission (CONAMYPE) in El Salvador (1996). However, this new interest in SMEs was not always accompanied by real progress in implementing policies, which often went no further than declarations or documents that were well publicised but produced little tangible fruit.

The last ten years have seen many institutional and regulatory changes and areas of intervention have been expanded and improved. These changes have benefited SMEs, and have been accompanied by greater efforts by the region’s governments to promote these firms, allowing new, innovative instruments to emerge.

In several countries of the region, concerns about job creation have led governments to include microenterprises in the scope of policies that were initially designed for SMEs. This is particularly visible in Chile, Ecuador and El Salvador. In Peru, meanwhile, policies are geared solely to micro and small enterprises, and exclude medium-sized firms.4 Normally when governments have included microenterprises in their policies it has been the result not so much of a period of reflection on business development as of an attempt to address unemployment, marginalisation and the informal economy in the country.

Because there is no clear analytical framework, the policies’ focus has been able to shift to reducing poverty and increasing employment, with the objectives of improving competitiveness and developing exports fading into the background. Medium-sized firms run the risk of being marginalised by the support policies, as do certain areas of intervention geared towards more dynamic firms (for example, gazelle companies, new ventures in dynamic, more knowledge-intensive sectors, and companies with the potential to enter international markets). 

The last ten years have seen many institutional and regulatory changes, and areas of intervention have expanded and improved. The growing interest in SMEs led governments to be more resolute in introducing initiatives that focus specifically on developing these economic agents, many of which have created innovative new instruments. This is especially true with regard to the promotion of business co-operation, production linkages and finance. However, in most countries too little time is still given to considering the contribution SMEs make to growing and changing the economy’s production patterns. The only recognition they get is limited to generic statements on their potential to contribute to job creation. The role of development policies for SMEs is also ignored.