Conclusions and recommendations: towards a new vision of policies for SMEs

Since the second half of the 1990s, major changes have been made to policies to support SMEs. In some countries, including Brazil and Mexico, these changes have probably been more pronounced, but in other countries changes have been made to the regulatory framework and institutional structure and the areas of intervention have been broadened (especially through production-linkage programmes). Despite the results achieved by a few individual initiatives, overall the policies have not significantly affected the performance of SMEs.

Certain key aspects need to be dealt with before a new policy agenda can be built. First, it seems necessary to make progress in defining an analytical framework to steer interventions and make them coherent. This involves specifying the roles assigned to SMEs as a whole and within each segment of SMEs in the country’s production and businesses. It also involves acknowledging the heterogeneity of the beneficiaries and the potentialities of each business sector, and marking the boundaries that define which businesses can be beneficiaries. These boundaries are not always clear, despite most countries having included microenterprises in their business-development policies. For instance, in the context of policies to support SMEs, there are doubts over the wisdom of including informal enterprises and sole traders and, more generally, all subsistence firms that have no real growth potential in programmes that assume beneficiaries have growth potential. Second, there needs to be a clear separation between economic and competitiveness objectives with other objectives, such as social objectives and poverty reduction.

Policies to support SMEs must match the productive-development guidelines of the countries in the region and become part of those efforts.

Once the heterogeneity of the beneficiaries has been acknowledged, these objectives must be consistent with the specific characteristics of these businesses. Certain areas generate complementary assets for firms, allowing for horizontal policies and approaches. However, it is much more important to define objectives, instruments and intervention methodologies that are effectively adapted to the full range of firms’ capacities and potentialities. Smaller firms, for instance, are unlikely to contribute to competitiveness objectives and will not be in a position to sufficiently respond to approaches based on demand-side subsidies. Instead, they will need much more intensive support and monitoring. Medium-sized and high-growth firms can associate with objectives to generate new sectors, enter international markets and develop production chains, and they are more likely to respond to specific incentives. Marking the boundaries of the beneficiaries does not mean excluding certain business sectors, but rather adapting and homing in on the objectives and mechanisms to support the specificities of the economic agents.

In relation to this, there also needs to be greater co-ordination between countries’ policies to support SMEs and their broader plans to transform production, if any. If the policy to support SMEs does not include social objectives, it should be integrated into the efforts to change the productive structures. One of the characteristics of Latin America’s structural diversity is the highly segmented web of businesses and structures. Given the little integration of many SMEs in the most important sectors of the production fabric, policies to support them need to be consistent with the countries’ guidelines for developing production to become part of those efforts. This is especially important for the most dynamic SMEs, which can successfully become part of national production chains, linking up with large firms to access international markets or helping generate new sectors. Initiatives geared towards SMEs should collectively be considered as a piece in the larger framework of industrial policy.

Policies need to go through a period of maturing and ongoing feedback. This requires an institutional maturing to guarantee the continuity and sustainability of interventions, whatever the political cycle. It also requires spaces for reflection on the results achieved, the effectiveness of the instruments and methodologies adopted, and the coherence and validity of the elements mentioned (analytical framework, objectives, focusing capacity, and coherence and integration with national development plans). At the same time, mechanisms are needed to monitor and adjust interventions, which means that monitoring systems and assessment instruments are vitally important.

Moreover, another element is necessary as a prerequisite for building an analytical framework and focusing actions according to the characteristics of the economic agents: the capacity to generate and update diagnoses through an information system built according to policy needs. Because quantitative information is so scarce in Latin America, it is difficult to diagnose the beneficiary firms’ circumstances and performance, and to evaluate the application of assessment mechanisms. Several countries have sources of information they do not use or they underuse.16 In most countries in the region, the results in this area have been rather poor, despite the innovative projects mentioned. The meagre results reflect the lack of commitment and the inability to see the importance of information in enabling the institutions responsible for the development of SMEs to design and assess policy.