MEDELLIN, Colombia – In anticipation of the 50th annual meeting of its Board of Governors, the Inter-American Development Bank today held here the first regional forum on small and medium-sized enterprises, a key economic segment for Latin America and the Caribbean.
In many countries of this region, up to 98 percent of businesses are micro, small or medium-sized. These enterprises, which generate around 60 percent of the region’s employment, are particularly vulnerable to economic and financial crises.
The conference underscored the importance of these businesses and showcased successful examples of programs to promote SMEs.
At the opening of the forum, IDB President Luis Alberto Moreno said the IDB Group, which comprises the Bank, the Inter-American Investment Corporation (IIC) and the Multilateral Investment Fund (MIF), has stepped up its efforts to support the private sector in Latin America and the Caribbean.
Over the past three years these institutions have more than doubled the volume of private sector operations, to nearly US$3.5 billion in 2008. The Bank is also making more resources available for countries with smaller and less developed economies.
“Our commitment for 2009 is to devote nearly half of the resources for these countries,” Moreno said.
At the closing of the forum, the IIC, the IDB Group affiliate that specializes in SMEs, signed an agreement with nine Colombian institutions to launch FINPYME, a program designed to help small businesses improve their productivity and their access to financing.
The agreement was signed by the chambers of commerce of Bogotá, Cali and Medellín; the universities of the Andes of Bogotá, ICESI of Cali and EAFIT of Medellín; and Bancoldex, Bancolombia and BBVA Colombia.
The SMEs forum featured panel discussions of successful programs and keynote presentations by international experts such as Juan Enríquez Cabot, a recognized authority on the political and economic impact of life sciences.
Addressing a full house at the Plaza Mayor Convention Center, Cabot said the world is starting on a new revolution sparked by advances in life sciences, building on the decoding of the DNA of various life forms. As in the digital revolution, only the countries that take advantage of this new wave of innovation will reap its biggest benefits.
Cabot, whose company invests in start-ups that develop new technologies and products based on life sciences breakthroughs, pointed out that few Latin American countries took full advantage of the digital revolution, in contrast with many Asian nations. In 1975, he noted, Koreans had one-fifth of the income of Mexicans. Now Koreans have incomes five times greater than Mexicans.
Latin American countries should ensure that their SMEs become conversant in the new technologies emerging from life sciences so they may become the major corporations of the future. “If it could be done in India, it can be done in Argentina, Brazil, Ecuador, Mexico or Peru,” he added.
Other panels of the forum focused on the outlook for Latin American SMEs, angel investor networks and institutional support for small businesses.
Paulo Okamoto, president of SEBRAE, Brazil’s small business development agency, described the steps his government has taken to promote the creation of businesses, such as eliminating red tape, simplifying taxes and giving SMEs preferential treatment in state procurement.These measures, together with the strong economic growth Brazil achieved in recent years, set the stage for the creation of some 460,000 businesses a year.
Access to financing is a huge obstacle for most micro, small and medium-sized enterprises. A successful case of a bank that caters to these businesses is the Dominican Republic’s Banco ADEMI.
ADEMI President Manuel Arsenio Ureña noted that the bank had started as an NGO in 1983 with US$500,000 from the IDB. Today it has more than 60,000 borrowers, 100,000 depositors and a loan portfolio of US$150 million.
“Many of our clients who started as microentrepreneurs now have small businesses. And some who started as small businessmen now have medium-sized enterprises,” Ureña said.
SMEs also have high death rates. Gabriel Silva, general manager of the Colombian Coffee Growers Federation (FNCC, for its initials in Spanish), said that only one in 10 small businesses make it past their first year. One way to break this “curse,” he said, is through collective action.
Silva used his own federation, which has 500,000 members, as an example. About 95 percent of Colombian coffee growers have farms smaller than 10 acres. By participating in FNCC, they have access to services and benefits that they could never afford individually.
The federation supports its members with marketing campaigns such as “100% Colombian Coffee” and genetic research of coffee varieties, helping even the smallest farmers to get their product to foreign markets. “You cannot have successful SMEs without collective action,” Silva said.