IDB supports drive to enhance Peruvian entrepreneurs´ innovation and productivity

Peru will promote micro, small and medium-sized enterprises’ (MSMEs) innovation, technical development and capacity building with a $40 million loan approved by the Inter-American Development Bank (IDB).

The project will help consolidate recent gains in Peru’s policy and institutional framework as well as the implementation of new measures to tackle challenges that hamper MSMEs’ ability to innovate, such as lack of financing or qualified personnel, insufficient access to technological or market information, and difficulty in finding investment partners.

Over the past decade Peru has posted one of the highest economic growth rates in Latin America, although research has shown that some long-term productivity gaps still remain. For example, its total factor productivity is only 49 percent that of the United States and 76 percent that of Chile.

With support from the Bank, the country has made major strides toward establishing a national innovation system through public-sector capacity building to promote science, technology and innovation and through a gradual deployment of incentives to boost investment and innovation. Yet, these processes take time to consolidate and yield results, so Peru’s aggregated investment levels on innovation are still lagging — it invests 0.15 percent of its gross domestic product in research and development (R+D) activities, compared with 0.78 in Latin America as a whole and 2.4 percent in OECD countries.

Additionally, recent research on perceptions regarding in the ability of Peruvian companies to innovate has revealed an underappreciation of the effects of adopting initiatives in science and technology. Consequently, the project includes actions aimed at improving the social perception of these key features throughout the country.

“Increasing human capital is vital to develop the innovation system. This program will fund courses leading to bachelor’s and master´s degrees to support entrepreneurs’, innovation managers’ and other key players’ capacity building,” IDB project team leader Claudia Suaznábar said.

The IDB’s $40 million loan is for an 11-year term, with an 11-year grace period, at a LIBOR-based interest rate and will be disbursed over seven years. The executing agency will be the Production Ministry (PRODUCE) through the National Innovation Program for Competitiveness and Productivity (PNICP). The project includes $60 million in local counterpart funding.

About the IDB

The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.