The causes of success of the micro and small enterprises in Brazil presentation - Cristiano Machado

The Causes of Success of The Micro and Small Enterprises in Brazil:

A review of the last few years of research

Cris>ano Machado Allan Costa

SEBRAE/PR

In our society, we find a growing need for entrepreneurship, particularly as economic growth has become a necessity in many countries. When large corporations downsize and reduce staff, the small and medium sized enterprise sector (SMEs) becomes more important (Hills & Hultman, 2006)

Overview

Micro and Small Enterprises in Brazil: 5.9 million formal micro and small enterprises and over 10 million informal ones More than 99% of formal establishments 60% of formal jobs (IBGE and SEBRAE 2009)

Overview

Overview

The success rate of small businesses that had survived at least two years in Brazil in 2002 was 51 %, and in 2005 this rate increased to 78%.

Overview

This study deals with an historical series of events that evaluates the evolution of the survival of the Brazilian micro and small businesses

Methodology

Exploratory research based on secondary data

Economic Context

Between 1997 and 2009, Brazil went through several rough patches that directly affected small businesses

Economic Context

The Asian crisis of 1997 and the Russian crisis of 1998, which led to dizzying oscillation and skyrocketing basic interest rates for the Brazilian economy, the Selic rate

Economic Context Starting in April of 2001, the rationing of electrical power, followed by crisis in the international financial markets and the Argentinean crisis in 2001 and 2002, which led to marked oscillation of the dollar and a new hike in the basic interest rate

Economic Context

A new increase in the basic interest rate in the Brazilian economy, starting in late 2004, used by the monetary authorities as the chief mechanism for controlling the domestic rate of inflation

Economic Context Figure 1 – Selic Basic Interest Rate (a.p.r.) and Exchange Rate (R$/US$)

Jan/97 to Dec/07

Source: Brazilian Central Bank

Institutional Context

During the period analyzed there were several changes in the institutional context which, in part, cushioned the adverse effects of the foreign crisis


Implementation of the Federal SIMPLES that is a simplified regime for collecting taxes which had lower rates for MSBs with gross domestic income of up to R$ 1,200,000. Among the advantages for the MSBs, lower taxation and reduced bureaucracy stand out.


Implementation of special fiscal regimes which favor MSBs at the state level Implementation of special fiscal regimes which favor MSBs at levels of various municipal governments


Creation of the Micro business and Small-sized Business Statute (Federal Law no. 9.841 of October 5, 1999), which deals with special and simplified legal treatment for businesses with annual income of up to R$ 1.2 million/year


Creation of de Individual Entrepreneur (Complementary Law no. 12/08 of July 1, 2009), which deals with special and simplified legal treatment for micro businesses with annual income up to R$ 36.000/year


The growth of Microcredit programs throughout the country


More training for entrepreneurs and entrepreneurial candidates through specific programs available in the SEBRAE System (for example, television programs, radio shows, corporate guidance products and free courses available on line, entrepreneurship stimulus programs at schools and universities, and more service posts)

Institutional Context Effort to draft and pass the General Law for micro and small business, considered to be the new national Statute for MSBs which proposes a broad range for MSBs, in fields of:

unification of Federal, state and municipal tax regimes for MSBs; reduced taxes on MSBs exports; exemption from some labor obligations; simplification of the process of opening and closing business; easier accesses to credit and to technological innovation services; preference in governmental purchases; and incentives for MSBs to associate and form consortiums

Apparently, the improved economic environment and increased support for small business tend to contributed to reduce rates of business mortality

Conclusion

Conclusion

This paper showed a spectacular improvement in survival rates of the Brazilian MSBs. The percentage of small businesses that survived at least two years increased from 51% in 2002 to 78% in 2005 (SEBRAE 2007)

Conclusion

In the economic environment, there occurred a reduction and control of the inflation and a gradual decrease in the interest rate; the increase in the credit offer to the individuals promoted the increase in consumption. As a result, there was a favorable period for the small businesses in Brazil.

Conclusion

Entrepreneurs that had a college level education, complete or incomplete, already represent 79% of the total, and those with previous experience in the private sector increased from 34% to 51% (SEBRAE 2007).

Conclusion

Therefore, the rate of the entrepreneurs that had identified one opportunity grew from 15% to 43% (SEBRAE 2007); this shows that we have been changing from necessity entrepreneurship to opportunity entrepreneurship.

Conclusion

It should also be considered that at the institutional context, implementations of laws create special fiscal regimes which favor MSBs at federal, state and municipal levels.

Conclusion

This data shows that the entrepreneurial environment has been improving in the country, which has contributed to the increased rate of success of Micro and Small Enterprises in Brazil.

References Brazilian Institute of Geography and Statistics. Estatísticas do cadastro central de empresas 2001. Social Cmmuniqué from 22/Sep/03. Retrieved on April, 8, 2010 http://ibge.gov.br

HILLS, Gerald and HULTMAN, Claes. (2006). “Entrepreneurial marketing. Marketing broadering the horizons”. Stefan Lagrosen and Göran Svensson.

PASSOS, Carlos Arthur Krueger et. al. (2008). Empreendedorismo no Brasil 2007.

References SEBRAE. (2007). Conditioning factors of the mortality rate of micro and small business 2003 – Volume I.

SEBRAE. (2007). Conditioning factors of the mortality rate of micro and small business 2004 Volume II.

SEBRAE. (2007). Conditioning factors of the mortality rate of micro and small business 2005 Volume III.

SEBRAE. (2007). Conditioning factors of the mortality rate of micro and small business 2006 Volume IV.

SEBRAE and VOX POPULI. (2007). Survival and mortality of MSBs – Condicional factors.

Thank you very much !

Cristiano Machado

[email protected]