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Latin America Day 2014 - Cologne
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Small and medium-sized enterprises in LAC
Present and future
65th Latin America Day 2014
Angel Melguizo
Head of the Latin American and Caribbean Desk
OECD Development Centre
Cologne - October 28, 2014
Economic slowdown in the short-term…
2 Source: IMF WEO Database, OECD forecasts for OECD 2014, CAF and ECLAC forecasts for LAC 2014
GDP growth in LAC and OECD (annual %)
-4
-2
0
2
4
6
8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
OECD LAC
Source: IMF WEO Database, OECD for 2014-2015 OECD projections, and Consensus Forecasts for LAC projections. 3
GDP growth in selected LAC economies and OECD (annual %)
-4
-3
-2
-1
0
1
2
3
4
5
6
7
Argentina Brazil Chile Colombia Mexico Peru Venezuela LAC OECD
2009-2013 2014 2015
… with significant differences among countries (Americas Latinas)
4
The middle income trap has proved to be especially persistent
GDP per capita in Latin America vs. selected OECD economies
(1990 USD PPP)
Source: OECD-ECLAC-CAF (2014), Latin American Economic Outlook 2015. Education, Skills and Innovation for Development.
Note: HI (High Income), UMI (Upper Middle Income), LMI (Lower Middle Income), LI (Low Income)
-
5 000
10 000
15 000
20 000
25 000
Chile Uruguay ArgentinaVenezuela C. Rica Mexico Colombia Brazil Peru Dom. Rep. S. Korea Ireland Spain
2013 1980 1950
LI
LMI
UMI
HI
5
Productivity is not everything, but in the long-term it is almost
everything (P. Krugman)
Total factor productivity in Asia and LAC (US=100)
Source: IDB (2014) Development in the Americas 2014. Rethinking Productive Development.
6
Source: OECD-ECLAC (2012), Latin American Economic Outlook 2013. SMEs Policies for Structural Change.
Distribution of firms by size in LAC and OECD (as percentages)
A high share of firms are small and micro, as in in the OECD…
0
10
20
30
40
50
60
70
80
90
100
Micro Small Medium Large
7
Relative productivity in selected countries in LAC and OECD (Large companies’ productivity= 100)
… but they tend to stay small, and are much less productive (vs big)
0
10
20
30
40
50
60
70
80
90
Argentina Brazil Chile Mexico Peru Germany Spain France Italy
Micro Small Medium
Source: OECD-ECLAC (2012), Latin American Economic Outlook 2013. SMEs Policies for Structural Change.
8
Enterprises that export directly or indirectly by size and by region (2019-10; as percentage)
SMEs internationalization remains low (vs other emerging regions)
0
10
20
30
40
50
60
Latin America Eastern Europe East Asia
Small Medium Large
Source: OECD-ECLAC (2012), Latin American Economic Outlook 2013. SMEs Policies for Structural Change.
3- El liderazgo de China
What are the main challenges?
• Business environment
• Financing
• Human capital (basic and middle management)
• Innovation
Differences across sectors, countries and within countries (e.g. Brazil)
Public-private (new productive development policies) and private-private
policy response (e.g. Volkswagen in Puebla)
9
Why is this the case, and what can be done?
Source: Own elaboration using OECD/PISA 2012 data 10
The region needs a human capital shock. Basic education…
Education performance and equity in education (2012)
11
Source: OECD-ECLAC-CAF (2014), Latin American Economic Outlook 2015. Education, Skills and Innovation for Development.
Proportion of firms that consider the lack of labour force with the adequate skills a significant restriction to growth (% formal firms)
… and the right high-quality skills
12
Connecting the productive sector with the educational system…
Unsatisfied demand for skilled labor by Latin American SMEs
(as percentage of firms)
0
10
20
30
40
50
60
70
80
90
100
Severe or very severe Moderate Little or none
Source: OECD-ECLAC (2012), Latin American Economic Outlook 2013. SMEs Policies for Structural Change.
13
… in a highly informal environment
Informality by firm size in LAC (2010; as percentage of workers)
Source: Bosch, M., A. Melguizo and C. Pages (2013), Better Pensions, Better Jobs. Towards universal coverage in LAC. IDB
14
Easing access to finance (rates and collateral) is important
Interest rates for SMEs and large firms (loans maturity over one year)
Brazil Chile Colombia
Ecuador El Salvador Peru
0
2
4
6
8
10
12
14
16
SMEs Large firms
0
5
10
15
20
25
30
35
SMEs Large firms
0
5
10
15
20
25
30
SMEs Large firms
0
2
4
6
8
10
12
14
16
18
SMEs Large firms
8.5
9
9.5
10
10.5
11
11.5
SMEs Large firms
0
2
4
6
8
10
12
14
SMEs Large firms
Source: OECD-ECLAC (2012), Latin American Economic Outlook 2013. SMEs Policies for Structural Change.
15
Innovation (already low) rarely stems from SMEs – not seen as
strategic, but would pay off
Investment in capital goods and R&D according to company size and sector (Percentage of firms)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Small
Medium
Large
Total
Total
Total
Small
Medium
Total
Small
Medium
Large
Total
Small
Medium
Large
Total
Ind
ust
ry
Ind
ust ry
Se rvi
ce sIn
du
stry
Ind
ust
rySe
rvic
esR+D (external) R&D (internal) Acquisition of machinery and equipment
Source: OECD-ECLAC (2012), Latin American Economic Outlook 2013. SMEs Policies for Structural Change.
16
New productive development policies
Modern productive development policies framework and instruments:
• Innovation
• Capabilities (work-related)
• Support to SMEs New firms (generally SMEs); private sector techniques (e.g. incubators)
• Horizontal and vertical industrial policies
• …
¡Gracias! Wir sehen uns auf dem 66. Lateinamerika Tag
