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News Article

International Cooperation Boosts SMEs in Latin America

By Alessa Flores | Tue, 09/08/2020 - 09:26

International development cooperation has become a useful tool to boost the development and economic promotion of MSMEs in the Latin American region. MSMEs are considered fundamental to our productive ecosystem in Latin America and the Caribbean, according to the Inter-American Development Bank, since they represent 99 percent of the companies in the region and generate 67 percent of the employment.

Unfortunately, less than 1 percent of the region's SMEs export. Similarly, the total number of companies in the region is equivalent to the number of companies in countries like Spain or the Republic of Korea and corresponds to a third of the existing exporting companies in countries like the US or Germany, according to ECLAC. On average, the World Trade Organization says MSMEs account for 34 percent of exports in developed countries.

According to INEGI, Mexico has about 4.1 million MSMEs, 95.4 percent of which are not involved in global value chains. INEGI also revealed that 34.8 percent of MSMEs said it was because they had no information on how to do that, 19.1 percent said it was unnecessary and 15.5 percent said they did not want to be involved in such chains. In comparison, INEGI explained that those MSMES participating in global value chains consider access to other markets, as well as having greater stability in demand and prices to be the main advantage to participate in other markets. 

According to AMEXCID, international development cooperation is a "joint effort by governments, supported by the dynamism of international organizations, civil society, academia and the private sector, to promote actions that contribute to sustainable development by transferring, receiving and exchanging information, knowledge, technology, experiences and resources." Therefore, support to MSMEs in their internationalization process can take different forms, such as assisting direct exports, indirect exports (sales of goods through a national third party that exports), contractual non-equity agreements and foreign direct investment (FDI) or other types of equity agreements, according to WTO.

A clear example is Centroamérica Exporta, a project funded by the EU and executed by the Guatemalan Export Association and the Central American Economic Integration Ministry. This project is an initiative to benefit MSMEs in the region through activities promoting business networking among companies in Latin America and Europe through MSMEs Service Centers coordinated by the Regional Center for Micro, Small and Medium Enterprise Promotion, explains SIECA.

One of the most recent projects in Mexico was the opening of Call 2020 in Support of Decentralized Cooperation Mexico-France. This was carried out by the Ministry of Foreign Affairs, through AMEXCID, the Ministry of Europe and Foreign Affairs of France. The call aimed to support projects in the fields of local and regional economic development, innovation and territorial promotion for the energy, agronomy and biotechnology, aeronautics, automotive and ICT sectors, as well as issues related to sustainable rural and urban development, environment and climate change. The selected projects should aim to develop networks of support between local economic development actors (institutional actors, research centers and companies) and encourage the creation of synergies between them, for example by creating clusters and poles for competitiveness, explained the AMEXCID and Ministry of Foreign Affairs of Mexico. 

AMEXCID has other ongoing projects involving the private sector. One of them is also a call for proposals from the Netherlands Enterprise Agency aimed at the non-governmental and private sectors for renewable energy issues.  

To date, 289 bilateral cooperation agreements have been signed by Mexico, most of them on economic, legal, educational, cultural and, lastly, technical and scientific cooperation. Mexico is also a member of 17 multilateral cooperation agreements, owing mainly to its participation in international organizations and multilateral environment agreements.

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Alessa Flores Alessa Flores Senior Journalist and Industry Analyst