UNLOCKING SME POTENTIAL IN LATIN AMERICA AND THE CARIBBEAN
ISSUE BRIEF
Unlocking SME Potential in Latin America and the Caribbean SEPTEMBER 2022
The Atlantic Council’s nonpartisan Adrienne Arsht Latin America Center (AALAC) broadens understanding of regional transformations while demonstrating why Latin America and the Caribbean matter for the world. The center focuses on pressing political, economic, and social issues that will define the region’s trajectory, proposing constructive, results-oriented solutions to inform public sector, business, and multilateral action based on a shared vision for a more prosperous, inclusive, and sustainable future. AALAC – home to the premier Caribbean Initiative – builds consensus for action in advancing innovative policy perspectives within select lines of programing: U.S. policy in the Western Hemisphere; Colombia’s future; Venezuela’s multidimensional crisis; Central American prosperity; US-Mexico ties; China in the Americas; Brazil’s trajectory; Caribbean development; regional economic development and commerce; and energy transitions. Jason Marczak serves as the center’s senior director.
ATLANTIC COUNCIL
ISSUE BRIEF
EVA LARDIZÁBAL AND PEPE ZHANG
S
mall and medium-sized enterprise (SME) development is critical for broadbased and sustained economic growth as Latin America and the Caribbean (LAC) grapple with ongoing global shocks following two years of pandemic-related fiscal challenges. SMEs are a primary source of job creation, comprising 99.5 percent of firms in the region, and accounting for 60 percent of employment.1 Yet, these same firms represent only 20 percent of gross domestic product (GDP), due to constraints spanning financial to productivity issues. Helping SMEs both overcome growth constraints and provide higher-quality jobs is important in the context of today’s disparate and fragile economic recovery. SMEs are particularly vulnerable to inflation and labor-market weaknesses from scarcity to informality.2 With risks of lasting consequences still present, returning to pre-pandemic levels of output is insufficient for the economy in general, and for SMEs.3
1
“Supporting SME Development in Latin America and the Caribbean,” Organisation for Economic Co-Operation and Development,” 2020, https://www.oecd.org/latin-america/regional-programme/ productivity/sme-development/#:~:text=Small%20and%20medium%2Dsized%20enterprise.
2
“Employment Situation in Latin America and the Caribbean: Real Wages during the Pandemic,” Economic Commission for Latin America and the Caribbbean and International Labor Organisation, June 2021, https://repositorio.cepal.org/bitstream/handle/11362/47927/S2200361_en.pdf?sequence=1&isAllowed=y; Roxana Maurizio, “Employment and Informality in Latin America and the Caribbean: An Insufficient and Unequal Recovery,” International Labor Organisation, September 2021, https://www.ilo.org/wcmsp5/ groups/public/---americas/---ro-lima/---sro-port_of_spain/documents/genericdocument/wcms_819029.pdf.
3
Carlos Felipe Jaramillo, “In 2022, Latin America and the Caribbean Must Urgently Strengthen the Recovery,” World Bank, February 4, 2022, https://www.worldbank.org/en/news/opinion/2022/02/07/ latin-america-and-the-caribbean-must-urgently-strengthen-the-recovery.
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