Digitalization, Innovation, Value Chains and Supplier Relocation as Opportunities for SMEs in the New Normal

The booming ecommerce, with its associated cost reduction and greater accessibility, is one of the opportunities for small and medium-sized enterprises (SMEs) in Latin America, which have been accelerated due to the digital transformation caused by the COVID-19 pandemic.  This was one of the examples addressed at the CAF Conference: The New Economy and the Future of Latin American SMEs, held online and on site in Mexico, featuring 34 leaders of the region.   

In his opening remarks along with José de Luna, head of the Public Credit and International Affairs Unit at the Mexican Ministry of Finance and Public Credit, CAF executive president Luis Carranza Ugarte stressed that the SME support agenda transcends their digital transformation, and includes a vision of inclusive development, boosting productivity and the road to prosperity in Latin America.

“This year we have re-directed USD 1.6 billion in lines of credit to support local development banks in their SME financing strategy. We have channeled funds to commercial banking in lines and guarantees in an effort to provide support, and we have doubled our lines with microfinance institutions, steadfast supporters of micro-enterprises, which have been hit hardest by the pandemic. We also support them with non-financial resources like innovation, internationalization, patents, and particularly, integration programs within value chains and business clusters,” Carranza added.

In addition, José de Luna noted: “Confinement changed people’s consumption habits, but opened up opportunities for SMEs to develop new business models, find better product and service distribution channels, and boost their productivity through the use of technology.  The treaty between Mexico, the United States and Canada is a golden opportunity that we must all seize; I think it is a great chance that we should not miss,” he added.

In the first panel: Crisis, Revival and the Leap to a New Economy, experts stressed the need to improve access to financing, training and digitalization of SMEs as measures to complement government plans to keep them afloat and help them adapt to the new reality. Costa Rica’s Minister of Economy, Industry and Trade Victoria Hernández highlighted the opportunity FinTech companies have to develop an immediate response model for SMEs; while Financiera Sustentable CEO Patricia Armendáriz highlighted the chance for entrepreneurs to capitalize on the basic and healthy consumption habits imposed by the pandemic.

Trends in global value chains, challenges and opportunities for SMEs in the region was the theme of the second panel, in which the leaders explained that the uncertainty caused by COVID-19, coupled with geopolitical and trade tensions, have opened a window for supplier relocation and strengthening regional value chains and clusters for the benefit of SMEs.

In the third panel: Accelerating Digital Transformation for SMEs, panelists stressed the need to strengthen human capital in the region to increase the diversity of talent in technicians, specialists and professionals, among others. “The pandemic forced us to take an incredible digital transformation leap. Now, the challenge is to keep that momentum and not turn back,” said Sylvia Constaín, Vice President of Government Relations for Latin America and the Caribbean at Visa and former ICT Minister of Colombia. Furthermore, Ernesto Kruger, founder of Kruger Corporation, recommended entrepreneurs to “first focus on their business and not on other regulatory problems in order to thrive,” and he added: “Talent is there, but progress must be made in regulations within countries because it is slower than entrepreneurs are reacting.”

The pandemic took all companies out of their comfort zone and made them rethink their business models, processes and customer service. The managers of Mercado Libre, Ualá, Laboratoria, CO_ Capital and the Entrepreneurship Center at IAE Business participated in the fourth panel discussing how they faced these challenges and opportunities to come out of this juncture stronger .

In the last panel: Public Policies to Drive SMEs towards the New Economy, Mexico’s Secretary of Economy Graciela Márquez Colín presented the initiatives conceived to support the MSMEs in the country. “We have been working on a two-fold strategy: prioritizing low-income groups and the most vulnerable micro-enterprises with transfers, preferential credit and payment facilities. The second is to support SMEs with targeted, cost-efficient measures through guarantees, training, e-wheels, digital inclusion, last mile technology, smart specialization, regulation and government procurement, among others,” Márquez explained.

The CAF Conference ended with the award for regional winners of the ”Ideas for the Future” University Essay Competition granted by CAF Secretary General Víctor Rico and Ibero-American Secretary General Rebeca Grynspan. The Guillermo Perry Award was given to Omari Joseph from the University of the West Indies in Trinidad and Tobago; the 2nd prize was for Kevin Steven Mojica from the University of Los Andes in Colombia; and the 3rd prize went to Nazarena Marano Suffern from Torcuato di Tella University in Argentina.