MSMEs: Drivers to Overcome COVID-19 Crisis in Latin America

The health care crisis, the confinement measures adopted by authorities to prevent and contain the COVID-19 pandemic in Latin America, have hit micro, small and medium-sized enterprises (MSMEs) the hardest, which play a key role in the protection of formal jobs and boosting economic and social recovery by accounting for 99% of the formal business fabric and employing more than 60% of the workforce in the region.

On the international day of micro, small and medium-sized enterprises (MSMEs), on June 27, CAF underscores the importance of boosting productivity and competitiveness to foster economic upturn and long-term sustainability through internationalization, productive integration into chains and clusters and a great deal of innovation. It also reiterates its support at this juncture through a regional anti-cyclical assistance facility for local development banks to cope with the effects of COVID-19, by providing financial resources for up to USD 1.6 billion as well as non-financial resources, to support the efforts of regional governments in favor of productive recovery through MSMEs.

“In 2019, we helped increase productivity of 23,213 SMEs, and we expect a greater effect through liquidity lines and other facilities to local development banks and commercial banking in addition to the strategy of ensuring more productive and competitive SMEs, with an emphasis on internationalization, innovation and productive integration, as well as the incorporation of socially and environmentally sustainable practices,” said CAF executive president Luis Carranza Ugarte.

Boosting productivity and competitiveness of SMEs in Latin America materializes by supporting countries in their public strategies and policies for this sector, developing capacity-building activities, providing financial and non-financial resources to microfinance entities, channeling institutional investment funds with risk-sharing models to support MSMEs, and supporting startups that develop innovative solutions in processes, products and business models tailored to the new reality.

CAF is supporting the region in an agile and timely manner to overcome the COVID-19 pandemic through a series of financial and technical instruments that complement the measures that governments are implementing. The comprehensive strategy includes a regional emergency credit line of USD 2.5 billion to reinforce countercyclical economic measures, which comes in addition to a credit line of USD 50 million per country to address the health care emergency, non-reimbursable funds for USD 400,000 per country, as well as knowledge generation and online training, among others.