Smaller companies key to Latin American growth

AP News
Posted: Nov 16, 2012 5:39 AM

CADIZ, Spain (AP) — Small and medium-sized companies in Latin America could play a key role in strengthening and consolidating the region's economic growth, which this year will slow down for the first time in nearly a decade, two international organizations said Friday.

The Organization for Economic Cooperation and Development and the Economic Commission for Latin America and the Caribbean said in their report that small and medium enterprises, or SMEs, account for 99 percent of businesses in the region and employ 67 percent of workers but their contributions to GDP and productivity remain low.

The report said large firms in Latin America have productivity levels six times higher than those of SMEs. In more developed economies, they are only 2.4 times more productive.

"Greater coordination is needed to help SMEs overcome obstacles in terms of access to financing, human capital and innovation," said OECD Secretary-General Angel Gurria in a statement before launching the report at an Iberoamerican Summit in this southern Spanish city.

The report said a common problem for such companies was their inability to scale up production and specialize.

It said access to finance was another obstacle, pointing out that only 12 percent of total credit in the region goes to these firms, compared with 25 percent in developed countries, which the OECD monitors. The report noted that SMEs are often charged much higher interest rates than large firms by commercial banks.

Economic growth in Latin America is forecast to ease from 4.4 percent last year to 3.2 percent in 2012, according to the report. Growth is then expected to accelerate again to 4 percent in 2013.

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The two organizations said Latin America's outlook remains relatively positive, but is exposed to uncertainty in the global economy.

The Iberoamerican summit brings Latin American leaders together with those of Spain and Portugal, two countries badly hit by Europe's economic crisis. Spain is in its second recession in three years and has a 25 percent unemployment rate, while Portugal is one of four eurozone countries to have received a sovereign bailout.


Ciaran Giles contributed from Madrid