SME Policy Index: Latin America and the Caribbean 2024

9. Dimension 7: Access to market and internationalisation

Abstract

Despite the advantages, SMEs are less inclined to internationalise compared to larger counterparts. The pathways to internationalisation for SMEs depend on their skills, resources, and ability to collaborate with domestic and international partners, facilitating direct or indirect involvement in imports and exports.

This chapter evaluates policies and programmes supporting SMEs in internationalising their operations, trade facilitation efforts, engagement in e-commerce, attainment of quality standards, and benefiting from Latin American and Caribbean (LAC) integration efforts.

Assessment Framework

Internationalisation is often perceived solely as a process linked to exports; however, from a broader standpoint, it encompasses a company's decision to target one or more markets beyond its original location. It is a dynamic process that adjusts to changes in various factors (Peralta-Jiménez and Tonon-Ordóñez, 2022[1]). While approximately 10 percent of Latin American SMEs export some of their production, in Europe, this figure rises to at least 40 percent. Latin American SMEs represent a diverse spectrum, ranging from microenterprises engaged in informal self-employment to innovative firms with robust export capabilities. With consistent and co-ordinated policies, SMEs could serve as agents of structural transformation by enhancing productivity (ECLAC, s.f.[2]).

Despite the advantages, SMEs are less inclined to internationalise compared to larger counterparts. The pathways to internationalisation for SMEs depend on their skills, resources, and ability to collaborate with domestic and international partners, facilitating direct or indirect involvement in imports and exports. SME internationalisation yields several benefits, including access to new markets and optimised resource utilisation. By tapping into a global market of over 8 billion people, SMEs can boost sales and diversify revenue streams. Furthermore, internationalisation fosters efficiency in resource management, such as labour, capital, and technology, as SMEs adapt to become more competitive and enhance production processes. Additionally, SMEs can glean valuable insights from the best practices of companies worldwide, leading to improved management, heightened productivity, and innovation in products and services (OECD/CAF, 2019[3]).

Regarding the evaluation framework for policy development to promote SME internationalisation, it is structured around policies and programmes supporting SMEs in internationalising their operations, trade facilitation efforts, engagement in e-commerce, attainment of quality standards, and benefiting from Latin American and Caribbean (LAC) integration efforts. A solid and stable institutional framework is crucial for designing and implementing programmes that address SME needs to overcome internationalisation obstacles. Additionally, programmes facilitating and streamlining export processes and improving products and processes under international quality schemes must be established. Furthermore, following the COVID-19 pandemic, there has been a clear need to implement policies to enhance e-commerce usage to increase regional competitiveness. Finally, one of the objectives of regional groupings or integration mechanisms, whether politically or economically motivated, is to facilitate commercial interaction between companies. In other words, integration processes establish normative and institutional frameworks that promote competition and enhance SME competitiveness.

The assessment framework for this dimension comprises (see Figure 9.1):

• Support programmes for internationalisation: This sub-dimension encompasses a wide possible range of support provided by export promotion agencies (EPAs) to SMEs.

• Trade facilitation: This sub-dimension assesses public initiatives aimed at aiding SMEs in complying with customs procedures. Specifically, they evaluate the availability of resources to address informational gaps, such as manuals, guidelines, support centres, or online trade portals. Additionally, they gauge advancements in streamlining customs processes, such as the implementation of e-customs platforms, Authorised Economic Operator (AEO) programmes, or National Single Windows for trade procedures. Furthermore, these indicators consider whether these initiatives cater to SME-specific needs and if support programmes are effectively implemented. Lastly, this sub-dimension incorporates the 2022 OECD Trade Facilitation Indicators (TFIs).

• Use of E-commerce: This sub-dimension examines initiatives aimed at promoting broader adoption of e-commerce among SMEs, encompassing regulatory considerations and government policies aimed at facilitating SMEs' access to digital platforms. Additionally, it assesses the provision of support services to address barriers hindering SMEs from leveraging the opportunities presented by increasing digital trade.

• Quality standards: The indicators within this sub-dimension assess public support programmes aimed at obtaining quality certification. These indicators consider factors such as private sector consultation, availability of sufficient funding, extent of service quality certification coverage, and the presence of comprehensive monitoring mechanisms.

• Taking advantage of the benefits of LAC integration: The indicators in this sub-dimension assess whether the LA9 countries are utilising their regional integration agendas to enhance SME development. This includes activities such as fostering regional value chains, implementing joint trade facilitation measures, establishing collaborative business development programmes, and implementing joint export promotion mechanisms.

Figure 9.1. Assessment framework – Access to market and internationalisation

The weighting of the five sub-dimensions was determined through a combination of expert input and discussions with national coordinators during the 2019 assessment. Sub-dimension 7.1 was allocated a weight of 40%, while the remaining four sub-dimensions were assigned equal weights of 15% each. Within four of these sub-dimensions (7.1, 7.3, 7.4, 7.5), thematic blocks were further divided into planning and design (35%), implementation (45%), and monitoring and evaluation (M&E) (20%). Sub-dimension 7.2, focusing on trade facilitation, differs slightly as it comprises four thematic blocks, each carrying a weight of 25%.

The weights assigned to each sub-dimension do not suggest that policymakers should prioritise export promotion over other measures concerning "access to market". Instead, priorities should be determined on a case-by-case basis, considering a clear articulation of policy objectives and an analysis of firm-level dynamics in each country.

Analysis

Internationalisation remains a challenge for SMEs. Establishing policies and agreements aimed at streamlining international trade for SMEs is needed, entailing the elimination of bureaucratic hurdles and the provision of robust support mechanisms for exporting their goods.

In the dimension of Access to markets and Internationalisation, the average score among the 9 LAC countries is 4.26 (see Figure 9.2). Overall, countries have robust strategies to support SME internationalisation, incorporating standardised facilitation schemes addressing various business needs such as training, market intelligence, trade facilitation platforms, and opportunities for interaction with potential international partners. The analytical framework used to support SME internationalisation considers both improving conditions for export promotion and implementing precise policy instruments to aid SME internationalisation.

Figure 9.2. Weighted scores for Dimension 7: Access to market and internationalisation

Note: Scores are on a scale of 1 to 5, with 5 being the highest. The comparison with 2019 is not exact due to changes in the methodology. Please refer to Chapter 2 for further information on the methodology. 2019 data for Brazil and Paraguay are not available as they did not participate in the 2019 assessment.

Sub-dimension 7.1: Support programmes for internationalisation

Most of the countries examined have established internationalisation policies guided by a strategic framework, either in the form of a plan or a national policy. These strategies serve as institutional frameworks for the development of programmes tailored to meet both the needs of businesses and the country's developmental objectives. Consequently, countries establish agencies for co-ordinating the implementation of public policies, tasked with promoting exports and facilitating the internationalisation process for SMEs. Consultation processes are carried out through various means, including focus groups comprising relevant stakeholders or consultations with business chambers, with feedback from programme beneficiaries also being considered. It is noteworthy that these programmes typically target SMEs.

Table 9.1. Sub-dimension 7.1 scores: Support programmes for internationalisation

	Argentina	Brazil	Paraguay	Uruguay	Chile	Colombia	Mexico	Peru	Ecuador	LA9	Mercosur	PA
Total score	4.91	4.38	4.22	4.50	5.00	4.64	4.73	4.91	4.46	4.64	4.50	4.82

Note: Scores are on a scale of 1 to 5, with 5 being the highest.

LA9 countries acknowledge the importance of fostering exports and enhancing the international competitiveness of SMEs

Countries like Chile (5.0), Argentina (4.91), Peru (4.91), and Mexico (4.73) top the rankings in this sub-dimension (see Table 9.1). However, all countries score above 4 points, indicating a strong performance in generating programmes to support internationalisation. Overall, LA9 countries recognise the importance of promoting exports and enhancing international competitiveness as part of their medium-term development strategies. Despite these achievements, there is a need for greater emphasis on monitoring and evaluating implemented programmes and initiatives. This entails going beyond merely quantifying user numbers and measuring impacts to identify areas for policy design or implementation improvements. Collaboration among government entities is crucial for programme efficiency, requiring the development of accessible tools or platforms for entrepreneurs. Distance training platforms, for example, have gained prominence amid the COVID-19 pandemic, highlighting the importance of adaptation to current challenges.

Sub-dimension 7.2: Trade facilitation

The region is committed to establishing mechanisms aimed at enhancing trade through improved documentation, procedures, information, and tariff systems. This underscores the importance placed on the planning and design of trade facilitation programmes, which align closely with the objectives outlined in strategic plans. To achieve this, countries provide guidelines to direct companies through the export process and offer training that integrates these aspects comprehensively.

Table 9.2. Sub-dimension 7.2: Trade facilitation

	Argentina	Brazil	Paraguay	Uruguay	Chile	Colombia	Mexico	Peru	Ecuador	LA9	Mercosur	PA
Total score	4.36	4.36	3.32	4.35	4.73	4.41	3.83	4.72	4.65	4.30	4.10	4.42

Note: Scores are on a scale of 1 to 5, with 5 being the highest.

LA9 countries have established Foreign Trade Single Windows as part of their endeavours to streamline trade processes for SMEs

These windows centralise and simplify procedures related to international trade, streamlining processes, and reducing bureaucratic burdens on companies. Furthermore, certifications are offered for Authorised Economic Operators (AEO), recognising companies that adhere to security and customs compliance standards. However, the development of AEO remains limited, with only a few companies currently holding this accreditation. Additionally, consideration should be given to implementing special fees for certified AEO companies to provide them with additional incentives to engage in international trade.

In this sub-dimension, the countries with the highest scores are Chile (4.73), Peru (4.72), Ecuador (4.65), Argentina, and Brazil, each scoring 4.36 (see Table 9.2). While the regional for LA9 countries is 4.30, indicating overall strong performance.

Sub-dimension 7.3: Use of E-Commerce

The adoption of e-commerce in LAC has seen remarkable expansion, bolstered by supportive policies and regulations aimed at fostering its advancement. Leading nations in the region have executed comprehensive strategies to stimulate financial inclusion, digital empowerment, and confidence in online transactions. This concerted effort has positioned e-commerce as a pivotal catalyst for economic growth and societal inclusion across the region.

Table 9.3. Sub-dimension 7.3: Use of E-Commerce

	Argentina	Brazil	Paraguay	Uruguay	Chile	Colombia	Mexico	Peru	Ecuador	LA9	Mercosur	PA
Total score	3.66	4.30	3.72	4.46	4.17	3.90	4.26	3.57	3.90	3.99	4.04	3.97

Note: Scores are on a scale of 1 to 5, with 5 being the highest.

There is a varying landscape regarding e-commerce regulation in LA9

Regulations governing E-commerce emphasise aspects like data usage and digital payment systems. Implementation strategies are typically guided by digital transformation plans aligned with broader national development agendas, ensuring policy coherence and synergy.

Among LA9 countries, Uruguay (4.46), Brazil (4.30), Mexico (4.26), and Chile (4.17) emerge as top performers in this sub-dimension (see Table 9.3). They are working to successfully cultivate an enabling environment for the growth and development of e-commerce, encouraging the adoption of digital technologies among citizens and businesses alike. Their strategic initiatives have propelled the digital economy forward and promoted financial inclusion, opening up opportunities for e-commerce across various economic sectors.

Additionally, countries in the region have implemented programmes to foster e-commerce, often focusing on training to integrate digital tools into marketing and sales processes. Initiatives to enhance technological infrastructure, provide digital training, and instil trust in online transactions have also been promoted. Some countries offer public e-commerce platforms for businesses. Despite the surge in e-commerce adoption following the COVID-19 pandemic, comprehensive monitoring and evaluation mechanisms have not been widely implemented across the region.

Sub-dimension 7.4 Quality Standards

Promoting the effective implementation of quality standards within the context of internationalisation policies can yield numerous benefits for SMEs in the region. Quality standards serve as a crucial tool for enhancing competitiveness, enabling SMEs to meet requirements and access demanding markets. They also facilitate the identification and resolution of potential production issues, thereby increasing efficiency and profitability. Additionally, adherence to quality standards fosters international trade relations and encourages alignment with regulations and standards in international markets, averting potential sanctions and trade barriers.

Table 9.4. Sub-dimension 7.4 Quality Standards

	Argentina	Brazil	Paraguay	Uruguay	Chile	Colombia	Mexico	Peru	Ecuador	LA9	Mercosur	PA
Total score	4.32	4.53	4.31	5.00	4.31	4.49	4.61	4.10	3.57	4.36	4.54	4.38

Note: Scores are on a scale of 1 to 5, with 5 being the highest.

LA9 countries recognise the importance of complying with international quality standards as a fundamental part of their export processes.

Countries in the region have established policies aimed at supporting companies in enhancing their quality standards according to international techniques and regulations. Typically, this objective is incorporated into National Development Plans. To achieve this, LA9 countries establish agencies responsible for developing the national quality infrastructure and conformity assessment systems. These agencies play a dual role: granting certifications directly to companies and to public and private laboratories that contribute to compliance with international quality standards and providing updated training on quality processes.

Overall, the countries perform well in this sub-dimension, although many lack robust systems for monitoring and evaluating the programmes and strategies implemented. Leading countries such as Uruguay (5.0), Mexico (4.61), Brazil (4.53), and Colombia (4.49) are particularly noteworthy. The average score for LA9 is 4.36 (see Table 9.4). Besides the training offered by standardisation and metrology agencies, other programmes integrate the enhancement of quality standards across all their training initiatives, especially for exporting companies.

Sub-dimension 7.5 Taking advantage of the benefits of LAC integration

Table 9.5. Sub-dimension 7.5 Taking advantage of the benefits of LAC integration

	Argentina	Brazil	Paraguay	Uruguay	Chile	Colombia	Mexico	Peru	Ecuador	LA9	Mercosur	PA
Total score	4.60	1.09	1.81	4.05	3.91	3.60	4.17	3.58	3.47	3.36	2.89	3.81

Note: Scores are on a scale of 1 to 5, with 5 being the highest.

There are varying perceptions regarding the benefits of regional alliances, even among countries within the same integration mechanism.

This sub-dimension exhibits significant heterogeneity, despite all analysed countries belonging to at least one subregional integration mechanism, with some, like Peru and Colombia, participating in two, namely the Pacific Alliance (PA) and the Andean Community (CAN). Interestingly, countries hold differing perceptions regarding the benefits of these alliances, even within the same integration mechanism. For instance, within Mercosur, Brazil and Paraguay report limited benefits, while Uruguay and Argentina perceive greater advantages. This complexity underscores the group-oriented nature of such dynamics, prioritising collective benefits over individual gains. Similarly, in the case of Colombia and Peru, these countries place greater emphasis on the benefits derived from the PA compared to the Andean Community. Despite both integration mechanisms boasting active institutional frameworks for SMEs, such as CAMIPYME in the CAN and the Technical Group on SMEs and Entrepreneurship in the PA, variations in perceived benefits persist.

Overall, the integration mechanisms within the countries lack comprehensive strategic plans with clearly defined and measurable objectives aimed at enhancing sub-regional exports and the internationalisation of SMEs. This absence hampers the implementation and sustainability of standardised programmes that could yield equivalent benefits for all participating countries over the long term. Furthermore, the limited availability of initiatives tailored to SMEs is compounded by insufficient monitoring and evaluation mechanisms, as well as inadequate financing. Among the countries, Argentina (4.60), Mexico (4.17), Uruguay (4.05), and Chile (3.91) reported the greatest benefits from integration, with the LA9 average standing at 3.36 (see Table 9.5).

Access to market and internationalisation for the development of women-owned or led SMEs

LA9 countries largely incorporate a gender perspective into their export promotion programmes

The "Argentina to the World" programme aims to promote women's leadership and equitable participation in international business. It targets companies, SMEs, female entrepreneurs, and cooperatives led by women who are either looking to start exporting or are already engaged in international trade and seek to enhance their performance.

The “Mujer Exporta MX” initiative hosts a series of specialised training sessions, workshops, and seminars aimed at providing resources and tools to women exporters in Mexico. The programme focuses on helping them identify opportunities and compete effectively in the export market.

In Peru, the "Ella Exporta" programme, targets businesswomen and decision-makers with internationalisation strategies. Through various training sessions, participants learn about export coaching, logistics, financial management, corporate social responsibility, digital marketing, business model development, and negotiation techniques.

Meanwhile, the Government of Uruguay offers a six-week course designed for women owners or executives of formally established companies operating in the domestic or foreign markets. This course strengthens their knowledge and skills related to international trade to better position themselves in the regional market.

Lastly, in Chile, the Mujer Exporta programme aims to raise awareness of gender issues and empower women-led exporting companies across different sectors. While not a government initiative per se, the programme facilitates access to strategic information, provides training, and offers support to companies in their internationalisation efforts.

The way forward

Table 9.6. Policy recommendations for dimension 7: Access to Market and Internacionalization

Policy area	Challenges and opportunities	Policy recommendations
Support programmes for internationalisation	SMEs have difficulties in accessing existing support programmes, either due to lack of information, complex requirements or cumbersome bureaucratic processes. The different SME support programmes are not well articulated with each other, which makes it difficult for companies to take advantage of them.	Improve communication channels between trade promotion agencies and SMEs, particularly in the provinces, through strategic partners. Consolidate the interoperability of export promotion agencies and broaden the participation of public and private actors in the design and implementation of policies and programmes. Establish monitoring and evaluation systems of internationalisation support programmes, in order to have tools for their continuous improvement. Implementing impact assessment analysis methodologies.
Trade facilitation	SMEs continue to face high trade barriers. SMEs have difficulties in obtaining financing for their internationalisation activities.	Strengthen the training of SMEs to obtain certification as AEO, in an integrated manner in the programmes of trade promotion agencies; as well as facilitate their accreditation. Improve SMEs' access to financing, through credit lines for internationalisation, which allow companies to grow and export.
Use of E-Commerce	Generate a robust regulatory framework that allows regular bodies to properly supervise the sector and generate targeted public policies for the growth of e-commerce. The technological infrastructure in some countries is still at an early stage of development for e-commerce, which limits the opportunities for SMEs.	Implement programmes for technical assistance, training, financing and access to digital platforms for e-commerce. Encourage the creation of national marketplaces and e-commerce platforms. Improve technological infrastructure and internet connectivity in rural areas, supported by operating companies. Adapt and strengthen the existing regulatory framework to facilitate regulation and competition and create incentives for the growth of e-commerce.
Quality Standards	SMEs do not have sufficient knowledge about international quality standards, which makes it difficult for them to access new markets.	Provide incentives and technical assistance to SMEs to adopt international quality standards. Disseminate the benefits of adopting quality standards, in a cross-cutting manner in the internationalisation programmes implemented.
Taking advantage of the benefits of LAC integration	There is lack of coordination LA9 to support SMEs in their internationalisation.	Implement standardised and collaborative trade promotion and internationalisation programmes for SMEs. This in the context of sub-regional integration mechanisms. Strengthen the institutional framework for the design, implementation and monitoring of SME programmes in the framework of sub-regional agreements such as Mercosur, the Pacific Alliance and CAN. This can be done by strengthening the SME working groups of each integration mechanism.

References

[2] ECLAC (s.f.), Acerca de Microempresas y Pymes, https://www.cepal.org/es/temas/pymes/acerca-microempresas-pymes.

[3] OECD/CAF (2019), Latin America and the Caribbean 2019: Policies for Competitive SMEs in the Pacific Alliance and Participating South American countries, SME Policy Index, OECD Publishing, Paris, https://doi.org/10.1787/d9e1e5f0-en.

[1] Peralta-Jiménez, N. and L. Tonon-Ordóñez (2022), Pequeñas y medianas empresas latinoamericanas: Dificultades de Internacionalización, https://revistas.uide.edu.ec/index.php/innova/article/view/2102.