SME Policy Index: Latin America and the Caribbean 2024

3. Dimension 1 : Institutional Framework

Abstract

This chapter presents the finding in the Institutional Framework dimension that assesses the development status of essential components in SME policy and evaluates the adoption of good practices in policy design, implementation, monitoring, and evaluation.

Countries demonstrating advancements attribute their success to adopting public policy recommendations and vigilant monitoring of good practices. The diverse SME institutional framework in LA9 reveals distinct sub-groups among the region based on their implementation of SME policy components and integration of best practices. In contrast, challenges in some countries are tied to persistent political and economic instability, leading to a lack of strategic direction, implementation weaknesses, and insufficient plans to tackle informality.

Assessment Framework

This dimension assesses the level of development of key components regarded as essential building blocks of SME Policy, along with the adoption of good practices in policy design, implementation, monitoring, and evaluation. It comprises four sub-dimensions covering: 1) the country’s SME definition; 2) SME policy design, implementation, and policy co-ordination; 3) framework and practices of public-private consultations; and 4) policy actions taken to reduce informality (see Figure 3.1). Additionally, it incorporates a not-scored analysis of the gender approach within this dimension.

• SME definition: This sub-dimension focuses on the introduction of a legally based and operationally sound SME definition, including four indicators: 1) the presence of a legal SME definition in the country: 2) the number of parameters used in the SME definition; 3) the use of a single SME definition across the public administration; and 4) the inclusion of an independence clause in the SME definition. Methodological adjustments have been made compared to the 2019 pilot edition, specifically concerning the individual weighting values assigned to the assessed elements.

• Strategic planning, policy design and co-ordination: This sub-dimension examines the clarity and comprehensiveness of the SME strategy. It assesses whether the strategy includes a well-defined vision statement outlining the expected performance of the SME sector. Additionally, it evaluates the presence of quantifiable objectives and intermediary targets, along with a detailed presentation of how the government plans to organise public policy to achieve these objectives. The assessment also considers whether the strategy incorporates a section on the planned sequence of policy interventions and how these interventions are supported and implemented.

• Public-private consultations (PPCs): This sub-dimension evaluates the presence of open and well-structured consultation mechanisms with organisations representing private enterprises. It also assesses the capacity of the governmental institution to engage in a constructive public-private dialogue. Furthermore, it examines how these mechanisms contribute fundamentally to the elaboration of well-designed policies for the SME sector.

• Measures to address the informal economy: This sub-dimension begins by examining the efforts made by countries to analyse and understand the issue of informality. It then evaluates the government's policy response to informality, focusing on enterprise informality and the status of policy implementation. The final set of indicators covers the phase of monitoring and evaluation.

Figure 3.1. Assessment Framework - Institutional Framework

Sub-dimension 1.2 Strategic planning, policy design and co-ordination has been assigned the highest weight (40%), while the remaining sub-dimensions each carry a weight of 20%.

Analysis

Figure 3.2. Weighted scores for Dimension 1: Institutional Framework

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.

The dimension scores (see Figure 3.2) reveal a broad categorisation of the LA9 countries into two sub-groups. The first group comprises countries such as Brazil, Chile, Mexico, and Uruguay, which have implemented most of the SME policy building blocks, resulting in dimension scores above 4 out of 5. In contrast, the second group, consisting of Argentina, Colombia, Ecuador, Paraguay, and Peru, encompasses countries at various stages of developing the institutional framework for SME policy. Challenges in this group often revolve around a lack of clear strategic direction, weaknesses in policy implementation, and a dearth of plans to reduce informality.

It is noteworthy that among the countries that underwent evaluation in the LAC SME Policy Index (SME PI) 2019, Chile and Uruguay have demonstrated progress. This advancement can be attributed to their adoption of public policy recommendations and the monitoring of good practices, as evidenced by the improvement in their scores. On the other hand, Argentina, Colombia, Ecuador, and Peru have seen a reduction in their scores for this dimension. This reduction is partly attributed to disruptions in policy-making caused by the COVID-19 pandemic since 2020. However, ongoing political and/or economic instability has contributed to the persisting challenges. Mexico, which previously held the highest score for this dimension, has also experienced a reduction, mainly due to changes in the country's development strategy, assigning a lower priority to SME policy and prompting a restructuring of the institutional framework for SME policy.

Sub-dimension 1.1: SME definition

Table 3.1. Sub-dimension 1.1: SME definition

	Argentina	Brazil	Paraguay	Uruguay	Chile	Colombia	Mexico	Peru	Ecuador	LA9	Mercosur	PA
Total score	4	4	4	4.7	4.5	4.33	4.33	3	4.33	4.13	4.18	4.04

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

The insights gained from SME policy assessments across more than 40 emerging economies highlight that the effectiveness of SME policy is significantly reliant on the development of specific building blocks and the adoption of best practices.

The initial building blocks and practices include the establishment of a clear and easily applicable SME definition, encompassing micro, small, and medium-sized enterprises. This definition should be based on multiple parameters, such as total employment, annual turnover, and total assets. The SME definition serves a functional role in delineating the scope of SME policy. A best practice involves adopting a unified definition applied consistently across the public sector administration, facilitating uniformity in SME data collection.

While all LA9 countries have in place an official SME definition, the way it has been set varies considerably.

In this sub-dimension, regional performance (see Table 3.1) is relatively high, boasting an average score of 4.13 out of 5. All LAC countries have officially adopted an SME definition, encompassing sub-definitions for micro, small, and medium-sized enterprises. In most cases, this definition hinges on two parameters - typically full-time employment and annual turnover - with Colombia being exception by incorporating three parameters (employment, turnover, and total assets). Peru, facing challenges in collecting reliable data on employment and assets, has a definition based solely on annual turnover. Argentina and Uruguay stand out as the only countries featuring an explicit independence clause in their SME definitions.

The SME definition in all LAC countries is established by law or government decree, often included in legislative acts that set the country's SME institutional framework. This ensures the legal adoption of the SME definition by all public administrative bodies in most countries. However, Peru and Brazil stand as exceptions where multiple definitions exist. In Peru, the definition issued by the Ministerio de la Producción (Ministry of Production, PRODUCE) has not been legally adopted by other administrations. In Brazil, various institutions operating in the SME policy domain, such as the Federal Revenue Board, Instituto Brasileiro de Geografia e Estatística (Brazilian Institute of Geography and Statistics, IBGE), the Banco Nacional de Desenvolvimento Econômico e Social (National Bank for Economic and Social Development, BNDES), and the Serviço Brasileiro de Apoio às Micro e Pequenas Empresas (Brazilian Micro and Small Business Support Service, SEBRAE), employ their own definitions based on different parameters.

To confirm their status and access public incentives and support programmes, SMEs in Argentina, Ecuador, Peru, and Uruguay are required to register annually with the SME registry managed by the ministry responsible for SME policy. This registration requirement imposes an additional administrative burden on SMEs, and its efficiency could be enhanced by improving data exchange across different administrations, such as the tax administration, the Ministry of Labour, and the company registry. Despite the clear SME definitions shaping the scope of public policy for small enterprises, the substantial informal sector in many LAC countries means a significant number of enterprises, particularly micro and family-run ones, operate outside the purview of public policy. This situation leads to their exclusion or misrepresentation in SME statistics, undermining the relevance of the legal SME definition.

Sub-dimension 1.2: Strategic planning, policy design, co-ordination and implementation

In addition to the building blocks related to the definition of SMEs, other key elements regarding strategic planning, policy design, co-ordination, and implementation include:

• Clear assignment of SME policy mandate: It is crucial to assign the SME policy mandate clearly to a line ministry. However, given that SME policy spans multiple dimensions falling under the jurisdiction of different ministries, it is fundamental to establish a system for policy co-ordination. This helps to avoid the introduction of overlapping measures and prevents the generation of policy inconsistencies.

• Medium-term time horizon and coordinated policy actions: SME policy typically has a medium-term time horizon and is more effective when it comprises a series of coordinated policy actions aimed at achieving clearly stated objectives, expressed in both qualitative and quantitative terms. Therefore, a best practice involves governments defining their medium-term SME policy objectives in a strategic document. This document should present, in a consolidated manner, the actions intended for implementation, how they will be monitored and evaluated. The document should result from a process of analysis and policy dialogue with all SME policy stakeholders and should be aligned with the country’s general development objectives. It could be either a stand-alone SME development strategy or part of the country’s socio-economic development plan.

• Dedicated institutions for policy implementation: Effective policy implementation is facilitated when there is one or more dedicated institution responsible for implementing public support programmes and providing assistance to entrepreneurs and SMEs. These institutions, such as SME or Enterprise Development Agencies, should act as a bridge between the central government, the enterprise sector, local administration, and the broader SME community. The institutions in charge of implementation should have a good level of autonomy and a well-designed governance system, including the presence of private sector representatives in the governing body.

The outcomes of the 2024 LAC SME Policy Index reveal notable variations in country performance for this sub-dimension (see Table 3.2).

Table 3.2. Sub-dimension 1.2: Strategic Planning, Policy Design and Co-ordination

	Argentina	Brazil	Paraguay	Uruguay	Chile	Colombia	Mexico	Peru	Ecuador	LA9	Mercosur	PA
Total score	2.89	4.32	3.70	4.23	4.56	3.66	4.09	3.01	3.09	3.73	3.79	3.83

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

In each of the LA9 countries, the responsibility for SME policy is distinctly assigned.

The region can be broadly divided into two sub-groups. The first group comprises Brazil, Chile, Mexico, and Uruguay. These countries have adopted most of the good practices outlined above, recording a sub-dimension score above 4. The second group includes Argentina, Colombia, Ecuador, Paraguay, and Peru, with scores ranging from 2.89 to a maximum of 3.70. This indicates that there are still gaps in adopting good practices, and policy building blocks are not fully developed. The LA9 regional average score for this sub-dimension is 3.73.

In all LA9 countries, the SME policy mandate is clearly assigned to a line economic ministry, such as the Ministry of Economy, Trade, Industry, or Commerce. Most countries have established a unit responsible for SME policy design and supervision, either a sub-secretariat or a general directorate within the ministry, with the exception of Brazil.

Brazil is the only LAC country that has a ministry dedicated specifically to SMEs. The Ministry for SMEs was established in October 2023, taking over functions previously assigned to the Federal Ministry of Economy, indicating the relevance that the Brazilian government has assigned to SME development. In contrast, Mexico took a different direction. Until 2019, Mexico had a separate public institution, Instituto Nacional del Emprendedor (National Institute for Entrepreneurship, INADEM), under the supervision of the Ministry of Economy, responsible for SME policy design and implementation. Since then, INADEM has been disbanded, and its functions reintegrated into the Ministry of Economy. A new Unidad de Desarrollo Productivo (Unit for Productive Development), responsible for SME policy design and implementation, has been established, but with reduced financial and human resources.

Inter-ministerial co-ordination in relation to SME policy is still relatively underdeveloped in the LA9 countries.

While Brazil, Colombia, and Paraguay have established policy co-ordination institutions, the rest of the LA9 countries have implemented more informal mechanisms. Brazil's Fórum Permanente das Microempresas e Empresas de Pequeno Porte (Permanent Forum of Micro and Small Enterprises) serves as a coordinating body involving relevant ministries and public agencies, along with private sector representatives, performing functions related to policy co-ordination, monitoring, and evaluation.

Colombia and Paraguay have introduced a National SME System, a network of institutions operating in the SME policy domain, coordinated by the responsible ministry. Colombia established a Sistema Nacional de Apoyo a las Mipymes (National SME Support System) in 2004, featuring public institutions, a National Council for micro-enterprises, and a National Council for small and medium-sized enterprises. However, the system underwent a review in 2020 with the creation of the National System for Competitiveness and Innovation.

Paraguay operates the Sistema Nacional de Mipymes (National SME System, SINAMIPYMES), aiming to support policy development for small-scale enterprises, facilitate co-ordination, and foster public-private dialogue.

Regarding SME development strategies, most LA9 countries integrate SME policy objectives into their medium-term economic and social development plans. Argentina, Chile, and Ecuador follow this approach, aligning SME objectives with broader national strategies. However, Paraguay and Uruguay have distinct multi-year SME development strategies, and Brazil is currently working on a new SME development strategy following the expiration of the previous one in 2023.

In Peru, SME development objectives were previously part of the country's multi-year Strategic National Plan, but the planning process faced disruptions due to the COVID-19 pandemic and political instability. Despite challenges, the government approved a long-term development plan, El Plan Estratégico de Desarrollo Nacional – Perú 2050 (The Strategic Plan for National Development - Peru 2050), in 2022.

Mexico incorporates broad SME policy objectives into the National Development Plan, valid through the presidential term. Additionally, the Ministry of Economy formulates a more specific Programa Sectorial de Economía (Economic Sector Programme, PROSECO), covering the period 2020-2024 and complemented by executive action plans.

Across the region, the mandates for policy design, implementation and monitoring are often not clearly defined.

In Argentina, Ecuador, Peru, Paraguay, and Mexico, the SME policy unit within the line ministry responsible for SME policy handles both policy elaboration and implementation, and in some cases, also monitoring and evaluation. This structure raises the potential for conflicts of interest within the same organisation. SME support programmes in these countries are managed by external organisations, such as chambers of commerce, sectorial associations, and local administrations, usually selected through call for proposals.

In Colombia, the Ministerio de Comercio, Industria y Turismo (Ministry of Commerce, Industry, and Tourism, MINCIT) supervise the implementation process, but funds are channelled through two main programmes, iNNpulsa Colombia and Colombia Productiva, each having its own staff and operational autonomy.

Brazil, Chile, and Uruguay have established autonomous agencies responsible for implementing enterprise support programmes. Brazil has established a well-organised network of public agencies to provide support for SMEs, known as the Sistema S (System S). These parastatal organisations operate with operational autonomy and have their funding sources generated through a levy on salaries, while remaining under government supervision. Among these, SEBRAE serves as the country's SME development agency, boasting a total staff of over 6,800 and offices nationwide. Additional agencies within the System S include the Serviço Nacional de Aprendizagem Industria (National Industrial Learning Service, SENAI), responsible for providing industrial vocational training, and the Serviço Nacional de Aprendizagem Comercial (National Commercial Learning Service, SENAC), the national training service.

Chile has two longstanding and well-staffed public agencies. Corporación de Fomento de la Producción (Production Development Corporation, CORFO) oversees the implementation of the country's industrial policy, managing various investment and R&D incentives, along with a credit guarantee fund accessible to enterprises of all sizes. The Servicio de Cooperación Técnica (Technical Cooperation Service, SERCOTEC), on the other hand, focuses on providing training and technical assistance programmes tailored for micro and small enterprises and new entrepreneurs.

In Uruguay, SME development is primarily managed by three public agencies. The Agencia Nacional de Desarrollo (National Development Agency, ANDE), with a general mandate for economic and enterprise development; the Agencia Nacional de Investigación e Innovación (National Agency for Research and Innovation, ANII) that focuses on promoting innovation, and the Instituto Nacional de Empleo y Formación Profesional (National Institute for Employment and Vocational Training, INEFOP) that operates as the agency for employment and vocational training.

LA9 countries exhibit varying degrees of monitoring efforts for SME policies, with limited formal evaluations.

In the LAC region, many countries engage in regular monitoring activities to assess the implementation of both the overarching SME policy strategy and specific support programmes for SMEs. However, the practice of conducting formal policy and programme evaluations is relatively underdeveloped. Notably, Mexico and Chile stand out as exceptions, taking a proactive approach by conducting thorough evaluations, setting them apart as leaders in the effective assessment of SME policies in the region. Mexico has gone a step further by establishing an independent agency dedicated to monitoring and evaluating public policies. Meanwhile, in Chile, CORFO and SERCOTEC play key roles in overseeing programme implementation, with policy evaluations falling under the purview of the Dirección de Presupuestos de Chile (Chilean Budget Directorate, DIPRES).

Sub-dimension 1.3: Public-private consultations

Public-Private Consultations (PPCs) are a crucial component of SME policy. It is imperative that SME associations and other private sector organisations actively participate in all phases of SME policy, ensuring an inclusive dialogue open to various categories of SMEs. The process of public-private dialogue should be transparent and conducted in a manner that encourages widespread engagement.

Table 3.3. Sub-dimension 1.3: Public-private consultations

	Argentina	Brazil	Paraguay	Uruguay	Chile	Colombia	Mexico	Peru	Ecuador	LA9	Mercosur	PA
Total score	2.77	4.33	3.51	3.93	4.33	4.18	4.60	3.82	3.52	3.89	3.64	4.23

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

All LA9 countries have developed a consolidated practice of PPCs on SME policy.

While the LA9 countries have established a consolidated practice of PPCs on issues related to SME policy, the channels, modalities, and degree of openness of PPCs vary considerably across the region. Scores for this sub-dimension range from a low of 2.77 to a maximum of 4.60, with the regional average score standing at 3.89.

As a standard practice, organisations representing the private sector, including SMEs, are consulted during the elaboration of new policy measures, particularly main legislative acts. Less frequently, private sector organisations are involved in other policy phases, such as implementation, monitoring, and evaluation. Several countries in the region have formalised PPCs channels by establishing SME Consultative Committees, including Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, and Uruguay. Notably, Mexico, Brazil, and Chile have developed good practices in this area.

Mexico secured the highest score in this sub-dimension due to the diversification and transparency of its consultation practices. The Law on Regulatory Improvement mandates public consultations before issuing any regulation affecting economic or social activities. Citizens can provide comments and observations on the digital platform "Participa con tu gobierno en línea". The National Council for the Competitiveness of SMEs serves as a major consultation channel at the sector level, open to all major enterprise associations, chambers of commerce, and sectorial associations. The Comisión Federal de Competencia Económica (Federal Economic Competition Commission, COFECE) ensures transparency in convocation procedures and reports on consultation conclusions. Another vital channel is the Comisión Nacional de Mejora Regulatoria (National Commission for Regulatory Improvement, CONAMER).

In Brazil, Law 13.655 of 2018 establishes that the approval of normative acts may be preceded by public consultation, with all government agencies having opened consultation channels. Private sector representatives are consulted throughout the policy cycle—design, implementation, and policy co-ordination. Major private sector and SME associations are members of the Permanent Forum of Micro and Small Companies, participate in the Simples Nacional (Simples National) contributing to tax regime elaboration for SMEs, and have representation in SEBRAE’s National Deliberative Council.

Chile utilises the Consejo Consultivo de Empresas de Menor Tamaño (National Consultative Committee for Small Scale Enterprises) as the primary consultation channel for SME policy issues. Chaired by the Minister of Economy, Development, and Tourism, the council meets regularly, and private sector representatives can propose legal acts and policy measures for debate.

Argentina has not established formal PPCs channels. In Argentina, consultations are called by the relevant ministry during the final phases of legislative act elaboration, mainly involving chambers of commerce and sectorial organisations. These consultations are relatively frequent but not regular and are often driven by the most powerful private sector organisations.

Across the region, a significant challenge lies in the representativeness of private sector organisations, particularly Chambers of Commerce and Industry and sectorial organisations. These entities are actively involved in PPCs, typically representing larger and well-established enterprises. SME federations often have limited influence, and the voices of start-ups and small-scale enterprises are seldom heard. Informal enterprises are generally excluded from the consultation process, further distancing them from the realm of public policy. Efforts from the government are crucial to establishing new channels and fostering consultations that include all segments of the SME population.

Sub-dimension 1.4: Measures to address the informal economy

Informality represents a grey area with significant social and economic implications. Informal entrepreneurs and enterprises typically exhibit lower efficiency compared to their formal counterparts. These entities face constraints in their growth potential, as they are excluded from traditional avenues such as bank financing and public procurement opportunities. Moreover, they operate beyond the reach of public policy and are often unable to benefit from support programmes. Consequently, the reduction of informality should be a prominent SME policy objective in countries characterised by a substantial informal sector.

Informality is defined as "the collection of firms, workers, and activities that operate outside the legal and regulatory framework" (Loayza, Servén and Sugawara, 2009[1]). At the firm level, informality encompasses all enterprises and self-employed individuals engaged in the production of legal goods and services but fail to comply with the country's labour, fiscal, and other administrative regulations (Feige, 2016[2]).

There are varying degrees of informality, ranging from total informality, where enterprises operate entirely outside any public administration control and are absent from company and tax registers to partial informality, where enterprises complete registration procedures but consistently employ non-registered workers and/or under-report revenues and profits to tax authorities.

Informal enterprises typically exhibit lower productivity compared to formal counterparts. They face higher external financing costs as they lack access to bank financing, often relying on informal financing networks. Informal businesses are less inclined to invest in staff training and tend to remain small to avoid detection by public authorities. Additionally, they pose a challenge as a source of unfair competition with formal enterprises that bear higher operational costs. The prevalence of a large number of informal enterprises hampers a country's economic growth potential and introduces significant distortions into its economic structure.

The prevalence of a substantial informal sector characterises most of the LA9 countries. Reliable data on the number of informal enterprises is lacking, but the extent of the informal sector is indirectly reflected in the proportion of informal workers compared to the total number of employed individuals in the country.

According to the 2022 International Labour Organization (ILO) Labour Overview of the LAC region, the share of informal employment in total employment remains markedly high across the LA9 countries, on average, more than half of the jobs in the region are informal (ILO, 2022[3]).

ILO underscores that, while the economic recovery following the end of the COVID-19 pandemic significantly reduced total unemployment, a considerable portion of the jobs created post-pandemic has been informal. This pervasive informality is regarded as a structural issue in the LAC region, persisting not only during economic downturns, but also throughout phases of economic growth.

Table 3.4. Sub-dimension 1.4: Measures to address the informal economy

	Argentina	Brazil	Paraguay	Uruguay	Chile	Colombia	Mexico	Peru	Ecuador	LA9	Mercosur	PA
Total score	3.82	4.30	3.53	4	3.94	3.69	3.86	3.86	2.71	3.75	3.91	3.84

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

All LA9 countries have been active in introducing measures to reduce informality, but performance has varied significantly across the region.

Efforts to mitigate informality vary across LA9 countries. Chile, Uruguay, and Brazil have demonstrated relatively strong performance, with scores ranging from 3.94 to 4.30, implementing systemic measures to address informality. Argentina, Colombia, Mexico, Paraguay, and Peru exhibit intermediate progress, introducing some measures primarily focused on reducing informal labour but lacking a cohesive approach. Ecuador is in the initial stages of addressing informality. The regional average for this sub-dimension is 3.75.

Brazil has prioritised reducing the informal sector, implementing diverse approaches such as minimising administrative burdens, introducing simplified tax regimes like Simples Nacional and Micro-emprendedor individual (Individual Micro-entrepreneur, MEI), and streamlining company registration procedures. Over the last four years, the number of new business registrations has increased by six million six hundred thousand units, according to the Servicio de Rentas Internas (Internal Revenue Service).

Uruguay has systematically tackled labour and enterprise informality, introducing initiatives like Monotributo (single taxation) in 2007 and closely monitoring trends through the Encuesta Continua de Hogares (Continuous Household Survey). According to the ILO, the share of informal jobs over total jobs is around 25%, which is among the lowest in the LAC region.

Chile has prioritised the reduction of labour and enterprise informality, implementing measures to streamline company registration procedures through the Registro de Empresas y Sociedades platform. Additionally, initiatives like Pyme Ágil aim to alleviate administrative burdens on small-scale enterprises. Simultaneously, SERCOTEC conducts workshops to guide entrepreneurs through formalisation procedures.

Mexico has adopted a similar approach with the Crezcamos Juntos programme and the introduction of a simplified tax regime for micro-enterprises, although the results have been less favourable. Ecuador has also taken steps to simplify the registration of small-scale enterprises in the company register.

Argentina's focus on reducing informal labour includes establishing the Registro Público de Empleadores con Sanciones Laborales (Public Registry of Employers sanctioned for not complying with labour regulations). The country has also implemented a reduction in social contributions for individual entrepreneurs and micro-enterprises.

As of now, no LA9 country has implemented a coordinated strategy for reducing labour and enterprise informality. However, Colombia and Paraguay have initiated efforts in this direction. Colombia has outlined strategic directions for reducing enterprise informality in Documento CONPES 3956 and established a public-private technical committee, the Comité Técnico Mixto de Formalización (Joint Technical Committee on Formalisation), to promote formalisation. In Paraguay, one of the goals of the National Development Plan is to reduce the size of the informal sector by 90% by 2030, with a primary focus on reducing informal labour. Since 2018, the government has been implementing a labour formalisation strategy, showing some limited positive results.

Institutional framework for the development of women-owned or led SMEs

Latin American countries strive to integrate gender perspectives in SME development efforts

In LA9, support for the development of SMEs led or owned by women is channeled through national gender equality plans with strategic axes focused on this issue. Meanwhile, other countries incorporate gender perspectives cross-cuttingly into programmes or sectoral production plans.

Regarding strategies and communication plans to raise awareness and promote women's entrepreneurial spirit, Uruguay stands out. The Unidad Especializada de Género (Gender Specialised Unit, UEG) of the MIEM is tasked with making the gender equality policy visible and developing communication strategies for this purpose. Notably, one of its specific programmes is the Call for Short Films, aimed at showcasing women in productive activities. This initiative is implemented by the National Directorate of Telecommunications and Audiovisual Communication Services (MIEMDinatel). Furthermore, the Call for Women Entrepreneurs on March 8th launches a communication campaign to disseminate and foster the empowerment of women in the industrial and business sector.

Finally, in analysing the informal economy from a gender perspective, Chile's Ministry of Economy, Development, and Tourism produces an executive summary (last updated December 2020) of the Micro-entrepreneurship Survey. This report sheds light on the results of female micro-entrepreneurship in Chile, including findings on informality with a gender perspective. Additionally, the establishment of the Gender Statistics Sub-department aims to deepen and create a solid foundation for gender mainstreaming in statistical production.

The way forward

Table 3.5. Policy recommendations for institutional framework

Policy area	Challenges and opportunities	Policy recommendations
SME Definition	Some LA9 countries lack a consistently applied SME definition across public administration.	Refine the SME definition by incorporating multiple parameters, regularly adjusting values for inflation, introducing an independence clause, and ensuring the consistent application of a single SME definition across the public administration.
Strategic planning, policy design and co-ordination	SME policy is not structured around a medium-term strategy with measurable targets, firmly anchored in the country's medium-term economic development plan.	Reinitiate the process of strategic planning for SME policies, considering the disruptions caused by the COVID-19 pandemic and, in some cases, by political and economic instability. Establish robust policy co-ordination mechanisms and enhance the operational autonomy of implementation bodies. Allocating additional resources for monitoring programme implementation and conducting evaluations for the most significant programmes for informed decision-making.
Public-private consultations	Good PPCs practices are essential for enhancing SME policy effectiveness. SME policies must be inclusive and responsive to the diverse needs of the SME population.	Ensure that PPCs are inclusive, welcoming all components of the SME population, and avoid being monopolised by organisations representing larger and well-connected enterprises. Private sector representatives should actively participate in all phases of the policy cycle.
Measures to tackle the informal economy	The existence of a significant informal sector diminishes the country's growth potential and introduces distortions into its economic structure.	Adopt a systemic approach to address the challenge of reducing enterprise and labour informality. Establish a medium-term plan, implementing policy co-ordination mechanisms, conducting evaluations of existing measures, drawing valuable lessons, and facilitating the formalisation process would contribute to a more comprehensive and effective strategy.

References

[2] Feige, E. (2016), “Reflections on the Meaning and Measurement of Unobserved Economies: What Do We Really Know About the ’Shadow Economy”, Journal of Tax Administration, Vol. 2/1, https://ssrn.com/abstract=272.

[3] ILO (2022), 2022 Labour Overview of Latin America and the Caribbean, https://www.ilo.org/wcmsp5/groups/public/---americas/---ro-lima/documents/publication/wcms_867497.pdf.

[1] Loayza, N., L. Servén and N. Sugawara (2009), Informality in Latin America and the Caribbean, https://documents1.worldbank.org/curated/en/532851468047799334/pdf/WPS4888.pdf (accessed on 4 March 2024).