Digitization and innovative policymaking are key to the growth of MSMEs in Latin America and the Caribbean
The COVID-19 pandemic has accelerated digitization among micro, small and medium-sized enterprises (MSMEs) in Latin America and the Caribbean, a region with enormous potential for industrial transformation. However, several challenges, such as structural barriers to technology adoption, social inequalities and lack of financial resources, still need to be addressed.
These are some of the key findings from the Global Manufacturing and Industrialization Summit (# GMIS2021) digital series on “Harnessing Policy Making to Strengthen Innovation and Digital Transformation of Latin American MSMEs” . Discussions highlighted the opportunity for digital transformation of MSMEs and their importance for today’s globalized economy, especially in the region, where they account for around 99.5% of businesses, 60% of jobs and 25% of regional GDP, according to the Inter-American Development Bank.
LI Yong, Director General of the United Nations Industrial Development Organization (UNIDO), said MSMEs were severely affected by the global economic recession resulting from the pandemic, which revealed a clear digital divide within and between country. “We are working closely with countries in Latin America to increase access to advanced manufacturing technologies. We, as the international community, can and must do more. We must accelerate our joint efforts to empower middle-income countries to deploy advanced technologies for transformative effect and achieve inclusive and sustainable industrial development. “
Even though the digitalization of industries was in place before the pandemic, the crisis has accelerated this process, fostering the development of innovative solutions in the form of products, processes and business models. Despite this, around 2.7 million MSMEs in the region disappeared in 2020 due to reduced access to markets and value chains and low rates of digital and financial inclusion, according to the Economic Commission for America. Latin and the Caribbean (ECLAC).
Alicia Bárcena, Executive Secretary of ECLAC, said the adoption of the technology has proven to be essential in boosting social and economic resilience in Latin America and the Caribbean. However, countries need greater government support and regional cooperation to enable digital transformation. “Unlike the developed countries or the emerging economies of Asia, the countries of our region have not reaped the fruits of successive waves of technological transformation, in particular the digital revolution that began in 1990 and the nascent 4.0 era. The productivity of MSMEs reaches only 10% of large companies in the region against 66% in Europe. Progress will require regional cooperation such as facilitation of electronic commerce and cross-border data flow. Likewise, greater digital cooperation can also promote better institutions at the national level and help define common principles and guidelines to advance digital transformation.
In Costa Rica, improving access to internet connectivity and strengthening public-private collaboration to promote the digitization of MSMEs has been a key priority for the government over the past year. Thanks to these efforts, around 88% of the country’s population now use the Internet and more than 60% have access to mobile Internet, said HE Victoria Hernández Mora, Minister of Economy, Industry and Trade of the Costa Rica, during the discussion. “All of this encouraged us to continue supporting digital maturity assessments in collaboration with the Inter-American Development Bank; Continuity of SME digitization programs towards transformation with the banking system for development; promote a new digital record; as well as a new fintech that powers small businesses with high-tech tools to give them access to resources. HE Mora said these initiatives will lead to increased competitiveness, diversification of GDP growth and creation and promotion of talent.
HE Victor Bisono Haza, Minister of Industry, Trade and MSMEs of the Dominican Republic stressed the importance of developing long-term strategies to help countries successfully meet the challenges of the Fourth Industrial Revolution. “The industrial revolution and digital transformation require a profound change in businesses and professionals – changes that affect all areas of the organization and all sectors of the economy, becoming a revolutionary framework due to technological advances. The Dominican Republic has already started working on a paradigm shift, reflected by the implementation of different initiatives and policies, such as Presidential Decree No. 7121, which establishes the creation of the Cabinet for Digital Transformation.
In order to foster bilateral collaboration in the areas of technology adoption and industrialization, the Dominican Republic signed a memorandum of understanding with Spain, focusing on two initiatives: the digital self-assessment tool Advanced (ADA), which will enable industry organizations to assess their maturity and levels of digitization, and the Activa program, which provides specialist advice to businesses, including situation assessments and transformation plans.
Gabriela Dutrénit, President of the Latin American Network for Learning, Innovation and Skills Building Systems (LALICS) referred to the limited innovation approach as a barrier to digitization, followed by the structural heterogeneity of regional economies. “The challenge is to manage this heterogeneity with differentiated policies according to the type of sector. On the one hand, there are larger companies or even SMEs that have already taken a step towards technological development, and on the other hand, we have MSMEs that have taken a step forward in digitization, using and not by developing new technologies. But we need a differentiated policy, so the rest is how to combine or articulate these policies. “
According to Ruben Geneyro, president of the National Institute of Industrial Technology (INTI) in Argentina, the digital transformation and the shift to the 4.0 paradigm represent an additional challenge for the country compared to its goal of changing the productive matrix. “There is a need for active states that design smart and dynamic institutional mechanisms to generate synergies between the public and private sectors, academia and workers. A few months ago, our Ministry of Productive Development presented a new Productive Development Plan 4.0 with the idea of encouraging the adoption of this paradigm and promoting the development of technological solutions in the country, taking into account the experiences other countries, but above all by considering our particularities, the production framework, our strengths and our weaknesses.
Argentina’s Productive Development Plan 4.0 includes 50 new awareness-raising measures, including training, technical assistance, investment support and institutional infrastructure that supports the process of industrial transformation. In addition, the National Institute of Industrial Technology is currently working on courses for industry and university degrees to build an institutional framework.
The Virtual Roundtable is the latest in a new series of sessions hosted by the GMIS 2021 Digital Series. The topics explored at the roundtable are closely aligned with the focus areas of the fourth edition of the Global Manufacturing Summit and industrialization (# GMIS2021). Under the theme “Rewiring Societies: Repurposing Digitalization for Prosperity”, # GMIS2021 will take place at the EXPO exhibition center in Dubai from November 22-27.
Source: World Summit on Manufacturing and Industrialization