CELAC-EU, Reinforcing Production Cooperation & Dialogue Spaces: the role of SMEs

The European Union - Latin America and the Caribbean Foundation (EU-LAC Foundation) was created as a result and initiative of the VI Summit of Heads of State and Government in May 2010 and formally began operating in November 2011.

With its headquarters in the city of Hamburg, Germany, the Foundation now consists of 33 member states from Latin America and the Caribbean, 28 member states from the European Union as well as a representative of the European Union as a whole. A total of 62 members.

The aim of the Foundation is to transform and adapt the strategic partnership between the European Union, Latin America and the Caribbean -adopted in 1999 - into a strengthened and visible reality where the respective societies in both these regions can actively participate.Abstract:
This paper is the outcome of a joint effort by the Economic Commission for Latin America and the Caribbean (ECLAC) and the EU-LAC Foundation to deepen understanding of the important role played by small and medium-sized enterprises (SMEs) in bringing about structural change and development, and of their role in innovation and in value chains. This publication was prepared in the framework of the second Summit of Heads of State and Government of the Community of Latin American and Caribbean States (CELAC) and the European Union, to be held in Brussels on 10-11 June, in the expectation that it may serve as an input for the discussions during the summit and help to identify areas in which governments and production sectors of the two regions can work together.

Although the Latin American and Caribbean countries have experienced rapid growth and development over the past decade, significant challenges remain in terms of increasing the region’s poor levels of productivity. Unless these are tackled, it will not be possible to progress towards more knowledge-intensive segments of value chains or to diversify production and create good-quality, skilled and better paid jobs. These are some of the challenges facing both the countries of CELAC and the European Union, and which are becoming all the more worrisome in light of what is fast becoming the “normality” for the next few years: lower international growth and heavier external and fiscal constraints.

It will not be possible to lock in and build on the progress the Latin American and Caribbean region has made over the past few years —stronger growth and reduction in poverty and in- equality— without achieving a shift in the production structure. The structure must have a place for SMEs and be able to include them in the learning, production and export process. It must reduce the technology and financing gaps which hold back their growth. This document discusses the main obstacles facing SMEs today: limitations in terms of human capital, financing, in- novation capacities, institutional and business setting, production linkages and access to global value chains. Overcoming these barriers will require public policy efforts, which become ever more urgent the faster the technology frontier moves away and the more complex the challenge of international competitiveness becomes.

These are some of the factors analysed in this document, which takes a comparative approach vis-à-vis the experience of the European Union countries to identify areas in which the two regions could intensify cooperation efforts.