Argentina Macroeconomic and SMEs Overview Lic. Evelin Goldstein Consulting

ArgentinaMacroeconomic and SMEs OverviewMacroeconomic and SMEs Overview

Lic. Evelin GoldsteinLic. Evelin GoldsteinConsulting

Undersecretariat of Small and Medium Enterprises and Regional DevelopmentSecretariat of Industry, Commerce and SMEs

Ministry of Economy and Production

May 2007

Lic. Evelin GoldsteinLic. Evelin Goldstein ARGENTINAARGENTINA

Topics of the Presentation

1. Crisis, Recovery and Development of Argentina’s Economy

2. SMEs Overview

3. SMEs Problems

4. SMEs Public Policies

Crisis, Recovery and Development of

Argentina’s Economy


New growth drivers for Argentina after the crisis

Destruction of National Industry

Convertibility Plan

Recovery and growth

Ec

on

om

ic c

ris

is

CompetitiveExchange

rate

TwinSurpluses(fiscal and

Commercial)

More active role ofThe government

The 90’s After devaluation (2002)

Fixed andOvervaluated

Exchangerate

Market’sliberalization


Growing after the Crisis

Source: Ministry of Economy and Production.Source: Ministry of Economy and Production.

Gross Domestic Product

0

50

100

150

200

250

300

350

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Mill

ons

of d

olla

rs

GDP Growth: 9% per

years in re

al term

s

Overvaluated exchange rate


43

48

40

41

42

43

44

45

46

47

48

49

Average 97-2001 Average 2002-2005

Solving the Problem of Unemployment

Employees for every millon of product

Source: Ministry of Economy and Production

+12.2%


Increasing investments to support growth

Source: Ministry of Economy and Production

Note: Fixed Gross Domestic Investment (FGDI) in Dollars.

Fixed Gross Domestic Investment

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

In m

illo

ns

of

do

llars

0%

5%

10%

15%

20%

25%

FGDI FGDI/GDP

FGDI/GDP: 22%


Results of supporting a competitive exchange rate

Source: Ministry of Economy and Production.

Balance of Payments

-5,00%

-4,00%

-3,00%

-2,00%

-1,00%

0,00%

1,00%

2,00%

3,00%

4,00%

5,00%

1997 1998 1999 2000 2001 2002 2003 2004 2005

Primary Superavit Global Financial Result Current Account Result

% of GDP

Argentina’sSMEs Overview


Growth of SMEs Start-ups

Source: Ministry of Labor and Social Security

Note: Almost all start-ups are of SMEs. Data is of the Second Quarter of every year.

8,8% 8,9% 8,4% 7,6% 6,9% 6,4% 5,1%

9,1%

13,8%

11,9%12,0%

0

10

20

30

40

50

60

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

In th

ousa

nds

0%

5%

10%

15%

20%

25%

30%

% o

f tot

al

Start-ups Sart-ups Rate %

Enterprises Start-ups


Also there are closings...

Source: Ministry of Labor and Social Security.

Evolution of Start-ups and closings +50,000 new enterprises per year

0

50

100

150

200

250

300

350

400

450

500

Th

osa

nd

s o

f E

nte

rpri

ses

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

TotalEnterprises

Closings

Start-ups


-

20

40

60

80

100

120

140

160

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Bas

e In

dex

199

6=10

0

The role of MiSMEs in Employment

Source: Ministry of Labor and Social Security.

MiSMEs: +47%

Between 2002 and 2005 MiSMEs Employment increased 47%, whereas in

big firms 22% in the same period.

Evolution of MiSMEs Employment


Dynamic SMEs exporters

Exports of SMEs grew 57% during the last three years.

There are 6,000 exporting SMEs and about 2,000 more that are starting to export.

It is possible to find different markets and production sectors.


SMEs exports tendency

0

100

200

300

400

500

600

700

800

900

1000

III-2003 IV-2003 I-2004 II-2004 III-2004 IV-2004 I-2005 II-2005 III-2005 IV-2005 I-2006 II-2006

Total SMEs Industrial SMEs

I Semester 2006: +17%

Source: Ministry of Economy and Production.

Millons of dollars


Credits for SMEs

Source: Central Bank of Argentina.

Nota: SMEs loans of less than $ 1 millon are considered.

0

2000

4000

6000

8000

10000

2002 2003 2004 2005 2006

Evolution of SMEs Debt

Millons of Dollars

Main Problems of SMEs in Argentina


SMEs ProblemsFinancing:•Bank restrictions•High interest rate• Limited Guarantees for loans•Many SMEs are not registered•Few developed capital market

InsufficentInvestment

SMEs use their own resources to finance investment


Other SMEs Problems

•Lack-of qualified employees•Weak relationship between entrepreneurs•Lack-of professionalism•Few resources for technology and innovation•Low productivity•Lack-of market information

Public Polices for SMEs


General Areas of Action

TRAINING TRAINING and and

START-UPSSTART-UPS

TRAINING TRAINING and and

START-UPSSTART-UPSFINANCINGFINANCINGFINANCINGFINANCING

DEVELOPMENT DEVELOPMENT OF DIFFERENT OF DIFFERENT

INDUSTRIESINDUSTRIESAND REGIONSAND REGIONS

DEVELOPMENT DEVELOPMENT OF DIFFERENT OF DIFFERENT

INDUSTRIESINDUSTRIESAND REGIONSAND REGIONS

FOREIGNFOREIGNTRADETRADE

FOREIGNFOREIGNTRADETRADE

Subsidized Subsidized

Credits for Credits for

MiSMEsMiSMEs

Mutual Mutual

Guarantees Guarantees

companiescompanies

Tax benefits for Tax benefits for employee trainingemployee training

Subsidies for Subsidies for quality improventquality improvent

Start-up Start-up DevelopmentDevelopmentProgramProgram

Net AgenciesNet Agencies

ClustersClusters

SW IndustrySW IndustryPromotionPromotion

Support of Support of

the first exportthe first export

Exports groupsExports groups

Trade Trade

promotionpromotion


The Net of Development Agencies is formed by non-profit insitutions with public and private participation

The Agencies objective is to promote the local economic development through the SEPYME’s program.

The Net is an instrument to improve the relation between SMEs and the SEPYME.

Net of Development Agencies


NortheastNortheast 9 Agencies9 AgenciesCuyoCuyo

7 Agencies7 Agencies

NorthwestNorthwest 5 Agencies5 Agencies

CenterCenter 14 Agencies14 Agencies

Buenos AiresBuenos Aires

16 Agencies16 Agencies

PatagoniaPatagonia 12 Agencies12 Agencies

Net of Development Net of Development AgenciesAgencies


Clusters

Promote the integration of the production

at regional levels through the

strengthening of the relation between

enterprises, Public sector, and research

institutions

ObjectiveObjective

MeansMeans •SEPYME’s Programs of Financial Aid (FONDER)

•Support and advice for the design of association projects


Financing

Subsidized RatesSubsidized Rates RegimeRegime

Subsidized RatesSubsidized Rates RegimeRegime

The objective is to reduce financial cost

of SMEs loans by subsiding interest

rates. Credits are offered by banks.

The objective is to reduce financial cost

of SMEs loans by subsiding interest

rates. Credits are offered by banks.

Global Credits Global Credits ProgramProgram

Global Credits Global Credits ProgramProgram

The purpose is to offer long-term loans

for SMEs with low interest rates.

Funds are provided by the IDB.

The purpose is to offer long-term loans

for SMEs with low interest rates.

Funds are provided by the IDB.

Mutual Guarantee Mutual Guarantee Companies (SGR)Companies (SGR)Mutual Guarantee Mutual Guarantee Companies (SGR)Companies (SGR)

Business companies facilitate financial access to SMEs through guarantees.

Business companies facilitate financial access to SMEs through guarantees.


Financing (cont.)

National Fund for National Fund for SMEs (FONAPYME)SMEs (FONAPYME)National Fund for National Fund for

SMEs (FONAPYME)SMEs (FONAPYME)

This Program finances investment inproductive development. Projects are evaluated by SEPYME. The interest rate is variable.

This Program finances investment inproductive development. Projects are evaluated by SEPYME. The interest rate is variable.

National Fund for National Fund for Micro-EnterprisesMicro-Enterprises

(FOMICRO)(FOMICRO)

National Fund for National Fund for Micro-EnterprisesMicro-Enterprises

(FOMICRO)(FOMICRO)

Entrepreneurs can borrow money without guarantees. Interest rates are low. Funds are provided by the National Bank of Argentina.

Entrepreneurs can borrow money without guarantees. Interest rates are low. Funds are provided by the National Bank of Argentina.

This Program provides subsidized credits for clusters. Funds are provided by the National Bank of Argentina.

This Program provides subsidized credits for clusters. Funds are provided by the National Bank of Argentina.

National Fund for National Fund for Regional Development Regional Development

(FONDER)(FONDER)

National Fund for National Fund for Regional Development Regional Development

(FONDER)(FONDER)

Muchas Gracias

Thank you

Evelin Goldstein

Ministry of Economy and ProductionSecretariat of Industry, Commerce and SMEsUndersecretariat of Small and Medium Enterprises and Regional Development

Documents

Argentina Macroeconomic and SMEs Overview Lic. Evelin Goldstein Consulting