Going Global: Promoting the Internationalization of Small and Mid-Size Enterprises in Latin America and the Caribbean

Abstract

Small and medium-sized enterprises (SMEs) are notably underrepresented in the external sector of Latin America and Caribbean (LAC), despite their importance in the region's economies: relatively few of them export, and those that do export tend to sell only a few products to a very small number of markets. The countries of the region can expand and diversify their exports to promote economic growth by internationalizing those SMEs with a strong potential to succeed abroad. To this end, countries must address a series of obstacles that firms face when attempting to venture into international markets: high trade costs associated with tariffs, rules of origin, transport, customs clearance, and information; limited capabilities of the firms themselves; and difficulties in accessing credit. This report offers practical recommendations for policymakers, companies, and practitioners on how to reduce each one of these barriers. It also presents three areas that can be leveraged to internationalize SMEs: global value chains, the LAC diaspora in the United States, and e-commerce. Recognizing the synergistic effect that these policies would have in reducing export barriers, the report suggests that countries shift their attention from providing isolated support mechanisms to firms, to adopting a coordinated set of policies and introducing consistent institutional innovations.

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