The global coronavirus outbreak has increased volatility and complexity for small and medium-sized businesses in the region. However, for some, it has also represented an opportunity. What's next? 

From the Rio Grande on Mexico's northern border to the Strait of Magellan at the southern tip of Argentina and Chile, SMEs are the protagonists of the economy in every country in which they operate. Companies with 1 to 200 employees represent more than 99% of all companies in the region and employ more than six out of 10 workers, according to the Development Bank of Latin America (CAF). The Covid-19 pandemic has been especially challenging for them, which is why they will once again be the protagonists in 2022.

Figures and projections from SURA experts, consultants and organizations consulted by Make sure you live, believe that small and medium-sized companies will have to appeal this year to one of their best-known competitive advantages: versatility. But, in addition, they will have to accelerate their professionalization, improve their logistics after the digital explosion and strengthen their ties with the needs of the market and their clients.

The starting point is not the best. Worldwide, the pandemic has affected more than 60% of SMEs and 51% of medium-sized companies, according to the International Trade Centre. And ECLAC warns that no less than 2.7 million companies in Latin America will have closed their doors when the pandemic ends, mostly SMEs. A considerable number considering that, according to SURA figures, there are more than 35 million SMEs in the region, including companies that operate as natural persons.

One explanation is that when the coronavirus outbreak began, only 40% of small and medium-sized firms in the region were digitalized; that is, they had digital sales channels, according to a CAF study.

“These data, which are harsh due to the socioeconomic impact it represents for the population, also indicate that, foreseeably, the most competitive companies that are adapted to digital tools will emerge stronger from the crisis. The prototype company that will survive the pandemic will be more productive, will take advantage of digital transformation and teleworking, and will grow faster than the traditional Latin American SME,” comments Jorge Arbache, Vice President of the Private Sector at CAF.

En an article On the subject, he adds that “this is where a great opportunity opens up, since, paradoxically, the pandemic could contribute a grain of sand to the qualitative leap that Latin America needs to close the productivity and competitiveness gaps that have limited its growth.” Arbache highlights that the role of the State, more preponderant in times of pandemic, must continue with policies such as reducing the costs of bureaucratic processes for employers, while “simplifying procedures, reducing taxes and creating more business development and financing programs, such as state purchases aimed at smaller companies.”

Road to competitiveness

Andrés Rave, SME expert at SURA Seguros Tendencias y Riesgos, emphasizes that “this transformation process that had already been taking place gradually is accelerated by the pandemic, not only in the business sector, but also in the regulator of transaction obligations.” This public-private change facilitates the digital possibilities of companies with their suppliers and consumers.

On the other hand, Rave highlights “an important change in consumer habits and expectations, where both entrepreneurs and their consumers have been finding the optimal point.” From an economic point of view, the SURA expert projects that 2022 will bring opportunities for SMEs. Why? “The devaluation of our currencies, the logistical limitations of international trade and inflationary pressures are once again awakening a special attraction for local supply, and small and medium-sized companies play a leading role there.”

Post pandemic time

In turn, in dialogue with Make sure you live, Jonathan Loidi, an expert in SMEs and an international speaker on the subject, comments that this business sector should be starting to think about “the post-pandemic era”, in which they have “as many challenges as opportunities”. He proposes that SME executives work on three topics “crucial for this moment”. Management, innovation and strategy, and the quality of services:

• Professionalization. “There is no longer room for improvisation, because the world is much more complex and profitability is reduced due to increasing competition at all levels,” he warns. For this reason, he encourages SME executives “to look at their organisation and ask themselves how professional the management is and how the level of improvisation could be reduced.”
• Innovation and strategy. The expert acknowledges that “this is something that is very difficult” for SMEs because, in general, the owners or managers “are busy with day-to-day work, instead of wondering where the market is going or what happened to my business model in the midst of so much change like the pandemic.” The challenge, then, is to have the operation, management, numbers, and administration in order and then think about innovating and growing strategically, Loidi adds, and defines his concept of innovation: “It is not about sending rockets to the moon, but about being able to generate changes in processes and focus on helping customers make their day-to-day life easier.”
• Quality of service. “This is perhaps the great competitive differential for SMEs. Customers, like never before in history, no longer value what product or service is sold, but rather how. And how is precisely how we develop the service, the quality of attention, the obsession with satisfying the customer, of understanding that the consumer is no longer served by the salesperson or the customer service department, but that the customer is served by everyone,” he concludes.

These are all challenges that are now seen as more possible with the forced digitalisation brought on by the pandemic, as periods of confinement accelerated the digital transformation of people and companies. The great challenge is to become more competitive, in a region where, according to the OECD, the productivity of large companies is 33 times that of a micro-enterprise and up to 6 times that of a small one.

However, even with a complex economic scenario, SMEs have the opportunity in 2022 to consolidate what they have learned in this post-pandemic period.