STRATEGIC SMALL AND MEDIUM- SIZED ENTERPRISES (SMEs)

The world is gravitating towards an improved structuring of SMEs as a way to give more flexibility to corporate systems and energizing the economy of countries. In Venezuela, there is an express intention to support this sector, but more assertiveness could be achieved through the joint efforts of the different social actors.

Close to 75% of the Latin American corporate field is composed of SMEs and there is a similar proportion in the European Union, while policies that place give companies as priority in the economy of developed countries are under design. There is a reason.
The advantages of SMEs are many. Since they are small and medium-sized, their structures are more flexible, interactive, have a greater adaptation ability and a faster response, are good job generators, have less expenses and in crisis situations, they are better at assimilating organizational cuts, as compared to large corporations.

Many entrepreneurs begin their personal projects as a labor alternative in times of recession and then frequently turn them into solid SMEs that help renovate the dynamics of the activity sectors.

As a result, the concept of “artisanal enterprise” – which applies to SMEs, micro corporations and franchises (which are mostly SMEs) are booming more than ever in countries such as Italy, France and Germany, especially because of their virtue of “feeding” (supplying) large corporations quickly and efficiently.

Another important role of the SMEs is breaking the monopoly paradigm. Through integral business models, many SMEs are dedicated to supplying or supplementing the production of large corporations with raw materials, parts, designs or product finishings, thus mitigating or balancing the power of the latter.

Antonio Pittelli, president of VeAmCham’s Entrepreneurs Committee, says: “Outsourcing is frequently used in other latitudes such as Europe, United States and Mexico because it allows the growth of SMEs and prevents large corporations from turning into monopolies. As a result of this outsourcing, corporations don’t centralize all functions of the productive process or have such a large payroll growth””.

The role of SMEs as a balancing factor of the economy could be regarded as being in line with the Venezuelan government’s ideology, whose main idea is downplay the importance of large monopolies. In fact, Alfredo Riera Hernández, president of the SMEs National Guarantee Fund (Fonpyme S.A.) has executed several agreements to leverage regional projects of the SMEs throughout the national territory.

However and paradoxically, SMEs have received in practice almost the same attacks as large private corporations (an important percentage of the private industrial park has disappeared, including SMEs) in a government that has declared to be in favor of the nationalist model.

“It’s not clear what an SME is for the government at this time and the Franchise Chamber is not feeling the support the government, but nevertheless, we remain in the market”, says Alfonso Riera, president of the Franchise Chamber (Profranquicias).

Any successful experiences that can be held as a model to enter into the micro economy world? “Many, but as examples I would mention www.empleate.com, a site that began as the initiative of a former, young CANTV employee that has now become a reference for job searches of the medium level; and Locatel, which started as an SME but has grown and diversified so much that it stopped being so” says Pittelli.

Some proposals

“In Venezuela, entrepreneurs or small businessmen need to have much money available and many guarantees in order for the banks to grant them credit to carry on their idea or business, but it shouldn’t necessarily work that way”, notes Pittelli.

There are many contrary cases to prove it. “Several European governments have developed credit systems practically without guarantees and they even have special plans for lost funds which have given them good results”, says, as a suggestion. He further adds that “in Venezuela politics should not be mixed with these issues, on the contrary, it should be directed towards the debate between the public and the private sector so that the designed programs are complete and efficient”.

The truth is that Fonpyme says it offers advice and solid support to the users of the guarantee systems and the Bolivarian missions have the duty of reinforcing SMEs and cooperatives, but the incentive for the sector cannot be such if the profits resulting from this work is not guaranteed to its holders in a socialist system (community system) that is being forwarded in the country.

Most Venezuelans believe that without private property there are no possibilities of making profits, work is not carried on with the same interest and therefore, any entrepreneurship and SMEs incentive programs become distorted in the face of the current governmental policies.  
“The local market is very good for SMEs if we take its size into account and because we are importing a large number of products that could be produced here, but there must be certain conciliation in the creation of integral plans between the State, banks, the private sector and universities to achieve that purpose. Even though there are specific plans for the development of SMEs, they are not sufficient to meet the demand” insists Pittelli.

“Nowadays, many SMEs promotions concur in the global scene because they don’t privilege primary entrepreneurship but secondary entrepreneurship, that is, the one that proved that the idea works and that it requires expansion”, says Alfonso Riera.

This new tendency to assign credits results from statistics that show that only eight of every ten entrepreneurs has an “entrepreneur vein” and that many ideas for new businesses that are financed are dead within one year of their materialization, meaning lost resources. Thus, the importance of training, advice and follow-up of entrepreneurships but mostly on focusing financing on projects that are already operating.

“The IDB has adopted his premise and is currently supporting secondary entrepreneurships in Colombia, Costa Rica and Ecuador. The idea has been explored in Venezuela but any help from international or multinational organizations to SMEs requires the approval of the national authorities” says the president of  Profranquicias.

Another concept of other countries that, in theory, could be applied in Venezuela, is the definition of incentive policies to large corporations so that they help in the construction of supplementary SMEs of their activities or suppliers of their productive chains in depressed sectors, which would reinforce social inclusion in the nation.

At this time there is no doubt that reconstruction is required in Venezuela and SMEs are a foundation to value their real dimension as a social and economic profit factor. There is much to be done. So be it.