A study reveals that MSMSs are not so relevant in exports

A report from the IBCE to Ana María Solares shows that, although 8 out of 10 exporter companies are from this sector, their level of sales to other countries reaches only 3% of the total exported. If they want to develop, these units have to associate and get more formal. (Formalize)

Nevertheless, these 8 out of ten formal companies that sell their products to external markets are micro, small and medium enterprises (mipymes), the level of export of the sector barely reaches 3% of the national total and only 10% if it involves the non traditional external trade.

The study was developed by economist Ana María Solares, the MSMs (mipymes for its Spanish acronym) in the Bolivian Exports, performed by request of the Bolivian Institute of External Trade (IBCE for its Spanish acronym). The report was presented in a forum of the same name, carried out on Wednesday 21st in La Paz.

Solares explains that the mipymes role in the Bolivian exports is still small, at least the formal one, since there is a great number of enterprises whose sales to external markets are not registered, that is , they are informal.

According to the study, until 2006 there were 1.241 legally constituted companies that sold their products abroad, some of them, 1.025 belong to the mipymes sector and 216 to big companies

This means that eight out of ten exporters are micro, small or medium enterprises.

Although the MSMCs (mipymes) exceed the big companies in number, the participation of this segment in the total exports reaches the 3, 15 % and 10, 13% if they are non traditional sales.

The investigation detected that from the 1.025 exporting MSMCs (mipymes), 800 belong to the manufacture sector. These 800 were the ones taken into consideration as a reference for the rest of the document.

The report also showed up the volatility of the small enterprises that sell abroad, because there is a register of a big number of companies that get in and out of business. That is, from the 800 exporting MSMCs (mipymes) registered until 2006, only 110 remained operating in a continuous form since 2003.

‘There is a lot of volatility in the entrance and exit of these class of enterprises, not only the exporting MSMCs (mipymes) , but also those dedicated to supply locally their products or services. The figures show that they have difficulties for long term operations’ says Solares.

The economist explains that this condition is determined ‘by its precariousness, by its low levels of productivity, and by its low competitiveness, also the poor knowledge in business management and their sector’s perspectives’

On the other hand, from 730 exported products in 2006, the main 20 represent the 60% of the value of sales from the productive micro units. So, more tan 70% of exports are concentrated in three sectors: lumber, textiles and leather.

According to the investigation, 15 countries are the main destinations of the exporting MSMCs (mipymes) production. USA occupies the first place with a total of 27,1% exported by these companies, then comes far contenders Peru(9,8%) and China (9,5%). Other minor markets are Chile, Spain, Japan, Argentina and the United Kingdom, to mention some.

Santa Cruz, La Paz, Cochabamba and El Alto concentrate 88% of the exports revenue from the small manufacturing units. From 800 MSMCs (mipymes)identified in the study, 276 are in Santa Cruz, 247 in La Paz, 153 in Cochabamba and 51 in El Alto.

Solares states that to be able to export, the MSMCs (mipymes) have to improve their productivity and consequently their competition. ‘This is the only way of having presence in the international markets’.

The expert notes that is also necessary to build up their capacities, to learn about their strengths, weaknesses and potentials.

Two vital aspects to guarantee the Enterprise’s success abroad are the partnership’s affiliation and the formalization.

In this Gary Rodriguez, the General Manager of the Bolivian Institute of External Trade (IBCE for its Spanish acronym) agrees, ‘We recommend that the MSMCs (mipymes) formalize, because this allows them to have a number of benefits,’ like the access to taxes refunds.

One successful example of small producers associating to export is El Ceibo industry. While, in El Alto and La Paz, seven tailoring industries are developing a textile complex to export to three countries.

Points of view

‘There is market, but no for the ones that can’t deliver their production’ Mario Tarqui. Textile Productive Complex Representative. ‘This project has been considered reviewing the bad experiences that the micro enterprises have had in El Alto and La Paz. We have searched how to withdraw this situation, but not in a traditional way…’

The partnership’s affiliations are good. This type of enterprises (like the Textile Productive Complex) must be copied… We are not selfish, we can go to other associations to explain how to do a (similar) project so they can benefit as we currently have. Markets, there are plenty. But there is no market for those workshops that don’t accomplish the production, for example of 3000, 4000 or 5000 clothes a month.

They have to associate and concentrate in a same location, where a quality control, that is required to export, can be made.

It’s also necessary to be 100% formal. That is why our employees, besides having the National Social Security, are also associated to the Social Security Rent (AFP Spanish acronym) and also work according to the parameters of the General Work Laws’.

‘The MSMCs (mipymes) have to associate to increase their supply and to export’ GARY RODRIGUEZ. General Manager of the IBCE.

‘It is advisable, from a MSMCs (mipymes) point of view, the association so their supply would increase according to markets demands, which are extremely high. This is one of the successful forms how in other countries the MSMCs (mipymes) are increasing their supply capacity.

Another possibility has to do with outsourcing , where as by the function of the capable production chains, the enterprises of bigger size, that already know the market and the trade routes, and have the conditions for financing and building capacities, work with them in a vertical integration. Something like this it’s been appreciated in Bolivia related to the US market.

The third option has to do with the State, through its institutions, so it can support the MSMCs (mipymes) in attending this market niches, meaning, small spaces, specialized, to pay attention to a supply that has to be different.’

‘If the Enterprise has plans to expand, it has to get formal’ ANA MARIA SOLARES, economist.

‘Making a balance between cost and benefit, and the benefit of formalization, we can find pros and cons from their economic point of view.

If this companies have projections of survival, it would be an advantage stay informal, because they don’t enter to the taxes bracket, and have no demands that formality requires. But if their projection is to grow, to expand, to export, they have to see formality as a previous step towards any of these activities. This allows them , even have the support of a tax refund, have the possibility to link to higher scale production of big enterprises because they access international markets….

Even though there are informal enterprises exporting, these exports are also informal and we cannot expect them to consolidate in international markets, because one of the demands is the invoicing.’

Sorce: Bolivias’industry and Enterprises, May 25, 2008.
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