Free Trade Area of the Americas - FTAA

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June 10, 2002

Original: Spanish
Translation: FTAA Secretariat



Name (s) Working Group on Government Procurement
Organization (s) COMISION ALCA/PERU (FTAA/PERU Commission)
Country Peru

We propose that the concepts of micro- and small enterprise be defined in relation to the different economies of the hemisphere, as sources of employment, and in relation to their impact on GDP in the development of each country, so as to avoid distortions in projections that would lead to the implementation of concepts, policies and measures out of keeping with the industrial reality in each country. We would thus minimize the risk of concluding tariff agreements at the hemispheric level that do not include an adequate framework of preferences and provide, in turn, policies on investment and transfer of technology conducive to the medium and long-term development of this important sector and therefore to the economic growth of the country.

Our proposals are based on:

In the FTAA-Peru context

• Importance of the SME sector to GDP and also as a source of employment.

• Importance of the SME sector to Government procurement and domestic sales forecasts for 2002.

• SME sector forecasts for export to the private and public sectors.

Inclusion of SME sector in the FTAA framework as a priority sector for national economic development.

We also propose

1. Developing the emerging sectors with the greatest potential should become one of the principal aims of the state, with a view to achieving, in the medium term, volumes of exportable production, by means of micro-enterprise consortia, that will put the country in a competitive position by the year 2005, when the progressive reduction of hemispheric tariffs in the framework of the Free Trade Area of the Americas (FTAA) is due to begin.

2. It is important to conclude tariff, facilitating, or countervailing agreements to ensure sustained development from 2005 onwards and boost the SME sector, in keeping with its contribution to GDP, with its job-creating role, and its place in the industrial landscape in each country. It should be mentioned that the concept is already accepted in civil legislation and needs clear expression in state contract law at the hemispheric level.

3. Definition of the concepts of micro- and small enterprise in terms of the hemispheric market, establishing categories conducive to an acceptable size of the SME market/segment with export potential, taking into consideration that it accounts for 98% of national industry and 45% of GDP in Peru, as well as the corresponding situation in other countries of the hemisphere.

It should be mentioned that classification and regulation of the sector is impeded by scarcity of information on its components. Thus, different government agencies concerned with SMEs give extremely disparate figures for its size. For example, SUNAT (Superintendencia Nacional de Administración Tributaria - the national tax administration bureau) puts the figure for micro- and small enterprises at 1.4 million, while Prompyme (Comisión de Promoción de la Pequeña y Mediana Empresa - commission for the promotion of small and medium enterprises) and MITINCI (Ministry of Industry and Foreign Trade) put it at 3.2 million and 8 million respectively. Source: Propuesta Organización y el Desarrollo de Consorcios Pyme para el Período 2001-2005 (submitted to the Ministry of Labor on 31/08/2001). This proposal, made for the purpose of securing a competitive position for the SME sector within the FTAA, includes, inter alia, the organization and development of SME consortia, a National Census of SMEs, which has just been given the green light(*), identification of SME segments with export potential, restructuring of rural credit institutions, the need for adequate representation of the sector, and the establishment of rural telecenters.

(*)Note: Dr. Luis Abugattas, Director of the Institute for Economic and Social Studies of the SNI (Sociedad Nacional de Industrias - National Association of Industries), announced on 10/1/02 that approval had finally been given, by DS (decreto supremo), for a SME census to be undertaken by the INEI (Instituto Nacional de Estadística e Informática - national institute of statistics and data processing) and SNI.

In the Peruvian Ministry of Industry, Tourism, Integration and International Trade Negotiations (MITINCI) alone there are different definitions of what is meant by small and medium enterprises (SMEs), each of them based on different criteria, although the Ministry has taken steps to bring the concepts into line with the information. The Peruvian definition, according to MITINCI, is: micro-enterprise, maximum 10 workers; small enterprise, maximum 20 workers; and medium enterprise, up to 200 workers. (Source: Alan Fairlie, Small and Medium Industrial Enterprises, study presented to the SNI with the participation of ECLAC, 10/1/02). Whereas in Argentina, to take one example, a medium enterprise is considered to be one with up to 490 workers. Source: Wilson Peres/ECLAC.

In the FTAA framework

• Their influence in the industrial structure is not always greatest in the smallest countries.

• SMEs are not a marginal sector in industry

• They are not a stagnant sector in the industrial dynamic of their countries.

• Different definitions of size and influence of activities with indivisibilities in the small countries.

• Policies without adequate human and financial resources, fragmented, low-impact decision-making.

• Promotional policies subordinated to macroeconomic and competitiveness-oriented policies.

Policies based on very poor-quality information, and policies that take no account of criteria for definition of actors. The dynamic of the productivity gap between SMEs and large enterprises shows great heterogeneity from one country to another.

Comision ALCA/PERU

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