Small and medium-sized enterprises. Promoting productivity in Latin America

On a global scale, Latin America is the furthest behind. Productivity is abysmal. Few regional companies are joining global supply chains. Small and medium-sized enterprises (SMES) in North America, Asia and Europe are developing new technologies and serve as engines of growth, but in Latin America the SMES, (mostly family-owned and non-competitive), add little value to goods and services distributed to local markets (OECD, Latin American Economic Outlook, 2015).

Two public-private programs are introducing similar methodologies, currently being carried out in Colombia and Mexico, focusing on introducing cleaner production in firms associated with supply chains, to improve productivity and also environmental protection among a large number of SMES in the region. RedES, Network of Sustainable Enterprises, was the first launched in Mexico in 2006, under the sponsership of Profepa, a federal Government agency, and by 2012 had enrolled 4,800 suppliers from 255 leading firms. In Colombia, RedEs was launched in November 2013 in SME companies. In September 2015, the number had already grown to 200 - grouped in 19 supply chains, each led by a key company. It is expected that more supply chains will be enrolled at the end of the year.

The program in Colombia is carried out by a great public-private partnership, led by the regional environmental authority of Cundinamarca and executed by the School of Management at the University of the Andes. Other public agencies also provide funds. Key companies that lead the supply chains offer other types of logistical support and locations to carry out the workshops.

Unlike most of the technical assistance programs of Cleaner Production (CP) in the world, which are expensive and not always effective, RedEs presents 10 week workshops, in which one learns by hands-on tasks, and it offers visits to the sites to apply the Clean Production diagnostic tools, such as Eco-Maps , eco-designs, and Eco-balances. Representatives of each firm become familiar with best practices, develop their own project of clean production and boost international learning. Follow-up studies in Mexico and Colombia show that nearly 70 percent of the projects designed are currently implemented: by doing this, the firms secure a knowledge of continuous learning.

Knowledge derived from RedES has shown the owners and managers of SMES ways to improve their productivity, by adding value to their products or services. Using new technology, empowering the operational managers and employees with new talents, joining supply chains, and learning about how to collaborate both with other suppliers and key firms that lead a chain. Consider these examples:

Alpine: is a Colombian dairy company, with operations in Ecuador, Venezuela and the United States. They were concerned about the productivity of their supply chain and invited 10 small suppliers of milk, located close to their main headquarters to participate in a Clean Production workshop for ten weeks. Some of the companies invited designed projects to reduce the water waste, other to install bio-digestives to transform cow manure into energy, and the others to fertilize paddocks buying compost from the flower producers in the surrounding areas. All of the companies shared and discussed the design of their projects. The annual savings of the participating firms was $300,000, with an average return on investment in 18 months.

Carmo Workshops: is a small Mexican company that provides plastic jugs for the syrups of Bristol Meyers Squibb. They increased their productivity when installing new technology. In a CP workshop, the Carmo owner and director, learned how to measure the cost of inefficient processing. He knew that the waste could be avoided when installing electrical heating molds, but believed that the cost was very high; application of the CP tool demonstrated that heating the molds could save them 30 percent on raw materials, with a recovery in investment in 6 months. Carmo very soon expanded its production and developed closer ties with the pharmaceutical company.

Turandes: in Colombia provided transportation services to schools and companies. They operate 160 vehicles. Its managers, who participated in the CP workshop, learned from the laboratory technology to monitor when the engine of a vehicle needed oil change -Turandes consumed 2,700 gallons of motor oil and 3,200 filters annually. Once the monitor was installed, the vehicle use indicators implemented, company drivers and trained mechanics, Turandes reduced the use of engine oil filters by 30 percent, with an annual savings of $20,000 and an investment recovery in 14 months.

The Ponderosa, in Mexico: supplying and promoted processed paper to producers of cardboard on non-returnable wooden platforms of different sizes. Managers who participated in the CP workshop developed a project in collaboration with key customers, with a focus on designing returnable platforms of the same size. When using renewable platforms for all their customers, the company obtained a monthly savings of $45,000 . In addition, they saved 444 cubic meters of wood, which is equivalent to 367 trees or three hectares of forest.

In conclusion, improving productivity in Latin America is key so that the region does not continue lagging behind other world economies, generating more social inequity and environmental degradation. SMES are the primary source of employment in the region, as well as the dominant category of formal enterprises. The above examples offer a robust evidence that SMES in Mexico and Colombia, as well as in Latin America, need to be shown how to increase their productivity. The RedES model to increase productivity and significantly contribute to the protection of the environment, provides a scalable, cost effective, and measurable way to promote growth and productivity of SMES in Latin America.

henrgome@uniandes.edu.co

bvan@uniandes.edu.co