Business Development and SME Support Services in Brazil: the role of SEBRAE Vinicius Lages Business Development and SME Support Services in Brazil: the role of SEBRAE Vinicius Lages Third Tri-nations Summit for Small Business Development New Delhi, November 18-22, 2008 Institutional Framework and Major Programmes for SME Development in South Africa, Brazil and India

Presentation Plan Challenges in designing institutional and police framework for SMEs support SMEs support in Brazil: institutional framework SEBRAE´s role in SMEs support Q&A

Major challenges Recognizing the importance of SMEs The concept: defining SMEs Defining appropriate policies, programs and instruments Establishing a sustainable police and institutional framework Designing a police and institutional system Facilitating access to business development services Advocacy planning – ‘voicing the voiceless‘

The importance of SMEs There is an established yet growing recognition of the importance of small, and micro enterprises (SMEs) in sustained national economic growth. In Latin America, SMEs comprise around 70 million units and are considered one of the most significant sources of employment and income across the region. In most countries the private sector is almost entirely comprised of micro and small enterprises. Given their importance, however, there exists little systematic research in the area of SMEs and the programs and policies to support them. As a result, scale-based enterprise promotion is often driven by social and political considerations rather than by comprehensive economic analysis.

The concept: defining SMEs Why it is so important? Policies designing and evaluation To understand the SME sector and create policies accordingly, countries must implement regular data collection schedules. Our Tri-nations Program initiatives should include: An inventory of data currently collected in the 3 countries Creation of comparable SME definitions (where possible, standardized definitions) Regular data analysis vis-à-vis the dynamics of our economies

Most common SMEs definition are based on the: Number of employees Growth revenues (annual) productive assets (capital assets)

according to gross annual revenue In our case… criteria for SME’s classification According to General Law of SME’s (14/12/2006): Micro: up to R$ 240 mil per year - U$ , Small: from R$ 240 mil up to R$ 2,4 million per year - U$ 1.1 million

Classification according to the number of employees But some institutions use other criteria for SME’s classification SizeSectores IndustryCommerce and Services MicroUp to 19 employeesUp to 09 employees SmallFrom 20 to 99 employeesFrom 10 to 49 emplyees MediumFrom 100 to 499 employeesFrom 50 to 99 employees BigMore than 500 employeesMore than 100 emplyees

Brazil Population: 191,6 millions GDP (current US$) 1,2 billions Agriculture (value added) - 5% GDP Industry (value added) - 31% GDP Services (value added) - 64% GDP

Context of SMEs in Brazil 5 million of formal enterprises (99%) and 10 million of informal enterprises 56,1% of the formal urban labor force 26% of the aggregate wage/salaries 20% of Brazilian Gross Domestic Product 13% of government supply 2,4 % of Brazilian exports

A land of entrepreneurs GEM 2007 – Global Entrepreneurship Monitor Brazil ranked 9th position Growing entrepreneurship based in opportunity evaluation (less by need or lack of alternative) Growing entrepreneurship among women

Until recent, favorable economic conditions Reached the investment grade – less risk Low inflation rate US$ 206 billion - foreign currency reserves Economic growth rate of 5,7 % (2007) Economic and social programs dedicated to poverty alleviation and promotion of equity Growing income of BoP (base of pyramid) Foreign direct investments US$ 30 billion in 2007 Public and private investments- PAC Program

But, challenges ahead Credit crunch – increase the rigour of risk analysis – raise the need for collaterals economic growth – real economy and its market impacts Slow down of private and public investment Consumption Protectionism

Development of SMEs Designing a enabling environment for business SEBRAE supports Formalization of SMEs Fair competition Low cost of formalization Longevity of SMEs Higher competitiviness Opportunity driven entrepreteurship Policy Integration

Brazilian Micro and Small Business Support Service Mission To promote competitiveness and sustainable development of micro and small enterprises and foster enterpreneurship

SEBRAE was originally a governmental institution, created in 1972 linked to Planning Secretary of Republic’s Presidency with the name of CEBRAE. Afterwards, it was transferred to Ministry of Industry and Commerce In 1990, it was transformed into SEBRAE, a private non profit autonomous social service, with a funding originated from a tax contribution of 0,3% over enterprises payroll.

27 units in all Brazilian states and Federal District (Brasília) Budget 2008: US$ 1,2 billion 788 service centers (of which 452 in partnership with other institutions) direct employees and external consultants partners from public and private sectors, NGO’s, and international ones involved in projects supported by SEBRAE Presence in more than 2000 municipalities Around 200 clusters supported by long term projetcs 377 Enterprise Incubators Around 11 millions of consulting services delivered participants in distance learning courses Portfolio of more than 2 thousand projects of entrepreneurial development – for 1 real (R$) invested, 2,6 reais are mobilized;

Governing Board National Council 13 members MDIC- Ministry of Development, Industry and Trade ABDE- Brazilian Association of Financial Institutions for Development CNI- National Industry Confederation CNA- National Agriculture Confederation CNC – National Commerce Confederation CACB- Commerce and Enterpreneurial Associations Confederation of Brasil. ANPROTEC- National Assoc of Support Institutions for High Tech Enterprises ANPEI - National Assoc for Research and Engineering of Innovative Enterprises BB – Bank of Brasil CEF- Caixa Economica Federal ABASE – Brazilian Assoc of State SEBRAE’s FINEP- Funding Agency for Studies and Projects BNDES - Economic and Social Development National Bank

 Implements activities in areas such as:  training programs (management)  encouraging a more dynamic start-up market;  encouraging business development in disadvantaged communities and under- represented groups.  facilitating market access,  fostering entrepreneurship  facilitating access to technology,  innovation support,  facilitating access to financial services;

 Acts in building of a more favorable business environment fostering better regulation and policies; i.e. General Law of SME’s, Innovation Law, government procurement scheme, credit guarantee societies

Modes of Assistance Individual - centers of assistance, mobile assistance, web, radio, TV, call centers, videos, CDs, DVD, etc. over municipalities, 200 clusters, and 370 business incubators. Group - projects dedicated to group assistance regarding over municipalities, 200 clusters, and 370 business incubators. These approaches consider sectors, clusters and territories as the contexts in which SMEs are involved Key- factors: governance among clusters, coordination, intangible actives (culture, history, reputation, trade marks), infrastructure, logistics, services, knowledge, sharing of best practices, commercial and productive integration).

Segmentation  Individual Assistance - life cycle  Potential entrepreneurs  Start-ups and companies: 0 to 2 years  Companies: over 2 years

Segmentation Group Assistance Clusters Groups of companies Associations Cooperatives Networks Franchisees Suppliers Trade associations

Result oriented strategy SIGEOR

Integrated Intervention Strategy Technology and Innovation Market Access Access to financial Services Individual and group assistance Business Organization Business Management Cooperation Culture Results

conclusion SME concept Policy framework Institution framework – network Instruments – business services Voicing the voiceless