Business Development and SME Support Services in Brazil: the role of SEBRAE Vinicius Lages

1. 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

2. 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

3. 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‘

4. 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.

5. 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

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

7. In our case… criteria for SME’s classification according to gross annual revenue • According to General Law of SME’s (14/12/2006): • Micro: up to R$ 240 mil per year - U$ 110.000, • Small: from R$ 240 mil up to R$ 2,4 million per year - U$ 1.1 million

8. But some institutions use other criteria for SME’s classification Classification according to the number of employees

9. 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

10. Context of SMEs in Brazil 5million 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

11. 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

12. 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

13. 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

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

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

16. 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.

17. 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) • 4.457 direct employees and 9.283 external consultants • 4.462 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 - 2007 • 252.000 participants in distance learning courses - 2007 • Portfolio of more than 2 thousand projects of entrepreneurial development – for 1 real (R$) invested, 2,6 reais are mobilized;

18. Governing BoardNational Council13 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

19. 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;

20. 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

21. Modes of Assistance • Individual - centers of assistance, mobile assistance, web, radio, TV, call centers, videos, CDs, DVD, etc. • Group - projects dedicated to group assistance regarding over 2.000 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).

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

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

24. Result oriented strategy SIGEOR

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

26. http://www.sigeor.sebrae.com.br

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