Sustainable economic development in Central America

Project description

Title: Sustainable economic development in Central America (DESCA)
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Central America
Lead executing agency: Centro para la Promoción de la Micro y Pequeña Empresa en Centroamérica (CENPROMYPE)
Overall term: 2007 to 2012

Context

Central America’s integration into international trade is making progress, now a regional customs union has been set up, the free-trade agreement CAFTA-DR has come into force and an Association Agreement with the EU was concluded in May 2010. The national governments of El Salvador, Guatemala and Honduras are relying increasingly on the dynamism of innovative micro, small and medium-sized enterprises (MSMEs). However, MSMEs are not yet able to perform the role assigned to them as engines for growth or to take advantage of the opportunities created by the liberalisation of trade. In the future the innovative part of the MSME sector will come under particular pressure to modernise. However, neither the policy framework nor the underlying institutional conditions are conducive to the commercial and technological expertise needed by innovative MSMEs.

Objective

The political and institutional framework for promoting the commercial and technological expertise of innovative MSMEs has improved.

Approach

This programme supports the establishment of a coherent regional and national system to promote MSMEs in Central America. Particular emphasis is placed on strengthening commercial and technological expertise and on tightening relations with the EU. The approach taken by the programme involves interventions at the supranational Central American level, at the national, policy-making levels, and at the level of the implementing organisations.

The programme measures include providing in-process consultancy, multi-institutional capacity building, information exchange on best practices and how to adopt these throughout the region, and the (transnational) networking of national and regional organisations in the areas of trade, innovation and technology. The aim is not only to improve the institutional efficiency of individual stakeholders, but to enhance the collaboration between private and public stakeholders as well as the conditions under which they operate. Another component of the programme is providing policy and strategic advice on trade and innovation.

The consulting firm AMBERO supports the implementation of the project.

Results achieved so far

Promoting trade

Knowledge transfer in relation to the EU Association Agreement and the reduction of trade barriers

• The Central American MSME platform, Consejo MIPYME Centroamericano (CMC), has improved the presence of the underrepresented MSME sector in trade policy, raising the level of its participation and influence. For the negotiations on the agreement with the EU, CMC submitted proposals and position papers, some of which found their way into the provisions of the agreement.
• Backing is provided to public and private support institutions for the creation of an (online) toolbox to help MSMEs better prepare for the advantages that will be available once the Association Agreement Central America–EU has been ratified. The toolbox contains written information and manuals to help MSMEs that want to export their goods to Europe. Partners are also receiving advice on how to form export consortia to make it easier for MSMEs to access the European market.
• El Salvador’s central bank has set up a single window for centralised import and export permit procedures. Import and export procedures have been improved in El Salvador, Guatemala and Honduras. As an example, processing times for some import procedures in El Salvador have been drastically reduced from four hours to 30 minutes.
• E-learning courses designed to improve foreign trade expertise have been developed and introduced by universities in El Salvador and Honduras as a way of enhancing services for business enterprises. Over 100 people have taken part in five self-financed online courses offered to date. The export plans developed by them enabled some businesses to enter new markets and find new customers.
• A mentoring programme to help women involved in trade, innovation and business start-ups has been launched in cooperation with several partners. So far 120 women in five countries have participated in mentors’ training; these in turn have advised 120 other women on starting up or running a business. Most of the positive achievements here related to motivation and management skills. Many of the women who took part in the programme also said that, thanks to the advice they were given, they were able to acquire new customers, increase sales, find new market niches and create something innovative.

Fostering innovation

Reinforcing the foundations of innovation systems, improving underlying conditions and promoting interaction

• Two countries have started offering training courses on innovation management.
  • In El Salvador, the ‘Diploma for Market-oriented Innovation Management’, developed by the International SEPT Programme (small enterprise promotion and training) of the University of Leipzig, has been integrated into the master’s programme of the Business School ISEADE. So far 103 people have completed the course and 32 innovation plans have been developed. A fourth course is currently being prepared without the financial support of development cooperation. Seven of the nine businesses questioned to date have implemented their innovation plans and have developed new marketing models, products or services.
  • In Guatemala, the innovation programme ‘InnovEmpresa’, originally from Costa Rica, is now being implemented. 19 innovation management consultants have completed the programme, four of whom have also completed instructor training. So far they have advised more than 60 business enterprises on the development of innovation plans. Seven innovation management consultants have set up a foundation (Fundación I). The technical education institute INTECAP has been offering online innovation management courses since 2011; 50 people have taken part in them so far. The export association AGEXPORT and a number of universities are also offering courses or have incorporated innovation management studies into their existing programmes. So far nine businesses questioned have confirmed that the innovation plans they implemented have made an impact. Eight entrepreneurs have, for example, developed new products or services or have introduced improvements to their processes. In four cases an increase in sales of more than 30% was reported.
• The so-called ‘Mesas Técnicas de Innovación’ in Guatemala and Honduras are helping to improve communication, coordination and cooperation among the important stakeholders of the innovation system. These monthly round-table discussions, which have now been formalised, are working on a coordinated publicity strategy, and also carry out joint projects such as the IT innovation competition in Honduras. Much progress has now been made toward institutional sustainability. They have attracted new members and cooperation partners, for example a number of private universities and the diaspora network Honduras Global, which is supported by the German Federal Ministry for Economic Cooperation and Development (BMZ).
• The start-up platform First Tuesday, with more than 2,000 members in El Salvador and Honduras, now has a solid place in the start-up scene. FUSADES, the Salvadorian foundation for economic and social development, and ANDI, the Honduran industrial association, both offer training sessions and networking events on a regular basis. Over 500 people to date have been able to present their start-up ideas. Some projects have already been financed by large corporations. Business associations have been established, and some of the participants are in the process of filing for a patent.
• The programme supports the development of efficient clusters in the IT field in order to strengthen the international competitiveness of SMEs. In Honduras, the first IT association (AHTI) has been founded. The IT clusters in the three partner countries are expanding their services for member companies to include export promotion and training activities.
• FONDEPRO, a fund for enhancing the competitiveness of MSMEs, was successfully transferred from El Salvador to Guatemala in June 2011. Its offices are now located in the Guatemalan Ministry of Economics. So far a total of EUR 130,000 has been awarded to 35 projects. The SME support fund in El Salvador was expanded to include the provision of start-up capital for the first time, as a new source of financing for innovative start-ups.