MAINSTREAMING MAINSTREAMING EXPORT EXPORT

COMPETITIVENESS: COMPETITIVENESS: How to Grow and How to Grow and Alleviate Poverty Alleviate Poverty Through ExportsThrough Exports

J. LUIS GUASCHJ. LUIS GUASCH

LACLAC

October 2007October 2007

So… You Want to Grow So… You Want to Grow Through Exports… and Through Exports… and

Mainstream SMEs into the Mainstream SMEs into the Export Chain?Export Chain?

Then I have good news for you!!!Then I have good news for you!!! It can be done and is relatively easyIt can be done and is relatively easy Yet it requires leadership, commitment Yet it requires leadership, commitment

and bringing in a number of and bringing in a number of stakeholdersstakeholders

Trough a combination of passive and Trough a combination of passive and active policies and programs: minimum active policies and programs: minimum platformplatform

Plenty of examples from LACPlenty of examples from LAC

Elements of a successful Elements of a successful strategy Istrategy I

Know thyselfKnow thyself Know the actorsKnow the actors Define your objectivesDefine your objectives Start gradual and strategically focusedStart gradual and strategically focused Discriminatory approaches and strategiesDiscriminatory approaches and strategies Geographically focused strategyGeographically focused strategy Should have short term and medium term Should have short term and medium term

objectivesobjectives

Understand what you need (already have and Understand what you need (already have and need to add): Institutions, Programs and need to add): Institutions, Programs and InstrumentsInstruments

Elements of a successful Elements of a successful strategy IIstrategy II

Access to marketsAccess to markets Logistic costs: infrastructure (hardware) Logistic costs: infrastructure (hardware)

and associated services (software)and associated services (software) Exportable OfferExportable Offer

QualityQuality ProductivityProductivity Knowledge/InnovationKnowledge/Innovation

Articulation of supplyArticulation of supply FDIFDI FinancingFinancing ServicesServices Institutions, Programs and InstrumentsInstitutions, Programs and Instruments

Taking stockTaking stock

Know thyselfKnow thyself Value Chain analysisValue Chain analysis Identifying opportunities and Identifying opportunities and

vulnerabilitiesvulnerabilities A reality checkA reality check Setting prioritiesSetting priorities Gradual and targeted engagementGradual and targeted engagement Build on (semi) successesBuild on (semi) successes

Productive Composition: Productive Composition: As a starting point, need to evaluate current As a starting point, need to evaluate current

productive compositionproductive composition

Decompose among the following, since Decompose among the following, since strategy depends on the typology:strategy depends on the typology: CommoditiesCommodities Indigenous productsIndigenous products Niche productsNiche products Mainstream manufacturingMainstream manufacturing ServicesServices

Evaluate export potentialEvaluate export potential Grow to valueGrow to value

Differentiated Differentiated approachesapproaches

Industrial organization of productionIndustrial organization of production Large firmsLarge firms SMEs (and even micro enterprises)SMEs (and even micro enterprises)

ConsortiaConsortia SuppliersSuppliers Individual exportersIndividual exporters

The critical bottlenecks for successful The critical bottlenecks for successful exporting are very different for large exporting are very different for large and medium firms than for the small and medium firms than for the small onesones

Access to MarketsAccess to Markets Bilateral and multilateral FTAsBilateral and multilateral FTAs Market intelligenceMarket intelligence

Identification of marketsIdentification of markets Identification of product characteristics and Identification of product characteristics and

standardsstandards Identification of distributors/buyersIdentification of distributors/buyers Identification of intermediaries/users: DiasporaIdentification of intermediaries/users: Diaspora Run by technical Ministry (aided by private Run by technical Ministry (aided by private

sector) and not by State or Foreign Relations sector) and not by State or Foreign Relations MinistryMinistry

Communications and InternetCommunications and Internet Export Promotion AgencyExport Promotion Agency

Infrastructure PlatformInfrastructure Platform HardwareHardware

Export corridorsExport corridors Network of service sitesNetwork of service sites Port and AccessesPort and Accesses Logistic terminals-networkLogistic terminals-network

SoftwareSoftware Single windowSingle window Dedicated linesDedicated lines Privileged lanesPrivileged lanes CustomsCustoms WarehousingWarehousing Cool ChainCool Chain Multimodality LawMultimodality Law Transport servicesTransport services

Exportable OfferExportable Offer

Quality: services and adoptionQuality: services and adoption Productivity: knowledge and Productivity: knowledge and

technology transfertechnology transfer InnovationInnovation Value Chain-ClustersValue Chain-Clusters Information ICTInformation ICT CITEs can play major roleCITEs can play major role DiscoveryDiscovery

DiscoveryDiscovery

QuinoaQuinoa Sauco, aguaymanto, coca, Sauco, aguaymanto, coca,

asparagus, tropical products, asparagus, tropical products, acquiferous, medicinal plantsacquiferous, medicinal plants

Value addedValue added BrandBrand Denomination of OriginDenomination of Origin Specialized CITESpecialized CITE

Financial instruments for Financial instruments for ExportingExporting

Export insuranceExport insurance Pre and Post export financingPre and Post export financing Credit to buyers abroadCredit to buyers abroad

Mainstreaming SMEsMainstreaming SMEs Easy ExportEasy Export Mermaids/ArticulatorsMermaids/Articulators Quality, quality and qualityQuality, quality and quality KnowledgeKnowledge PackagingPackaging CITEsCITEs Internet access/ CentersInternet access/ Centers

Mermaids/ Articulators IMermaids/ Articulators I Centaurs/Articulators II: Adding valueCentaurs/Articulators II: Adding value

Bottom up approachBottom up approach In situ assistantIn situ assistant Role of communities/local Role of communities/local

governmentsgovernments

Easy ExportEasy Export Export by postExport by post From any part of the countryFrom any part of the country Avoids all intermediation and logistic Avoids all intermediation and logistic

costscosts Filing one page trough internetFiling one page trough internet Limits in value 2,000 to 5,000 US$Limits in value 2,000 to 5,000 US$ Limits in size 30 to 50 KilosLimits in size 30 to 50 Kilos But unlimited sendsBut unlimited sends Insurance availableInsurance available Extraordinary impact on micro and SMEsExtraordinary impact on micro and SMEs

ArticulatorsArticulators

Mermaids: can be found, trained and Mermaids: can be found, trained and hired hired

Centaurs: can be identified by Centaurs: can be identified by mermaids (they have enough charm mermaids (they have enough charm to get their attention)to get their attention)

CITES can also play that roleCITES can also play that role FDI alsoFDI also

Articulator I: MermaidsArticulator I: Mermaids

Usually specialized individual Usually specialized individual agents, can be trainedagents, can be trained

Functions: identifying communities Functions: identifying communities of small producers and seeking of small producers and seeking coordination among them; transfer coordination among them; transfer information; identifying centaursinformation; identifying centaurs

Articulator II: Centaurs-Articulator II: Centaurs-High valueHigh value

Who are they? They are usually large, Who are they? They are usually large, formal firms: The usual suspects plus formal firms: The usual suspects plus others through diggingothers through digging

Larger exporters (often looking for Larger exporters (often looking for scaling up), buyers, firms higher up in scaling up), buyers, firms higher up in the value chain (pulp, canning etc), the value chain (pulp, canning etc), foreign firms, chains, firms in related foreign firms, chains, firms in related businessbusiness

Functions: transfer know-how, quality Functions: transfer know-how, quality issues, lock in contracts ex-ante (that can issues, lock in contracts ex-ante (that can be used for securing finance)be used for securing finance)

Quality, reliability and scale are the Quality, reliability and scale are the critical factors for Centaurs to get critical factors for Centaurs to get involved (prices obviously help)involved (prices obviously help)

CITEsCITEs Centers of technology and knowledge transfer, mostly Centers of technology and knowledge transfer, mostly

oriented to serve SMEsoriented to serve SMEs In situIn situ Offer services, knowledge and technology transfer, Offer services, knowledge and technology transfer,

conformity to standards, testing, assist in articulation and conformity to standards, testing, assist in articulation and export export

And trainingAnd training Highly focused: leather and shoes, furniture and wood, art Highly focused: leather and shoes, furniture and wood, art

craft, metal-mechanic, textile, fruits, packaging, agro craft, metal-mechanic, textile, fruits, packaging, agro industry, software, logisticindustry, software, logistic

Private runPrivate run Capital equipment grant, operating costs through user feesCapital equipment grant, operating costs through user fees

Spain (pioneer), Peru, Dominican Republic, Croatia, Spain (pioneer), Peru, Dominican Republic, Croatia, Slovenia, Honduras, Colombia, Mexico, etc Slovenia, Honduras, Colombia, Mexico, etc

Typical Assistance to Typical Assistance to FarmersFarmers

Soil preparation, seed selection and Soil preparation, seed selection and treatment, harmonization and planting treatment, harmonization and planting density, timing of production, use of density, timing of production, use of fertilizers, fito-sanitary control and fertilizers, fito-sanitary control and testingtesting

When applicable, procedures for organic When applicable, procedures for organic certification and the certification itselfcertification and the certification itself

When applicable FSC certification for When applicable FSC certification for forestry producers forestry producers

Range of productsRange of products

All sort of fruits, vegetables and horticultureAll sort of fruits, vegetables and horticulture Animal related, meat, cheeses, lactic, fiberAnimal related, meat, cheeses, lactic, fiber Fish farming, trout, tilapia, shrimp and Fish farming, trout, tilapia, shrimp and

other indigenous speciesother indigenous species Peanuts and other nuts, berries, medicinal Peanuts and other nuts, berries, medicinal

plants, potatoes, wood and related products,plants, potatoes, wood and related products, GrainsGrains Art crafts, leather and related productsArt crafts, leather and related products

Results: An example of Results: An example of mainstreaming micro and mainstreaming micro and

SMEs into exports SMEs into exports Within 24 months, in the Peru program Within 24 months, in the Peru program

67,000 small producers were 67,000 small producers were articulated, increasing sales by US$ 65 articulated, increasing sales by US$ 65 million, exporting over 50% of their million, exporting over 50% of their products (tripling their earnings)products (tripling their earnings)

Profile: Small and micro: farmers (about Profile: Small and micro: farmers (about 1 hectare holdings), animal husbandry 1 hectare holdings), animal husbandry (meat, cheeses, fibers), art crafts , fish, (meat, cheeses, fibers), art crafts , fish, wood, tourism, minerswood, tourism, miners

Through about 200 Through about 200 mermaids/articulatorsmermaids/articulators

InstitutionalityInstitutionality

Led by a strong Export Promotion Led by a strong Export Promotion AgencyAgency

With a Board composed by private With a Board composed by private sector agentssector agents

Capacity and appropriate resourcesCapacity and appropriate resources Coordination capacityCoordination capacity