1. Argentina Macroeconomic and SMEs Overview Lic. Evelin Goldstein Consulting Undersecretariat of Small and Medium Enterprises and Regional Development Secretariat of Industry, Commerce and SMEs Ministry of Economy and Production May 2007

2. Lic. Evelin Goldstein ARGENTINA Topics of the Presentation 1.Crisis, Recovery and Development of Argentina’s Economy 2.SMEs Overview 3.SMEs Problems 4.SMEs Public Policies

3. Crisis, Recovery and Development of Argentina’s Economy

4. Lic. Evelin Goldstein ARGENTINA New growth drivers for Argentina after the crisis Destruction of National Industry Convertibility Plan Recovery and growth Economic crisis Competitive Exchange rate Twin Surpluses (fiscal and Commercial) More active role of The government The 90’sAfter devaluation (2002) Fixed and Overvaluated Exchange rate Market’s liberalization

5. Lic. Evelin Goldstein ARGENTINA Growing after the Crisis Source: Ministry of Economy and Production. GDP Growth: 9% per years in real terms Overvaluated exchange rate

6. Lic. Evelin Goldstein ARGENTINA Solving the Problem of Unemployment Employees for every millon of product Source: Ministry of Economy and Production +12.2%

7. Lic. Evelin Goldstein ARGENTINA Increasing investments to support growth Source: Ministry of Economy and Production Note: Fixed Gross Domestic Investment (FGDI) in Dollars. FGDI/GDP: 22%

8. Lic. Evelin Goldstein ARGENTINA Results of supporting a competitive exchange rate Source: Ministry of Economy and Production. % of GDP

9. Argentina’s SMEs Overview

10. Lic. Evelin Goldstein ARGENTINA Growth of SMEs Start-ups Source: Ministry of Labor and Social Security Note: Almost all start-ups are of SMEs. Data is of the Second Quarter of every year. Enterprises Start-ups

11. Lic. Evelin Goldstein ARGENTINA Also there are closings... Source: Ministry of Labor and Social Security. Evolution of Start-ups and closings +50,000 new enterprises per year

12. Lic. Evelin Goldstein ARGENTINA The role of MiSMEs in Employment Source: Ministry of Labor and Social Security. MiSMEs: +47% Between 2002 and 2005 MiSMEs Employment increased 47%, whereas in big firms 22% in the same period. Evolution of MiSMEs Employment

13. Lic. Evelin Goldstein ARGENTINA Dynamic SMEs exporters  Exports of SMEs grew 57% during the last three years.  There are 6,000 exporting SMEs and about 2,000 more that are starting to export.  It is possible to find different markets and production sectors.

14. Lic. Evelin Goldstein ARGENTINA SMEs exports tendency I Semester 2006: +17% Source: Ministry of Economy and Production. Millons of dollars

15. Lic. Evelin Goldstein ARGENTINA Credits for SMEs Source: Central Bank of Argentina. Nota: SMEs loans of less than $ 1 millon are considered. Evolution of SMEs Debt Millons of Dollars

16. Main Problems of SMEs in Argentina

17. Lic. Evelin Goldstein ARGENTINA SMEs Problems Financing: Bank restrictions High interest rate Limited Guarantees for loans Many SMEs are not registered Few developed capital market Insufficent Investment SMEs use their own resources to finance investment

18. Lic. Evelin Goldstein ARGENTINA Other SMEs Problems Lack-of qualified employees Weak relationship between entrepreneurs Lack-of professionalism Few resources for technology and innovation Low productivity Lack-of market information

19. Public Polices for SMEs

20. Lic. Evelin Goldstein ARGENTINA General Areas of ActionTRAININGandSTART-UPSTRAININGandSTART-UPSFINANCINGFINANCINGDEVELOPMENT OF DIFFERENT INDUSTRIES AND REGIONS DEVELOPMENT OF DIFFERENT INDUSTRIES AND REGIONS FOREIGNTRADEFOREIGNTRADE  Subsidized Credits for MiSMEs  Mutual Guaranteescompanies  Tax benefits for employee training  Subsidies for quality improvent  Start-up DevelopmentProgram  Net Agencies  Clusters  SW Industry Promotion  Support of the first export  Exports groups  Trade promotion

21. Lic. Evelin Goldstein ARGENTINA  The Net of Development Agencies is formed by non-profit insitutions with public and private participation  The Agencies objective is to promote the local economic development through the SEPYME’s program.  The Net is an instrument to improve the relation between SMEs and the SEPYME. Net of Development Agencies

22. Lic. Evelin Goldstein ARGENTINA Northeast  9 Agencies Cuyo  7 Agencies Northwest  5 Agencies Center  14 Agencies Buenos Aires  16 Agencies Patagonia  12 Agencies Net of Development Agencies

23. Lic. Evelin Goldstein ARGENTINA Clusters Promote the integration of the production at regional levels through the strengthening of the relation between enterprises, Public sector, and research institutions Objective Means SEPYME’s Programs of Financial Aid (FONDER) Support and advice for the design of association projects

24. Lic. Evelin Goldstein ARGENTINA Financing Subsidized Rates Regime Regime Subsidized Rates Regime Regime The objective is to reduce financial cost of SMEs loans by subsiding interest rates. Credits are offered by banks. The objective is to reduce financial cost of SMEs loans by subsiding interest rates. Credits are offered by banks. Global Credits Program Program The purpose is to offer long-term loans for SMEs with low interest rates. Funds are provided by the IDB. The purpose is to offer long-term loans for SMEs with low interest rates. Funds are provided by the IDB. Mutual Guarantee Companies (SGR) Mutual Guarantee Companies (SGR) Business companies facilitate financial access to SMEs through guarantees. Business companies facilitate financial access to SMEs through guarantees.

25. Lic. Evelin Goldstein ARGENTINA Financing (cont.) National Fund for SMEs (FONAPYME) National Fund for SMEs (FONAPYME) This Program finances investment in productive development. Projects are evaluated by SEPYME. The interest rate is variable. This Program finances investment in productive development. Projects are evaluated by SEPYME. The interest rate is variable. National Fund for Micro-Enterprises(FOMICRO) Micro-Enterprises(FOMICRO) Entrepreneurs can borrow money without guarantees. Interest rates are low. Funds are provided by the National Bank of Argentina. Entrepreneurs can borrow money without guarantees. Interest rates are low. Funds are provided by the National Bank of Argentina. This Program provides subsidized credits for clusters. Funds are provided by the National Bank of Argentina. This Program provides subsidized credits for clusters. Funds are provided by the National Bank of Argentina. National Fund for Regional Development (FONDER) National Fund for Regional Development (FONDER)

26. Muchas Gracias Thank you Evelin Goldstein Ministry of Economy and Production Secretariat of Industry, Commerce and SMEs Undersecretariat of Small and Medium Enterprises and Regional Development