Upgrading in Clusters and Value Chains in Latin America: The Role of Policies

What are the policy requirements to promote small and medium enterprises in Latin America?

This paper analyzes the upgrading process of small and medium enterprises (SMEs) in the context of clusters and value chain. The study draws data from twelve new clusters in Latin America and bases its analysis on literature review of cluster studies.

The paper states that:

  • Latin American and Caribbean countries should increase their competitiveness to benefit from the globalization process;
  • SMEs located in clusters can innovate as a consequence of external economies and joint actions (collective efficiency);
  • SMEs may play a critical role to trigger the region's competitiveness.

The author also presents a menu of actions to support cluster development:

  • Facilitate the development of external economies by building a specialized labor force;
  • Promote linkages between firms by:
    • Creating and enhancing trust between firms;
    • Promoting the establishment of collective projects;
    • Creating and strengthening business associations;
    • Strengthening local supply of financial/non-financial services;
    • Promoting innovation.
  • Strengthen the local position within value chains by:
    • Attracting the chain leaders into the clusters;
    • Sustaining supplier upgrading;
    • Facilitating the interaction within value chains;
    • Promoting access to new markets and value chains;
    • Assisting SMEs in meeting international standards.

Finally, the study provides:

  • Policy lessons and recommendations on how to support SME upgrading in the global market and increase competitiveness;
  • Practical examples of promoting externalities, joint action and innovation for SMEs located in clusters around the region.

About this Publication

By Pietrobelli,C. & Rabellotti, R.