The Startup Nations Ministerial secretariat works throughout the year, guided by a Steering Committee of national authorities, which includes H.E. Mariano Mayer, Secretary for SMEs and Entrepreneurs at the Ministry of Production of Argentina, the world’s 30th largest economy.
Here are some policy lessons Secretary Mayer shared with the Startup Nations policy network at the 2019 Global Entrepreneurship Congress.
Can you please tell us about the barriers to entrepreneurship you have identified and the policy tool(s) you designed to address them?
One of the issues that we had been working on since my time working in the City of Buenos Aires Government, and which we had identified as one of the main hurdles for entrepreneurs was the need for a regulatory framework that streamlines the process for setting up a new business. This, along with the lack of access to entrepreneurial financing, were the main pain points we set out to address at the national level. We did this by working jointly with the Association of Entrepreneurs of Argentina (ASEA) on a legislative project.
We introduced a bill to Congress in 2016, and after about a year of legislative process, on March 29, 2017, it became what we call the "Law of Entrepreneurs" (Law 27,349). We think this feat shows Argentina’s firm commitment to support entrepreneurs. The new law seeks to generate the conditions to foster and develop business ideas, talent and creativity.
What about its implementation? What has been the experience in that regard?
The process of regulating and implementing the Law of Entrepreneurs required coordination with different ministries and State agencies, led by President Mauricio Macri. We worked as a team and on the basis of dialogue with all productive sectors because we needed to improve the competitiveness of the entire economy.
It was an arduous effort, and despite the hard work, the first version of the system at which we arrived did not please us. With 500 fields of information to complete, the procedure would have been very cumbersome for entrepreneurs. So we kept adjusting details until we got to the current process. Under this new legal framework, entrepreneurs can create a new company online, open a bank account and register it with the federal tax agency - all in just 24 hours.
Can you tell us about early results, and how you are tracking them?
The first element of the law that was implemented was a new type of commercial entity called "Simplified Share Company" (SAS - "Sociedades por Acciones Simplificadas"), first in the Federal Capital which was the first sub-national government to adhere to the law, and then the rest of the country followed. To date, entrepreneurs have established 11,002 SAS.
We are now accompanying the full implementation of the law of entrepreneurs, training local actors on the benefits of the SAS and opening digital signature windows in the Entrepreneur Clubs.
We recently won the call of the CAF Development Bank to carry out an impact evaluation on the entrepreneur financing programs enabled by the law. This will be in addition to the monitoring of the projects which received investment via these law’s instruments.
The Startup Nations policy network members learn from each other by looking into their peers’ policy failures as well as their successes. Can you please tell us about an entrepreneurship policy that didn't go so well?
With have had to correct some of the processes. We learned the most out the experience in implementing a new SME Law, which took much longer than expected after its approval. The path that we traveled left us great lessons, such that when we started working on the Law of Entrepreneurs, we did it articulating with all the organizations that would later have a role in its implementation.
We are aware that we still have a lot to improve, but we are working so that more SMEs from across the country can continue to grow via better financing tools and instruments that allow them to improve their productivity.
What is one public policy in your country that you think other places should adopt?
We believe that the Economic Development Center for Women (CEDEM), created by the Ministry of Production and Labor, is a public policy tool which other countries should adopt. CEDEM aims at promoting inclusion and participation of women in the programs, tools and other services offered by the Secretariat of Entrepreneurs and SMEs and other public and private institutions. The Center is the first public organization dedicated to working on women’s economic self-sufficiency.
Also important for other countries to work on is digital transformation. We are promoting several actions so that digital transformation can improve efficiency and expand the reach of companies, increasing their productivity and competitiveness. These initiatives aim to educate in skills and promote the adoption of new technologies by SMEs and entrepreneurs.
Argentina’s SMEs Digital Transformation Program 4.0 seeks to increase the knowledge and digital skills of the management of SMEs and their employees, so that they can manage the changes associated with the application of 4.0 technologies: big data, Internet of things, additive manufacturing, advanced robots, virtual and augmented reality, cloud computing, cybersecurity, among others. It is all about training and providing technical assistance to promote and accompany SMEs in the development and implementation of digital transformation plans at a 4.0 level.
What is one policy (or lack of policy) that you see elsewhere that you think is highly innovative and creative?
We believe that a public policy that is highly creative and innovative is the regulation of the crowdfunding platforms in the United States. Although we, with the Law of Entrepreneurs, created the regulatory framework for the development of collective financing platforms, we still have a long way to go.
In the United States, in the beginning only those who met certain criteria of wealth and income were allowed to invest in this way. In 2015, thanks to the momentum of the private sector and some existing platforms, a regulatory framework was created that eliminates certain restrictions that made encouraged the sustainability and development of crowdfunding.
Also, one interesting way in which a small and medium enterprise (SME) can seek to grow abroad, is by participating in international tenders managed by Multilateral Development Agencies - United Nations, World Bank, Inter-American Development Bank, among others. This opportunity is a very interesting form of internationalization for SMEs since it is a truly open and global market, in which contracts are awarded via transparent and pre-established procedures and in which financing is assured.
These organizations have funds, which come from donor countries and are channeled to projects aimed at promoting economic and social development and at reducing poverty in the countries receiving these grants. So, they need to contract goods, works and services on a large scale. Each year, the market of multilateral tenders moves hundreds of millions of dollars in projects across different countries and sectors.
How much did you have to coordinate with other levels of government (cities, states, provinces) to enact policy on entrepreneurship? What have you learned from their actions for your work at the national level?
In December 2015, we observed a significant regional asymmetry in terms of resources and opportunities. The evidence also showed that 80% of companies under 5 years old had been created across only five provinces of the country. The main challenge has been to ensure that all Argentineans have the same opportunities to start and grow a company, regardless of the province, city or family in which they were born.
To that end, we developed and consolidated a federal network of organizations with municipalities and provinces, universities, companies, chambers and civil society organizations that allows to coordinate efforts, and share work methodologies. Most importantly this approach allow us to achieve scale (reach more and more entrepreneurs) and ensure that everything we do is sustainable by developing local capacities.
In this regard, coordination with the different levels of government is fundamental. Today, we carry out a support network for entrepreneurs formed by more than 30 cities, 54 Entrepreneur Clubs and more than 500 incubators to increase social capital and strengthen entrepreneurial support institutions.
The same is true with regards to the implementation process of the SAS in all the provinces, which requires constant interaction with the different levels of government.
We are convinced that the best social policy is private, genuine and sustainable employment. In this sense, entrepreneurs and small businesses are the center of any serious public policy that seeks to transform a city based on the logic of local economic development. Cities are going to be transformed to the extent that they generate the conditions for entrepreneurs to emerge, and that these entrepreneurs find in the cities the tools that allow them to grow and develop their businesses. Or else, the entrepreneurs will emigrate.
An entrepreneur is first and foremost an agent of economic change, because his or her work generates wealth, but also an agent of social change because the excellence, energy and passion with which he or she faces the entrepreneurial project becomes a role model for others.
What is your administration’s top priority area of public policy related to entrepreneurship?
Argentina Emprende is a national public policy created to foster the emergence of enterprises that generate genuine employment, to develop the entrepreneurial ecosystem at the federal level with a focus on the growth of weaker regions and the most dynamic sectors, and to enhance innovation that improves entrepreneurs’ sustainability.
These overarching public policy objectives are achieved through specific initiatives that guarantee: the availability of risk capital, the promotion of social innovation, the formation of entrepreneurial human capital, the development of the entrepreneurial community, and the establishment of a solid and reliable regulatory framework.
Today, after 3 years we can say that:
- We have gone from position number 7 in Latin America to position number 3 in the ranking of the Index of Dynamic Entrepreneurship. This is not coincidental; it has to do with our public policies.
- We propelled a support network for entrepreneurs consisting of more than 50 Municipalities, 54 Entrepreneur Clubs and more than 500 incubators to increase social capital and entrepreneurial support institutions.
- As mentioned, we adopted the new Law of Entrepreneurs that allows the creation of companies in 24 hours.
- With FONDCE, we generated an instrument that guarantees access to credit from the Seed Fund for entrepreneurs in early stages, and incentives for co-investment with private companies in scientific and technological ventures through acceleration and expansion funds.
What policy (or policies) are your nation’s entrepreneurs asking for? In other words, which barriers do they demand attention to?
Every time I meet with Argentinean entrepreneurs and SMEs, the issues that emerge as priority needs are consistent: financing, and tax simplification and relief. This is why we have made plans and are implementing a set of tools to improve these axes:
- Tax Relief: In July 2016 the project to promote SMEs became a Law. Since then, more than 470,000 SMEs registered to access the benefits of the law. Since its implementation, these SMEs have been able to deduct productive investments worth more than 4,470 million pesos from their income taxes, and the benefit of the tax credit bonus reached 687 million pesos. Also, the SMEs were able to defer the payment of more than 21,500 million pesos in the year they accessed the VAT ninety day deferral benefit. Twenty of the 23 provinces have already adhered to the SME Law.
- Financing: The pool of capital in Argentina’s financial system is very small. In fact, 70% of SMEs are outside the system. Loans granted to the private sector have a value equivalent of just 14% of GDP, and only 3.8% of that goes to SMEs. Of these credits, only 0.5% are long term. In response, today we have a variety of credits for long-term productive investment so that SMEs throughout the country can finance their projects, as well as lines of working capital with a rate subsidized by the Ministry of Production and Labor, in agreement with 29 banks.
- Productive Simplification: We are simplifying the relationship between businesses and the State to add transparency and reduce time and costs. The administrative simplification plan that we set forth will allow us to generate savings for companies of approximately 1% of GDP, until the end of this administration in 2019. Some examples of the measures that make life easier for companies are the Simplified Shares Company (SAS), the modified mechanism for processing embargoes, and the Simple Export platform that allows entrepreneurs and SMEs to export products anywhere in the world from a computer.