Ms. Gabriela Avendaño, associate of the Corporate team at LatinAlliance, wrote the following article for Edition No. 85 of Law and Business magazine.
Find the article at: https://issuu.com/derechoynegocios/docs/revista_ed_85_final/10
In El Salvador, over the years, it is evident that the activities carried out by micro, small and medium-sized enterprises -MSMEs- have contributed greatly to the sustainability and growth of the local economy, creating decent jobs for men and women. through the generation of various jobs, as well as the productive use of small capital and the increase in business capacity.
Its impact on the Salvadoran economy is so great that protection of this sector has been encouraged and its development encouraged, through different tools such as: simplifying procedures, access to financing, creating new and better programs that allow inclusion of these companies in the market, and above all the support of government and municipal institutions.
However, the National Commission for Micro and Small Enterprises (CONAMYPE) has indicated that the majority of MSMEs do not strictly comply with the regulations established in the applicable legal framework. This is so, in large part, due to the high costs of time and money, which are inevitably associated with the formalization of these companies and the fulfillment of the obligations related to their operation that are established in the corresponding laws, while at the same time there are no benefits or incentives that encourage MSMEs to formalize, thus significantly limiting the possibilities of growth and competitiveness before large companies that are in the market due to non-compliance with the necessary requirements to participate in different projects and bidding processes.
Consequently, and in order to provide greater opportunities to the activities carried out by MSMEs, the Public Administration Procurement and Contracting Law (LACAP) was reformed in 2011, including article 39-C within its provisions. , through which the responsibility of facilitating access to MSMEs in the contracting and acquisition of goods and services was established for government institutions and municipalities, so that they can comply with the corresponding regulations and be contracted.
Similarly, in literal b) of article 39-C, the obligation was established for each government institution and municipalities, to allocate at least 12% of the annual budget in acquisitions and contracting of goods and services with MSMEs, provided that the latter guarantee the quality of what is offered to the State.
The previous reforms were sought in order for MSMEs to have easier access and greater competitiveness to offer goods and services to the State, in comparison with large companies or more consolidated companies, and eventually achieve, be awarded under the different forms of administrative contracting.
Currently, the Treasury and Special Budget Committee of the Legislative Assembly is studying the reform of the article mentioned above, so that the demand for public purchases in favor of MSMEs is increased, raising the percentage of the annual budget allocated to these hires from 12% to 25%.
On the other hand, according to the data provided by CONAMYPE, it is estimated that MSMEs currently generate approximately 700 direct jobs. In addition, they contribute around 35% of GDP and together they consume more inputs and services than the large companies that are within the market and that at the same time sell to the State.
But What advantages for MSMEs could we identify if this reform were to be approved?
- Generation of new jobs: new jobs would be generated for men and women, allowing them to develop professionally and gain more experience. On the other hand, they would generate more work for companies and, therefore, new and better products to offer.
- Continue helping the sustainability and economic growth of the country, through the generation of new business opportunities;
- Increased liquidity of MSMEs, allowing them to innovate through new products and services offered, as well as improve their quality; and,
- Acceleration and/or possible elimination of bureaucratic processes in government and municipal institutions, so as to avoid unnecessary costs and expenses in procedures and/or time for companies that wish to formalize legally.
According to the data generated by the Public Procurement System of El Salvador (COMPRASAL), currently the MIYMES have access to approximately 40% of the public purchases of government institutions and/or municipalities, therefore, the increase in the minimum percentage intended for MSMEs, currently it is already above the value regulated in the LACAP.
For more information contact us at: elsalvador@latinalliance.co