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Why exporting services matters for SMEs

Published on June 10, 2021

Many small and medium enterprises (SMEs) contact me looking for support to provide their knowledge-based services (KBS) in foreign markets. They usually wonder if it is worth investing time and money in developing an export strategy, particularly in the case of highly-volatile macroeconomic and regulatory scenarios. The answer is always “Yes!” and there are several reasons for that.

First of all, we should understand that markets are global. Most Latin American markets are very small. For example, Argentina represents only 0.6% of the world population and its share in global GDP dropped from 1.3% to 0.7% during the last four decades and it will keep going down during the next 5 years. In other words, focusing only on the domestic market equals ignoring more than 99% of the potential clients.

Second, exporting enables risk diversification and growth acceleration. Providing services to larger, less fluctuating and more dynamic markets is especially relevant considering unstable local macroeconomic conditions. GDP in Argentina fell during 10 of the last 20 years and it will continue to underperform compared to the rest of the world. According to the IMF, the global economy is projected to grow at 4.0% a year in 2021-2026. Latin America and the Caribbean will expand at a slower annual pace (2.9%), while Argentina is expected to grow only 2.5% a year during the same period.

Third, exports result in a virtuous competitiveness circle. On the one hand, this is the consequence of increasing scale and gaining efficiency in the provision of services. On the other hand, competing in the global arena with the best players poses an enormous challenge, but it is also an incentive to develop a differentiated and competitive offer.

Fourth, it is important to consider that KBS exports face a positive global outlook. These activities are dynamic and will continue to expand steadily, especially those related to digital transformation and digitally-enabled services. In fact, cross-border supply faces lower internationalization costs and less trade barriers, especially compared to other modes of supply (e.g. commercial presence or movement of natural persons) or other industries where Argentina is competitive (e.g. agribusiness).

Last, but not least, KBS could benefit from some advantages Argentina has to offer. On one side, there are qualified human resources at competitive costs that enable exporting intermediate and upper-intermediate value-added KBS. On the other side, time zone and cultural and language similarities (including the highest English level of the region) are appropriate for exporting services to the Americas.

What motivates you to export?


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