Challenges of Mipymes against Covid 19: Impact, Significance, and Development

By: Shirley Jenine Moya Pantoja, Jorge Frank Tovar Rodríguez and Johana Edith Vargas Mendez


“Formal and informal MSMEs represent more than 90% of all companies and represent, on average, 70% of total employment and 50% of GDP. As such, they are key players in achieving a green recovery. ” (United Nations, nd )


In this way, the UN remembered, for the Day of Micro and Small and Medium Enterprises on June 27, 2021, the importance of Mipymes not only in the economy but also in the environment. Beyond the fact that companies had to face the consequences of Covid 19, there is a key factor in the performance of MSMEs even before the pandemic: productivity.


It is mentioned in Adriano Perez (2019), that Latin American companies are almost 50% less productive than European companies, and this implies a lower incidence in their contribution to the country's GDP, as well as in exports. And it is not for less, since it is precisely these types of companies that suffered the greatest impact from covid 19, which are mostly SMEs, reflecting in a massive closure of businesses and a large reduction in sales; a fact that will be analyzed in the Impact of the Pandemic on Mipymes.


In the case of Peru, of all the existing companies, 95% are made up of mypes and this percentage was reduced due to the closure of businesses due to the effects of Covid 19. However, for many years, Peru has faced another big problem: informality. It is estimated that 85% of businesses in Peru, by the year 2020, were informal and this figure is increasing year after year. (COMEXPERU, 2020).


This is reflected in the low rates of productivity, sales, and contribution to the country's GDP to other countries in the region (Adriano Perez, 2019), which shows the efforts that have been made so far in favor of MSMEs have not have given the expected results. However, the pandemic, in addition to the closure of businesses, also brought something positive which is that many companies "reinvented" themselves to survive and many Peruvians are opting, as in most countries, for the digitalization of their businesses.


Impact of the Pandemic on MSMEs


In 2020, the arrival of the pandemic not only caused havoc at the health level but also in the economy, since micro, small and medium-sized companies were greatly affected, especially in Latin America, where they play a very important role. In the economy. Considering the formal economy, MSMEs represent 99.5% of the companies in the region and the vast majority are micro-enterprises (88.4% of the total ), with 60% of the population employed and a 25% incidence in the GDP of the region (ECLAC, 2020).


In Mexico, the MSMEs also suffered a drastic impact, since it caused the closure of a considerable number of companies. Based on recent data from Mexico, INEGI reported that a staggering 20.8% of micro, small, and medium-sized enterprises (MSMEs) closed for good between May 2019 and September 2020 (approximately 1 million businesses). (UNDP, 2021)


In the case of Colombia, micro-enterprises were the most affected in their sales between 2019 and 2020 with a net or evolution balance of -57.0%, followed by small ones with -49.7% and medium-sized ones with -39.7%. 50.0% of SMEs decreased their employment in 2020 compared to 2019, 35.0% maintained it and 15.0% increased it. A survey conducted in 2020 by the International Trade Center (ITC) of more than 4,467 companies in more than 132 countries, showed that 1 in 5 SMEs went bankrupt within the first three months of the start of the pandemic. (ACOPI, 2020)


As for Peru, the pandemic caused by COVID-19 has meant one of the largest economic setbacks in the modern history of Peru. This phenomenon not only brought with it the loss of millions of jobs, but also the extinction of more than half a million formal companies. In Peru, the impact of the pandemic on MSMEs was not minor. According to the latest PRODUCE statistical yearbook, the pandemic caused the disappearance of 25% of formal companies in the country. With this, the total number of formal productive units in Peru was reduced by 600 thousand, going from 2.4 million in 2019 to 1.8 million in 2020. (IPE, 2021)


Adaptation to digitization


"To reach 50 million users, radio took 39 years, TV 13 years, cable TV 10 years, and the Internet to reach that number of users have only needed 4 years." (Sunday, 2000, p. 99). And it is that, since the arrival of the internet in our lives, a new world of opportunities has opened up for businesses that have historically been traditional, as well as for those that are just starting. But it was not until we suffered the blow of the pandemic, and the consequent social isolation, that electronic commerce took an explosive momentum worldwide. (United Nations Conference on Trade and Development [UNCTAD], 2021).


Although Latin America and the Caribbean (ALEC) are still lagging with only 2% of online sales compared to 40% in Asia ( Fernandez Diez & Puig Gabarró, 2020). Within the region, Peru, where the term “reinvented” was adopted as a form of natural survival for companies in the context of the pandemic, the outlook is relatively good since, according to the newspaper Gestión (2022), the country leads the growth of electronic commerce with 87% followed by Brazil (67%) and Colombia (53%).


According to the Peruvian Chamber of Electronic Commerce (CAPECE, 2022) cited by Diario El Comercio (2022), the size of electronic commerce in Peru has grown by 55%, moving approximately 9.3 billion dollars in 2021 and 41.8% of Peruvians made purchases online, unlike 18.6% in 2020.


According to Fernandez Diez & Puig Gabarró (2020), for MYPIMES to adapt adequately to this digital market and not be left behind compared to companies that have already done so, it is necessary to focus on three aspects: means of payment, trading platforms, and Logistics. This is why training for MYPYMES about digital tools is important, such is the case of the COMPRALEALPERU.PE program launched by the Peruvian Chamber of Electronic Commerce (CAPECE) in June 2020 or, the SME Opportunity Creators Summit promoted by BBVA.


In this regard, there is still a long way to go and some of the barriers that companies must overcome, in addition to having an adequate digital platform, are: -Fear of fraud by consumers (Pamela Flores, 2017), - Commissions for online sales and prevent the informality of offline sales from being transferred to online sales (CAPECE, 2021)


The transition from traditional to digital commerce is imminent, as is the passage of generations in people. And this is why companies must adapt to this new demand; the only thing COVID 19 did was speed up this process. Do you see it? Not everything is bad, even bad situations bring something positive, even COVID 19. You just have to adapt.


Youth Entrepreneurship


The study of entrepreneurship as a field of research is relatively new - not less than 30 years old. The word "entrepreneur" comes from the French " entrepreneur " which means "pioneer", that is, in its beginnings, an entrepreneur was conceived as an adventurer who began a journey arriving without certainty of what he expected. This uncertainty is one of the main characteristics of the entrepreneur today. Given this, an entrepreneur linked to a company, the characteristic of innovator was added. So, entrepreneurship can be defined as one that innovates in uncertainty or that seeks to innovate in uncertainty. The second part of the definition covers youth entrepreneurship.


Youth entrepreneurship is the entrepreneurship of the millennial generation, that is, it is the entrepreneurship that youth found necessary to innovate due to the difficulty of accessing the labor market. Factors that produce this difficulty are digitization and robotization which widen the gap in competitiveness among the same youth. Thus, the market that asks for experience for its positions cannot hire a large group of young people who cannot acquire the required experience: "Without experience, there is no contract, without a contract there is no experience"


References


De Haro, G. (April 17, 2017). ' Millennials ', the entrepreneurial generation. The country. https://bit.ly/3wNiklA


Institute of Mining Engineers of Peru (2020). What is the profile of the young entrepreneurs of the so-called "Bicentennial Generation "? https://bit.ly/3LzrnMb


Plan International Peru. (June 16, 2021). Learn about the reality of youth entrepreneurship in Peru and what's coming. https://bit.ly/3LB2rnp


United Nations. ( n.d. ). MSMEs , key to an inclusive and sustainable recovery .

https://www.un.org/es/observances/micro-small-medium-businesses-day


COMEXPERU. Micro and small companies in Peru. Results in 2020 .

https://www.comexperu.org.pe/upload/articles/reportes/reporte-mypes-2020.pdf


United Nations Conference for Trade and Development (2021, May 03). Global e-commerce hits $26.7 trillion as COVID-19 drives online sales.

https://unctad.org/en/news/global-e-commerce-reaches-267-trillion-dollars-as-covid-19-drives


Fernandez, M & Puig, P. (2020). The challenges of electronic commerce for SMEs . Inter-American Development Bank. https://publications.iadb.org/en/the-challenges-of-electronic-commerce-for-the-main-key-SMEs-in-the-process-of-


Management Writing. (2022, March 15). Electronic commerce: Peru leads growth in Latin America, according to a study . Management. https://gestion.pe/economia/empresas/comercio-electronico-peru-heads-the-list-of-growth-in-latin-america-according-to-estudio-rmmn-noticia/?ref=gesr


Peruvian Chamber of Electronic Commerce. (2021). Official Report of the Ecommerce industry in Peru. https://www.capece.org.pe/wp-content/uploads/2021/03/Observatorio-Ecommerce-Peru-2020-2021.pdf

COLLECTION (2020). Impact of the COVID-19 Pandemic on MSMEs in Colombia. Retrieved from https://www.uao.edu.co/wp-content/uploads/2021/08/Impacto-de-la-Pandemia-por-COVID-19-en-las-Mipymes.pdf


UNDP. (2021). Small Businesses, Big Impacts: Supporting Productive SMEs as the Engine of Recovery in LAC. Retrieved from: https://www.undp.org/es/latin-america/blog/peque%C3%B1as-empresas-grandes-impactos-apoyando-las-pymes-productivas-como-motor-de-la-recuperci %C3%B3n-en-alc#:~:text=For%20example%2C%20bas%C3%A1ndose%20in%20data,approximately%201%20mill%C3%B3n%20of%20companies ).