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Latin America and glocalised economies - the key to overcoming the COVID-19 crisis

by José Gómez, Chairman of the RSM Latin America Council and RSM Puerto Managing Partner and Oscar Bobadilla, Consulting Center of Excellence Leader RSM Latin America and RSM Colombia Managing Partner

The speed at which small and medium businesses, in Latin America, join the glocal economies will depend on their ability to innovate and adapt in the aftermath of COVID-19 as José Gómez and Oscar Bobadilla explains.

The global health emergency caused by COVID-19 impacted every aspect of the world as we knew it, altering economic and social activities on a huge scale. 

The urgency to contain the accelerated spread of the virus required lockdowns to be implemented, in many parts of the world, almost overnight - bringing daily life and many supply chains to a halt.  

All businesses, regardless of their size and sector, have continued to face strong economic pressures as the pandemic has progressed. With quarantines in progress, many companies face a significant loss of profit , putting jobs at risk. 

According to Cepal´s – Comisión Económica para América Latina y el Caribe- report “Latin America and COVID-19” the most affected sectors by the pandemic across the region are aviation, tourism and services; especially restaurants and small shops.  

Latin America’s business demographic 

In Latin America, 99 percent of companies are small and medium size companies, and 85 percent of them are micro-businesses. In general terms, micro-businesses are defined as those that generate from 5 to 100 jobs and from 101 to 250 the medium-sized ones. Altogether, they add up to 64 percent of formal jobs according to Cepal data. 

The crisis will be a catalyst for change in terms of how companies are structured, also accelerating transformation-based initiatives that were already in progress, such as digitalisation. 

In Latin America, small and medium sized companies are concentrated across commerce, restaurants, hotels, transport and logistic, health services and real estate and rental activities, as well as manufacturing and agriculture.  

Some of the looming changes include the obligation for offices to maintain social distancing between desks. The chances are that, in addition to maintain an extended distance between desks, employees will also need to follow the routine of walking clockwise around the office environment - the  rationale being to avoid the risk of an increased wave of contagion.  

For small and medium sized organisations involved in interior space design, office furniture manufacturers, contractors and consultants, this may well create a number of opportunities for new business. 

Remote working 

But the biggest change of all will be in the facilitation of remote work. The World Health Organisation estimates that the best possible way of returning to daily activities will involve the intermittent return to work facilities and, together with the adaptation of office spaces and teleworking, will become the new normal for the vast majority of companies.  

In order to do this, organisations will require efficient and secure systems to carry out video conferences and remote workshops. This is, perhaps, one positive to have stemmed from COVID-19 as the pandemic has created a best practice laboratory of sorts with technology system providers offering different tools and packages - subsequently seeing their profits increase significantly over the last few months. However, there is still room for improvement, particularly in the streamlining of virtual meetings. For small and medium companies developing link systems and security and application design, this will provide good prospects. 

E-commerce 

E- commerce seems to be the great winner of the pandemic. Quarantine forced many consumers to shop online and pushed banking customers to carry out all activities online - practices that have increased exponentially in Latin America during the pandemic.  

For small and medium sized businesses here, restaurants, commerce, hospitality and mobility must adapt to the new wave of digitalisation and take advantage of the plethora of digital marketing and contact tools available. Ensuring their place in the market will be key to maintaining that all important competitive edge. 

Looking ahead 

Jeremy Rifkin, president of the Foundation on Economic Trends stated in an interview for BBC that, in order to overcome the crisis, countries should glocalise their economies or, in other words, develop their local economies and strengthen their own internal supply chains. 

The speed at which Latin American small and medium businesses join the glocal economies will depend on their ability to innovate and adapt to the demands of their local markets. Rifkin says that technology acquisition will become increasingly accessible and it will be the government’s responsibility to support them in terms of local economic development.