Living in Peru : your everyday companion

Info provided and translated by the
American Chamber of Commerce of Peru (AmCham Peru)

Some SME promotion strategies focus on providing them special legislation in terms of labor obligations and tax payment, that creates an incentive for formalization and at the same time, assures a better employment conditions for Peruvian workers. However there is another group of strategies equally necessary that offers SMEs greater development opportunities by integrating them with the local and international market. One of these tools is outsourcing and occurs when one company decides to buy a product or a service from another company in order to conclude its production process.

Outsourcing gives a company enough flexibility to develop in a competitive world and is well known by big companies and commercial conglomerates but constitutes a vital tool for SME development because it allows little companies to provide goods and services to others that already have presence in the local or international market.

Then, outsourcing occurs in indirect export operations where SMEs relieve the request of direct exporters to produce or perform a service along the production process of a good that is finally exported. By this tool SMEs gain experience and know how from the bigger ones and exploit their potential. For example, a company that exports pants could use outsourcing and hire an SME to do a special design with added value on their products.

So, any initiative that limits the possibilities for outsourcing figures reduces the opportunities for SME´s expansion and competitiveness. By ignoring the benefits of this important business tool, the government affects not only big companies, but small ones as well, especially those with export potential.