São Paulo – Brazilian micro and small businesses have been heavily affected by the coronavirus pandemic, but some of them are managing to survive and even export. Most of those that keep shipping products are related to commodity chains such as energy, ore and foodstuffs like soy and meats. “They took a hit but are managing to survive by exporting,” Brazilian Micro and Small Enterprises’ Support Service (SEBRAE) competitiveness analyst Gustavo Reis (pictured above) told ANBA. He gave us an overview on how the pandemic has been like for micro and small enterprises.
Most small exporting businesses in Brazil are manufacturers, which is one of the sectors that have suffered the most damages in the pandemic. It includes footwear, gems and jewelry, and tailoring industries. Because the consumer is socially isolated and the retail of these products are closed in most countries, these sectors have been severely affected. “Since they aren’t essential items and people are in lockdown, these companies have taken a hit,” Reis says.
Brazil has 20,000 exporting companies, and 40% of them are small businesses. But the marketed value is smaller than 1% of Brazil’s total exports. These companies usually export by air postal services like Exporta Fácil by Correios. Reis says that out of the 30 airlines operating in Brazil, half had 100% of their flights cancelled, and these products were shipped in the cargo of commercial flights. According to him, there are charter flights to do the job, but prices have skyrocketed during the pandemic. “The air modality has heavily impacted small exporting businesses,” he says.
Overall, Brazilian micro and small enterprises, which account for 99% of Brazil’s business sector, are suffering greatly from the crisis. “When you look at these companies’ profile, many of them are related to sectors that require a great deal of social contact,” Reis says, mentioning that many of them are in tourism, like hotels and inns, food, like bars and restaurants, as well as beauty salons, gyms, pet stores. They have all stopped dealing directly with their clients. The revenue of micro and small enterprises has receded by 69%. “Small businesses have taken a huge hit,” he says.
Among micro- and small-sized factories, 2.2% closed due to COVID-19, as per surveyed by SEBRAE. Half of them have discontinued their activities temporarily, 38% changed the way they operated, and 9.6% has managed to keep operating in the same way. Reis says that most survivors are related to products that remain essential during the pandemic, such as foodstuffs. At the end of this production line, where’s retail, some have even saw increases in revenue due to the customers’ race to the supermarkets.
Other companies that have got around the crisis are from sectors such as manufacturing of hospital uniforms, coverings, medical material and devices, healthcare technologies, and rapid tests, as well as chemical, cleaning, hygiene and cosmetics industries. Many products in the healthcare sector had their exported banned due to the domestic demand both in Brazil and many other countries.
The pandemic brough changes for small-sized industries in Brazil. “It forced companies to put themselves in the digital world,” the SEBRAE analyst says. They now use technologies for online meetings and digital trade and exporting platforms. Supported by SEBRAE and other organizations, many small businesses have recently participated in a ten-day B2B in the food and beverage sector using the ConnectAmericas platform by Inter-American Development Bank (IADB). “Small businesses rely on trade shows and missions to export, which are not happening right now, but they can get by talking online with their clients,” he says. The B2Bs were a success.
Gustavo Reis believes that the digital presence and a higher use of technology are changes that are here to stay in micro and small factories. Other transformation experienced by small businesses during the pandemic that is expected to remain is the adoption of a leaner structure. “Some factories had 15 to 20 employees, and now, during the pandemic, they realized they only need ten or eight people,” he says. The planning of a foreign trade logistic is also expected to remain.
The analyst believes that companies will rethink their value chains. “Industries that relied on imports, foreign suppliers, will also have to start reinventing themselves by looking more inside Brazil,” he says. He mentions studies pointing out the trend of closing and restricting markets, the implementation of technical barriers to preserve domestic industries, and other actions in this regard. Reis believes that Brazil will also start developing new sectors to match the new reality.
Several measures were announced in Brazil to help companies deal with the pandemic crisis. The SEBRAE analyst says the micro and small enterprises have used the measures that depended just on them, such as the suspension of contracts and reduction of workdays. As for the credit promised, most can’t access it. “It depends a lot on the relationship the company has with the bank, its history, its financial health,” he says.
SEBRAE signed an agreement with Caixa Econômica Federal and will implement a credit guarantee fund to help small businesses to take loans. This fund will make the companies look better for the bank. “Credit is following the same logic it has always followed in Brazil, that large companies get it because of their structure,” he says. He explains that factories linked to federations that feature credit cooperatives are having access to loans, but they are still few. “Our daily struggle with the federal government is how to facilitate this access to credit, because it’s been made difficult by the banks,” he says.
Reis says that SEBRAE has worked on the National Plan of Exporting Culture headed by the federal government to spread the exporting culture among companies. The initiative includes the National Confederation of Industry, Brazilian Trade and Investment Promotion Agency (Apex-Brasil) and SEBRAE. The analyst says that the group meets every week to help Brazilian companies wishing to export in aspects ranging from training and planning exports to price formation and contract management. During the pandemic, the group wants to strengthen the companies’ internationalization.
Translated by Guilherme Miranda
