In Latin America, micro, small, and medium-sized enterprises (MSMEs) do not have a marginal role; they are the core of productive activity: they represent 99.5% of the business landscape and 60% of formal employment (UNDP, 2024). Additionally, more than a third of the region's workers are self-employed (ILO, 2023). 

"Placing MSMEs at the heart of an inclusive, digital, and green productive transformation is an imperative for accelerating sustainable development"

However, a paradox persists: although they are essential for social and economic inclusion, MSMEs face gaps that restrict their capacity to grow, generate quality jobs and drive innovation. This leads to lower incomes, less resilience, and limited competitiveness compared to more advanced economies. 

Placing MSMEs at the heart of an inclusive, digital, and green productive transformation is an imperative for accelerating sustainable development. This requires action on four strategic fronts: 

• Insertion into Local and Regional Value Chains 

The limited participation of MSMEs in value chains limits their access to demanding markets and higher quality standards. To address this challenge, it is key to strengthen the role of large companies as pivotal companies, which promote innovation and dissemination of know-how and to articulate national clusters with regional networks. In the context of productive relocation and nearshoring, Latin America can leverage its geographical and cultural proximity to consolidate more robust and resilient chains, positioning itself as a strategic supplier to global markets. 

• Technological uptake 

The region maintains a considerable digital divide: between 2014 and 2016, technology assimilation in businesses grew by just 4.5%, compared to 16.4% in China (ECLAC, 2021). In 2019, only half of businesses had a website, and the use of big data or artificial intelligence (AI) was minimal. Although the pandemic accelerated digitalization, the benefits were captured by large firms. 

Closing digital gaps requires strengthening digital support frameworks, connecting universities, innovation centers, and technology providers with business demands. It is also key to promote collaborative platforms and learning networks that drive the exchange of information and knowledge management, as well as strengthen digital connectivity infrastructure. 

MSMEs must not lag behind in leveraging the opportunities of AI. Beyond operational efficiency, AI can transform business models by anticipating trends, personalizing products in real-time, and improving traceability and quality, which are essential conditions for their insertion into value chains. 

• Climate Mitigation and Resilience 

Latin America, despite emitting less than 5% of global CO₂, is one of the regions most vulnerable to climate change (EIB, 2023). Hurricanes, floods, and droughts directly affect productive chains, while almost half of the countries’ capital cities are classified as "extreme risk" (Green Climate Fund, 2021). In a just climate transition, MSMEs face two challenges. The first is mitigation: decarbonizing their business models with renewable energy and energy efficiency, and converting carbon-intensive sectors toward sustainable activities. The second is adaptation: being especially vulnerable, they must strengthen their resilience and capacity to respond to hydrometeorological events that threaten the continuity of their operations. 

The great challenge will be to maintain and improve job quality. Some jobs will disappear, others will be transformed, and new ones will be created, but the objective must be a positive net effect on employment, without leaving any segment behind. 

• Access to Financing 

Financing is decisive for MSMEs to advance in these transformations. The global credit gap amounts to USD 5.7 trillion; Latin America accounts for nearly USD 1 trillion (SME Finance, 2025), which affects 29 million businesses. Closing this gap demands modernizing financing infrastructures, integrating open finance and data systems, credit schemes based on assets, and effective frameworks for insolvency. Development banks must expand their transformative role with derisking strategies and the mobilization of private capital toward underserved segments. Furthermore, financial education strategies are relevant to promote a productive use of credit and encourage responsible repayment habits, which are not very strong in the region. 

A New Productive Contract for the Region 

The future of Latin America depends on its capacity to place MSMEs at the heart of the productive, digital and green transformation. The challenges are significant, but the opportunities are even greater. An agenda that combines these four elements can make MSMEs the cornerstone of a development model that leverages entrepreneurial talent, innovation potential, and the ability to generate quality jobs in the region. 

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