CNI study points out that the last decade presented several difficulties for companies
The CNI (National Confederation of Industry) took stock of the last 10 years and found that small industries have been dissatisfied with their financial situation for a decade. The main factor is the difficulty they face in accessing credit.
The Small Industry Panorama survey also provides data on performance in previous years and expectations for the coming months of 2024. The data was released this Monday (26.Feb.2024). Here's the complete (PDF – 2 MB).
“Small industries are those most penalized by economic changes such as, for example, the increase in the basic interest rate. They are also the ones with the least availability of resources to deal with possible problems. For these and other reasons, the last ten years have not been easy for industrial SMEs and Panorama details this scenario”, explains CNI economist Paula Verlangeiro.
From 2013 to 2023, small industrial entrepreneurs in the construction and manufacturing sectors experienced difficulty accessing credit in all 40 quarters analyzed. The index was below the historical average in 21 of the 40 quarters for the manufacturing industry, while it was below the historical average in 24 of the 40 quarters for the small construction industry.
Financial situation
In 2016, the Financial Situation Index marked the worst result in the series with 29.5 points, reflecting the increase in interest rates, which reached the highest level of the period in the third quarter of 2015, 14.25% per year. From 2015 to 2019, the indicator had ups and downs, but always remained below the historical average (38.4 points).
It was only in mid-2020 that the index recovered and even recorded the highest value in the series (43.1 points). One of the reasons was the creation of support and incentive programs for companies to overcome the covid-19 crisis, such as Pronampe (National Support Program for Micro and Small Businesses) and Peac (Emergency Credit Access Program) , which facilitated access to credit for small industrialists.
“As much as the programs offered a breather, it was not enough to say that small industrial companies are financially well and recovered. One of the initiatives that can help entrepreneurs access the right resource is the CNI's Credit Access Center (NAC), which provides consultancy and guidance on financing lines throughout the country”, said the economist.
High tax burden
The Small Industry Panorama provides a ranking of the main problems faced by small industries in each quarter, segmented by industrial segment (manufacturing and construction) since 2015.
Despite the fluctuations throughout the decade, one of the problems that remained with a high percentage of reports, regardless of the segment, was the high tax burden. The Panorama methodology only considers the number of employees per establishment (10 to 49 in the case of small companies). Therefore, there are companies that are not taxed by Simples Nacional in the sample and there are companies that fall under the regime. Both demonstrate that they are often penalized by the complex and onerous tax system.
Simples is a taxation regime for MPEs, which allows the unified payment of various taxes in a single form, such as ICMS, ISS, PIS, Cofins, IRPJ, CSLL, among others. The calculation is based on the company's monthly revenue.
Interest rates and unfair competition
In the 4th quarter of 2023, the main problems perceived by small business owners in the manufacturing industry were: high tax burden, insufficient domestic demand and unfair competition (such as informality and smuggling). This last problem has gained strength since 2021 and is now in third position. This highlights the need to promote healthy competition, with actions to curb practices that could harm competitiveness.
For the construction industries, from the 1st quarter of 2021 to the 3rd quarter of 2023, high interest rates experienced a continuous increase in signs. The sector is directly affected by rising interest rates, which harm both businesspeople by making resources for projects more expensive, and consumers by also making financing for property acquisition more difficult.
Expectation for 2024
The Business Confidence Index (ICEI), which captures how businesspeople perceive current conditions, what their expectations are and, with this information, anticipates changes and trends in industrial activities, recorded 51.2 points in January 2024 The indicator is above the 50-point dividing line, which separates confidence from lack of confidence.
“Confidence and prospects are improving, especially due to the reduction in interest rates. We hope these improvements will help drive small business growth in the future. Measures to benefit the business environment, which reduce bureaucracy and provide better access to credit are essential for the competitiveness of small companies”, said Paula Verlangeiro.
Methodology
The Small Industry Panorama is a survey prepared by the CNI, which presents and evaluates four indicators: Performance Index, Financial Situation Index, Perspectives Index and the Icei (Industrial Entrepreneur Confidence Index) for small businesses. Furthermore, the research provides a ranking of the main problems faced by MSEs in each quarter.
All indices range from 0 to 100 points. In the case of Icei, values above 50 points indicate business confidence and the more above 50 points, the greater and more widespread the confidence. Values below 50 points indicate a lack of confidence on the part of the entrepreneur and the more below 50 points, the greater and more widespread the lack of confidence is. For the other indices, the higher the value, the better the result.
The composition of the indices takes into account items such as production volume, number of employees, use of installed capacity, satisfaction with operating profit and financial situation, ease of access to credit, expected evolution of demand and investment and hiring intentions.
The survey is released quarterly and each edition consults around 900 entrepreneurs from small-scale industries across the country.
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