Globalization: Looking To Colombian Smes

GLOBALIZATION: LOOKING TO COLOMBIAN SMEs
By Luis E. Uribe H. – April the 14th, 2012

Alvaro Caso, a philosopher attached to the Social Investigation Institute of the Autonomous National University of Mexico once said that, globalization, seen as an inevitable phenomenon, is an emerging characteristic of any economic system. His words may lead us to think, that globalization is somethingthat will occur somewhere in time, either soon or late, but it will happen, although some aspects for a variety of countries will condition their inclusion in what it can be called as “the globalized world”.

In Colombia, according to the statistics of 2005 of the National Department of Statistics (DANE, by its acronym in Spanish) the SMEs are the 92% of the commercial establishments areresponsible for more than 40% of Colombian production. And as of today, because of initiatives of the past and present presidents, there are Regional Trade Agreements (RTAs) and Free Trade Agreements (FTAs) that, either in force or soon to be in it, are accelerating the process of globalization for our country.

That is why, the coming of the globalized international investors, either by reasons of theRTAs, FTAs or FDIs, that come into our country speaking the “new” financial language of the International Financial Report Standards (IFRS), will force the SMEs to “speak”, as soon as possible, this new language. And to “help” the SMEs not to fall behind, the government issued in 2009 the 1314 law that obliges all firms, by the 31st December 2014, to issue their financial statements under theIFRS. Seeming, if looked a priori, that SMEs still have time. Think again. The IFRS says that for a financial statement to be examined, it has to be done looking (in comparison) to the past two years, and if so, those past to two years must have been done also with an IFRS format, so SMEs should start immediately, because if they don’t, this issue can become a great barrier in the negotiations withforeign investors.

But, is it just as easy as to look at new accounting principles and methods? Apparently not. Why? Because some say that there is going to be some collateral damage, which consists in a reduction of Equity that can be from 15% to 36% in average, but in some cases it can reach 50%. Frankly, it looks rather disappointing but, although it may be true, it is not the whole truth.Bad thing, in the first year, the EBIDTA is going to be affected. Good thing, there is going to be a positive impact in revenues and some other future financial results, that can go from 54% to 214%.

So, there is somewhat a balance. A balance that can demolish the barrier that exists for negotiations with foreign investors. But to muse on the subject doesn’t give Colombian SMEs peace of mind.Because although barriers can be tore down, decisions have to be made. And they have to be made now, ipso facto.

I’ve been a consultant in Management and ITC for almost four years. The firm, that as of today I do consultancy for, decided in the last stockholders meeting that took place on the 27th March this year, that from the 2nd April 2012 onwards there was going to be a change in its ERPsoftware, in order to work under IFRS by the beginning of July and to reach its natural market as soon as possible, although its purpose as a firm is engineering services, and the path to conversion from the actual ERP to the next one is far from easy, and this firm is a SME with more than 40 years in existence, I consider, being no authority in the matter, that this firm has been courageous enough toface the future and to leap into it.

And what does it mean to be courageous? Does it mean to be fearless? I read the answer many years back in some book that I do not remember its name, nor its author, but I consider right (I may be wrong though) that being courageous, or doing something with courage, is not being fearless, it is, simply put, doing that something even if with fear.

So...