Open Regional Fund for the Economy and (Youth) Employment in Central America (FACILIDAD)

Project description

Title: Open Regional Fund for Economic and (Youth) Employment in Central America (FACILIDAD)
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Countries: Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica
Lead executing agency: Secretaría General del Sistema de la Integración Centroamericana (SG-SICA)
Overall term: 2012 to 2017

Context
The economies of the countries of Central America are dominated by agricultural exports, manufacturing and processing industries, and migrant worker remittances to their home countries. The majority of the region’s micro, small and medium-sized enterprises (MSMEs) operate in the informal sector. The countries need to introduce comprehensive and sustainable structural changes. These changes are particularly relevant in the light of the free trade agreements between the Central American countries and the USA (DR-CAFTA), which came into effect in 2009, and the European Union Central American Association Agreement (EU-CAAA) of 2013.

Although regional growth rates have accelerated slightly in recent years, this has had little impact on employment and income levels. On average, more than half of the people of Central America continue to live below the poverty line. Particularly in Guatemala, Honduras and El Salvador there is still a large gap between rich and poor.

Central American enterprises are not very competitive internationally. Outmoded technologies and dated production and management methods, a shortage of external financing possibilities and a lack of experts and qualified personnel, contribute to their low productivity and competiveness. Unemployment and underemployment are widespread, especially among the youth, because the available training does not correspond to needs of the job market. At the same time, in some of the most dynamic sectors there is a marked shortage of experts, and the entrepreneurial potential of women remains untapped for lack of support and encouragement.

Objective
In selected sectors in Central America, MSMEs have become more competitive and there are greater opportunities for employment.

Approach
The open regional fund FACILIDAD is a new mechanism for promoting innovative ideas through individual measures. Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica are all taking part in FACILIDAD for the full term of the project until 2017. In each country, competitions are held to identify good ideas, for which funding is then awarded for the implementation of individual projects.

The ideas competition is open to projects that:

  • trigger product or process innovations, thereby improving the competitiveness of MSMEs
  • improve incomes and employment opportunities, especially for women and young adults
  • introduce new training courses or labour market services that respond to the needs of enterprises.

The project works with its partners to develop viable implementation strategies for the best ideas from the contests, and then carry them out. It is particularly keen to support partnerships between policy, business and academic stakeholders. Such partnerships should lead to the formation of alliances and supra-regional partnerships across the various sectors.

The project target groups are owners and employees of MSMEs with a potential for growth, as well as job-seekers and potential business start-ups, especially among women young people.

Results
Through the first three ideas competitions 25 proposals were selected, mainly for regional projects. In the course of the projects’ implementation, 99 enterprises have been formed, employing 176 people (including the founders of the businesses). In addition, 621 women and young people have successfully been placed in work. 22 new training courses and employment services have been developed, of which ten have already become established and are now available without support from GIZ. Two financial products have been introduced to promote innovation and improve the support given to new entrepreneurs.