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Jul 4, 20232 min read

The Effect of Unilateral Economic Sanctions in South America on Small- and Medium-sized Entrepreneurs

Economic sanctions, although allegedly aimed at altering governmental behaviour or discouraging policies contrary to international norms, often produce unintended consequences that extend beyond the targeted political and institutional entities. These measures, while sometimes necessary to uphold international standards, frequently affect the broader economic landscape, disrupting access to resources, markets, and financing. This can be observed in Russia as well, where sanctions following the country’s 2022 invasion of Ukraine have severely impacted SME activity (Barinova et al. 2022). This comparison reveals common trends among sanctioned regions, highlighting how these measures restrict both governmental and entrepreneurial capacities. SMEs, often less resilient than larger corporations, struggle to sustain productivity and employment when faced with restricted access to international markets and resources.


In South America, SMEs, particularly in the agricultural sector, bear a disproportionate share of the burden. In Venezuela and Colombia, small- and medium-sized farmers encounter escalating barriers to importing essential supplies and exporting goods. Such measures obstruct the agricultural sector’s growth by limiting access to foreign markets and reducing export revenues (Larch et al. 2024). In countries with large rural populations like Venezuela, these constraints exacerbate rural poverty, displace local communities, and drive urban migration. As farming becomes economically unsustainable due to reduced income and increased operational costs, depopulation accelerates, threatening the cultural and economic foundation of rural areas. This ripple effect not only disrupts individual livelihoods, it also erodes the stability and sustainability of local food systems, a critical component of national security and development.


The impact of sanctions on small-scale agricultural businesses exemplifies how policies intended to pressure governments can undermine the very foundations of economic stability, equity, and growth. The UN Working Group on the Rights of Peasants and Other People Working in Rural Areas has highlighted the need to protect the rights of rural workers and their communities in the face of such challenges. Its mandate stresses safeguarding rural populations against the adverse impacts of policies that might threaten their livelihoods, emphasising the importance of resilience, food security, and equitable development.


Countries such as Colombia and Venezuela, both heavily reliant on agricultural SMEs, present clear examples of how unilateral sanctions reduce productivity, limit market access, and intensify socio-economic vulnerabilities (Larch et al. 2024). The implications of these findings should serve as a call for a more nuanced approach to economic sanctions. Policymakers must consider the strategic objectives of such sanctions as well as the socio-economic repercussions they create for local communities, especially those reliant on agriculture and SMEs. Failing to account for these impacts risks undermining developmental progress and the rights of rural workers, necessitating an international discourse that prioritises sustainable, equitable economic policies in sanctioned regions.


Sources:

  • Barinova, Vera, Zemtsov, Stepan, Demidova, Ksenia & Levakov, Pavel (2022): Business activity of small and medium-sized enterprises in Russia in the context of sanctions. Moscow (RU): Gaidar Institute Publishers.

  • Larch, Mario, Luckstead, Jeff & Yotov, Yoto V. (2024): Economic sanctions and agricultural trade. American Journal of Agricultural Economics, 106(4), 1477-1517.


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