According to the MSE Observatory, inflation affects MSE companies in several ways, for example, the increase in the cost of purchases, capital goods such as machinery, assets such as rents, and the cost of supplies, energy, gasoline, among others.

According to the Observatory, this generates a decrease in profits in general and in liquidity, as well as a lower capacity to accumulate capital, which is often used to reinvest in competitive improvements.

For example, if a store that sells clothing must pay more for materials to make its garments, it may not be able to increase retail prices because customers would not be willing to pay more. So the store would have to find a way to reduce costs, either by buying cheaper materials. But if all suppliers raise prices, the store will have to look for other options, which is not always easy.

In addition, when inflation rises, the money people have lost value. For example, if a person has US$100 saved and there is a lot of inflation, he or she may not be able to buy the same amount with that amount as before. Then, that person will probably have to look for cheaper products to be able to buy what he/she needs, which affects the companies that sell more expensive products.

In the face of inflation, MSEs should evaluate the impacts and analyze the figures to anticipate and reduce the effect on the profitability of the business.

Translated by: A.M