The determinants of the costs of production in microenterprises and small businesses in Latin America are diverse and complex, for this reason, they cannot be observed so disjointed, but that must be borne from a more holistic view to understand the phenomenon. It is for this reason that, within the most common are labor, raw materials and supplies, energy and utilities, infrastructure and logistics, regulations and administrative burden, as well as the technology and innovation capacity ( Chiatchoua, 2021); having a direct influence and significant on the operating costs of these companies, which, often have limited resources and face competition with larger firms ( Lavanda Reyes, Martínez García and Reyes Acevedo, 2021).

Carrying out a comprehensive approach to these factors, it is recognized that labor is a critical factor in determining production costs in SMEs ( Erazo-Panduro et al., 2022). In this context, wages and benefits can vary widely in Latin America, depending on the country and sector; in turn, staff training and retention also have an impact on production costs ( Valderrama Santibanez, Neme Castillo and Garcia Meza, 2019; Hilario Rivas, 2022). For this reason, SMEs face challenges in attracting and retaining qualified talent due to competition with larger firms and limited resources to offer competitive salaries and benefits ( Baldeos, 2020).

Another factor involved in production costs was found to be associated with the availability and cost of raw materials and other inputs. In the case of Latin America, which is considered one of the richest regions due to the availability of natural resources, it is also one of the most unequal, therefore, there are phenomena related to the variability in international prices of raw materials that can impact the profitability of micro and small enterprises ( Arévalo-Alva et al., 2022; Maekawa Miyasato, 2022; Pillpe Valencia, 2022). In addition, transportation and logistics costs for acquiring and distributing these materials also impact production costs ( Ponce Gifted and Zevallos Vallejos, 2017).

In addition, the costs of energy and other utilities, such as water and gas, are part of the factors that represent a significant part of the operating costs in SMEs. In this sense, fluctuations in energy prices and tariffs can have a direct impact on production costs and reduce the profitability of these companies ( Cotrina Llamoca and Pumarrumi Huaylla, 2020; Espinoza Espinoza, Venturo Orbegoso and Bravo Chavez, 2020). In addition, the lack of reliable and accessible energy infrastructure in some Latin American countries may also increase dependence on more expensive energy sources ( Vera Correa and Florián Rodríguez, 2022).

For him, the quality of infrastructure and logistics services can affect the efficiency of productive processes in SMEs. Therefore, the lack of efficient roads, ports and transportation systems can increase transportation costs and delay the delivery of raw materials and finished products ( Centurión Medina, 2015; Concha and Juscamaita, 2016; Mendiburu, 2019), which means additional costs for micro and small enterprises, negatively impacting their profitability.

In another vein, it is important to recognize that SMEs in Latin America often face a significant administrative and regulatory burden. Thus, compliance with labor, tax and environmental regulations may require additional resources and increase operating costs ( Tanta Espinoza, Vilca Coaquira and Luy Medina, 2020; García Monsalve, Tumbajulca Ramírez and Cruz Tarrillo, 2021), and the lack of knowledge and experience to comply with these regulations may result in penalties and fines, which affects the profitability of SMEs ( Rosales Domínguez, 2020).

This issue has allowed us to recognize that SMEs in Latin America usually face a significant administrative and regulatory burden, which is directly and significantly influenced by compliance with labor, tax and environmental regulations, which may require additional resources and increase operating costs, which along with the lack of knowledge and experience to comply with these regulations may result in penalties and fines, affecting the profitability of SMEs.

However, to improve the profitability and competitiveness of SMEs in Latin America, it is crucial to address these factors strategically, which implies seeking opportunities to reduce costs by training and retaining skilled labor, establishing alliances with suppliers to obtain better prices for raw materials, adopting energy-efficient practices, improving infrastructure and logistics services, and simplifying administrative regulations. In addition, boosting innovation and access to advanced technology can help improve efficiency in production processes and reduce operating costs. This requires government support and the promotion of collaboration between SMEs, academic institutions, and other relevant actors.

Production cost reduction and control strategies in micro and small enterprises in Latin America play a crucial role in their profitability and competitiveness ( Cholán and Cano, 2016). For this reason, companies should focus their attention on aspects that involve the implementation of effective strategies, such as process analysis and optimization, negotiation with suppliers, efficient inventory management, efficient use of energy and resources, and personnel training and development ( Bonilla-Pastor, 2015; Cutipa-Limache et al., 2021), with which SMEs can achieve a significant reduction in production costs.

In this sense, a key approach to reduce and control production costs in SMEs is to conduct a comprehensive analysis of operational processes ( Velasquez, 2022); This involves identifying inefficient activities, eliminating redundancies and seeking ways to simplify and streamline processes, in addition to adopting methodologies such as Lean Manufacturing and Six Sigma, which can be of great help in this regard, allowing the identification and elimination of activities that do not add value and optimizing overall efficiency ( Avolio, Mesones and Roca, 2011; Cruz Coria, 2021; Jasso Ramos, Aguilar Rascón and Ocegueda Mercado, 2022).

Effective negotiation with suppliers should also be considered as an effective strategy to reduce the acquisition costs of raw materials, inputs and services. In this particular, SMEs in Latin America can take advantage of their flexibility and size to establish strong relationships with local suppliers, seek cheaper alternatives and negotiate better prices and payment terms ( Apaza Apaza, Marin Apaza and Cutipa Ticona, 2021; Rodríguez Suárez, Mascarúa Alcázar and Ruiz Contreras, 2022). In addition, the consolidation of orders and the adoption of joint purchases with other similar companies should be considered as a strategy to generate economies of scale and reduce procurement costs ( Chacón Monterrosa, 2017; Chávez Bravo, 2020).

Following this order of ideas, it seems useful to highlight that an adequate inventory control is fundamental to reduce production costs. For this reason, the SME must continuously evaluate its inventory levels and ensure that it has only what is necessary to meet demand ( Cruz Delgado et al., 2020; Prado Ramos, 2022), which implies implementing efficient inventory management systems, establishing policies, inventory rotation, and minimizing the costs associated with storage and product obsolescence ( Ménez Bahena, 2019; Zumaeta-Julca, 2022).

Also, the optimization of energy consumption and other resources, which can generate significant savings in production costs. In this way, SMEs can implement energy efficiency measures, such as the use of more efficient equipment, the installation of LED lighting and the adoption of automatic shutdown practices ( Cortés, 2019; Hoyos-Estrada and Sastoque-Gómez, 2020; García-Contreras, Valle-Cruz and Canales-García, 2021). In addition, involving strategies that can encompass recycling and material reuse tasks can reduce raw material acquisition costs and contribute to a more sustainable approach ( Solis Granda and Robalino Muñiz, 2019).

Another fundamental strategy for the reduction and control of production costs associated with staff training and development; therefore, it is considered essential that SMEs can invest in training programs to improve the skills and knowledge of their employees, which can result in higher productivity and a reduction in errors and waste ( Ortiz Useche, Rodríguez Monroy and Izquierdo, 2013; Meraz et al., 2021; Martínez-Martínez et al., 2022).

As we have seen, the strategies presented above allow micro and small businesses to maximize efficiency in their operations, eliminate unnecessary or inefficient activities, and optimize the use of their resources. In this particular, it is imperative to determine that, by improving the management of production costs, SMEs can offer more competitive prices in the market, improve their profitability and maintain a solid position against the competition ( Herrera Marín, 2019).

However, the implementation of these strategies not only results in economic benefits for SMEs, but also in environmental benefits by promoting the efficient use of resources and the adoption of sustainable practices, which contributes to the sustainable development of the region and the generation of a positive image in front of consumers and society in general ( Paredes-Valverde and Quispe-Paredes, 2022). Despite this general overview, it is important to note that each SME is unique and faces specific challenges in relation to production costs. Therefore, it is crucial to adapt strategies to the needs and characteristics of each company, considering its industry, size and geographical location.

In summary, this topic has made it possible to visualize a series of strategies for reducing and controlling production costs, understanding these as a key tool for strengthening the business performance of SMEs in Latin America; by implementing these strategies effectively, these companies can improve their competitiveness, increase their profitability, and contribute to the economic and social development of the region. For this reason, it is essential that micro and small enterprises recognize the importance of managing their production costs efficiently and continue to explore new opportunities and approaches to optimize their operations.

Production costs have a direct impact on the selling prices of the products or services offered by SMEs. Thus, if production costs increase, companies may find it difficult to maintain competitive prices in the market. If not properly adjusted, profit margins may be reduced, affecting the company’s profitability. Therefore, iSMEs must know and control their production costs in order to set prices that allow them to earn adequately ( Giraldo González et al., 2018; López et al., 2018).

In this sense, the ability to compete effectively in the market is crucial for the success of micro and small enterprises, which is why high production costs can hinder their competitiveness vis-à-vis larger or multinational companies ( Benavides Pupiales and Bolaños Delgado, 2020). In this context, understanding that, in order to remain competitive, SMEs need to find ways to optimize their costs as an essential element to improve efficiency in their processes and deliver high quality products or services at attractive prices ( Bermeo Giraldo, Guisado Gómez and Valencia-Arias, 2022; Ladino Fernández, Briceño Barrero and Rodríguez Rojas, 2022); therefore, efficient management of production costs can help SMEs to differentiate themselves and attract customers, which in turn translates into higher revenues and profitability ( Valencia and Erazo, 2016).

In addition, production costs also have an impact on the ability of SMEs to invest and grow, for example, if production costs are high, and absorb much of the revenue, companies may find it difficult to allocate resources to expansion activities, innovation, or infrastructure improvement, which may limit their long-term growth and their ability to capitalize on new market opportunities ( Vásquez Pacheco, 2015; Leyva-Carreras, Espejel-Blanco, and Cavazos-Arroyo, 2017; González Díaz and Becerra Pérez, 2021; Hernández Peralta et al., 2021). Therefore, the proper management of production costs allows SMEs to free resources to invest in their development and improve their competitiveness.

Under these premises, it is recognized that sustainable profitability is fundamental for the survival and growth of SMEs in Latin America, so production costs play a crucial role in business sustainability, as they directly affect the ability to generate profits in the long term ( Suárez Pérez and Pérez Barral, 2021; Chávez Zapata, Reinoso Pérez and Urbina Poveda, 2022). Given this reality, an efficient management of production costs not only improves current performance, but also provides a solid foundation for the future growth of the company and its ability to face economic challenges ( Sánchez Barraza, 2016).

In summary, production costs have a significant impact on the profitability of micro and small enterprises in Latin America, therefore, proper management of these costs is essential to ensure the sustainability and growth of these companies; that is, by controlling production costs, establishing competitive prices, improving operational efficiency and identifying growth opportunities, SMEs can improve their profitability and strengthen their position in the market. In addition, it is important for governments and other entities to support micro and small enterprises by providing training, access to financing and promoting policies that encourage economic development. For this reason, it should be understood that the success of micro and small enterprises benefits not only the enterprises themselves, but also the economy as a whole, generating employment and contributing to Latin America’s socioeconomic progress.

Ethical approval and consent were not required.