In Huancavelica at least 500 business associations are engaged in artisanal products derive from alpaca fiber, sheep, vicuña and cotton-based natural coloring and dyeing. Although their fabrics are hand made with ancient traditional techniques and feature a variety of colors and designs, their products are poorly differentiated in the market, and compete with products from low-cost industrial processes, with similar appearance and low quality. To get the best prices in order to increase their income, Huancavelica textile artisans need to: incorporate technology and innovations in the designs of their products to strengthen collective capacities around the design. Bypreserving ancient iconography and the symbolic meaning of their designs and positioning there can be new product development that are of interest to the international market and are appreciated for their techniques, materials, and manual labor.
Description of the business opportunity
Words of the Detector:
ACT TechnoparkIDI - Huancavelica
We are the first Technology Park of the Industry of Information Technology, Communication and related areas. We have 5 branches located in various parts of Peru as well as Huancavelica, in which we focus on research, development and innovation. Our mission is to support the incubation and development of dynamic enterprises that offer innovative and competitive solutions in the domestic and international markets, to improve the quality of life of rural low-income youth and women. We have a wide network of partners in the public, private, academia and civil society. We believe in generating processes that achieve coordination between different actors for the consolidation of win-win relationships, making efficient the use of Information and Communications Technologies.
The Identified Need
In Huancavelica at least 500 business associations are engaged in artisanal products derive from alpaca fiber, sheep, vicuña and cotton-based natural coloring and dyeing. Although their fabrics are hand made with ancient traditional techniques and feature a variety of colors and designs, their products are poorly differentiated in the market, and compete with products from low-cost industrial processes, with similar appearance and low quality. To get the best prices in order to increase their income, Huancavelica textile artisans need to: incorporate technology and innovations in the designs of their products to strengthen collective capacities around the design. Bypreserving ancient iconography and the symbolic meaning of their designs and positioning there can be new product development that are of interest to the international market and are appreciated for their techniques, materials, and manual labor.
Why is this need a business opportunity able to have an impact in poverty reduction?
The domestic and international market of textile handicraft products has increased in recent years thanks to the foreign trade policies through Free Trade Agreements - FTAs, policies giving support to associations of rural producers and the fashion trends which are increasingly seeking handmade and natural fiber clothing. The context helps turning this need into a business opportunity for regional craft Huancavelica, which is in demand in the international market for its quality and original designs taking into consideration trends like export to developed countriesfocusing the trend of exports to developed countries.
Threfore it is appropriate to provide and build capacities in product design in order to enable the producers to create a differentiated offer with better prices, strengthening its position in the value chain. The consolidation of these collective capabilities strengthens artisanal production units and will add value to the craftsmanship as an ancient practice linked to the identity of communities. Same conditions will be created for strengthening the subsequent production stages in the chain, related to marketing and international market access entry.
Scope of the identified need
In Huancavelica are approximately 7,000 people working in textile crafts of alpaca fiber. Nationwide, it is accounted in more than 200,000 textile artisans. In places like Arequipa there are over 49 companies of organized textile artisans. In Ayacucho there are around 45 formally constituted companies with experience of over 10 years in exporting textile crafts. In Cajamarca there are 86 companies dedicated to the process of improving the quality of their products. Cusco has 90 companies manufacturing textile crafts with ethnic design and well-positioned in the national market.
Detector’s interest in addressing the identified need
Tecnhopark IDI seeks to create infrastructure and give support for innovation, productivity and competitiveness of the population of Huancavelica. In Huancavelica, they are committed to strengthening productive chains which involve low-income rural communities, for which we consolidate alliances under win-win strategies that enable the development of innovations and improve the quality of life of the communities in the area.
Analysis of the Business Opportunity.
Minka-Dev Space
About the identified need and its context:
Number of people directly related with the identified need.
In Huancavelica there are approximately 7,000 people working with textile crafts of alpaca fiber. Approximately 200,000 people are involved in the crafts production chain in the country. In Peru communities working with crafts as main activity are located in the departments of Ancash, Ayacucho, Cusco, Huancavelica, Ica, Junín, La Libertad and Lambayeque.
Relevant Social, geographic, economic and regulatory characteristics
Economic context
- The income of a family dedicated to the textile arts is about 300 Peruvian Nuevo sol per month (115 USD);
- Sales of textile crafts have been increasing both domestically and internationally. In 2012 artisans sold in units: 31,200 caps, 40,350 Scarves, 7,000 pairs of gloves, 16,000 scarves and shawls.
Social context
- Approximately 50% of the population of Huancavelica lives under the poverty line.
- The textile craftsmanship incorporates animal fibers mainly in women clothes.
- There are several craft associations made up of small groups of 10 people. Most of members have in general have low education.
- Artisans of Huancavelica have ancestral knowledge for weaving and dyeing animal fibers.
- Many of these artisans have indirect export experience since they are hired by companies exporting to developed countries.
Geographical context
- Huancavelica is located more than 3650 m above sea level. It has a varied climate comprised of a wet season (November-April) and a dry season (May to October). The minimum temperature is 3.4 ° C and maximum 20 ° C, and in the highest arriving at dawn at 4 ° C below zero.
- Populations that are scattered geographically into remote areas must walk long distances. This dispersion suggests it should be considered the use of mobile technologies combined with the development of strategic activities in the city hubs (like the city of Huancavelica).
Local assests that could leverage a business solution with social and environmental impact
- Some initiatives have been developed in the framework of public-private partnerships in order to improve the quality of craft production of Huancavelica. Some craftsmen have experience in exports, which gives them knowledge and sensitivity to the needs of international markets.
- More than 50 textile artisans associations are registered in the National Directory of Artisans, by the Ministry of Foreign Trade and Tourism of Peru.
- The government has considered national priority the support of textile artisans through socioeconomic and financial inclusion policies. Inclusive businesses are being promoted through various programs of the Ministry of Foreign Trade and Tourism.
- The communities have their products mostly in communitarian spaces, one located in the capital of Huancavelica and other closer where the community members live. Considering the geographical dispersion, those are useful spaces to meet and display their products.
- Huancavelica has a Regional Directorate of Trade, Tourism and Handicrafts that has among its objectives the brand positioning of "Huancavelica Craft" in national and international crafts markets.
- Peru has an international reputation as a producer of fibers and yarns of animal origin, such as alpaca and vicuna.
- Many of the textile artisans companies supported by Belgian cooperation have been able to position themselves in the market and are starting to get experience in the international arena. These practices have helped to articulate the development actors of Huancavelica in order to join forces and achieve the brand positioning of Huancavelica.
- The textile crafts of the area have the competitive advantage that are made with all natural products, and, that the production process is handmade, different from the industrial products made in China and India. To improve its competitiveness is being considered to integrate appropriate technology without losing the traditional style
Liabilities, vicious cycles of poverty and market inefficiencies that must be taken into consideration
- The various trainings that have receive the artisans in fabrics, design, color scheme have failed to consolidate collective capabilities.
- In some cases the designer collaborations with artisans present an unequal distribution of economic value generated.
- There is a high portion of informal work. There is resistance to formalize all the procedures because there is no trust, neither understanding in the work of the SUNAT (National Customs and Tax Administration).
- Despite its worldwide recognition as a producer of animal fibers, Peru does not have wide recognition for their crafts, because it doesn’t adapt its product offer to the quality and design standards required by markets in the United States and Europe.
- There are some programs and organizations that provide interfaces between the artisans and the market, but most are not community based and do not reach all craftsmen.
- Alpaca production, one of the main raw materials in crafts manufacturing is done in Huancavelica, but the transformation of the alpaca yarn is done in other cities and returns to Huancavelica once processed. This situation has a direct impact on the competitiveness of craft products. In this way, the challenge that seeks to create greater value from alpaca fiber aims to strengthen local industry transformation of alpaca for greater competitiveness of the sector and creating a favorable ecosystem for increased sustainability.
Business ecosystem of the affected population and synergies with other actors / programs.
In the region are various organizations engaged with the strengthening and promotion of the textile chain: Regional Directorate of Foreign Trade and Tourism, Chamber of Commerce of Huancavelica, CITE TEXTILE HUANCAVELICA, Commercial Shops Huancavelica, Huancayo and Lima, and various NGOs operating. There are also companies like Wayra who has nearly 10 years of experience in working with artisans Huancavelica with interest in the development of products for markets willing to pay fair prices for products with ethnic ancestral history.
The public sector issued the Law and Development Artisan Crafts activities, which provides guidelines and mechanisms for the promotion and marketing of the craft activity. Additionally, in the aim to promote Huancavelican craft supply, it has been developed capacity building actions in Information Technology and Communication and Tourism-craft initiatives. In 2011 more than 600 artisans from Huancavelica participated in these initiatives. These initiatives encourage the craft sector and support to articulate it with the tourism sector, creating greater opportunities for development.
Additionally, there are public initiatives that create new conditions for the development of the craft sector; the government has considered national priority support through policies textile artisans’ socioeconomic and financial inclusion. It is being promoted inclusive business through various programs of the Ministry of Foreign Trade and Tourism. Moreover, the President Ollanta Humala on his last visit to Huancavelica (November 9, 2012), has provided a central government support to the region of Huancavelica in the amount of 19.800 million Peruvian nuevos soles (approximately U.S. $ 6.5 billion) to improve infrastructure that articulates the economic corridors in the north, south and center of the region. This help to shorten distances between for producers in rural areas. Moreover, the Ministry of Economy and Finance has given the Regional Government of Huancavelica through PROCOMPITE, a management tool to distribute a budget amount of 10 million Peruvian nuevos soles (approximately more than $ 3 million USD) for productive projects, mainly in the productive chains of camelids, agro textiles and crafts.
Opportunities
Innovation Opportunity
- Integrate appropriate technology to traditional craftsmanship adapted to the geographical and infrastructure conditions of the area.
- Development of high quality products, combining ancient tradition with international market interests.
- Achieve forward integration in the local value chain, strengthening the development of associative mechanisms. Harnessing traditional craft knowledge of the Huancavelican community.
- Development of mechanisms, systems and models to educate artisans in product design making their products more competitive. For example, through the development of training modules that combine face-to-face and blended modalities with designers / foreign trainers.
Opportunities for systemic change in poverty reduction and environment conservation
- Build capacity within the artisan communities, in line with their ancestral knowledge, allowing them to generate a handmade offer with higher added value that when effectively introduced into different markets would consolidate its position and would enable competitive advantages.
- This capacities’ generation under associative schems will allow consolidate the social network and higher income level
- In the textile crafts manufacturing, dyed yarns are used with natural dyes, woven with ancient techniques. Building the capacity of artisans will add value to their art while simultaneously promote techniques with low environmental impact.
- The development of more competitive handicraft products will create a virtuous favorable cycle for the business opportunity while reducing poverty. An Increase in competition will generate more revenues enabling better access to appropriate technologies and training.
Why this is a business opportunity that has greater potential when extrapolated?
- Artisanal products represent 12% of Peru's exports.
- In Latin America the main exporters of handicrafts are: Peru, Mexico, Colombia, Honduras, Guatemala, Bolivia and El Salvador. Mexico and Peru are considered regional leaders for the quality of its products and its rich design.
- The main importers of Peruvian handicrafts are Latin America, United States, Germany, Japan and New Zealand.
- There are a variety of potential markets for garments with communities from Andean elements, such as Japan (alpaca paperback); Europe, especially Italy and Germany (fair trade and natural dyes), Chile and Argentina.
- The development of technologies, such as software design or others, with good availability and comprenhensive, and / or training centers aimed at improving the competitiveness of handicrafts designs, could be widely replicated to the large population of artisans Latin America. Right now, the vast majority of artisans can’t enjoy the growth benefits of the sector.
- There is an increase interest of young European designers in using Alpaca fiber in their collections, which could expand the visibility and presence of this fiber in couture markets.
Economic incentives
The Promotion Act for the development of productive activities in high Andes, issued by the Government of Peru in 2009. This law seeks to promote and encourage the development of productive activities and services that create added value and promote the use of labor in the Andean area, to alleviate poverty. This law streamlines and exempts the payment of all tariffs and taxes, for an initial term of 10 years to investments that are installed and offer work opportunities to the Andean country's provinces located above 2,500 meters. Among the activities benefited from this law are considered craft activities and textiles.
Competitive and comparative advantages
Technopark IDI has a deep knowledge of the area as well as strategic alliances with various strategic partners in Huancavelica, such as the Municipal Government, the Chamber of Commerce and the National University of Huancavelica. It also has the support of the DESCO, an NGO specialized in the production chain of camelids, with over 15 years experience in this area and has the respect of textile artisans.
Additionally, TECHNOPARK IDI has signed an Agreement with the Provincial Municipality of Huancavelica, with the purpose of organizing a Networking between the traders of region of Huancavelica with others world traders interested in placing products primarily in Europe and Asia.
Some funding sources
In Peru
- Rural Business Development Program, Ministry of Agriculture
In Latin America
Inter-American Bank Development, Cultural Development Grants Program
Want more Information?
- About TechnoparkIDI
- About Huancavelica
- About Peruvian crafts
- Be inspired by other cases: Kirah Design, Design with communities of Cusco.
Fases
For investors:
- Investors registered in business opportunities in which are interested to invest in inclusive business boosted may participate in the selection process of the best business solution.
- Accessing to information on the stages of co-creation, business model design and due diligence of inclusive business driven.
- Accessing to a portfolio of inclusive business in which have generated business ecosystems that increase the viability, sustainability, social and environmental impact of business supported.
