Business Competitiveness for Producers in the Yungas Region of La Paz

The Montaño Family

Alejandra Ramos is over 70 years of age and has lived with her family for over half a century in the Yungas region, in the department of La Paz, the largest coca-producing region in Bolivia. During several decades she and husband Cervando cultivated coca to sustain their ten children. At the beginning of the ‘80s, with the cooperation of the United Nations’ Agro-Yungas project, they started to diversify their production by cultivating coffee, as coca demanded a lot of labor and it did not provide enough income to sustain the family. For several years, the family’s income proved insufficient to leave coca cultivation. But their unique vision encouraged them to continue to diversify their production.  Looking at their farm in Inca Pampa community, in the municipality of Coroico, one can see the family has improved, through hard work, their living standards. In the past years, their income has started to grow significantly, as a result of their entrepreneurial ability and of the new business approach being promoted in the region.

New business approach

Starting in 2005, a new approach is providing direction to the productive and economic efforts in the Yungas region of the department of La Paz, a subtropical zone that includes eight municipalities. The new business approach is being promoted by Actividad Rural Competitiva, a project financed by the U.S. Agency for International Development (USAID), within a donation agreement with the Bolivian Government. This project supports the governmental National Development Plan 2006-2010 and the Integrated Development Program, thus contributing to the efforts against illegal drug trafficking. The approach’s main objective is to increase the competitiveness of rural enterprises by means of supporting business opportunities.

The new approach differs from traditional development initiatives in many aspects. For instance, traditional projects are almost always based on identifying poverty-stricken areas, usually considered in terms of municipalities. On the contrary, the business approach is not based on territorial criteria but it goes across geographical local and even international boundaries. The new paradigm is based on the concept of economic corridors: in order to create opportunities it is necessary to work within the Yungas rural communities as well as in urban areas (Coroico, La Paz, El Alto, or any other city in Bolivia or abroad) where there are buyers demanding a specific product. The project introduces a sharp methodological change by acknowledging that in order to attain competitiveness it is necessary to first explore the urban centers where the markets are located. It is there where the demand for certain products can be identified. For this reason, the project starts by identifying buyers and concrete demands for a specific product. Then, technical assistance is provided to the producers (farmer communities and indigenous populations, unions, artisans and rural and urban business organizations), so that they improve their production and marketing skills in order to supply the buyers’ requirements.

The projects’ clients receive support to approach the buyers and also get other services to reach commercial agreements, form strategic networks and increase their trade transactions. Also, the project provides the producers advice to avoid “bottlenecks” that prevent increase and improvement of their production operations. The project promotes the idea of “producing what can be sold” instead of helping to “sell what is produced.”

Changes and effects

In order to develop entrepreneurial capacities, the project has introduced successfully an innovative mechanism of co-investment, through which resources are committed on the basis of a business plan. The project has not directly implemented any activity, but has strengthened its clients so that they assume higher responsibility for their own businesses. The project transfers resources so that the producers carry out capital investments by themselves, thus eliminating access restrictions to technologies and markets. The resources are deposited in the clients’ accounts as they achieve the benchmarks established in the co-investment agreements. With the project’s support, the clients are responsible for selecting, hiring, supervising technical services, investing, and purchasing equipment and supplies.

However, the project’s success is not measured by the resources used (the amount of co-investment funds, number of trained producers, number of productive hectares, or completed infrastructure), but by the tangible and measurable impact in terms of sales, jobs, and investment generated by the businesses. To date, for each dollar invested by the project in Los Yungas the producers have generated 5 dollars in additional sales. From 2005 to 2007, Actividad Rural Competitiva was able to introduce more than 1,700 producer families from about 180 communities in the Yungas to productive chains based on poultry and on organic products such as amaranto, banana, tea, cacao, coffee, beans, and papaya, thus generating additional sales for approximately $5 million and creating more than 800 full-time jobs. It is estimated that by the end of 2009, the project will generate additional sales for over $12 million and will create more than 2,000 new jobs.

This project is helping thousands of producers become commercial suppliers, who, through their organizations and in partnership with their buyers, are opening new business opportunities that include competitiveness and long-term sustainability. This new approach seeks to create a new entrepreneurial culture in the Yungas region, which will eventually allow the producers to reduce their dependency on governmental subsidies and international cooperation.

Crucial facts

The Motaño Ramos family case is an example of the success achieved by the new business approach at a community level. Supported by the project, this family has established an ad hoc association called Coroico Community Producers Group. This association is providing assistance to the families of more than 54 producers in Inca Pampa and other communities. Besides producing coffee, beans, racacha, and handicrafts, the group has recently begun to cultivate amaranto (a highly nutritious Andean cereal) which is entirely sold to an exporting company. In 2007, the Coroico Community Producers Group achieved additional sales for almost 70,000 dollars. Also, the Montaño family successfully participated in the international coffee contest “Cup of Excellence”. Two Yungas coffee farms achieved the second and tenth places in the international competition, selling their production to Norway and Japan for over $30,000.

With the new business approach, the group is improving the living standards of its affiliates, thus making a significant impact in their communities. In Los Yungas, there are hundreds of families who, like the Montaños, have started to make their way out of poverty, by replacing their survival agricultural patterns for new highly demanded organic products. Actividad Rural Competitiva is facilitating this transition, by getting together producers and buyers under new innovative business concepts that generate higher incomes and better life conditions.