63870 Women’s Economic Opportunities in the Formal Private Sector in Latin America and the Caribbean A Focus on Entrepreneurship The World Bank Women’s Economic Opportunities in the Formal Private Sector in Latin America and the Caribbean A Focus on Entrepreneurship © 2010 The International Bank for Reconstruction and Development/The World Bank 1818 H Street, NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved 1 2 3 4 11 10 09 08 This volume is a product of the staff of the International Bank for Reconstruction and Development/The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. GTZ Promoting Gender Equality and Women’s Rights - Programme Director Christine Brendel Programme Promoting Gender Equality and Women’s Rights – Programme Officer Judith Frickenstein World Bank Vice President, Latin America and the Caribbean Region Pamela Cox Sector Director, Poverty Reduction and Economic Management Marcelo Giugale Sector Manager, Poverty and Gender Unit Louise J. Cord Task Managers Amanda N. Ellis Maria B. Orlando Inter-American Development Bank Vice President for Sectors and Knowledge Santiago Levy Manager of Social Sector Kei Kawabata Chief Gender and Diversity Unit Andrew Morrison Senior Social Development Economist Claudia Piras Cover Design: Ari Ribas - Apis Propaganda & Marketing Design and Layout: Ana María Origone Printed in Peru by LEDEL SAC. Acronyms BMZ Federal Ministry for Economic Cooperation and Development, Germany CEDAW Convention for the Elimination of All Forms of Discrimination Against Women CEDLAS Center for Distributive, Labor, and Social Studies, Universidad Nacional de La Plata, Argentina CIMO Program of Comprehensive Quality and Modernization, Mexico CONOCER Standardization and Certification of Labor Competency Council, Mexico CPMEN Permanent Council of Women Entrepreneurs, Nicaragua ECLAC Economic Commission for Latin America, United Nations ENAMIN National Micro-enterprise Survey (Mexico 2002) ENE National Labor Survey (Mexico 2002) GEM Gender Equity Model (Mexico) GTZ German Technical Cooperation IDB Inter-American Development Bank ILO International Labor Office IPA Innovations for Poverty Action Survey (Puebla, Mexico) JUNJI National Association of Pre-Schools, Chile LAC Latin America and the Caribbean LCTN Labor Competency Technical Norms LSMS Living Standards Measuring Survey NGO Non Governmental Organization PAC Training Support Program, Mexico PRODEMU Foundation for the Promotion and Development of Women, Chile PROGENIAL World Bank Program to Mainstream Gender in Operations in LAC PROMPERU National Investment and Export Promoting Agency, Peru PRONAF National Program for Strengthening Family-Based Agriculture, Brazil SEDLAC Socio-Economic Database for Latin America and the Caribbean SERCOTEC Technical Cooperation Service, Chile SME Small and Medium Enterprises USAID United States Agency for International Development VAT Value Added Tax 3 Table of Contents Acronyms ...................................................................................................................................................................................................................... 3 Table of Contents ....................................................................................................................................................................................................... 5 Acknowledgments ..................................................................................................................................................................................................... 7 Executive Summary ................................................................................................................................................................................................... 9 Introduction ...............................................................................................................................................................................................................13 Chapter 1: Women as Workers in the Formal Private Sector in Latin America and the Caribbean: Why do Women Become Entrepreneurs? ........................................................................................................................................................................................................15 1.1 Women in the Labor Market in Latin America and the Caribbean .....................................................................................15 1.2 Women Entrepreneurs in Latin America and the Caribbean................................................................................................19 1.3 Why Women Become Entrepreneurs in Latin America and the Caribbean.....................................................................20 1.4 When Given Lemons, Open a Lemonade Stand: Push-out Factors ...................................................................................21 1.5 When You See an Opportunity, Seize It: Pull-in Factors..........................................................................................................22 1.6 Choices and Constraints Both Play a Role in Leading Women Towards Entrepreneurship .......................................23 Chapter 2 : Performance of Female-Owned Firms: Does Size Matter? ................................................................................................25 2.1 Why Size Matters ..................................................................................................................................................................................25 2.2 Performance of Female-Owned Firms ..........................................................................................................................................25 2.3 Characteristics of Female-Owned Firms ......................................................................................................................................28 2.4 Sector Concentration ..........................................................................................................................................................................30 Chapter 3: Why are Female-Led Firms not Scaling-Up? ............................................................................................................................33 3.1 Barriers to Female-Owned Businesses’ Growth ..........................................................................................................................33 3.2 Doing Business Environment – Regulatory Burdens and Market Conditions ................................................................34 3.3 Individual Skills and Human Capital ..............................................................................................................................................36 3.4 Intra-Household Allocation and Gender Roles ..........................................................................................................................37 3.5 Other Social Factors .............................................................................................................................................................................44 Chapter 4: External Financing, Access to Credit and Asset Accumulation ..........................................................................................45 4.1 Access to Credit in Enterprise Survey Data ..................................................................................................................................45 4.2 Use of Credit ..........................................................................................................................................................................................47 4.3 Demand for Credit.................................................................................................................................................................................48 4.4 Asset Ownership by Gender .............................................................................................................................................................50 4.5 Asset Portfolios and the Value of Business Assets .....................................................................................................................53 5 Chapter 5 : Promising Approaches ...................................................................................................................................................................55 5.1 National Gender Equality Policies and Plans .............................................................................................................................55 5.2 Targeted Interventions ......................................................................................................................................................................55 Chapter 6 : Conclusions and Recommendations ..........................................................................................................................................63 6.1 Releasing the Full Potential of Women Entrepreneurs: Remaining Challenges ..........................................................63 6.2 Releasing the Full Potential of Women Entrepreneurs: A Program for Action ..............................................................65 Annex A: Terms and Definitions ..........................................................................................................................................................................67 Annex B: Focus Group Discussions and Case Studies .................................................................................................................................68 Annex C: Special Analysis of Nicaragua Household Surveys – Asset Accumulation........................................................................69 Annex D: Women’s Business Associations in Latin America and the Caribbean ...............................................................................73 References...................................................................................................................................................................................................................75 Case Studies Argentina ................................................................................................................................................................................................................81 Bolivia ......................................................................................................................................................................................................................89 Brazil .........................................................................................................................................................................................................................99 Chile....................................................................................................................................................................................................................... 109 Jamaica................................................................................................................................................................................................................. 119 Mexico .................................................................................................................................................................................................................. 129 Nicaragua ............................................................................................................................................................................................................ 137 Peru........................................................................................................................................................................................................................ 145 Uruguay ............................................................................................................................................................................................................... 155 6 Acknowledgments This report is a joint effort of GTZ on behalf of the Federal Carmen Diana Deere (Professor, University of South Florida), Ministry for Economic Cooperation and Development, Gina Alvarado (PhD Candidate, University of South Florida), Germany (BMZ), the World Bank, and the Inter-American Eva G. Ramirez (Advisor on Gender Statistics and Evaluation, Development Bank. It was prepared under the guidance National Statistical Institute Mexico and National Women’s and supervision of Christine Brendel (as GTZ, Programme Institute Mexico and World Bank Consultant), Maria Elena Director- Promoting Gender Equality and Women’s Rights), Castro (Senior Social Specialist, Social Development, and Louise J. Cord (World Bank, Sector Manager, Poverty Latin America and the Caribbean, World Bank), Claudia and Gender Unit, Latin America and the Caribbean). The Piras (Senior Social Development Economist, Gender and report and Case Studies were prepared by the following Diversity Unit, Inter-American Development Bank), Michelle core team: Amanda N. Ellis (Task Manager and Lead M. Pérez (Consultant, Inter-American Development Bank), Specialist, Gender and Development, World Bank) and and Luis Tejerina (Economist, Social Protection and Health Maria Beatriz Orlando (Task Manager and Senior Economist, Division, Inter-American Development Bank). In-depth Poverty and Gender Unit, Latin America and the Caribbean, interviews with female entrepreneurs were ably conducted World Bank), Ana Maria Muñoz Boudet (Gender Specialist, by Dina Piños (Consultant, World Bank) and Tara Sabre Poverty and Gender Unit, Latin America and the Caribbean, Collier (Consultant, World Bank). ComunidadMujer Chile World Bank), Claudia Piras (Senior Social Development conducted Focus Groups and prepared a summary report in Economist, Gender and Diversity Unit, Inter-American May 2009. Mujeres Empresarias Chile provided insights and Development Bank), Maira Reimao (Junior Professional help for the Case Study Chile, and the Brazilian Secretariat Associate, Poverty and Gender Unit, Latin America and the of Women’s Affairs provided great materials for the Case Caribbean, World Bank), Jozefina Cutura (Consultant, World Study Brazil. Vital Voices organized a session on women’s Bank), Judith Frickenstein (Programme Officer, Promoting entrepreneurship jointly with the World Bank during Vital Gender Equality and Women’s Rights, GTZ), and Ane Perez Voices Summit of the Americas in Buenos Aires in October Orsi de Castro (Program Assistant, Poverty and Gender Unit, 2008. The World Bank Lima Office helped organize informal Latin America and the Caribbean, World Bank). The report consultations in Peru in May 2009. was edited for publication by Cecilia Valdivieso (Consultant, World Bank), Katy Hull (Consultant, World Bank) and Sarah The team is grateful for comments received during a Nedolast (Program Officer, World Bank). Decision Meeting in mid January 2010. Peer reviewers for the report were: Michael Goldberg (Senior Economist, Background papers and research were prepared by: Miriam Private Sector Development Group, Latin America and Bruhn (Economist, Development Group, World Bank), the Caribbean, World Bank), Florian Garcia (Private Sector 7 Development Group, GTZ), and Shwetlena Sabarwal owners, small firm owners, and micro-entrepreneurs with (Economist, Africa Region, World Bank). backgrounds and activities as varied as the region itself. We are indebted to the talented and determined business All of you are an endless source of enthusiasm, ideas, and women from Latin America and the Caribbean who shared inspiration. All of you came to our meetings with the firm their knowledge, stories, challenges, and achievements conviction that things can be better for the next generation through in-depth interviews, consultations, and focus of male and female entrepreneurs. To each and all of you, groups. They are innovators, social entrepreneurs, large firm our deepest gratitude. 8 Executive Summary “In Latin America and the Caribbean, the great expansion in women’s capabilities is not matched by an expansion of their economic opportunities.� Pamela Cox – Vice President, Latin America and the Caribbean Region – World Bank Over the last decades, the Latin America and the There have been mixed results in translating this Caribbean (LAC) region has made great progress in progress in rights and capabilities into greater economic terms of promoting gender equality. In many countries opportunities for women in the region. On the one hand, in the region, girls have surpassed boys in education there has been a sustained increase in female labor force enrolment and completion. The ratio of girls’ to boys’ participation in the last decades, and the employment enrollment in primary school is 97% for the LAC Region, gender gap, though significant, has been closing. On the and girls’ secondary school enrollment equals or exceeds other hand, there is segregation of women and men by that of boys in 80% of countries in the region. Gains are sector and occupation, and an apparent lack of mobility also being made in reproductive health. Maternal deaths that could have important costs in terms of efficiency and have dropped, and deliveries attended by skilled health poverty reduction. personnel have increased. Moreover, in LAC, cultural norms tend to designate women Progress in terms of institutional reform for gender as the primary household caretakers. As such, working equality has also been steady, following the Beijing women are still considered secondary wage earners and platform and the signing of international conventions face a triple burden: juggling employment, household - such as the Convention for the Elimination of All Forms chores, and child-rearing duties. of Discrimination against Women (CEDAW) - by most countries in the region. Institutional reforms have Faced by the need for flexibility, and burdened by the included: changes in National Constitutions, the creation wage gap and limited opportunities in the private of Women Affairs Ministries or Institutes, reforms to the sector, women in the region frequently turn to the Civil Code, penalization of Gender-Based Violence, and the informal sector and entrepreneurship. Shirking strict implementation of gender equality policies. In politics, labor force regulations, the informal sector offers women progress has been steady, although the share of women in some flexibility, but frequently at the cost of labor rights, local and national governments is still below 50 percent in pensions, and other benefits. Entrepreneurship often gives 1 most countries, and even lower at the local level. women flexibility in tending to household chores and 1 World Bank (2010). 9 childcare duties while offering an opportunity for growth Characteristics of Female-owned Firms and advancement not found in the formal private sector. There are several characteristics that distinguish female- owned firms from male-owned firms. In general, female- However, gender-based inequalities between male owned firms use less labor and physical capital, and in and female entrepreneurs persist. Men are the majority some countries exhibit lower levels of human capital. of business owners and tend to have larger businesses These differences have an impact on a firm’s productivity than women2. Women entrepreneurs are concentrated and profitability. in micro- and small enterprises. This difference may be related to the link between gender-based inequalities and Women entrepreneurs in Latin America and the Caribbean ownership of productive assets, such as land and capital, are over-represented in micro-enterprises and small and its detrimental impact on women’s ability to partake in firms and under-represented in medium to large firms. 3 the opportunities afforded by economic development. Or Female-owned firms also tend to be concentrated in it could be a matter of women preferring the flexibility that fewer economic sectors than male owned firms, operating running a micro or small enterprise offers. mainly in the commerce, services and manufacturing sectors. In Guatemala, for example, more than 70 percent Why Do Women Become Entrepreneurs? of businesswomen who are employers are in the Women’s decisions to become entrepreneurs are influenced commerce sector. by a number of push-out factors from the labor markets and pull-in factors related to earnings expectations. Women entrepreneurs who are able to overcome the barriers to firm growth successfully are able to compete Push-out factors are those derived from necessity as owners of medium to large size firms. Female-owned rather than opportunity. They often stem from lack firms are less profitable than male owned firms and less of opportunities in the labor market and the need to productive at the micro and small-enterprise level. However, supplement household income. Many of the push- at the medium and large size levels, they are as productive out factors are specific to women, and are related to as (or more productive than) firms owned by males. gender issues in asset accumulation and human capital accumulation or to intra-household allocation of resources Barriers Faced by Female Entrepreneurs and childcare responsibilities. What prevents female entrepreneurs from scaling up their businesses? While some barriers are not gender- Pull-in factors are opportunity-based. They are often specific and present challenges for both male and female based on the desire for flexibility, following a life’s calling, entrepreneurs, this report finds that others do affect women innate ability, starting or joining in a family business, and disproportionately and create additional barriers. identifying a unique business opportunity. This report suggests that men are more likely to become entrepreneurs Regulatory burdens affect both male and female in response to a recognized economic opportunity than entrepreneurs. However, female entrepreneurs tend to women. feel less equipped to maneuver complex procedures. Female entrepreneurs report not having sufficient information on business registry procedures and the 2 enforcement of other regulations. Analysis in this report Whether measured by number of employees, revenues or business equity (OECD 1998; Thurik and Verheul 2001; Valenzuela 2004b). also indicates that women feel more vulnerable to 3 Dollar and Gatti (1999). corrupt officials. 10 Female entrepreneurs have difficulty accessing women. Being a household head, having children networks and markets for their products. Having under five years of age, having a business located in the contacts who are knowledgeable about the steps to starting home, and having lower returns on time invested in the a business and labor regulations is important, particularly business are all related to women’s need to combine for women entrepreneurs who feel uninformed and/or household responsibilities with business activities. These intimidated by lofty processes. Furthermore, networks are and other impediments continue to disproportionately often key to accessing trade channels, technology, and affect women entrepreneurs in the formal private sector, financing for businesses. posing challenges to releasing the full potential of women entrepreneurs. Female business owners do not have lower overall entrepreneurial ability than males, but they are less likely Increasing Women’s Economic Opportunities in the to have access to training and business development Formal Private Sector services. When training is available, it often follows This report suggests that a shift to placing more emphasis traditional roles, shutting women out of more productive, on promoting the growth of female-owned firms rather high-growth sectors. Women also have more difficulty than on firm creation is needed. The analysis in this accessing networks for finding the right markets for their report leads to several policy recommendations to help products. increase women’s economic opportunities in the formal private sector. Although there are no significant differences in access to credit between male and female entrepreneurs, women • Target labor market reforms to alleviate barriers to seem to exhibit higher risk aversion or fear to apply for women’s participation in formal sector employment. credit, as well as less familiarity and satisfaction with Improving women’s access to and performance in larger-size credit instruments. Female entrepreneurs tend formal sector employment are not only important from to use credit less often, take out smaller loans, and rely on a labor market efficiency standpoint and from an equity more informal sources of financing. standpoint, but also to reduce push-out factors that may be creating distorted incentives to seek self-employment Women’s assets are consistently of lower value than as a last resort. This includes: introducing policies aimed those owned by men. However, they are often required at reducing the gender wage gap, providing flexible to put up significantly more collateral than men to access schedules through part-time and flex-time employment, credit. The ability to draw upon personal assets such as one’s and encouraging the targeted hiring of female employees own home, consumer durables or a vehicle is a key factor in in decision-making positions. enabling entrepreneurs to establish a business. Men entrepreneurs’ use of hard collateral is twice the level • Provide a combination of services to help female of women entrepreneurs. Women tend to use signed entrepreneurs grow their businesses or become more documents and movable property as the main form of productive. Such services might include: facilitating guarantee, which is more limiting in terms of financing access to financial services and business development through banks and other formal sources of credit. training; promoting high quality business training, taking into account women’s needs in SME business Traditional gender roles continue to assign domestic development services; and promoting access to networks and family responsibilities disproportionately to and new markets for women entrepreneurs. The provision 11 of childcare services is another area of proven effect approach that has gained support from workers and where improvements could be made. management alike. • Promote good gender practices in the public and private • Use social marketing to promote gender equality in sectors. Good gender practices have the potential of government programs for SME development, land reducing some critical push-out factors which discourage titling, financial services, and other programs. World women from seeking employment in the formal labor Bank-funded initiatives in land titling show that even the market. Firm certification, developed and tested in slightest change in communications, such as introducing Mexico with World Bank support (Gender Equity Model radio messages or posters to highlight that both men - GEM), has proved to be a successful tool for promoting and women can participate in the program can make a gender equity in the private sector under a participatory difference. 12 Introduction Entrepreneurship contributes to a vibrant private sector and analyzes differences in the characteristics and and can stimulate broader economic growth. Not only do productivity of male and female-owned firms. Barriers to entrepreneurs generate income, but they often create new entrepreneurship and their potential gender impact are jobs and competition among firms, leading to increases discussed, with special attention to the issues of access to in productivity and technology transfer. As innovators, credit and asset accumulation. entrepreneurs also bring knowledge and new ideas to the economy, another important element of growth. Promoting The objective of this report is to explore if women women entrepreneurs is increasingly viewed as an are choosing size and sector for their micro and SME important lever for private sector development. firms optimally, or if this is the result of multiple constraints, including gender constraints. What prevents LAC countries have experienced an important growth female entrepreneurs from scaling up their businesses? Is of microenterprises led by women, but little is known there anything that can or should be done from a policy about the factors that explain this trend. Attention perspective to alleviate these constraints and foster female- has focused on the development of microenterprises by owned firm productivity? women in recent decades, both as a ladder out of poverty and as a means for the economic empowerment of women. Although an important aspect of the economies of Latin Hence, most studies of women and entrepreneurship in America and the Caribbean, this report does not discuss Latin America focus on whether women’s entrepreneurial women’s participation in the informal sector. Nor does it activity is able to lift them out of poverty and/or on gender discuss in detail gender gaps in employment and wages. differences in earnings and productivity. Fewer studies Evidence of such gender gaps has been thoroughly have examined gender differences in factors affecting documented elsewhere, and is the subject of ongoing entrepreneurship and business growth between men reports by the World Bank, ECLAC, and IDB.4 and women. This report focuses on entrepreneurship in the formal This report focuses on women’s economic opportunities private sector. Although little is known about barriers in the formal private sector in LAC with a special focus on and enabling factors for microenterprise and SME female entrepreneurship. The report considers the reasons growth and productivity, policy interventions (some behind women’s decisions to become entrepreneurs, funded through World Bank, IDB, and other donors) 4 For further information, please see the references in Chapter 1. 13 emphasize entrepreneurship as a way to empower women commerce, and other more traditional sectors. One of the 5 economically. This report attempts to go beyond enterprise Focus Groups included beneficiaries from two Government creation to tackle firm productivity and growth with a programs in Chile (SERCOTEC and PRODEMU) that are gender lens. Microenterprises may be important in the targeted to poor households. short run from the point of view of women’s economic empowerment or poverty reduction, but unless their The report is structured as follows: Chapter 1 provides the natural progression to succeed and grow or fail and context for discussing women’s economic opportunities in re-start is enabled, their link to macroeconomic growth the region. It considers women’s participation in the labor remains tenuous. market and explores why women become entrepreneurs. Chapter 2 examines the performance and characteristics The report combines quantitative and qualitative data. of male and female-owned firms. Chapter 3 examines Data from World Bank Enterprise Surveys is used whenever barriers that may be affecting the performance and growth it is possible to identify the owner’s gender. Two household of female-owned firms. A more detailed analysis of access surveys with special modules on assets and businesses to credit and asset accumulation is discussed in Chapter 4. owned by household members are analyzed (Guatemala Chapter 5 summarizes promising approaches that support and Nicaragua). The analysis in this report is also based on female entrepreneurs in the region. Concluding remarks and in-depth interviews with female entrepreneurs and nine policy recommendations are presented in Chapter 6. Annex case studies of successful businesswomen in Argentina, A provides a list of terms and definitions used in the report; Bolivia, Brazil, Chile, Jamaica, Mexico, Nicaragua, Peru, and Annex B provides more details on how the Case Studies and Uruguay. The Case Studies are presented at the end of this Focus Groups were conducted; Annex C gives details on report. In addition, four Focus Groups were conducted in the special analysis on asset accumulation in the Nicaragua Chile, which included participants from microenterprises Household Surveys; and Annex D presents a non-exhaustive and SMEs from sectors as diverse as agribusinesses, web list of Women’s Business Associations in LAC. 5 The World Bank’s Gender Action Plan includes several initiatives for female-owned businesses.See www.worldbank.org/gender. Since 2007 the Multilateral Investment Fund of the IDB has approved projects in Chile, Colombia and Peru to specifically support the creation and growth of female-owned enterprises. 14 Chapter 1 Women as Workers in the Formal Private Sector in Latin America and the Caribbean: Why do Women Become Entrepreneurs? “…. My motivation to start was to improve the quality of our lives, as my husband had lost his job, and I did not want to take a job that would deprive me from seeing my children…� Participant – SERCOTEC and PRODEMU Focus Group, Chile “ ….. I knew what I liked, and saw what was missing in American brand-name stores. I realized that using Bolivia’s indigenous art and textile practices as well as the highly demanded alpaca wool from the Andes was a unique opportunity…� María Claudia Méndez (Orígenes Bolivia) – Case Study Bolivia Summary While important progress towards gender equality has been achieved in terms of increased female labor force participation and employ- ment in general, challenges remain in terms of earnings and gender wage gaps, and other job quality issues, such as schedule flexibility. These factors are frequently cited by women as reasons to start a business (formal or informal). The quotes above highlight the two main forces driving women towards entrepreneurship: necessity and opportunity. Push-out factors driving necessity-based entrepreneurship include barriers in the labor market or need for supplemental income. Pull-in factors, on the other hand, are usually opportunity-based, related to earnings expectations or the desire for more flexibility. This chapter provides context for a discussion on women’s economic op- portunities in Latin America and the Caribbean (LAC), with a focus on women’s participation in the labor market in the formal private sector. The first half outlines recent trends and remaining barriers faced by women, while the second half focuses on female entrepreneurship. 1.1 Women in the Labor Market in Latin America and over 70 percent.7 At the lower extreme, Costa Rican the Caribbean women’s participation in the labor force was about 52.6 Female labor force participation, currently around 57 percent in 2007. However, this represents an increase from percent, has increased significantly in Latin America just over one-third in 1990.8 and the Caribbean over the last 20 years. In Brazil, for example, female labor force participation increased by Despite significant progress, women’s participation in the 10 percentage points during the 1980s alone, from 38.3 labor force still lags far behind men’s participation. While percent in 1981 to 48.2 percent in 1990. By 2004, 2 in 3 female employment ranges from 40 percent to 70 percent 6 Brazilian women were in the labor force. Similarly, while in the Region, male employment is above 85 percent female labor force participation was already high in urban in all countries. As Graph 1.1 shows, female labor force areas in Uruguay in 1989 (54.9 percent), it continued to participation in Latin America and the Caribbean is on par climb over the following two decades and is currently with the world’s average, but it remains lower than in other 7 6 CEDLAS and the World Bank (2009). Ibid. 8 Ibid. 15 Graph 1.1: Female and Male Labor Force Participation Around the World 90 84.9 85.1 83.6 82.6 80.9 80 76.5 73.7 72.0 70 61.5 60 57.1 58.6 57.7 50 40 37.2 30 27.6 20 Female 10 Male 0 c sia ca ia an ca e ifi ag As ri lA c ri be Pa Af Af er h ra ib ut n Av & r th nt r ra Ca So ia Ce ld No ha As & or Sa & & ica st W pe b- Ea st er Su Ea ro Am Eu e dl tin id La M Source: World Bank (2009), Genderstats database, 2007 data. regions, especially East Asia and the Pacific, where women’s from 68 percent to 81 percent from 1986 to 2001. During participation in the labor market is over 70 percent. the same period, male earnings were on average 28 percent higher than female earnings, even when controlling for Gender wage differentials remain an important barrier education (45 percent higher without controls).10 In Brazil, for female economic advancement. Atal, Ñopo, and controls actually widen the wage gap: Brazilian women Winder (2009) estimate that, in Latin America as a whole, earn 29 percent less than men; however, when controlling men on average earn 10 percent more than women, for education, age, and hours worked, female earnings are though there is significant variation among countries and about 34 percent less than male earnings.11 sectors.9 In fact, the authors note: “Men earn more than women at any age, for each level of education, in any type Women’s participation in the labor force tends to be of employment (self-employed, employers and employees) concentrated in a few sectors – mainly commerce, and in both large and small firms.� The gender wage gap education and health – making them more vulnerable is even more apparent when looking at country-specific to industry shocks. In Jamaica, almost half of employed measurements. In Argentina, women earn on average 30 women are in low-paying, minimum-wage jobs.12 In percent less than men in the same occupation, and average Guatemala, Honduras, Jamaica, Nicaragua and Peru, roughly earnings for women with complete tertiary education are one third of employed women work in commerce, while equivalent to only half the average earnings of their male less than 20 percent of men work in that sector. Similarly, counterparts. The percentage of employed women who around 30 percent of women in Argentina and Uruguay, completed secondary or tertiary schooling in Peru climbed and roughly one-quarter of women in Chile, Jamaica and 10 Ñopo (2004). 9 Atal, Ñopo and Winder (2009). The study also finds that controls for 11 World Bank (2003). education widen the wage gap for the region as a whole. 12 Wyss and White (2004). 16 Panama are employed in health and education. In contrast, such as Argentina, Uruguay, and Brazil, countries with the less than 11 percent of men are employed in these sectors. highest female employment rates tend to have a larger share of women in the informal sector. This pattern is in contrast to A large proportion of women tend to work in the informal male employment, which hovers between 80 percent and 95 sector and thereby remain uncounted. As can be seen percent, even though informality ranges from as little as 28 from the graphs below, with the exception of a few countries percent to as much as 75 percent (Graphs 1.2 and 1.3).13 Graph 1.2: Female Employment in LAC 80.0 % 70.0 % 60.0 % 50.0 % 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % ic ca ile a a y ico la or il a a as r ay u ia do ua az am in gu al r bl ue liv ad ur Pe Ri gu Ch em ex nt Br ua pu ug ra Bo nd ez n lv ta ra ge M Pa ca Ec at Ur Re Sa n s Pa Ho Co Ar Ve Ni Gu El n ica in Informal Sector Formal Sector m Do Source: Authors’ calculations from CEDLAS and World Bank (2009), SEDLAC database. Graph 1.3: Male Employment in LAC 100.0 % 90.0 % 80.0 % 70.0 % 60.0 % 50.0 % 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % ile y ca a or a ico la il a u r a ay ic ia as do ua az in m gu al r bl ue liv ad Pe ur Ri gu Ch em ex nt na Br ua pu ug ra Bo nd ez lv ta ra ge M Pa ca Ec at Ur Re Sa n s Pa Ho Co Ar Ve Ni Gu EL n ica in m Informal Sector Formal Sector Do Source: Authors’ calculations from CEDLAS and World Bank (2009), SEDLAC database. 13 CEDLAS and the World Bank (2009). 17 Traditional household roles and cultural beliefs in LAC of individuals in Argentina, Mexico, and Trinidad and help explain higher unemployment rates and longer Tobago said men do have a greater right to jobs. In Chile, periods of unemployment for women. Secondary 34.7 percent of men and 26.0 percent of women agreed breadwinners may be unemployed for longer periods of that men should be given priority for jobs.14 Furthermore, time than primary breadwinners by choice (e.g., they have 29 percent of Mexicans believe that university education the freedom to “hold out� until they find a job they want) is more important for boys; 14 percent of Chileans and as well as by default (e.g., they are unable to search for a 10 percent of Guatemalans “strongly agree� with this job full-time, as they have a larger burden of household statement. In Chile and Mexico, the share of women who duties to attend to). Cultural values may also play a role, as “agree� or “strongly agree� that university education is more analysis from the World Values Surveys shows. In a survey important for boys than for girls is 23.9, and 27.6 percent; question asking, within a context of job scarcity, if men have higher than the combined world average for female and a greater right to jobs than women, around one-quarter male respondents of 21.6 (see Graph 1.4). Graph 1.4: Cultural Norms on Education: Is a university education more important for boys than for girls? 25.0 % 20.0 % 15.0 % 10.0 % 5.0 % 0.0 % e ag e al er M e av al e a, m al e ld in al e M Fe or al e nt m al e il, W ,M a, e ge Fe al em az al in M e ile Ar il, m e Br nt al ,F al e a, az Ch Fe M ge al ile m e bi Br al ,M a, e a, Ar Fe m Ch al em e al bi lo ico al ,M a, e em m Co ,F al em al e ex lo ru al ,M at em ico e ,F Co M em Pe Strongly Agree e al Gu go al ex at ru M ,F m Gu ba M Pe Agree y, Fe go ua To ba y, ug d ua To an Ur ug d ad an Ur id ad in Tr id in Tr Note: Only “strongly agree� and “agree� responses to the question “Do you agree strongly, agree, disagree, or disagree strongly? A university education is more important for a boy than for a girl� are shown here. Sources: World Values Surveys: Argentina (2006), Brazil (2006), Chile (2006), Colombia (2005), Mexico (2005), Peru (2006), Trinidad and Tobago (2006) and Uruguay (2006). 14 World Values Surveys: Argentina (2006), Chile (2006), Mexico (2005), disagree with the following statements? When jobs are scarce, men and Trinidad and Tobago (2006). Question asked: “Do you agree or should have more right to a job than women.� 18 1.2 Women Entrepreneurs in Latin America and the rights in the region. On the other hand, it may reflect limited Caribbean labor options for women in salaried work or a greater need to The LAC Region has higher rates of female entrepreneur- supplement household income. ship and a smaller gap in participation between men and women entrepreneurs than other regions.15 A study on fe- According to nationally representative household male entrepreneurship prepared by the Global Entrepreneur- surveys from Latin America, most female-owned firms ship Monitor (Allen, 2007) found that, although men are more are classified as small enterprises17. The percentage of likely to be entrepreneurs than women world-wide – with the female firm owners is highest among firms with less than exception of a few countries, including Brazil and Peru – on 5 employees (ranging from 33 percent in Argentina to 50 average, the gender gap in LAC is smaller. This difference is percent in Honduras). As firm size increases, the percentage especially marked when focusing only on new firms (less than of female business owners drops in all countries. Women 42 months), for which the gender gap in LAC is 24 percent, make up only 18 to 31 percent of firm owners having 5 to in contrast to 43 percent and 45 percent for Asia and Europe, 10 employees in the countries studied. Firms with more 16 respectively. This higher entrepreneurial activity among than 11 employees have the lowest percentage of female LAC women may reflect broader economic opportunities for owners, ranging from 29 percent in Brazil to 12 percent in women, resulting from political advancements on female Mexico18 (Graph 1.5). Graph 1.5: Percentage of Female Firm Owners by Size 60 50 50 44 40 38 41 38 40 37 33 31 29 30 28 26 27 25 24 23 21 19 23 20 20 20 18 14 12 10 0 Argentina Bolivia Brazil Ecuador Honduras Mexico Peru Uruguay(*) Micro Small Medium Note: Micro firms are defined as having less than 5 employees (including the owner), small firms have 5 to 10 employees, and medium size firms have more than 11 employees. For Uruguay only, small firms have between 5 and 9 employees and medium size firms have more than 10 employees. Data circa 2008. Source: Bruhn’s calculations based on household surveys from local statistical agencies. 15 17 Gender gap in this section refers to the difference between men and This pattern is similar in other regions around the world, where most women entrepreneurs. female-owned firms also fall into the smallest size categories (see 16 Allen et al. (2007). Livani 2007). 18 Bruhn (2009). 19 1.3 Why Women Become Entrepreneurs in Latin life’s calling, innate ability, and capitalizing on a America and the Caribbean business niche. The quotes at the beginning of this chapter highlight the The decision-making process for becoming an entrepreneur two main forces driving men and women in the region differs between men and women. Determinants of towards entrepreneurship: necessity of supplemental entrepreneurship at the micro-level, such as education income and vision of a unique business opportunity. levels and having children in the household, affect men and women’s decision to become an entrepreneur differently Push-out factors are those derived from necessity. (see Box 1.1 and Table 1.1). Many of the push-out factors are They often stem from lack of opportunities in the labor specific to women, and are related to gender issues, such as market and the need to supplement household income. women’s traditional responsibility for family and child care, Pull-in factors are opportunity-based, and are their roles as secondary wage earners, and glass walls and often related to the desire for flexibility, following a ceilings in the private sector. Box 1.1: Differences in the Determinants of Female and Male Entrepreneurship: Evidence from a Special Household Survey Module in Guatemala Using data from a credit module and a special module for firm owners included in a household survey (2006) in Guatemala, the authors explored the determinants of women’s and men’s decisions to become entrepreneurs, among individuals 21 to 60 years old who are working. As Table 1.1 shows: While increased education raises the probability of men becoming entrepreneurs, it diminishes the chances of entrepreneurship for women. An additional year of schooling makes a woman more than 0.3 percent less likely to work as an entrepreneur, while it increases the probability of a man becoming an entrepreneur by almost 0.3 percent. This gender difference, albeit small, may signal that entrepreneurship in Guatemala is not a preferred option by educated women, in contrast to men, and may partly explain the underperformance of female-owned firms relative to male- owned firms, as documented in the next chapter. Household wealth reduces the chance of women being self-employed entrepreneurs. The opposite is found for men. This is somewhat surprising, as we would expect to see a positive effect of wealth on the probability of being a business owner for women as well, since more property would be potentially available to use as investment or collateral for the business. Nonetheless, it reinforces the idea that for many women, entrepreneurship is not a preferred option, and those who have the means are less likely to undertake it. The number of adult females in the household seems to be a relevant determinant for women but not for men. Having more women in the household reduces the probability of women being self-employed entrepreneurs by 2 percent and of becoming employers by 1 percent. This finding implies that the presence of more women within the household may indicate a greater availability of support for or division of domestic chores and childcare responsibilities, giving some women within the household more freedom to work as employees. Source: The Guatemalan National Living Conditions Survey of 2006 was used for the study. It is a nationally representative household survey and includes a specific module on household businesses and another one on household credit, providing information on dimensions of businesses that are usually missing in traditional household surveys. It also covers both formal and informal firms. However, as it is a household survey rather than firm survey, it captures only a few large firm owners, limiting the analysis that can be done on this type of firms. Nevertheless, this may not constitute a severe bias, since Gutiérrez (2009) reports that in Guatemala over 95 percent of firms have less than nine workers (micro and small enterprises). 20 Table 1.1: Gender Differences in the Determinants of Entrepreneurship (1) (2) (3) (4) Female Entrepreneur Male Entrepreneur Variables Female Entrepreneur Male Entrepreneur (including (including (only employers) (only employers) self-employed) self-employed) Years of Schooling -0.00336*** 0.00273*** -0.001588*** 0.000972*** Number of adult female household -0.0198*** 0.00540 -0.00404*** 0.00366* members Wealth of -0.0162*** 2.79e-07*** 1.31e-07*** 1.31e-07*** Household Observations 14369 14369 14369 14369 Significance level: *** p<0.01, ** p<0.05, * p<0.1 Source: Piras, Pérez and Tejerina (forthcoming). Notes: Calculations are done using a bivariate probit model with all observations in the sample. The regression controls for gender, age and having children. In the region, female entrepreneurship is influenced by married women are better positioned to bear that risk, as women’s position as a secondary income earner. A 1994 they are not the primary breadwinner for their household.21 survey among urban women in Mexico, for instance, found that as many as 57 percent of female micro-enterprise 1.4 When Given Lemons, Open a Lemonade Stand: owners run their business in order to complement rather Push-out Factors 19 than simply provide household income. Furthermore, Push-out forces stemming from lack of opportunities in the Cunningham (2001) found that married women, single labor markets play an important role in influencing women mothers, and single women without children in Mexico to become entrepreneurs, especially for poor women and behave differentially with regards to employment and those who become micro-enterprise owners. This sentiment self-employment, according to their roles as primary/ was echoed by Focus Group participants and some of the secondary breadwinners. For example, as married women women interviewed for the Case Studies in this report. are considered only secondary income earners, their labor “ …I was completely broke…I used to sell empanadas to survive, until a force participation patterns differ during macroeconomic friend told me about the classes held by PRODEMU, which also offered expansion and contraction periods, and they are more seed capital for a new business. I felt as if getting out of a hole.� likely to start informal enterprises during an economic SERCOTEC and PRODEMU Focus Group Participant, Chile downturn.20 In contrast, macroeconomic shocks do not appear to affect the labor force participation rates of single “Given that my salary was not enough to meet my needs, a common mothers, and single women with no children participate problem in Nicaragua, I decided to start my own business. That would in the labor force at higher rates, near those of male labor allow me to be my own boss, make my own schedule, and make force participation. Cunningham (2001) explains that, more money…� although entrepreneurship, particularly informal, is risky, Ximena Ramírez (EuroAmericana) – Case Study Nicaragua 19 Sánchez and Pagán (2001). 20 Cunningham (2001). 21 Ibid. 21 Although men are generally more likely than women Focus Group Participants also mentioned other push-out to become entrepreneurs in response to a recognized factors influencing their decision to become entrepreneurs. economic opportunity, LAC has the lowest ratio of Among them, being older than 50 was seen as a limiting opportunity-to-necessity for female entrepreneurs. factor in the labor market and a major driver towards In the region, only 7.5 percent of women become becoming entrepreneurs. The lack of childcare options entrepreneurs to seize an opportunity, while another 5.3 and the traditional division of gender roles were also percent do so for necessity. The ratio between the two (1.4), highlighted. Glass-ceiling type barriers to growth and to is lower than the ratio for male entrepreneurs in the region attain decision-making positions at the top of the corporate (1.6) as well as for women business owners in Europe and ladder were also frequently identified as having a push-out 22 Asia (1.9) and in high-income countries (4.2). effect (see Bolivia and Jamaica Case Studies). Low returns to education in salaried work often push 1.5 When You See an Opportunity, Seize It: women towards entrepreneurship. In Peru, enterprise Pull-in Factors owners are more likely to be women, not poor, and to have The flexibility afforded by self-employment is an secondary and even tertiary education.23 This is in part important factor for entrepreneurs, and may even explained by the fact that although Peru has a relatively outweigh earnings differentials. In Bolivia, for example, high rate of secondary school completion, returns to self-employed individuals are less likely to perceive education are low relative to other countries in the region. themselves as poor than non-self-employed individuals That is, many Peruvian women may become entrepreneurs with the same socio-economic status, indicating in order to achieve higher rates of return to education, perceived benefits to self-employment not captured returns they cannot find in salaried employment despite by income alone.25 One participant from Focus Group 2 their high educational achievement levels. (ComunidadMujer) stated: “I wanted to earn money, but also needed flexibility to spend a lot of time with my children.� It is often more than just a matter of fixing the wage In Mexico, Cunningham (2001) found that married women gap; lack of opportunities in the labor market and with school-age children are more likely to go into the barriers to entry can influence women’s decisions to informal than the formal sector, and ascribes this pattern become entrepreneurs. In the mid-1990s the wage to the need for flexibility.26 That is, even when full-time gap shrank in Nicaragua. However, women still turned to childcare is not needed, mothers look for work that is self-employment at higher rates than men. Self-employed amenable to their need to tend to their children before and women in Nicaragua out-earned salaried women by 25 after school. percent in 1993; by 1998, however, their earnings were around 2 percent lower than those of salaried women. Female entrepreneurs also tend to run their businesses Nonetheless, female participation in self-employment fell from within their homes. This provides greater by less than a percentage point during the period and stood flexibility as well as reduced costs and risks for owners. at 37 percent in 1998.24 This implies women were choosing In Bolivia and Mexico, for example, female-owned entrepreneurship based on need rather than opportunity. businesses are two to three times more likely to be based 22 Allen et al. (2007). 23 World Bank (2005a). 25 World Bank (2005b). 24 Pisani and Pagán (2004). 26 Cunningham (2001). 22 within the home than male-owned businesses.27 Notably, as the reason for starting their business.29 Participants in Sanchez and Pagán (2001) also found that in Mexico, Case Studies and Focus Group discussions articulated these while one in three female-owned micro-enterprises was opportunity-based factors, particularly Anne Marie Richard run from within the home, about 25 percent did not have (Argentina) and Maria Elena Mendoza (Mexico). fixed premises. Only 40 percent of female-owned micro- enterprises are run from a separate fixed location.28 This 1.6 Choices and Constraints Both Play a Role in Leading flexibility, however, comes at the expense of growth and Women Towards Entrepreneurship earnings. These pull-in and push-out forces differ considerably from those faced by men. Pull-in forces can provide a path Other pull-in factors driving women’s decision to become for capable female entrepreneurs who are able to take entrepreneurs include: a desire for flexibility, following a life’s advantage of business opportunities and/or flexibility and calling, innate ability, starting or joining a family business, independence. However, push-out forces can result in self- and capitalizing on a business niche. In a survey conducted employed women, who might prefer to work as employees in Mexico, for example, as many as one-fifth of female if positions with a favorable environment and wage were microenterprise ownership cited a desire for independence available. 27 Bruhn (2009). 29 Ibid. 28 Sánchez and Pagán (2001). 23 Chapter 2 Performance of Female-Owned Firms: Does Size Matter? “… As of 2008, Grupo SyN employs 40 people and generates annual revenue of over 1 million USD…� Anne Marie Richard (Grupo SyN) – Case Study Argentina Summary This chapter finds that gender differences in firms’ productivity diminish as a firm grows. At the micro and small enterprise levels, female- owned firms are less profitable than male-owned firms, and less productive. However, at the medium and large size levels, female-owned firms are as productive as (or more productive than) firms owned by males. Given the patterns observed in the case studies, differences in profitability or sales volume documented in survey data may be partly due to the fact that women entrepreneurs are disproportionately concentrated in start-up operations. They also use less labor and less physical capital, and, in some countries, female entrepreneurs have lower levels of human capital. Successful female entrepreneurs are able to advance to the next phase of business, or to abandon less suc- cessful operations. This chapter looks at differences in firm performance and characteristics among male and female-owned firms30. 2.1 Why Size Matters should be a point of investigation. Gender parity (or disparity) There are several possible explanations for why female in income levels could be explained by differences in firm firms are concentrated in small and micro enterprises. size. Lack of access to finance and other obstacles to doing First, it could be the case that only a small fraction of business could also be correlated to firm size, and often affect women possess the entrepreneurial skills needed to men and women differently. Better understanding these successfully run a larger firm. Second, female-owned firms relationships can help lead to better informed policies.31 in Latin America could be constrained from performing well 2.2 Performance of Female-Owned Firms and from growing by certain obstacles that affect women Female-owned firms have lower profits than male- disproportionately more than men. These obstacles could owned firms. Graph 2.1 shows that median profits among include childcare and household obligations, access to female-owned firms are between 30 and 70 percent lower finance, or regulatory burdens and market conditions. It than median profits among male-owned firms, according could also be the case that women simply have a preference to a number of firm surveys from Latin America32. In a for running smaller firms than men, or that the small size of similar analysis, Bruhn (2009) finds that female-owned firms’ female-owned firms reflects an efficient division of labor in average and median profits are between 15 and 20 percent the household. But does size matter? of a standard deviation lower than male-owned firms. Firm size is linked to the profitability of the firm and the However, this does not necessarily imply that all female- income of the owner. Firm size and gender differences owned firms are less productive than male-owned firms. 30 31 Estimations using Enterprise Survey data in this chapter are Amin (2010). 32 based on Bruhn (2009), which contains a more detailed explanation The fact that the differences between female-owned and male-owned of the methodology. Estimations based on a household survey firms vary across countries could be due to country-specific factors. special module for Guatemala are based on Piras, Pérez, and However, the surveys for each country include different types of Tejerina (forthcoming). Both background papers were prepared firms, which could also explain the different results. Also note that for this report. enterprise surveys cover only formal businesses. 25 Graph 2.1: Median Profits 400 373 348 350 300 290 248 250 233 207 203 US$ 200 150 100 76 50 0 Mexico Bolivia Peru Enterprise (micro) (micro) (micro) Surveys* Male-Owned Female-Owned Note: *The numbers for the Enterprise Surveys are in 100s of US Dollars. All other numbers are in US Dollars. Firms in Mexico, Bolivia and Peru were microenterprises, while the Enterprise Surveys covered larger firms. Source: Encuesta Nacional de Micronegocios (ENAMIN), 2002, Bolivian World Bank Micro Enterprises Survey, 2007; Peruvian World Bank Micro Enterprises Survey, 2008; World Bank Enterprise Surveys for Brazil, Ecuador, El Salvador, Guatemala, Honduras, and Nicaragua, 2003. Graph 2.2: Differences in Productivity by Percentile of Sales (Female – Male) 25 20 19 15 10 5 2 % 0 -5 -2 -10 -6 -9 -7 -15 -13 -50 -20 -17 -25 Mexico Bolivia Enterprise Surveys (micro) (micro) 25th percentile 50th percentile 75th percentile Note: The figure displays the coefficients on the female dummy in separate productivity regressions that are based on a Cobb-Douglas production function of the form Y = (AL)1-α-βHαKβ, where A stands for technology, L stands for labor, H for human capital, and K for physical capital. The outcome variable is in sales. Firms in Mexico and Bolivia were microenterprises, while the Enterprise Surveys covered larger firms. Source: Encuesta Nacional de Micronegocios (ENAMIN), 2002; Bolivian World Bank Micro Enterprises Survey, 2007; Peruvian World Bank Micro Enterprises Survey, 2008; World Bank Enterprise Surveys for Brazil, Ecuador, El Salvador, Guatemala, Honduras, and Nicaragua, 2003. 26 Micro and small female-owned firms are less productive firms. This is true for the firms at the 50th and 75th percentile than male-owned firms; the majority of female-owned of sales in the World Bank Enterprise Surveys, where the firms fall into these size categories. Graph 2.2 shows difference in productivity is close to zero (see Graph 2.2). th th that firms at the 25 and 50 percentile of sales in the It is also true for firms at the 75th percentile of sales in the Bolivian data and all firms in the Mexican Micro-Enterprises World Bank Survey of Bolivian Micro-Enterprises, where Survey are less productive than male-owned firms. The female-owned firms are more productive than male-owned firms included in the Mexican survey typically have only firms; but this difference is not statistically significant. 1.4 employees on average, followed by 3.9 in the Bolivian In Guatemala, female-owned firms are smaller in survey and 85.6 in the Enterprise Surveys. The evidence terms of sales volume; but they are as profitable as across surveys suggests that differences in productivity male-owned firms. There are significant differences in are more pronounced among smaller firms, and can even the average volume of sales between female and male be reversed among larger firms. entrepreneurs, with self-employed female entrepreneurs showing the worst performance in terms of profitability. Medium and large female-owned firms are as The sales volume of female businesses is on average 60 productive as male-owned firms of the same size. A percent smaller than the sales volume of male-owned productivity analysis that compares sales across female- businesses, but their profitability, measured as the ratio of and male-owned firms, controlling for differences in the profits to sales, is similar for all employer-entrepreneurs, inputs to the production process, reveals that relatively with slightly higher levels for bigger businesses, as can be large female-owned firms are as productive as male-owned seen in Graph 2.3.33 Graph 2.3: Business Sales and Profitability 60.0 35,000 52.8 % 49.9 % 30,000 50.0 38.0 % 25,000 40.0 37.0 % 30.4 % 20,000 Quetzales 29.6 % 30.0 15,000 20.0 10,000 10.0 5,000 0.0 Male Female Male Female Male Female Self-employed 2 to 4 >=5 Number of employees Profits/sales Average monthly sales Source: Analysis Guatemala Living Condition Survey - Special Module. 33 A productivity analysis requires information on the different inputs contain any question about the value of the physical capital. This of the production function of the firm. The business module used lack of information limits the analysis that can be done in terms of from the Guatemala National Living Conditions Survey contains only productivity. some of the inputs, including labor and material costs, but does not 27 Table 2.1: Differences in Characteristics of Female- and Male-Owned Firms Percent Differences in Averages (Female - Male) Mexico Bolivia Peru Enterprise (micro) (micro) (micro) Surveys Employees -9.4*** -36.1*** -2.9 -31.9*** Property value -60.9*** -79.4** -54.5*** Machinery value -121.3*** -227.3*** -74.8*** Owner’s years of schooling -0.74*** -1.81*** -32.3 (in years, not percent) Owner participated in business training -14.1*** Hours worked -26.5*** -22.7*** -3.7 Number of firms 8,293 265 582 2,175 Note: Statistical significance levels: *** 1 percent, ** 5 percent, * 10 percent. Source: Encuesta Nacional de Micronegocios (ENAMIN), 2002; Bolivian World Bank Micro Enterprises Survey, 2007; Peruvian World Bank Micro Enterprises Survey, 2008; World Bank Enterprise Surveys for Brazil, Ecuador, El Salvador, Guatemala, Honduras, and Nicaragua, 2003. 2.3 Characteristics of Female-Owned Firms firms have between 9 to 36 percent fewer employees than There are significant differences in the characteristics male-owned firms, even at the micro level.34 Household of female and male-owned firms. An assessment of survey data from Guatemala supports this finding. business owners from our sample in Guatemala shows that similar percentages of women and men are entrepreneurs. Although the vast majority of businesses in Guatemala Women constitute the majority of business owners in are very small in terms of the number of employees, the Guatemala, with 53 percent of entrepreneurs being female size distribution is even more skewed in the case of female (47 percent being male). But this is where the similarities business owners. As is the case in other Latin American end. As Table 2.1 illustrates, there are significant differences countries, as firm size increases, the percentage of female- in the human and physical capital of female and male- owned businesses drops. Graph 2.4 shows that as many owned firms. Female entrepreneurs tend to have fewer as 67 percent of female entrepreneurs in Guatemala have employees, own property of lower value, participate less no employees (self-employed), while 57 percent of men frequently in business training, and work fewer hours. entrepreneurs are self-employed. There are relatively similar These characteristics may help explain the differences in percentages of micro firms (between 2 and 4 employees) performance and size. (Physical capital and assets will be owned by men and women. For businesses with more than discussed in Chapter 4.) 5 employees, the gender difference is significant. They represent 7 percent of all male-owned businesses and less Female-owned firms have fewer employees than male- than 2 percent of female-owned businesses. owned firms. Enterprise surveys show that female-owned 34 The fact that the differences between female-owned and male-owned firms vary across countries could be due to country specific factors. in the Mexican survey only have 1.4 employees on average, while the However, the surveys for each country include different types of firms, firms in the Bolivian, Peruvian, and Enterprise Surveys have 3.9, 7, and which could also explain the different results. For example, the firms 85.6 employees on average, respectively. 28 Graph 2.4: Distribution of Business Owners by Size 80 67 70 57 60 50 40 37 31 30 20 10 7 2 0 Men Women Men Women Men Women Self-employed 2 to 4 >=5 Number of employees Source: Analysis Guatemala Living Condition Survey (2006) - Special Module. Female entrepreneurs have lower human capital than with more than 5 employees. There are also significant male entrepreneurs. As noted above, Enterprise Survey gender gaps in participation in training. The gap is larger data for formal firms show that female firm owners have among small entrepreneurs, where the percentage of significantly less formal education than male firm owners, women owners that took some training in the last year and that they work fewer hours. This includes years of is 45 percent lower than the percentage of male owners. schooling and the business owner’s participation in training The gender gap is 33 percent among those self-employed over the last 12 months. Table 2.2 shows that self-employed and 23 percent in the case of businesses with more than and small-firm female entrepreneurs in Guatemala have 2.4 5 employees. Both variables are statistically significantly fewer years of education than their male counterparts. The smaller for female owners than for male owners. gender difference increases to 2.6 years for business owners Table 2.2: Differences in Human Capital of Business Owners in Guatemala Entrepreneurs by number of employees Self-employed 2 to 4 >=5 Self-employed 2 to 4 Gender >=5 Gender Male Female Gender Male Female Male Female Difference Difference Difference Years of schooling 7.3 4.9 2.4*** 7.3 4.8 2.4*** 9.3 6.7 2.6*** Took training courses in the last 11.5 7.7 3.8*** 14 7.6 6.4*** 11.0 8.4 2.6*** 12 months Significance levels: *** p<0.01, ** p<0.05, * p<0.1 Source: Analysis Guatemala Living Condition Survey- Special Module. 29 2.4 Sector Concentration Global Entrepreneurship Monitor, LAC countries exhibit a Female-owned firms tend to be concentrated in fewer gender gap of 24 percent between male and female early economic sectors than male-owned firms. Graph stage entrepreneurs. This gap widens to 47.1 percent for 2.5 shows the distribution of male and female-owned established business owners35. One reason why women businesses across sectors of the economy. While male remain in start-up operations and do not abandon them firms are distributed among a variety of 7 aggregated for new and potentially more profitable opportunities may sectors, female businesses operate mainly in trade, services be that they are more risk-averse than men. Differences and manufacturing, with a significant concentration in in risk aversion related to credit behavior have been commerce. In Guatemala, among those women business documented by private banks, but this hypothesis could owners who are employers, more than 70 percent are in not be formally tested using nationally representative the commerce sector. Graph 2.6 shows the distribution of enterprise or household survey data. female-owned firms by sector in seven countries, showing that most female-owned firms are concentrated in trade, Most of the Case Studies were selected based on successful followed by manufacturing and services. entrepreneurs who could shed light on ways in which women can overcome different barriers from start-up to Women entrepreneurs are disproportionately growth. They have captured female-owned businesses at concentrated in start- up operations. According to the the top of the profit/sales distribution within the SME Graph 2.5: Distribution of Businesses by Sector 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Male Female Male Female Male Female Self-employed 2 to 4 >=5 Number of employees 1. Farming and fishery 5. Construction 2. Mining and extraction industry 6. Trade 3. Manufacturing 7. Transport and telecommunications 4. Services Source: Analysis Guatemala Living Condition Survey –Special Module 35 Allen et al. (2007). 30 Graph 2.6: Percentage of Female-owned Firms, by Sector 60% 50% 40% 30% 20% 10% 0% Argentina Bolivia Brazil Ecuador Honduras Mexico Peru Agriculture Construction Services Manufacturing Trade Source: Brunh´s Analysis of Household Surveys circa 2005. sector and large firms. All these female entrepreneurs operations and had used these experiences for learning have proven entrepreneurial ability and human capital. valuable business lessons (see the Peru and Argentina For example, in the Brazil Case Study, our featured female Case Studies). In a way, being an entrepreneur entails a lot entrepreneur is a meat exporter, and in the Mexico Case of learning by doing. It is possible that the rates of firm Study, we feature the owner of the largest funeral services failure and success are similar for men and women, once company in LAC. However, some entrepreneurs had they overcome the start-up phase. experienced failure (or lower profits) in previous smaller 31 Chapter 3 Why are Female-Led Firms not Scaling-Up? “.. I needed to get validation in my role as an entrepreneur, as it is traditionally a male role. …Women usually are worse at charging for services and try to argue less with clients about money� Participant - Second Focus Group with members from ComunidadMujer, Chile “If I had been a man, the company would have probably grown a lot more. I would have made it much bigger and reached out to more clients.� Karina Von Baer (Saprosem, GranoTop, AvenaTop, OleoTop and TreeTop) – Chile Case Study Summary While some barriers to micro and small enterprise growth are not gender-specific, and present challenges for both male and female entrepreneurs (such as regulatory burdens), other barriers affect women disproportionately. Findings from enterprise surveys and household surveys indicate that some doing business and human capital issues may have a gender bias, such as vulnerability to corruption or access to business training. Similarly, there is evidence of the impact of childcare and other household chores, in terms of limiting female-owned business growth. Furthermore, household survey data from Guatemala sheds light on more subtle gender differences that warrant further research and closer attention. It finds that not only are female entrepreneurs concentrated in a few, less profitable sectors, but that many of their operating costs may be unaccounted for, thereby affecting the profitability of their businesses. This chapter draws on enterprise surveys, a special household survey module in Guatemala, and qualitative data to take a closer look at the barriers to female-owned firms’ growth. 3.1 Barriers to Female-Owned Businesses’ Growth connected entrepreneurs, or self-selected beneficiaries Enterprise surveys, household surveys, and focus group of Government programs in Chile. Furthermore, they do discussions bring to light the barriers to scaling up not include men, so in some cases it is difficult to discern micro and small enterprises that may affect women if the issues raised are gender-based, or if men also face disproportionately. It must be noted that the data used similar barriers. Nevertheless, results confirm those of has its limitations. Enterprise Surveys cover only formal previous sections and bring to light more subtle gender businesses, thereby leaving out a large portion of female differences that are worth probing further. The barriers to entrepreneurs. The Focus Group discussions and Case entrepreneurship and firm growth examined in this chapter Studies, on the other hand, are also imperfect, as they tend are summarized in Table 3.1. Issues related to access to to involve particularly successful, well-known, or well- credit or building on assets are presented in Chapter 4. 33 Table 3.1: Barriers to Entrepreneurship and Scaling-Up Micro and Small Enterprises Affect Women Affect both Men and Women Affect Mostly Women Disproportionately • Lack of information about firm • Legislation still requires registry and permits husbands to approve • Exposure to corruption Doing Business Environment • Cumbersome procedures and personal assets and through high regulation sometimes extremely high taxes business transactions • Burdensome labor law (Chile) • Female entrepreneurs • Differences in entrepreneurial have lower human Individual Skills and Human ability capital (some countries) Capital • Lack of quality training and • Lack of quality training courses and relevant courses • Asset ownership (land and real estate) by • Insufficient asset accumulation • Use of collateral husbands and fathers • Problems with land and real • Problems with land and only still prevails (in Asset Accumulation, Use of estate registry and titling real estate registry and some countries) Collateral, and Finance • Incipient financial systems titling • Women accumulate • Lack of financial products for • Lack of financial assets of less market SMEs products for SMEs value • Business is located at home • Childcare • Concentration in responsibilities (elderly Intra-household Allocation sectors and occupations care and sick care ) and Gender Roles by gender • Business is located at home • Access to networks limited by • Access to networks Other Social Factors social class limited by social class 3.2 Doing Business Environment – Regulatory Burdens report the level of skills and education of available workers and Market Conditions as an obstacle than male firm owners. Finally, female firm Regulatory and market-based obstacles to operating owners in the Enterprise Surveys were 4.1 percent more and growing a business affect both male and female likely to say that macroeconomic instability is an obstacle owners. Many of the regulatory burdens and market to firm operation and growth than male firm owners36. conditions listed in Table 3.1 are equally perceived as However, this difference is small in magnitude, considering obstacles by female-owned and male-owned firms. There the fact that close to 90 percent of firm owners consider are three exceptions. First, female firm owners in the macroeconomic instability as an obstacle. Bolivian survey were less likely to perceive corruption as an obstacle than male firm owners. Second, female firm 36 owners in the Peruvian data were significantly less likely to Piras, Pérez, and Tejerina (forthcoming). 34 Table 3.2: Regulatory and Market-Based Obstacles to Firm Operation and Growth Percent that perceive ( …) as on obstacle Average for Female-Owned Firms Difference (Female - Male) Bolivia Peru Enterprise Bolivia Peru Enterprise (micro) (micro) Surveys (micro) (micro) Surveys Access to land 59.5 45.1 -6.5 3.9 Labor regulation 31.4 61.9 65.2 -2.6 4.4 -2.5 Skills and education of available workers 55.4 62.5 77.4 -3.0 -9.0** 2.1 Business licensing and operating permits 53.3 -2.7 -3.6 Economic and regulatory policy uncertainty 83.5 91.1 88.4 -6.1 -0.5 -1.2 Macroeconomic instability 89.3 94.6 92.2 -1.7 -0.8 4.1** Corruption 80.2 92.3 88.1 -9.4** 1.0 3.1 Crime, theft and disorder 91.7 93.5 81.5 4.9 -2.7 1.1 Anti-competitive or informal practices 84.3 3.2 Legal system/conflict resolution 32.2 54.2 65.2 -7.4 0.8 -2.0 Note: Statistical significance levels: *** 1 percent, ** 5 percent, * 10 percent. Source: Bolivian World Bank Micro Enterprises Survey, 2007; Peruvian World Bank Micro Enterprises Survey, 2008; World Bank Enterprise Surveys for Brazil, Ecuador, El Salvador, Guatemala, Honduras, and Nicaragua, 2003. Formalization could lead to more frequent visits from business, especially in the food sector, due to additional corrupt government officials. Some female business sanitary regulations. Bureaucratic procedures for permits owners running informal enterprises in Bolivia express were perceived as cumbersome and information for concern that by registering their business they would make the public less than clear. Specifically, participants cited themselves more vulnerable to corruption and bribery. variations in different regions and municipalities that Notable comments include: “The police always extort us and hindered their firms’ geographic expansion. put pressure on us for the smallest things. If we register, this will surely get worse.�37 In Bolivia, female formal business Labor legislation and labor inspections are a challenge owners exhibit higher levels of confidence with regard to for SMEs. Participants did not express a preference for corruption than men. This is likely not mirrored by those in hiring men or women, even though complying with post- the informal sector. Half of all employed women in Bolivia natal permits and lactation regulations could be costly. are self-employed in the informal sector, as compared to Some participants favored cost sharing schemes with the 38 one-third of working men. government or among several microenterprises or SMEs to reduce the cost of providing maternity benefits or day Female entrepreneurs feel less equipped to maneuver care services. However, in Bolivia, strict labor regulations complex procedures than their male counterparts. In discourage small businesses from formalizing, and non- Chile, Focus Group participants mentioned regulatory wage benefits can amount to up to 8 percent of profits burdens as one of the most important barriers to start a (World Bank, 2005b and Bolivia Case Study). Entrepreneurs navigate these difficulties by keeping their staff small and 37 contracting work as needed (as seasonal workers). In the World Bank (2009a). 38 Ibid. Bolivia Case Study, María Claudia Méndez found a creative 35 way of working with artisans through an affiliation legal entrepreneurs interviewed for our Case Studies benefited agreement in which each workshop regulates their own from international programs such as Endeavor and Vital hours and payment and sells their crafts to Orígenes Bolivia Voices that offer access to networks and mentorships.41 under fair trade pricing practices. Participants of the Focus Group comprised of micro- entrepreneurs who are beneficiaries of government In general, LAC registers high tax rates, cumbersome programs in Chile targeted to poor households (SERCOTEC manual processes, and a high number of payments and and PRODEMU), emphasized the importance of the hours devoted to taxes per year. In Chile, participants training received through those programs. Beneficiaries of of Focus Groups commended the tax administration government programs in Chile and Peru also noted that for being well-organized and disseminating clear sometimes the quality of training is lacking or training is information through several media, including the internet. not relevant to market demands or the current business Participants did not mention the tax rate as a burden for environment.42 The female entrepreneur in the Brazil Case the development of their businesses. In Mexico, taxes Study also noted that training for women, when available, can be paid online and tax administration has improved too often emphasizes traditional roles, focusing on skills significantly, according to María Elena Mendoza (Case Study such as sewing and cooking. Mexico), but there is still room for improvement with the number of tax payments per year at 27 and the total tax Table 3.3: Provision of Business Training by Region rate at 51.5 percent of net profits. In Argentina, although Region Average Score in appearance the situation is similar to Mexico, taxation burdens are worse; the value-added tax is 21 percent and High-income countries 4.36 may affect women disproportionately (concentrated in Latin America and Caribbean 2.94 SMEs and retail commerce). Anne Marie Richard (Case Europe and Central Asia 2.83 Study Argentina) describes this tax burden, specifically the multiplicity of different taxes she must pay and keep East Asia and Pacific 2.80 track of, as a significant obstacle for her business. This is Middle East and North Africa 2.53 not surprising, as the total tax rate incurred by a sample Africa 2.22 of formal enterprises was more than 100 percent over net profits, making tax evasion almost a necessity. 39 South Asia 1.75 Note: The score runs from 1 to 5, with 5 indicating the highest level of business 3.3 Individual Skills and Human Capital training. The factors considered in constructing the score are “existence of government or non-government programs offering Small- and medium- a) Training Opportunities enterprise (SME) support/development training.� Source: “Women’s Economic Opportunity Index� database by the Economist Access to training and business development Intelligence Unit. services was cited as an important enabling factor by women entrepreneurs. Participants from Focus 41 The women interviewed for the Argentina, Bolivia, Nicaragua, and Groups placed a high value on opportunities to improve Peru Case Studies are members of Vital Voices. The Chile Case Study was organized by Mujeres Empresarias in Chile. their managerial skills and business practices, including 42 Results for Chile stem out of Focus Group 4 (SERCOTEC and one-on-one mentorship opportunities.40 Several PRODEMU), where entrepreneurs suggested stronger Government supervision and a streamlined supply of more personalized and sector specific courses. Results from Peru are taken from informal consultations with a women’s business association. Chapter 5 39 World Bank (2006). Enterprise Surveys: Argentina. describes promising approaches on business training provision, 40 Chapter 5 presents more information on mentorship programs such including a program in Mexico that takes into account the business as ComunidadMujer in Chile and international business networks. demand side for SMEs. 36 More could be done to improve the provision of SME that, for the entire Guatemalan population, males from training in LAC in general. According to the Economic recent cohorts are more educated than females.43 However, Intelligence Unit, LAC ranks highly in an international Ñopo and Gonzales (2008) report that, for employed comparison of the existence of small- and medium- individuals, women spent more years in the educational enterprise (SME) training programs (Table 3.3). The mean system than men. Our findings, that women entrepreneurs score for LAC, however, is only 3 out of 5, suggesting have lower levels of education than men, could reflect that there is room for improvement in the provision of the fact that the selection of males and females into SME training. Moreover, the data from Bolivia indicate that entrepreneurship in Guatemala does not differ by gender, female firm owners are less likely than male firm owners as opposed to the non-random selection that takes place in to participate in business training programs, implying the labor market in general. that more research is needed to determine how women’s participation in business training courses can be improved. d) Entrepreneurial Ability Female firm owners do not have lower overall b) Access to Networks, Markets, and Technology entrepreneurial ability than male firm owners. Female entrepreneurs have difficulty accessing Box 3.1 compares several measures of entrepreneurial networks and markets. Some of the entrepreneurs in our ability across female and male firm owners and concludes Case Studies and Focus Group participants emphasized the that female firm owners do not have lower measured importance of networks in accessing markets, technology, ability, nor do they lack the self-confidence needed to run and financing. Having the right contacts, as well as friends a business, compared to male firm owners. Female firm and colleagues who are knowledgeable about the steps to owners also score similarly to male firm owners on other starting a business and labor regulations was an important measures of entrepreneurial ability. A possible way of element for success for the entrepreneurs featured in fostering female firm owners’ ability and self-confidence, the Bolivia, Argentina, and Mexico Case Studies. Some as needed to run a business, would be to provide them entrepreneurs from one of the Focus Groups conducted with business training44. with members of ComunidadMujer mentioned the importance of social networks in expanding their business. 3.4 Intra-Household Allocation and Gender Roles Old friends and colleagues were key to obtain financing, Gender roles may have an impact on the characteristics find the right logistical support and/or market their and performance of female- and male-owned businesses. products and services, provided these were of good quality. Traditional gender roles continue to assign domestic and Participants of the Focus Group that included beneficiaries family responsibilities disproportionately to women. As of public programs targeting poor women in Chile cited María Elena Mendoza (Jardines del Recuerdo) expressed severe difficulties regarding access to markets and trade in the Mexico Case Study: “ …Here in Mexico, there is no channels, starting out with simple door-to-door strategies ideology that men should help women around the house…. that were not always effective. c) Education 43 Duryea et. al. (2007) report that Guatemala is one of the countries Female entrepreneurs tend to have significantly lower in LAC with the highest disparities in educational attainment and attendance. levels of education and training, relative to male 44 Karlan and Valdivia (2006) find that female entrepreneurs who are business owners. This lower human capital can limit the microfinance borrowers in Peru improved their business knowledge, practices and revenues after being randomly selected to receive productivity and growth of a business. Recent studies find business training as part of their regular banking meetings. 37 Box 3.1: Differences in Entrepreneurial Ability Few firm surveys measure the firm owner’s entrepreneurial ability. The Bolivian Micro-enterprise Survey, however, asked whether any of the firm owners’ parents have ever run their own business. This measurement has been linked to greater entrepreneurial ability in economics and psychology literature. The first row of the Table below shows that about 6 percent more female firm owners than male firm owners have parents who have run their own business, although this difference is not statistically significant. The Bolivian survey also included a series of questions that measure the ability and self-confidence needed to run a business. A recent World Bank report found that female firm owners score lower on an index based on these questions than male firm owners (World Bank, 2009a). In order to further investigate whether there are differences in the entrepreneurial ability of female and male firm owners in other countries, this box draws on data from an Innovations for Poverty Action Survey (IPA) of micro, small, and medium-sized enterprises conducted in Puebla, Mexico, in 2007. This survey attempted to measure the “entrepreneurial spirit� of the firm’s principal decision maker (in many cases, the owner) by asking the principal decision maker to which extent they agree with a series of statements, such as “If I don’t reach a goal in the way I aspired to, I try again.� The answers to these questions were aggregated into an entrepreneurial spirit index with mean zero. About 30 percent of principal decision makers surveyed were women. The Table below shows the average values for this index, separately for women and men. Women scored slightly higher on this index, but the difference is not statistically significant. The IPA survey also measured the principal decision maker’s level of risk taking, through a series of questions that are based on questions asked in the German Socio-Economic Panel survey. It is sometimes argued that an increased willingness to take risks reflects higher entrepreneurial ability. The Table below shows that women scored slightly higher on the risk-taking measures than men, but the differences are, again, not statistically significant. Note that the IPA survey was conducted among firms that applied for a government-subsidized mentorship program, suggesting that the sample consists of motivated entrepreneurs and is not necessarily representative of all firms. In general, more research is needed to establish whether female firm owners in Latin America have lower entrepreneurial ability than male firm owners on average. The data from Bolivia and Mexico discussed in this Box provide mixed evidence on this issue. Measures of Entrepreneurial Ability Women Men Difference (Women - Men) Parent had own business (percent) 50.4 44.1 6.3 Entrepreneurial spirit index 0.14 -0.05 -0.19 General risk taking 8.04 7.87 0.17 Financial risk taking 6.23 6.01 0.22 Note: Statistical significance levels: *** 1 percent, ** 5 percent, * 10 percent. Source: Bolivian World Bank Micro Enterprises Survey, 2007; Innovations for Poverty Action SME Survey for Puebla, Mexico, 2007. 38 all working women still have to come home, clean, and prepare considered in this chapter did not explicitly ask firm owners food for the next day, regardless of whether they are executives whether childcare and household responsibilities represent or secretaries.� The non-remunerated work done by women obstacles for their firms. It is, however, possible to link the entrepreneurs in terms of domestic chores and caring for Mexican firm data to a household survey and to investigate their family may influence the amount of effort and time the correlation between the presence of children in the that they are able to dedicate to the business. In fact, these household and firm performance. two factors are not isolated, since women may decide to enter into a type of business where it is easier for them to Childcare responsibilities often translate into fewer combine work and family responsibilities. Furthermore, employees and lower profits for female-owned firms. women may have different motivations and expectations Female-owned firms in the Mexican survey have 5.3 percent about their businesses than men. fewer employees than male-owned firms when no children are present in the household of the firm owner (Graph 3.1). a) Childcare Responsibilities and Household Chores When children are present in the household, this difference Female firm owners are much more likely to report is much larger (8.7 percent). The difference in the median having to care for small children and having to fulfill profits of female- and male-owned firms also increases other family obligations and household chores as an from US$44 to US$69 when children are living in the obstacle to firm operation and growth than male firm household. These findings are consistent with the evidence owners. Data from the Bolivian Micro-Enterprises Survey from Bolivia that women are more likely to report childcare indicates that 59.5 percent of female firm owners perceive responsibilities as an obstacle to firm operation and child and family care responsibilities to be an obstacle to firm growth than men. The findings also suggest that providing operation and growth. This number is much lower for male childcare facilities could help female entrepreneurs firm owners (36.1 percent). Similarly, 71.1 percent of female grow their business and improve the performance of firm owners see family obligations or household chores as their business, although more research is needed to an obstacle to firm operation and growth, as opposed to investigate the effect of providing childcare facilities on the only 49.3 percent of men (see Table 3.4). Other firm surveys performance of female-owned businesses45. Table 3.4: Childcare and Household Chores as an Obstacle to Firm Operation and Growth Percent that perceive (…) as an obstacle Women Men Difference (Women-Men) Having to care for small children or family 59.5 36.1 23.4*** Family obligations or household chores 71.1 49.3 21.8*** Note: Statistical significance levels: *** 1 percent, ** 5 percent, * 10 percent. Source: Bolivian World Bank Micro Enterprises Survey, 2007. 45 A study on the effects of providing childcare centers on female labor examines the effects of introducing childcare programs in Rio de force participation is currently in progress for the Mexican Childcare Janeiro. Program Guarderías. There is also another study underway that 39 Graph 3.1: Childcare Responsibilities and Differences in Firm Characteristics % Difference in Employees  Difference in Median Profits No Children in Children in No Children in Children in household household household household 0.0  0  -2.0  -20  -4.0  -40  -6.0  -5.3  -44   -8.0  -60  -10.0  -8.7  -80  -69   Source: Encuesta Nacional de Micronegocios (ENAMIN); 2002, and Encuesta Nacional de Empleo (ENE), 2002-I (Mexico). Table 3.5: Family and Domestic Responsibilities in Guatemala (1) (2) (3) (4) (5) (6) VARIABLES Ln Employees Ln Employees Ln Sales Ln Sales Ln Profits Ln Profits Female entrepreneur -0.0832*** -0.0365 -0.618*** -0.436*** -0.529*** -0.406*** (0.0282) (0.0257) (0.0794) (0.0713) (0.0693) (0.0659) Children < 5 years old -0.00274 -0.00311 -0.0216 -0.0308 -0.0277 -0.0342 (0.0298) (0.0271) (0.0751) (0.0676) (0.0647) (0.0610) Female entrepreneur * -0.00031 0.0120 -0.250** -0.208** -0.155 -0.128 Children < 5 years old (0.0366) (0.0339) (0.107) (0.0982) (0.0953) (0.0910) Percent family employees -0.728*** -2.032*** -1.328*** (0.0484) (0.106) (0.0969) Business at home 0.0678*** -0.176*** -0.140*** (0.0192) (0.0552) (0.0505) Observations 2028 2028 2027 2027 2026 2026 R-squared 0.078 0.226 0.297 0.421 0.290 0.360 Robust standard errors in parentheses. Significance levels: *** 1 percent, ** 5 percent, *10 percent Source: Analysis Guatemala Living Condition Survey (2006) – Special Module. 40 Household survey data from Guatemala supports Table 3.6: the inference that having young children negatively Access to Childcare Scores by Region and LAC Country impacts women entrepreneurs’ sales. Female-owned firms in Guatemala have sales that are 62 percent lower Region Average Score than male-owned firms, in households with no children High-income countries 3.91 under 5 years old. The gap increases to 87 percent if there are young children in the household. In the case of East Asia and Pacific 3.80 number of employees and profits we see a similar pattern, Europe and Central Asia 3.33 with a difference of 8.3 percent in number of employees and 53 percent difference in profits. However, for these Latin America and Caribbean 3.06 two indicators the gap between female- and male-owned Africa 2.78 businesses is not affected by having young children. Middle East and North Africa 2.67 Table 3.5 shows that, even if women business owners are as South Asia 2.50 likely to have children as men entrepreneurs, there seems to be a differential effect of young children on female-owned businesses in terms of sales, number of employees and Country Average Score profits. In the analysis, Bruhn’s exercise is emulated and the number of employees, sales and profits in their natural Chile, El Salvador, Honduras, 4 Nicaragua logarithms are regressed on dummy variables representing Argentina, Brazil, Colombia, Costa female entrepreneurship, having children under the age Rica, Ecuador, Mexico, Panama, 3 of 5, as well as an interaction of the first two. To mitigate Peru, Uruguay, Venezuela bias in the regressions, there are controls for age, years of Bolivia, Dominican Republic, 2 education, marital status, regional dummies and sectoral Paraguay dummies. Note: The score runs from 1 to 5, with 5 indicating the easiest access to childcare. The factors considered in constructing the score are “availability, affordability and quality of childcare services, as well as the Access to childcare in Latin America is more restricted role of the extended family in providing childcare.� than in other regions of the world. The Economic Source: “Women’s Economic Opportunity Index� database by the Economist Intelligence Unit (forthcoming). Intelligence Unit scores the “availability, affordability and quality of childcare services, as well as the role of the extended family in providing childcare,� for a large number of countries around the world. Latin American countries In Latin America, Chile, El Salvador, Honduras, and have an average score of 3 (out of 5) on this indicator. In the Nicaragua score the highest in terms of access to international comparison, this positions the region behind childcare (including public and private centers as well high-income countries, behind East Asia and Pacific, as well as intra-household provision).These four countries have as behind Europe and Central Asia (Table 3.6). This indicates a score of 4 for access to childcare, which is on par with the there is room for improvement in access to childcare average score for high-income countries (Table 3.6). Chile, in Latin America. Such improvements could benefit for example, has recently made significant progress in the female entrepreneurs by helping them balance childcare provision of public childcare, through the expansion of the responsibilities with running successful businesses. Chile Crece Contigo Program. Starting in 2006, this program 41 Table: 3.7: Percentage of Firms Operating Inside the Owner’s Home Female-Owned Firms Male-Owned Firms Difference (Female - Male) Bolivia 23.2 10.1 13.1*** Mexico 30.3 11.1 18.8*** Note: Statistical significance levels: *** 1 percent, ** 5 percent, * 10 percent. Source: Bolivian World Bank Micro Enterprises Survey, 2007; Encuesta Nacional de Micronegocios (ENAMIN), 2002 (Mexico). has focused on providing childcare to households in the household, 20 percent more than the percentage of male lowest four income deciles of the population. Between 2006 businesses. This gap is 5 percent for firms with more than and 2010, the government built 3,500 new public childcare 5 employees. If the decision about the location of the firm centers that are free-of-charge for these households, and is based on considerations beyond business reasons, it can that have the capacity to care for 70,000 children between 0 have adverse consequences on the performance of the firm. 46 and 2 years of age. Analysis using the Guatemala data suggests that having the business in the dwelling is associated with a reduction in Household chores, other than caring for children, could sales of more than 17 percent, 7 percent less employees and have an impact on the location and performance of a profit level that is 14 percent lower 47 (Table 3.5). female-owned businesses. More than twice as many female-owned firms as male-owned firms operate inside b) Unaccounted Costs the owner’s house. Only about 10 percent of male-owned Employing family members could represent a significant businesses operate inside the owner’s home. For female- subsidy to the business, if those family members do owned firms, this number is twice as high in Bolivia and not receive payment for their work. Female business three times as high in Mexico (Table 3.7). The difference in owners in Guatemala with more than 2 employees have the Mexican data remains unchanged even after controlling more family members helping in the business than male for whether children are present in the household. business owners 48 (Table 3.8). Indeed, a significantly higher percentage of women entrepreneurs’ total employees are Locating a business in the household can lead to lower family members, compared with male-owned businesses. returns, particularly for women, especially if they While the share is 67 percent in the case of men business are also expected to be taking care of the children owners, the percentage is 86 percent in the case of women or doing domestic chores. An important difference entrepreneurs. This factor is very significant statistically and between women and men entrepreneurs is that women are more likely to locate their business in the household. 47 To test the effect of this characteristic, we include a dummy variable This allows women to carry out their work in the business that measures if the business is in the household in columns (2), (4) and attend their family and domestic responsibilities. The and (6) from Table 3.5. These characteristics are more prevalent among female business owners. The inclusion of these variables in the data from the Guatemala survey show that 57 percent of model makes the coefficient for female entrepreneurs fall in all three dependent variables, but they still have significant and sizeable effects female businesses with 2 to 4 employees are located in the on all measures of performance. Although the results presented are correlations and do not necessarily imply causality, these strong relationships warrant further research. 48 46 Junta Nacional de Jardines Infantiles (JUNJI) website: http://www.junji. Although the survey does not distinguish paid and unpaid family cl/junjijoomla/index.php?option=com_content&task=section&id=7& members, we assume that family members are less likely to receive Itemid=178 payment than non-family members. 42 Table 3.8: Differences in unaccounted costs Entrepreneurs by number of employees Self-employed 2 to 4 >=5 Self- 2 to 4 >=5 Employed Male Female Male Female Gender Male Female Gender Gender Difference Difference Difference Number of family members 1.9 2.2 -0.3*** 3.1 3.7 -0.6* with or without a salary Household consumed 20.1 44.5 -24.4*** 38.7 69.2 -30.5*** 33.4 62.4 -29.0*** goods from the firm Value of consumed goods 284.7 224.8 59.8*** 506.8 403.7 103.1 1031.2 711.0 320.3 from the firm Significance level: *** p<0.01, ** p<0.05, * p<0.1 Source: Analysis Guatemala Living Conditions Survey – Special Module in magnitude, and is associated with lower levels of sales, c) Sector Concentration employees and profits (Table 3.5). The reason could be The fact that women entrepreneurs are concentrated that family employees are not as productive as non-family in fewer sectors than men could help explain the employees, or that they dedicate less number of hours to differences in size, as well as some other characteristics the business. Unfortunately, the data does not allow for of the business, such as lower sales and use of credit. In testing of these hypotheses. the analysis of the relative performance of female-owned businesses, we control for the sector of activity to take The Guatemala survey also measures if the household into account the significant sector segregation by gender consumed goods from the business. As seen in Table among entrepreneurs. 3.8, members of the household are twice as likely to Why are women concentrated in commerce in Guatemala? consume products from female owned businesses Some possible explanations are that activities in this sector than from male firms. The difference is statistically demand less specific training and do not require higher significant across all firm sizes. Interestingly, the value levels of education, that they allow more flexibility in terms of such private consumption is higher in the case of male of location and operating hours, and that social conventions owned firms, in particular among the self-employed. consider trade an acceptable area of activity for women. This may be the result of the segregated nature of the An additional factor that might come into play is that the sectors of activity of women and men entrepreneurs, commerce sector may require lower levels of investment to where women tend to work in sectors related to start a business. We do not have information to test these consumer goods, such as food and clothing.49 In sum, hypotheses. However, evidence from enterprise surveys we can conclude that these unaccounted costs make the coincides in terms of the high concentration of women in measurement of profitability of small businesses very commerce (48 percent of business owners in commerce complicated and that there is a gender dimension of are women). Female micro-entrepreneurs in Mexico are these costs that comes into play. concentrated in services and retail, which have one of the smallest earnings gaps among sectors. 50 That is, as women 49 Allen et al. (2007) note that Latin America and the Caribbean countries 50 show the highest level of women in consumer industries. Sánchez and Pagán (2001). 43 turn to micro-entrepreneurship, they select sectors with the and targeting an underserved community or market least earnings bias against them. Therefore, encouraging can be viewed as high-risk. The social exclusion of Afro- female entrepreneurs in Mexico to move into other sectors descendant and indigenous women can also cut them would not in itself address, and might in fact increase, the off from the contacts and potential business linkages earnings gap between female- and male-owned businesses. needed to be competitive in a market. In countries with high Afro-descendant or indigenous populations, such as 3.5 Other Social Factors Brazil and Bolivia, women´s economic empowerment is Latin America’s racial and ethnic diversity is linked to linked to strategies to reduce social barriers and promote a history of social, political and economic imbalances. racial equality. Approximately 30 percent of Latin America’s population is Afro-descendant, ranging from a low of around 1 percent As the region becomes more aware and more proactive in Argentina to a high of over 47 percent in Brazil and 61 with regards to racial and ethnic equality, public policies percent in Cuba. Approximately 10 percent of Latin America’s have been formulated to nurture educational opportunities population is indigenous, ranging from less than 1 percent and protect productive resources for marginalized groups. in Brazil to over 60 percent in Bolivia. Afro-descendant and Non-governmental organizations have assumed a central indigenous populations are generally the most economically role in empowering economic opportunities for Afro- vulnerable and socially marginalized ethnic groups in the descendant and indigenous women. Criola (Brazil) and region and Afro-descendant and indigenous women face the Mujeres en Acción (Guatemala) work with Afro-descendant compounded barriers of racial and gender discrimination. and indigenous women, respectively, in designing and marketing artisan products. Because of their higher poverty rates and compromised access to labor markets, Afro-descendant and Social class can play a similarly powerful role in indigenous women have strong incentives for complicating women’s access to networks or financing. entrepreneurship, but they are also more likely to In Chile, a participant from a Focus Group that included encounter barriers. In some cases, their unique cultural both members and non-members of ComunidadMujer background and location in underserved areas help them was explicit about the role of social networks: “Here in tap into or even monopolize new markets. On the other Chile we know each other based on our last names and hand, they are more likely to experience rejection or the school we went to.� In LAC, addressing poverty and resistance from lenders or the broader business community. inequality remains an important task for supporting high Social bias shapes lenders’ assessment of loan applicants, productivity female entrepreneurship. 44 Chapter 4 External Financing, Access to Credit and Asset Accumulation “…In Nicaragua, access to credit is determined by the availability and use of collateral….traditionally, men have inherited land [and real estate] …putting women at a disadvantage.� Ximena Ramírez (EuroAmericana) – Nicaragua Case Study Summary Enterprise Survey data analysis for several countries concludes that there are no significant differences in access to credit between male and female entrepreneurs, controlling for firm size and sector of operation. However, male and female entrepreneurs use credit very differently; women tend to use credit less often, have smaller loans, and rely more frequently on informal sources of credit. Women seem to exhibit higher risk aversion or fear to apply for credit, as well as less familiarity with larger-size credit instruments. Asset ownership is also a limiting factor in accessing credit, as women’s assets are consistently of lower value and smaller in size. Furthermore, men and women tend to invest in different assets and accumulate assets in ways that are affected by their gender roles within the household and the socially determined gender roles in commerce and service provision. To better understand these differences in credit use, this chapter looks at female entrepreneurs’ demand for credit and asset ownership and accumulation. 4.1 Access to Credit in Enterprise Survey Data the access to credit faced by all female entrepreneurs There are no significant differences in access to credit in the region may be much lower. between men and women. Enterprise survey data reveals that there is little difference in the use of external finance by Data also suggests that female business owners are female- and male-owned firms.51 The percentage of working equally (or less) likely to perceive access to finance capital financed by banks is almost the same for female- and as an obstacle to firm operation and growth than male-owned firms (Graph 4.1). Similarly, in the Mexican and male business owners. Table 4.1 shows that there is no Peruvian data sets, there is no significant difference in the significant difference in the percentage of female- and share of firms that have a loan from a financial institution male-owned firms that perceive access to finance as an (Graph 4.2). In fact, female-owned firms are somewhat more obstacle to firm operation and growth in the Peruvian likely to have a loan than male-owned firms. Based on the data and in the Enterprise Surveys. In Bolivia, women are Bolivian and Peruvian data, there is no difference in loan less likely to report access to finance as an obstacle. This size across female- and male-owned firms after controlling finding was echoed in the Peru Case Study, where Flora for region, size, and industry of the firm. It must be noted, Reátegui stated, “The Banks are coming to us. Today the however, that these results only cover formal firms; and, as banks have so many different options for entrepreneurs.� women are more likely to be in the informal sector in LAC, Overall, the surveys do not provide strong evidence that female-owned firms have less access to external finance 51 This finding is consistent with the literature for LAC and recent work commissioned by the IDB (Galiani, 2009). than male-owned firms. 45 Graph 4.1: Percentage of Working Capital Financed by Banks 30.0  24.0  23.3  25.0  20.0  %  15.0  10.0  6.9  7.8  2.2  3.2  5.0  0.0  Bolivia Peru Enterprise Surveys  (micro)  (micro) Male-Owned  Female-Owned Source: Bolivian World Bank Micro Enterprises Survey, 2007; Peruvian World Bank Micro Enterprises Survey, 2008; World Bank Enterprise Surveys for Brazil, Ecuador, El Salvador, Guatemala, Honduras, and Nicaragua, 2003. Bolivia and Peru data refer to microenterprises. Graph 4.2: Percentage of Firms that Have a Loan from a Financial Institution 60.0  52.4  49.5  50.0  46.7  41.5  40.0  36.8  %  30.0  24.0  20.0  9.0  8.1  10.0  0.0  Mexico Bolivia Peru Enterprise (micro) (micro) (micro) Surveys Male-Owned Female-Owned Note: In the Mexican data, this measure refers to ever having had a loan since starting the business, rather than currently having a loan. The percentage of firms that have a loan in Mexico is low compared to the other countries, but the data is from 2002, pre-dating the opening of Banco Azteca, a bank targeted toward low-income households and microenterprises. The same survey was not conducted in later years. Source: Encuesta Nacional de Micronegocios (ENAMIN), 2002; Bolivian World Bank Micro Enterprises Survey, 2007; Peruvian World Bank Micro Enterprises Survey, 2008; World Bank Enterprise Surveys for Brazil, Ecuador, El Salvador, Guatemala, Honduras, and Nicaragua, 2003. Mexico, Bolivia and Peru data refer to microenterprises. 46 Table 4.1: Access to Finance as an Obstacle to Firm Operation and Growth Percent that perceive access to finance as an obstacle Women Men Difference (Women-Men) Bolivia (micro) 71.1 81.9 -10.9** Peru (micro) 75.6 78.3 -2.7 Enterprise Surveys 76.2 75.2 1.0 Note: Statistical significance levels: *** 1 percent, ** 5 percent, * 10 percent. Source: Bolivian World Bank Micro Enterprises Survey, 2007; Peruvian World Bank Micro Enterprises Survey, 2008; World Bank Enterprise Surveys for Brazil, Ecuador, El Salvador, Guatemala, Honduras, and Nicaragua, 2003. 4.2 Use of Credit microentrepreneurs. As Graph 4.3 illustrates, the While there may not be major gender differences in difference between male and female entrepreneurs’ use access to credit in many countries in LAC, differences of loans for firms with 5 employees or more is less than 2 do appear in how men and women entrepreneurs use percent. This difference increases to over 10 percent for credit. Analysis of household survey data from Guatemala firms with 2-4 employees. This is consistent with Tejerina and the Case Studies suggests that female entrepreneurs and Westley (2007), which finds that men use credit more tend to use credit less often, take out smaller loans, and rely frequently than women, except in the case of accessing on more informal sources of financing. informal credit. There are also significant differences in the size of the loans obtained by business owners according The percentage of female entrepreneurs in Guatemala to their gender. Loans to male business owners are on that use credit is significantly lower than male business average between 2.2 and 2.5 times larger than loans to owners, particularly among the self-employed and female business owners. Graph 4.3: Percentage of Entrepreneurs with a Loan, by Size of Business 20.0 19.0  18.1  18.0 16.5  16.0 13.9  14.0 12.0 9.8  10.0 8.0 7.0  6.0  4.0  2.0  0.0  Male  Female  Male  Female  Male  Female  Self-employed  2 to 4  >=5  Number of employees Source: Analysis Guatemala Living Conditions Survey –Special Module 47 Graph 4.4: Credit Source Distribution 120  100  80  60    % 92.35  40  81.35  73.94  78.4  74.96  63.28  20  0  Male  Female  Male  Female  Male  Female  Self-employed 2 to 4 >=5 Informal  Formal/semiformal Source: Analysis Guatemala Living Conditions Survey – Special Module Female entrepreneurs use different sources of credit comparison with the scarcity of credit of a scale and interest than male business owners. Analysis of household rate appropriate for SMEs. The main issue may be the survey data from Guatemala on the source of credit used availability of appropriate credit products for the micro by those businesses that were granted a loan reveals a to SME business transition rather than gender-specific significant gender gap (Graph 4.4). Male-owned businesses concerns. have greater access to formal/semi-formal sources of credit, in particular to private banks, while a higher share of 4.3 Demand for Credit female-owned firms use informal sources of credit, such as There are several factors that may explain gender family and friends. Among firms with 5 or more employees, differences in use of credit. When we analyze the funding the main source of credit for 25 percent of female source used to start the business it becomes clear that entrepreneurs is relatives and friends, while this is only the personal savings are the main source of financing for more case for 7 percent of male business owners of the same size. than 73 percent of business owners, regardless of the size Similarly, in Bolivia, Enterprise Survey data found that of the business and the gender of the owner. However, the female-owned firms are about 12 percent less likely to have importance of savings is even larger for self-employed a loan from a financial institution than male-owned firms. and small female-led firms. This could be explained by However, they are 16 percent more likely to participate lower access to finance or higher levels of risk aversion. in a Rotating Savings and Credit Association (an informal There are gender differences in the way men and financing scheme). women initially finance their businesses, with women more likely to use their own resources. The 1992 National In the Case Studies, female entrepreneurs emphasize Survey of Microenterprises revealed that the majority of the relative abundance of microcredit for women, in Mexican male and female urban entrepreneurs rely on their 48 Graph 4.5: Perception of Discrimination in Access to Credit as the Main Reason for Not Applying for a Loan 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Male Female Male Female Male Female Self-employed 2 to 4 >=5 Number of employees Source: Analysis Guatemala Living Conditions Survey –Special Module own resources (principally, personal savings) to in the last 12 months was 2.1 times the share of female start a business. The reliance on own resources and entrepreneurs. The gender gap tends to close as the size the differences by gender were greater among rural of the business increases, but a gap remains, even among 52 entrepreneurs compared with those in urban areas . the largest firms. Nevertheless, women lack financial resources and may have limited start-up capital due to their lower level To help understand the reasons for the lower demand of wage earnings and ability to save, the patterns of for credit among self-employed and very small female discontinuity in the labor force, and because household/ entrepreneurs, we examined a question in the survey about family property tends to be registered in the names of the main reason for not applying for a loan. The most their husbands.53 The latter might limit both women’s ability frequent answer given by both men and women business to access household wealth, and their ability to use it, for owners is the preference to work with their own resources, example, as collateral for loans. which is consistent with the use of personal savings reported above. However, a particularly relevant gender difference There are also significant gender gaps in the demand is their perception of discrimination in access to finance. for credit among business owners. Given that Over 27 percent of self-employed women report that gender gaps in financing are not necessarily caused by “people like them do not receive credit� as the main reason discrimination from the supply side, differences in demand for not requesting a loan, 10 points above the percentage for financing between men and women entrepreneurs reported by self-employed men (see Graph 4.5). Although have been explored. The Mexican data reveals that the the percentage of respondents that perceive discrimination percentage of male business owners that applied for a loan by lending institutions also diminishes with the size of the business, there is a significant gender gap across all business 52 sizes. Over 11 percent of female entrepreneurs with 5 Sánchez and Pagán (2001). 53 Thurik and Verheul (2001). or more employees perceive discrimination by lending 49 institutions, versus only 2.9 percent of male entrepreneurs.54 The ability to draw upon personal assets such as Studies show very high levels of loan approvals among one’s own home, consumer durables or a vehicle is a individuals requesting credit, which could indicate that key factor in enabling women to establish a business.57 55 individuals are self-discriminating. Further research is In her review of the informal economy in Latin America, needed to understand if there are actual regulations Valenzuela (2004) observes that women’s access to assets and/or practices among financial institutions that restrict is generally lower than men’s, and that this influences the access to finance of female entrepreneurs and what both the rate of business formation and the size of the interventions could be put in place to correct this businesses with which women initiate independent perceived bias. economy activity.58 Many entrepreneurs use consumer credit products to Women tend to draw on signed documents59 and speed things up. They report that requirements for a movable property as their main sources of collateral. business line of credit are still more difficult for women in In Guatemala, household survey data show that male micro and SMEs and include, in many cases, co-signature entrepreneurs use hard (immovable) assets twice as by husbands or other relatives. Ximena Ramírez, the focus frequently as female entrepreneurs. Collateral most of our Nicaragua Case Study, for example, reported: “In our frequently used by women, such as signed documents and country’s patriarchal system, like many other Latin American movable property, is more limiting for obtaining financing countries’, the man inherits the business, the title, and, through banks and other formal sources of credit (see Box consequently, the property, so they asked my husband 4.1). Similarly, the Nicaragua Living Standard Measurement to come sign with me.� Survey (LSMS) reveals that women rely more often on machinery and equipment for collateral than men. This 4.4 Asset Ownership by Gender category of capital accounts for more than 35 and 41 percent Asset ownership affects access to credit and a firm’s of collateral used by medium and large female-owned firms’, level of earnings and permanence in the market. respectively. In contrast, male-owned firms’ use of this type Access to assets and asset accumulation patterns may of collateral is ten percentage points less for medium-size help explain female entrepreneurs’ relatively small firms and twenty percentage points less for large firms. firm size. Antonopoulus and Floro (2006) explore the relationship between the ownership of assets and the Despite significant progress in establishing women’s economic empowerment of women. The type of assets formal land rights, significant gender gaps persist. In individuals choose or are able to acquire and to save may LAC, women make up less than one-third of land owners.60 be influenced by intra-household gender dynamics and Legal barriers to women’s ownership of land persist, will have impacts beyond the household when engaging in market activities56. 57 Grasmuck and Espinal (2000), Valenzuela (2004). 58 Of the six country case studies of the micro and small enterprise sector presented in Valenzuela (2004), only one study reported data 54 A similar situation of self-discrimination has been documented in the on household wealth or business assets by gender, and this was by labor market, where to some extent gender gaps in wages can be household head, not business owners. In Peru in 2000, the business explained by expectations of lower wages by women compared to assets in male-headed households were over twice the value of men in similar jobs (Moreno et al., 2004). those of female-headed households, among those households with 55 Tejerina and Westley (2007) and Galiani (2009). microenterprises. The value of the home was 27 percent higher and 56 The authors give the example of Bangladeshi women, who refrain the value of consumer durables was twice as great in male-headed as from having assets in the form of large sums of cash, since this is compared to female-headed households with businesses (Trivelli and likely to attract the attention of male household members who then Cotler, 2004). 59 take control of those assets. In Ghana, access to an informal savings Signed documents include promissory notes, IOUs, private contracts program enables women to save money without other household and predated checks. 60 members knowing the amount. Deere, Alvarado, and Twyman (2009). 50 including marital or inheritance laws, as well as cultural persistent, as seen in Graph 4.6. Home-ownership is near norms. Box 4.2 describes some of these barriers in the case gender parity in Panama and Nicaragua and joint ownership of Nicaragua. Gaps in home ownership, however, are less is around the 40 percent level in Argentina and Ecuador. Box 4.1: Evidence from the Guatemala Household Survey As in most developing countries, collateral in Guatemala is generally needed to secure bank financing. In fact, 86 percent of business owners in the survey declared using some type of guarantee for their credit. Under these circumstances, a gender gap in asset ownership may limit the ability of female business owners to access credit. While the lack of collateral was not offered as an option in the question about the reasons for not requesting a loan, information was gathered on the type of collateral used to obtain a loan. Female business owners, particularly those with less than 4 employees, report less use of collateral, which is consistent with women’s higher participation in microcredit schemes with solidarity groups that do not require a guarantee. Another interesting result is that women business owners tend to use signed documents and movable property as the main form of guarantee, which are more limiting in terms of financing through banks and other formal sources of credit. We used the Guatemala Household Survey to construct an index of household wealth and explore the use of “hard� collateral among nascent male and female business owners.1 We look only at businesses less than two years old, to reduce the problem of endogeneity of access to credit on family wealth. Since we have no information on the value of the collateral, we define as “hard� collateral those assets that on average have higher market values, such as real estate properties, including land, houses and buildings. Nascent female business owners have significantly lower wealth indices than male entrepreneurs, particularly among the self-employed and those with 2 to 4 employees. However, women entrepreneurs who employ 5 or more employees exhibit the opposite situation, with higher wealth than their male counterparts. This could be signaling a higher proportion of entrepreneurship due to necessity among women with very small businesses compared to men, and a higher share of female entrepreneurs due to opportunity among larger businesses. To control for the differences in wealth, we compare the use of hard collateral by female and male business owners in the same wealth bracket. Although we have no specific information on individual levels of asset ownership from this survey, the results are consistent with traditional gender norms, where most immovable asset titles are registered or controlled by the husband or male in the household. The disparity is striking, with 38 percent of male business owners in the lower third of wealth using real estate as collateral for their loans, while only 7 percent of female business owners in the same wealth bracket do. The gender gap tends to close as wealth increases. Nevertheless, even among the wealthier, male entrepreneurs’ use of hard collateral is twice the level of female entrepreneurs. This simple exercise suggests that the lack of hard collateral is a potential barrier women have in accessing credit. 1 Unfortunately, data on individual property is limited. The household wealth index is computed as the sum of the values of the household assets. This index is an imperfect measure of individual wealth in terms of decision-making over the assets. However, the use of hard assets as collateral implies that the asset is registered under the name of the business owner. 51 Graph 4.6: Ownership of household dwelling by sex in selected countries in Latin America 80  70  60  50  Men % 40  Women 30  Couples 20  10  0  Honduras 2004* Chile 2003 Ecuador 2005* Guatemala 2000* México 2004 Nicaragua 2001 Paraguay 2000* Panamá 2003* Argentina 2001* Source: Deere, Carmen Diana (2009) based on LSMS surveys Note: * Includes only those with titles Box 4.2: Legal Barriers to Asset Ownership for Women in Nicaragua Nicaragua ratified the UN Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) in 1981. Over two decades later, parts of CEDAW, particularly those related to the economic rights of women, have been recognized by the Nicaraguan Constitution. However, they have not yet been incorporated into the Civil Code. In some areas, the outdated Civil Code does not reflect current laws; in others, it has become an amalgam of rules that are incoherent or confusing. In Nicaragua, social and cultural norms dictate that real estate be registered under a man’s name. In the event of divorce or separation, a woman must show proof of the marriage or union in order to assert her stake on the asset. Legal efforts to protect women have failed to fully address these practices. Law 38, for example, seeks to protect women in the event of divorce, but excludes homes bought under the man’s name from the settlement. Public land titling programs further reinforce these practices. These programs tend to apply to the household head, assuming the land will be under his/her name and he/she will be responsible for decisions regarding that land. However, the Civil Code designates the husband as the “family representative.� Furthermore, the Civil Code does not define joint ownership. As a result, despite a law establishing joint ownership (Law 209) for land titles introduced in the mid-1990’s, only 13 percent of land is registered under a woman’s name, either individually or jointly. Source: Tijerino, Nordlund, and de Atrip (2008), La Función del Marco Jurídico en la Promoción de la Equidad de Género. Serie Cuadernos de Género para Nicaragua. World Bank and Inter-American Development Bank. 52 4.5 Asset Portfolios and the Value of Business Assets Male business owners on average invest more in The value of women’s assets is lower than men’s. Few business assets than female business owners. Graph 4.7 surveys collect data on asset ownership at the individual draws on Enterprise Survey data to show that, regardless of level and disaggregated by gender. Nicaragua’s LSMS the year and size of the business, overall male entrepreneurs surveys were one of the few in Latin America gathering invest more in assets than female business owners. Small data on assets. The 1998, 2001 and 2005 versions of these female-owned firms invested more in machinery in 2001 surveys have data on individual ownership of assets, and 2002, almost double the investment in male-owned including modules on business ownership. When looking firms. Only in 2002 did female-owned firms invest more at business assets according to the sector of business in land. The difference suggests some government policy activity in Nicaragua for both 1998 and 2001, the value in favor of land registration and/or titling. Women business of men’s business assets exceeds that of women’s. There owners did not invest in vehicles at all in 2001 or 2002. is also evidence that females in Nicaragua are more At the medium size level, nevertheless, female owners 61 entrepreneurial than men , but women in 2001 owned invested more in machinery in 2000 and 2001, but the only 36 percent to 41 percent of the value of household situation reversed in 2002. Women-owned medium sized physical wealth, as estimated by Deere, Alvarado and firms show no investment in land, and almost none in Twyman (2009). Please see Annex C for a more detailed vehicles (with men investing 10 times more than women analysis of asset accumulation in Nicaragua. in this last item). Graph 4.7: Investment in Machinery, Land and Vehicles (US$) by Firm Size and Sex of the Owner 2000 2001 30,000 30,000 25,000 25,000 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 0 male male small female male female small female male small medium male small medium female male medium female medium female large male large male large female large female total total total total Machinery Machinery Land Land Vehicles Vehicles 2002 30,000 25,000 20,000 15,000 Machinery 10,000 Land 5,000 Vehicles 0 male small female male female small medium male medium female large male large female total total 61 Tejerina (2006). 53 There may be a correlation between asset values, rely on for collateral, it is possible to identify some gender investment and credit that operates differently for differences in their portfolio (and value) of assets. Female women and men. According to the same survey (Nicaragua small business owners rely mostly on land and buildings as LSMS), men experience less barriers and requirements when collateral (41.4 percent, compared with 29.5 percent of male deciding to borrow to invest. 56.5 percent of medium size owners), in line with their larger investment in this asset. firms owned by women report that they required collateral The situation is reversed for medium size firms, where 50 or a deposit in order to obtain financing, while only 39.5 percent of the collateral of male-owned firms is land and percent of male-owned firms of the same size faced that buildings. For small firms, male owners rely much more on requirement. For large firms, the demand for women’s personal assets than female owners (26.3 percent versus 3.6 collateral raises to 80 percent, while it stays at 42 percent percent) which may point to gender inequalities in asset for male-owned firms. Judging by the kind of assets women ownership. 54 Chapter 5 Promising Approaches “…While Ximena has prospered, her impression remained the same: If opening a business was difficult for her, it must be extremely difficult for other women in Nicaragua who have less education and resources….Ximena was determined to do something and in 2000 she started dedicating over half of her time to advocating for business opportunities for women in Nicaragua� Case Study Nicaragua Summary For those female entrepreneurs who were able to grow their businesses, overcoming gender barriers was an important personal triumph. Although more research and rigorous impact evaluations are needed to generate sound empirical evidence on the effectiveness and impact (or lack thereof ) of gender-focused policies and programs, there are some promising approaches in the region. Investing in childcare (either publicly provided or by subsidizing privately provided care) and promoting good gender practices in the public and private sectors have the potential of reducing some critical push-out factors which prevent women from seeking employment in the formal labor market. Promoting high quality business and professional training, taking into account women’s needs in SME business development services, and promoting access to networks and new markets for female entrepreneurs can open new paths for firms’ productivity growth and scaling-up. This chapter highlights some of these promising approaches. 5.1 National Gender Equality Policies and Plans 5.2 Targeted Interventions Several countries in the region have been successful a) Firm Certification on Good Gender Practices: at establishing a gender equality policy platform as a The Power of Positive Incentives and Disseminating result of the 1995 Beijing Platform of Action following Good Practice. 63 The traditional way of improving labor the Fourth World Conference of Women. Policies standards for women has been through regulation. include strategies and plans with specific goals and However, enforcement of regulations that were supposed indicators, as well as commitments for different line to help women, such as precluding women from night ministries. Brazil’s Secretariat for Policies for Women, shifts, forcing firms to provide childcare centers, extending for example, has devised a plan and coordination maternity leave benefits and anti-discrimination laws, mechanisms with line ministries and state and local have often had unintended negative impacts on women’s level governments (Box 5.1). In Chile, the National employment and professional advancement 64 (see also Service for Women works with other agencies on Bolivia and Chile Case Studies). specific projects to support female labor force participation and has promoted “equal pay for equal work� legislation.62 63 This section is based on Castro (2007) and on a recently commissioned ex-post evaluation of the Gender Equity Model (GEM). 64 World Bank (2006) and World Bank, Inter-American Development 62 World Bank, Inter-American Development Bank, and SERNAM (2007). Bank, and SERNAM (2007). 55 Box 5.1: A National Plan for Women in Brazil While many governments voice a commitment to gender equality, Brazil has made significant progress in integrating gender equality into the broader policymaking agenda. In 2003, the Secretariat for Polices for Women was created, under the Presidency of the Republic. It functions like a Ministry, advising the Presidency and coordinating with governmental bodies at the federal, state and municipal levels on issues of gender equality. The Secretariat for Policies for Women is charged with mainstreaming gender and, along with several partners, outlining the nation’s course for improving gender equality within National Plans for Policies for Women. Since the establishment of the Secretariat, two National Plans for Policies for Women have been implemented. Under the First National Plan, covering 2004-2007, eleven different campaigns were carried out with implementing partners, including the Ministry of Labor, the Secretariat for Policies for Racial Equality, the Ministry for Agrarian Development, the Secretariat for Human Rights and the Ministry for Social Development. Through mass media and local events, these campaigns touched on issues ranging from sexual assault to International Labor Office (ILO) Conventions and from civil documentation to land deeds to racial discrimination. The focus of these initiatives was to raise public awareness, stimulate discussion, and, over time, contribute to changes in social mores. The establishment of the Second National Plan for Policies for Women coincided with the enactment of the Multi-Year Plan for the Country (2008-2011), which, for the first time, incorporated racial and gender equality into the federal government’s official strategic objectives. The Second National Plan for Women outlines nearly 400 policies over eleven programmatic axes to be executed during 2008-2011 with the support of twenty-two federal agencies. Goals for the current Plan include: • Increase the number of children aged 0-6 in publicly-funded or -supported day-care or pre-school institutions by 12 percent • Build 1,714 day-care and pre-school facilities • Maintain the national average for women’s participation in training and workforce development programs developed by the Ministry of Labor and Economy at a minimum of 50 percent • Increase the social security coverage of domestic workers by 30 percent • Provide credit to 58,000 women rural workers through the National Program for Strengthening Family-Based Agriculture (PRONAF) between 2008-2011 • Increase women’s participation in PRONAF to 35 percent • Reach 29,000 women with gender-specific technical assistance between 2008-2011 Aside from furthering programs supported by the previous plan, the Second National Plan introduces some innovative approaches to improve women’s productivity. Through the Women Constructing Autonomy Program, the Ministry of Mines and Energy expects to introduce more women into construction, generating employment for women in a non-traditional field and contributing to infrastructure and local development. The program will target lower-income, Afro-descendant and less educated women. The Women’s Labor and Entrepreneurship Project, also introduced through the Second National Plan for Women, supports female entrepreneurship through public policy, capacity building and strengthening of business and social networks. The program was launched as a pilot in 2007, as a cooperation between the Secretariat for Women, the Brazilian Institute of Municipal Training, the Brazilian Agency for Micro and Small Business Support, and the Federation of Business and Professional Women. Potential beneficiaries are nominated by partner institutions and undergo training in business management, as well as in broader themes of leadership and gender empowerment. Sources: Secretariat for Policies for Women: First National Plan for Policies for Women, 2004-2007, and Second National Plan for Policies for Women, 2008-2011. Interview with Eunice Moraes, Secretary for Women, June 22, 2009. 56 Gender firm certification, such as the Gender Equity Model have been certified, the firms can receive a certification seal (GEM) that was developed and tested in Mexico with that can be used in their products and marketing campaigns. World Bank support, has proved to be a successful tool for promoting gender equity in the private sector and has Preliminary results from an evaluation of the Mexico gained support from workers and management alike. Firm GEM program point towards an important reduction of certification is a process to validate and recognize gender gender gaps in employment, access to training, promotions, equity actions in private firms, civil society organizations, and wages. Results are also promising in terms of improved and, in some countries, public institutions. Participation is self-awareness of workers and management, improved voluntary and a firm’s commitments are based on a self- working conditions and work environment. Several firms assessment and diagnosis conducted with the technical mentioned increased productivity and competitiveness, assistance of the implementing agency. An impartial, although sound quantitative data on these dimensions is not independent agency, selected through a process set up by the available (see Box 5.2). Firm certification is being replicated implementing agency, assesses compliance with the steps set using different modalities in Brazil, Uruguay, Argentina, Chile, out in the firm’s own action plan. Once the selected actions Colombia, Egypt, and the Dominican Republic.65 65 Uruguay and Brazil started independently, and without World Bank firm certification. Presentations are available at www.worldbank. Support. UNDP is promoting a similar approach in Central America. org/lacgender. In June 2008, the World Bank organized a regional conference on Box 5.2: Firm Certification: GEM Mexico – Preliminary Results of Evaluation The evaluation of Mexico’s Gender Equity Model (GEM) Firm Certification program is based on firm surveys and interviews with key informants, which were conducted during the 6 years of program implementation. In the absence of a baseline or ex-ante impact evaluation design, the evaluation consists of comparisons between certified firms and firms who participated in the program and dropped out at some point. Non-participant firms would not be a valid comparison group as there is strong self-selection in program participation. The table below describes the 255 firms and organizations that have participated in the program. GEM includes NGOs and public entities as well as private firms. Number of Firms and Organizations Participating in GEM by Sector (2003-2009) 2003 2004 2005 2006 2008 2009 Total Manufacturing 6 3 7 12 8 7 43 Commerce or Services 14 17 12 50 60 59 198 Total 20 20 19 62 68 66 255 Participant firms implemented management systems for continuous improvement, including work environment surveys in medium and large size organizations. These surveys provide organizations the information needed for adjustments in their adopted action plan and a continuous evaluation of progress. Some firms have reported improvements in overall management systems beyond specific gender equality aspects just by implementing the periodic surveys. During the implementation of the GEM, a 350-400 employee firm invested an average of 450,000 Mexican Pesos, including events, training, and performance awards. Firms invest on the following: Training Support services Flexible schedule schemes Communications Paid maternity, paternity or marriage leave Wage scale adjustments Adapting or building facilities apt for female employees such as restrooms, Promotion changing rooms, and lactation rooms Talent promotion Events Work-life balance actions 57 All workers in certified firms exhibit greater knowledge of organizational procedures regarding wages and promotion opportunities, as seen in the Table below. However, the percentage of women who report they do not have knowledge of this information is higher than for men in all firms, with the exception of knowing about performance evaluations. Knowledge of Employees about Organizational Procedures by Type of Firm in 2002 Certified Firm Comparison Group Total Promotion Opportunities Women 42.5 % 47.1 % 44.6 % Men 58.3 % 51.6 % 53.5 % Criteria to Obtain a Promotion Women 48.8 % 51.4 % 50.0 % Men 69.2 % 46.9 % 53.3 %t Existence of Performance Evaluations Women 66.7 % 64.7 % 65.8 % Men 66.7 % 56.7 % 59.5 % The firm has transparent mechanisms for promoting employees Women 47.1 % 41.2 % 44.1 % Men 64.3 % 44.4 % 53.1% Workers in certified firms are more likely to have been victims of some form of harassment, or are more aware that some behaviors are forms of harassment that are inappropriate in the workplace. Certified firms are much more likely to have processes in place to deal effectively with harassment cases. Harassment and Sexual Harassment in the Workplace Certified Firm Comparison Group Total Received at least one unwelcome invitation or 8.5 % 3.2 % 5.7 % sexual proposal in the workplace Was subject to pressure to take on tasks outside of the terms of reference of your contract or job 4.8 % 3.2 % 4.0 % description Knows someone in the company who has been 25.4 % 29.9 % 27.7 % harassed There is a process in the firm to file harassment 59.6% 36.1 % 47.5 % complains Source: Ramírez (2009). First Report Ex-Post Evaluation GEM, commissioned for this report and in collaboration with the Women’s Institute Mexico, based on firm surveys and in-depth interviews with key informants. The final report will be available in mid - 2010. 58 b) Networks - Women’s Business Associations While not as acclaimed or widely promoted as credit, Box 5.3: Networks: Women to Women social networks are one of the most pivotal resources an Some NGOs currently provide opportunities for enterprise can leverage for growth. Market information, women entrepreneurs to expand their social and linkages to suppliers and investors, and even access to business networks. These programs aim to provide financing are all impacted by an entrepreneur’s social opportunities for women to build their capacity, networks. Box 5.3 highlights some efforts to help women expand their networks, learn from successful business create and use networks. Chambers of commerce and women, and share experiences. industry associations have been male-dominated for CPMEN (Congreso Permanente de Mujeres many generations, and in some cases retain vestiges of Empresarias de Nicaragua) is a national movement gender bias and resistance to women´s participation. aimed at supporting Nicaraguan businesswomen in Nevertheless, women are increasingly engaged, and the national economy. It helps women entrepreneurs assuming leadership roles within them. Business find business opportunities and solutions at the local incubators and business development service providers and national level. CPMEN provides capacity building also fill a key role in building capacity, boosting and public policy advocacy. performance and creating linkages. They rarely have Endeavor is a non-profit organization that supports a gender focus, but, in targeting micro and small ‘high-impact’ entrepreneurs. Its programs are not enterprises, they reach a substantial proportion of women specifically geared toward women entrepreneurs, but entrepreneurs. Women´s business associations66 are provide training, operational support and access to another vital ally, facilitating firm-level cooperation and in financial networks to selected scalable entrepreneurs many cases, helping leverage for more responsive public at the base of the pyramid. Endeavor has programs in policies. Chile, Brazil and Argentina. Endeavor Chile is one of the executing agencies of the Chile Emprendedoras Women’s Business Associations are blossoming program supported by the Inter-American everywhere in the region and are an important advocate Development Bank. for needed policy reform and improvements of public Vital Voices is a non-profit organization that invests programs. The Chile and Peru Case Studies highlight in leadership training for women entrepreneurs and the importance of access to both mixed and women’s offers opportunities for networking and mentorship networks, including women’s business associations and for businesswomen. There activities include: organizations such as ComunidadMujer Chile and Mujeres hosting trade fairs, providing opportunities for Empresarias Chile. As discussed in Chapter 3, access to business women to meet and exchange experiences, networks is important to counteract gender barriers and supporting mentorships between women linked to ethnicity and social class. Networks can provide entrepreneurs in the United States and those access to information and contacts that are vital to around the globe. tapping into new distribution channels and supply chains and useful in obtaining credit and access to technology. www.euram.com.ni/Empresarias/index.htm www.chileemprendedoras.cl www.endeavor.org.br www.endeavor.org.ar 66 See Annex D for a non-exhaustive list of women’s business www.vitalvoices.org associations in LAC. 59 Another important contribution of women’s networks is capital for start-ups, as well as business development access to one-on-one mentoring opportunities. The Bolivia services. This government agency pays special attention and Argentina Case Studies feature entrepreneurs who to female entrepreneurs and has adapted its services to had the opportunity of benefiting from mentorship from their needs, especially focusing on their need for accurate seasoned female entrepreneurs in other countries. information regarding how to access credit or markets. The Chile Case Study provides more information on c) Financial Services and Business Development SERCOTEC. for SMEs that Integrate a Gender Perspective There is a need in the region for financial services and Female entrepreneurs often criticize business training business development training that targets micro- services in the region because of their lack of quality and enterprises and SMEs with growth potential to help them relevance. In fact, this critique is common to publicly scale-up and improve productivity. For greater impact, provided job training in general, especially training targeted training services should escape traditional roles and to microenterprises and SMEs. Mexico’s CIMO program provide women with relevant skills for productive, high- provides incentives to SMEs to provide high quality and growth sectors as well. SERCOTEC in Chile offers a range relevant training (Box 5.4) and could be adapted to the of services and benefits, including training and seed needs of female entrepreneurs. Box 5.4 : Incentives for SME training : Mexico’s Program of Comprehensive Quality and Modernization (CIMO) In Mexico, there are over 200 Government programs for SMEs. Although every program includes a mix of goals and interventions, two types of programs deserve special mention. The first is assessment-consulting programs, which subsidize assessments that determine an individual firm’s weaknesses, and then provide consulting, training or technology appropriate to remedy those weaknesses. One example of this type of programs is CIMO (founded in 1987 with the name Program of Comprehensive Quality and Modernization and re-named Training Support Program, PAC, in 2001). The first attempt to analyze and compare the net impact of the largest SME programs was a World Bank study in 2004. Impact evaluation studies found statistically significant impacts of CIMO participation on intermediate outcomes— such as investments in training, capacity utilization, use of quality control systems, workplace organization, changes in production processes, and job retention—that are believed to lead to productivity improvements. There is also evidence that the CIMO program tends to attract firms that are on average less productive than non-participants (the control group) with broadly similar characteristics. The second type is knowledge-sharing programs, which subsidizes shared research programs, organizes industry fairs, encourages industry partnerships, and develops economy-wide standards that do not target any individual firms. An example of this type of programs is CONOCER (Standardization and Certification of Labor Competency Council), which funds committees to establish labor standards and identifies certifying agencies and evaluation centers that are accredited to certify workers that satisfy labor competency technical norms (LCTN). Impact evaluations of CONOCER indicate that LCTN workers received more incentives and benefits and had significantly more promotions than non- LCTN workers. They were also more multi-skilled. Source: World Bank (2004), Tan and Acevedo (2004) working paper, World Bank (2007). 60 d) Expanding Access to Markets for Women: corporations and local producers. It is a partnership Trading across Borders between the private and public sectors aimed at leveraging Increased trade and economic globalization have coincided capital, investments, skills, knowledge and access to with women´s increased levels of education, labor market markets to collaboratively improve social and economic participation, and professional achievements. While conditions. A similar model could be adopted to foster increased trade certainly brings new opportunities, more gender-responsive international trade linkages, resources, and linkages to all entrepreneurs, its impact which could benefit micro and small enterprises.67 upon women entrepreneurs, specifically, is more complex. Many of Latin America’s key exports are derived from e) Childcare male-dominated industries, such as the extractive industry, Latin American countries are stepping up early childhood agriculture and manufacturing. Women´s presence in these education efforts. Some programs provide government industries trends towards smaller-scale firms and lower support and supervision to community and intra-household professional positions. Simultaneously, there is an influx provided childcare (Colombia’s Familias en Acción, and of more competitive products and services. Since women Mexico’s Guarderías program). Other programs, like the are concentrated in micro and small enterprises, their Chile Grows with You (Crece Contigo) program, include firms may be edged out by the lack of economies of scale. direct public provision and subsidies for private childcare In Peru, the national investment and export promoting that adheres to strict quality standards. Uruguay and agency (PROMPERU) is highlighting the contributions of Brazil are also building pre-school facilities and, since businesswomen who are also exporters. the mid-nineties, Uruguay has instituted mandatory attendance for pre-school. While international trade has expanded women´s opportunities in the labor market, greater effort is needed Most of these programs have an explicit early childhood to integrate women entrepreneurs into global supply development goal or even an equality of opportunities chains. Social networks and business development services from early childhood goal. However, they are also likely to have been vital in this process, with growing support contribute to the freeing of women’s time for labor force from governments and international donors. WEConnect participation or entrepreneurship. Results from program International, for example, certifies businesses that are at evaluations will clarify what impact these programs have on least 51% women-owned, managed, and controlled, making women’s labor force participation. The Mexico Guarderías this information available to larger businesses looking to program had the explicit goal of increasing female labor diversify their supply chain (see Jamaica Case Study). force participation and a similar program in Rio de Janeiro is The United States Agency for International Development’s also being evaluated in terms of impact on women’s work. (USAID) Global Development Alliance, on the other hand, is Chile’s program evaluation included measuring the impact on an initiative aligning the bilateral donor with multinational female labor force participation and women’s time allocation. 67 For more information see USAID Global Partnerships at www.usaid.gov/our_work/global_partnerships/gda/ 61 Chapter 6 Conclusions and Recommendations “[policies should focus on] …developing, not promoting, microenterprises led by women. Latin America has been particularly successful at creating self-employment for women through microenterprises… However, only a few have evolved from that micro stage. Policies and programs [targeting women] continue to focus on small units of operations to the point that it may be more convenient to have several mi- croenterprises than a single larger firm, distorting natural economies of scale…� Marcelo Giugale – Sector Director, Poverty Reduction and Economic Management, LAC, World Bank Summary Fifteen years after the Fourth World Conference on Women in Beijing, the issue of women’s economic empowerment and how a favorable policy environment can help advance gender equality remains a challenge. Previous chapters highlighted the choices and constraints that influence women’s decisions to become entrepreneurs in the region. Pull and push forces differ for men and women, and often create additional barriers for female-owned firms’ growth. This final chapter attempts to draw out policy recommendations to help women entrepreneurs reach their potential in the formal private sector in LAC. 6.1 Releasing the Full Potential of Women Policies too often focus on firm creation rather than Entrepreneurs: Remaining Challenges on improving the operation and promoting the growth This report acknowledges the improvements that have been of female-owned firms. This report finds that medium- made in the rights and resources available to women over sized and large female-owned firms are as productive the past two decades. It notes that these improvements as male-owned firms of the same size, but most female- have led to more women participating in the labor force owned firms are concentrated in micro and small firms and more women becoming entrepreneurs. In its analysis, that are less productive than male-owned firms. These the report finds that, despite significant progress, the work findings suggest that an important question for the policy of promoting gender equality in the private formal sector agenda is how to help female-owned firms to either grow is not yet complete. Being a household head, having (from microenterprises to SMEs) or perish, thus freeing children of less than five years of age, having the business resources and the entrepreneur so she can undertake more located in the home, having assets of lower value, or that productive investments. At this stage, this issue is perhaps are less likely to be accepted as collateral, and having lower more important than fostering the creation of female- returns on time invested in the business are all related to a owned firms, since the percentage of female-owned woman’s need to combine household responsibilities with firms is already high among micro-enterprises, reaching business activities. These and other impediments continue up to 50 percent in some countries. to disproportionately affect women entrepreneurs in the formal private sector, and pose challenges to releasing Improving women’s access and performance in formal the full potential of women entrepreneurs. sector employment is important from a labor market 63 efficiency standpoint and from an equity standpoint, More than lack of access to credit per se, women in the but also to reduce push-out factors that may be creating region exhibit higher risk aversion or fear to apply for distorted incentives to seek self-employment as a last credit, as well as less familiarity and satisfaction with resort (necessity entrepreneurship). Reducing the gender larger-size credit instruments. Thus, in Latin America wage gap and removing the glass ceilings that prevent and the Caribbean there is room for developed country women from making progress in the formal sector have style innovations in products and services to tap into the been highlighted as an important step. Some well-intended underserved market of formal large size credit for female policies, such as requiring businesses to provide childcare entrepreneurs. However, more information and research for female employees or barring women from working at are needed in terms of what has prevented credit suppliers night should also be re-evaluated for potential negative for SMEs and large firms from taking on these innovations consequences (see Chile and Bolivia Case Studies). or marketing their products in ways that appeal to female entrepreneurs. Also, women in some countries, namely In addition to reducing employment and wage Nicaragua and Guatemala, still have less asset accumulation discrimination, important challenges remain on the labor or tend to use less collateral than men. The acceptance of supply side. Early childhood development interventions and movable assets could also broaden women’s access to public policies aimed at improving quality and affordability credit (see Bolivia Case Study). of childcare often offer a win-win solution. Countries like Chile, Mexico, Colombia, and Brazil are actively pursuing Asset accumulation has specific gender dimensions this road. Women in LAC have a strong preference for that need to be addressed to reinforce continuity schedule flexibility that formal labor markets are often and improvements in programs that promote gender unable to provide. Modern telecommuting technologies equality in land ownership and real estate ownership. and innovations on part-time work regulation and practice For both men and women, the value of individually owned should help women, as well as men, achieve a better work- consumer durables is important, as important as the value life balance. of the home or the land. Household durable goods are both consumer durables and ‘productive durables’ and can Improving the “Doing Business� climate helps both male provide immediate use value—whether for consumption and female entrepreneurs, but can also even out the or productive/business purposes—to its owners. Men are playing field from a gender perspective. Tried and true able to accumulate more value in land and real estate assets interventions to reduce the costs of starting a business, than women. In terms of consumer durables, women tend enforcing contracts, and complying with labor and tax to accumulate value in appliances and furniture, while men regulations may have the additional benefit of reducing tend to accumulate more value in cars and trucks. barriers that affect women disproportionately. Similarly, improving the quality of Business Development Services Gender social norms affect businesswomen negatively for microenterprises and SMEs helps both men and women; and intra-household allocation issues are present yet, since women are overrepresented in these sectors, throughout all the themes examined in the report. improving the quality and impact of these services implies Addressing these issues directly as a policy priority has taking into account women’s needs. Improving information been the subject of great debate in the region. However, flows and transparency in business registry procedures, at the very least, it is essential to take these issues into paying taxes, and enforcement of other regulations seem account for policy and program design to improve the to benefit women in particular, as they reportedly feel more quality and impact of SME development policy. In addition, vulnerable to corrupt officials and to the lack of information. evidence from women entrepreneurs’ narratives shows 64 that initiatives that showcase the positive role of successful • Provide a combination of services to help female female entrepreneurs (business magazines, special articles entrepreneurs grow their businesses or become more in the media, prizes from public sector agencies) are having productive. Such services might include: facilitating tangible demonstration effects. access to financial services and business development training; promoting high quality business training, 6.2 Releasing the Full Potential of Women taking into account women’s needs in SME business Entrepreneurs: A Program for Action development services; and promoting access to networks As noted above, steps taken to improve the business and new markets for women entrepreneurs. The climate will benefit all entrepreneurs and may have added provision of childcare services is another area of proven returns for women entrepreneurs; but such reforms alone effectiveness where improvements could be made. are not enough to level the playing field. Gender equality needs to be integrated into the overall policy agenda and • Promote good gender practices in the public and targeted interventions are needed to meet the specific private sector. Good gender practices have the needs of women entrepreneurs. The analysis in this report potential of reducing some critical push-out factors from leads to several policy recommendations which could be seeking employment in the formal labor market. Firm combined to develop a comprehensive plan for promoting certification, developed and tested in Mexico with World female entrepreneurship or as part of broader policy actions Bank support (Gender Equity Model -- GEM), has proved to address specific barriers. to be a successful tool for promoting gender equity in the private sector under a participatory approach that has • Target labor market reforms to alleviate barriers to gained support from workers and management alike. women’s participation in formal sector employment. Improving women’s access and performance in formal • Use social marketing to promote gender equality sector employment is important from a labor market in government programs for SME development, efficiency standpoint and from an equity standpoint, land titling, financial services, and other programs. but also to reduce push-out factors that may be creating World Bank-funded initiatives in land titling (such as distorted incentives to seek self-employment as a the program to mainstream gender in operations in last resort. These include introducing policies aimed LAC -- PROGENIAL) show that even the slightest change at reducing the gender wage gap, providing flexible in radio messages or posters to highlight that both men schedules through part-time and flex-time employment, and women can participate in the program, can make and encouraging the targeted hiring of female employees a difference. in decision-making positions. 65 Annex A Terms and Definitions Term Definition Qualification An individual initiating economic Entrepreneur activities in the formal sector under a legal form of business Enterprise Survey data does not include the agricultural sector – it does include A firm that is officially registered and Formal enterprise the following sectors: manufacturing, pays taxes. services, construction and transport, and storage and communications. This definition is used by Household Micro-enterprise* A firm having less than 5 employees surveys used in this study and by Enterprise Survey data Enterprise survey data uses a threshold Small enterprise A firm having 5-10 employees of 5-19 employees and household survey data uses a threshold of 5-10 employees. Enterprise survey data uses a threshold of Medium enterprise A firm having 11 employees or more 20 – 99 employees Working for oneself, as opposed to for Self-employed could include both formal Self-employed another individual or company and informal sector activities Economic activity that is not Informal sector regulated, registered, or taxed. * The Guatemala background paper uses a different definition, identifying as microenterprises those businesses with 2-4 employees. 67 Annex B Focus Group Discussions and Case Studies Focus Group Discussions Case Studies The women contacted for the Focus Groups include The Case Studies were based on interviews of self-made self-employed women and business owners (micro, small, female entrepreneurs, with a focus on understanding the and medium firms). Large firms were not included, as barriers they had faced in establishing their businesses. there is a scarcity of women owners or women in high The main criteria used in selecting the women to be management positions in large firms. All firms are within interviewed included: heterogeneity between micro, the formal sector of the economy. small, medium, and large firms; heterogeneity between sectors and countries; and non-traditional gender roles. Each Focus Group included women with different age, sector, or type of firm characteristics. The samples were The first set of interviews was conducted during an selected from the data bases of SERCOTEC, PRODEMU, entrepreneurship conference in Buenos Aires organized and ComunidadMujer. In addition, some women with by Vital Voices, and other interviews were conducted special entrepreneurship experiences were included. later, with help from the World Bank country offices. There were four Focus Groups: Interviews were conducted with women entrepreneurs • Focus Group 1: Database ComunidadMujer from nine countries: • Focus Group 2: Database ComunidadMujer • • Argentina: Anne Marie Richard (Grupo SyN) Focus Group 3: Database ComunidadMujer • Focus Group 4: Databases SERCOTEC and PRODEMU • Bolivia: María Claudia Méndez (Orígenes Bolivia) • Brazil: Nara Fauth Pereira (Estância Boa Vista da Quinta) The focus group discussions took place between May • Chile: Karina Von Baer (Saprosem, GranoTop, AvenaTop, 18 and June 1, 2009. The main difference between OleoTop, and TreeTop) the participants in the first three groups (from the • Jamaica: Audrey Hinchcliffe (Manpower and Maintenance ComunidadMujer database) and the fourth (from the Services), and Dr. Sandra Palmer-Peart (SSP APTEC) SERCOTEC and PRODEMU databases) is the educational • Mexico: María Elena Mendoza (Jardines del Recuerdo) level of the participants. Women in the first three groups generally had tertiary education, while the women • Nicaragua: Ximena Ramírez (EuroAmericana) in the fourth Focus Group were mostly secondary • Peru: Flora Reátegui (Aranza Joyas) school graduates, and lived in communities of lower • Uruguay: Mónica Avila (Costumbres Uruguayas) socioeconomic status. 68 Annex C Special Analysis of Nicaragua Household Surveys – Asset Accumulation In Nicaragua, there are links between the individual less likely to have a business run within the home. Just over wealth of business owners, combined with certain a quarter of businesses owned by the Peruvian poor are individual, household, and business characteristics, and run from within the home, a share statistically significantly their ability to accumulate business assets. It is expected smaller than the 30.3 percent found among non-poor that being male, older, a household head and married is entrepreneurs.68 Along similar lines, Sánchez and Pagán positively related to the level of gross business assets of the (2001) found that, in Mexico, female micro-entrepreneurs owner. The same can be said for higher levels of educational are concentrated in sectors in which their earnings ratio attainment. The number of workers in the business, the is highest. That is, women are selective in their sector number of months that the business has been in operation, choices, and female-dominated sectors tend to have higher and the number of hours worked weekly by the business female-male earnings ratios (e.g., in urban areas, .58 and owner should also have a positive impact on business asset .54 in services and trade, respectively, compared to .30 in accumulation. To test this hypothesis, a set of regressions manufacturing).69 were performed. Results confirmed these assumptions. In the survey data from Nicaragua, once the value of other The value of consumer durables and the number of assets owned by the entrepreneur (mostly household hours worked per week by the owner were key factors goods) is also controlled for, the education level of the in asset accumulation for all entrepreneurs in 1998. business owner and the weekly hours worked are the When looking at all entrepreneurs (Table C.1), being variables with the strongest positive relationship with female appears to be negatively associated with asset the total value of business assets. accumulation. All other things being equal, the value of women’s business assets are on average 5,154 córdobas The same exercise for female entrepreneurs shows lower than that of male entrepreneurs. However, when that both the value of the woman’s home and of the adding variables related to business characteristics, being consumer durables that she owns are positively and female loses significance, and new variables emerge. An significantly associated with the level of her business additional worker in the business explains an increase of assets. After controlling for individual and business 5,607 córdobas in the value of business assets. The age characteristics, a unit increase in the value of consumer of the business and the number of hours worked by the durables explains an increase of .67 units of the variance business owners also have positive effects on the value of in the value of business assets. Being older, having at least business assets. some high school education, and the number of hours worked are the variables that impacted the value Interestingly, having a business located in the home has a of women’s business assets positively and significantly in negative impact in the value of business assets in Nicaragua; 1998. In 2001, age was a positive factor for men. Being the as is having a business in a predominantly female sector. household head, having the business in the home, and all The former is not supported by findings from Peru, nor is the latter consistent with findings in Mexico. In Peru, poor 68 World Bank (2005a). households own businesses with lower profitability and are 69 Sánchez and Pagán (2001). 69 Table C.1: Total Value of Business Assets Regressed on Individual Characteristics of the Owners, Characteristics of the Businesses and Value of Other Assets Owned by the Business Owner. Nicaragua 1998 Model 1: Individual Model 2: Business Model 3: Value Characteristics Characteristics of other assets Female -5,153.47 *** -2,216.90 -2,495.08 Age 160.91 ** 130.74 * 97.83 Household head -1,746.47 -2,775.13 -3,876.63 * Married 5,698.92 *** 3,476.04 * 3,352.03 Education Technical 17,705.68 *** 17,710.44 *** 14,797.15 *** Education University 32,198.29 *** 28,880.67 *** 23,509.23 *** With children 5 or younger 594.59 418.47 654.62 Workers 5,607.25 *** 5,098.14 *** Months 615.23 *** 535.98 ** Hours 144.85 *** 141.69 *** Location (in the home) -4,513.52 ** -4,564.99 ** Predominantly female sector -6,788.64 *** -6,192.46 *** Value Durables 0.51 *** Number of observations: 1,599 Source: Nicaragua LSMS, 1998 the sector variables are negatively associated to female’s were the ones at a disadvantage in the accumulation of business assets’ value. business assets. - Women benefit from any level of education above primary Education, the hours invested in the business, and the school, whereas men benefit primarily from university- value of the consumer durables in the hands of the level education. owner are important for the asset accumulation of both female and male entrepreneurs. A comparison between - Having children of any age is less of a factor than male and female entrepreneurs for 1998 and 2001 suggests expected for women. The presence of children aged five that there are important gender differences in the process or less had a negative effect on business assets only for of accumulating business assets and that these factors are female business owners in 2001. not constant over time. For two years of analysis, following - For men, adding one worker and having the business model 3,70 Table C.2 shows: working an extra month explains a large share of asset - Of all individual factors, age was a more important factor value. For women, the number of workers is only for female business owners in 1998, but in 2001 it lost significant in 2001. Each additional hour worked by the relevance (although it did become important for men). owner contributes positively to the value of business Being a household head is always negatively correlated to assets, although less for women than for men. the value of assets, but female household heads in 1998 - Sector concentration was a negative factor, but it is significant only in 1998 for women. 70 This model controls the influence in the total value of business assets - The value of consumer durables is positive and significant by individual characteristics of the owners, characteristics of the business, and the value of other assets owned by the business owner. for both men and women for both years. 70 Table C.2: Total Value of Business Assets Regressed on Individual Characteristics of the Owners, Characteristics of the Businesses and Value of Other Assets Owned by the Business Owner by Sex and Year 1998 2001 Female Male Female Male Individual Characteristics Age 128.57 * 60.71 74.05 360.6 *** Household head -6089.95 ** -3819.29 -4,061.66 -7,744.02 Married 431.02 4834.81 854.64 3,982.63 Education Primary 3336.32 -6688.01 3,568.89 8,255.70 Secondary 6488.51 *** -5279.8 6,613.70 * 19,495.90 *** Technical 21684.57 *** 3823.53 11,158.73 12,299.11 University 20868.55 *** 20257.86 *** 27,663.76 *** 29,147.58 *** Household characteristics Urban 2633.98 5690.57 359.48 1,741.99 With children 5 or younger 2972.21 -2110.54 -6,840.73 ** -1,232.86 With children 6 or older 2523.87 2192.98 -1,710.59 3,673.51 Business characteristics Workers 493.96 6727.27 *** 6,073.94 *** 5,565.37 *** Month 119.04 949.45 ** 354.73 950.14 * Hours 179.62 *** 110.88 ** 56.9 276.01 *** Location (in the home) -5214.54 *** -3721.28 -1,620.04 -319.1 Predominantly female sector -9718.05 *** -4591.12 4,907.54 -2,039.96 Mixed sector -8270.18 *** 1501.87 1,265.53 -3,164.00 Other sectors or businesses in -7324.16 ** 452.2 9,799.08 4,480.65 two or more sectors Assets value Value Farm 0.28 0.03 -0.01 0.13 *** Value Home 0.08 ** 0 0.04 -0.06 Value Durables 0.67 *** 0.42 *** 0.44 *** 0.54 *** Credit received -1,854.38 18,398.94 *** Number of observations 834 764 873 778 Source: Nicaragua LSMS 1998, 2001 - Credit has an important positive value for men, but is controls were introduced, is secondary or higher level negative and not significant for women71. of education (Table C.3). For women, having a child five years of age or younger significantly and negatively affects In 2001, the only individual characteristics of female the level of business assets. When including the role of entrepreneurs that contributed positively and credit, the amount of credit has a positive and significant significantly to the value of business assets once other impact on the value of men’s business assets; but not for women, for whom the value of consumer durables has a 71 Credit is only measured in the 2001 survey. larger impact. 71 Table C.3: Total Value of Business Assets Regressed on Individual Characteristics of the Owners, Characteristics of the Businesses and Value of Other Assets Owned by Female Business Owners. Nicaragua 2001 Model 1: Individual Model 2: Business Model 3: Value of characteristics characteristics other assets Household Head -594.55 -2,500.01 -4,061.66 Secondary Education 9,090.94 *** 8,622.35 ** 6,613.70 * Technical Education 14,097.14 ** 12,302.21 * 11,158.73 University Education 41,727.97 *** 36,321.56 *** 27,663.76 *** With children 5 or younger -4,719.44 -7,076.60 * -6,840.73 ** Workers 6,584.96 *** 6,073.94 *** Credit received -1,334.71 -1,854.38 Location (In the home) -990.66 -1,620.04 Value Durables 0.44 *** Number of observations: 873 Source: Nicaragua LSMS, 2001 72 Annex D Women’s Business Associations in Latin America and the Caribbean Name Acronym Country Website Mujeres, Oportunidades y Negocios Argentina http://www.mujerynegocios.com/default1.htm Asociación Argentina de Empresarias ASEM Argentina Asociación de Mujeres en Política y Empresa Argentina Asociación de Mujeres de Negocios y BPW Buenos Argentina http://www.bpwbuenosaires.com.ar/home.htm Profesionales - Buenos Aires Aires Asociación de Mujeres de Negocios y BPW Recoleta Argentina http://bpw-recoleta.blogspot.com/ Profesionales - Recoleta Asociación Femenina de Ejecutivas de AFEET Argentina http://www.afeetargentina.org.ar/home.html Empresas Turísticas Cámara Mujeres en Carrera Argentina Cámara de Mujeres PYMES CMP Argentina http://www.cdeb.com.ar/cmp/servicioseven.htm Fuerza Empresaria FE Argentina http://www.cdeb.com.ar/fe/ Organización Argentina de Mujeres Empresarias OAME Argentina http://www.oame.org.ar/ Red de Mujeres Empresarias del Programa Argentina Bolívar Asociación Mujeres Empresárias y Ejecutivas AMEE Argentina http://www.cdeb.com.ar/amee/ Asociación de Mujeres Empresa de Familia Argentina Foro Empresarial de la Mujer Argentina para el FEMALE Argentina http://www.redfemale.com.ar/ Libre Emprendimiento Asociación de Mujeres y Profesionales del Sur Argentina http://www.amnypdelsur.com.ar/ Federación Argentina de Mujeres de Negocios y FAMNYP Argentina http://www.bpwargentina.com/asociaciones/ Profesionales Asociación Civil de Empresarias y Profesionales ACEP Argentina de San Martín Cámara de Mujeres PYME - Pilar CMP Argentina http://www.cdeb.com.ar/cmp/ Asociación Argentina de Mujeres de Negocios y AAMEP Argentina http://www.aamep.com.ar/ Profesionales Emprendedoras en Red Argentina http://emprendedorasenred.com.ar/quienes.php Business & Professional Women BPW Barbados Barbados BPW Bermuda BPW Bermuda Bermuda Movimiento Femenino Indo-Iberoamericano MOFISP Bolivia Senti-Pensante Federación Boliviana de Mujeres Empresarias y Bolivia Profesionales Conselho Nacional da Mulher Empresária CNME Brazil http://www.cacb.org.br/acao/con_mul_empresaria.htm Organização Brasileira de Mulheres Empresárias OMBE Brazil Conselho da Mulher Empreendedora CME Brazil http://www.acminas.com.br/conselhos_sub.php?s=13 http://asmulheresempreendedoras.blogspot.com/, Associação de Mulheres Empreendedoras AME Brazil http://www.amedf.org.br/ 73 Federação das Associações de Mulheres de Negócios e BPW Brasil Brazil http://www.bpwbrasil.org/principal/50.html Profissionais ComunidadMujer Chile Mujeres Emprendedoras Chile Chile http://mujeresemprendedoras.cl/links Foro de Mujeres Empresarias y Profesionales Costa Rica http://foroempresariascr.blogspot.com/ Federación de Mujeres Empresarias Dominico- FEM Dominican Republic Internacional Inc. Asociación Nacional de Mujeres Ejectivas, Empresarias y ANMEPRO Dominican Republic Profesionales Asociación Dominicana de Mujeres Empresarias ADME Dominican Republic Unión de Mujeres Micro Empresarias Lencas de Intibucá Honduras Women Business Owners Jamaica Asociación Mexicana de Mujeres Empresarias AMMJE Mexico http://www.ammjenacional.org/ Comisión de Mujeres de la Industria de la Alta Tecnología COMIAT Mexico http://www.mujeremprende.com.mx/sobre- Mujer Emprende Mexico mujer-emprende.html http://portal.exatec1.itesm.mx/portal/page?_ Ex-A-Tec Mujeres Empresarias y Ejecutivas Mexico pageid=53,448296,53_460310&_dad=portal&_ schema=PORTAL&l_asoc=1090 Congreso Permanente de Mujeres Empresarias de CPMEN Nicaragua http://www.euram.com.ni/Empresarias/index.htm Nicaragua Mujeres de Negocios y Profesionales de Panama BPW Panama Panama Asociación Paraguaya de Empresarias, Ejecutivas y APEP Paraguay Profesionales Asociación de Mujeres Empresarias del Perú AMEP Peru Asociación Peruana Mujeres Industriales del Sur MISUR-PERU Peru Asociación Femenina de Ejecutivas de Empresas Peru Turísticas del Perú Asociación de Mujeres Industriales, Empresarias y Peru Profesionales del Perú Organización Internacional de Mujeres en Negocios OWIT Perú Peru http://www.owitperu.org/default.php Asociación de Ejecutivas de Empresas Turísticas del Perú AFEET Peru Peru http://www.afeetperu.org/home.htm Union de Mujeres Empresarias del Perú UMEP Peru Instituto Empresarial para la Mujer IEM Puerto Rico http://www.mujeryempresas.org/cms/ Hispanic Business Women’s Alliance HBWA Puerto Rico Women’s Business Group Suriname Caribbean Association Women Entrepreneurs CAWE Trinidad & Tobago Cámara Empresarial de Mujeres de Uruguay CEMU Uruguay http://www.cemu.org.uy/esp/ Federación de Mujeres Empresarias de Venezuela FEDEMEV Venezuela Federación Interamericana Empresarial FIE http://www.fiepymes.com/espanol/home/ Asociación Iberoamericana de Mujeres Empresarias AIME http://www.aime.org.ar/ Federación Iberoamericana de Mujeres Empresarias FIDE http://www.empresariasfide.org/ Foro de Mujeres del Mercosur Federación Internacional de Ejecutivas de Empresas FIASEET Turísticas International Association of Caribbean Women IACWE http://iacwe.com/about/ Entrepreneurs 74 References Allen, I. 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No one had any expectations from me, and I could do whatever I wanted – innovate, fail, run my own business.� Unlike her brothers, she did not feel pressured to take on a profession like medicine, law, or engineering. She tried out a few business ventures before founding Grupo SyN in 1998. Her �rm quickly became a go-to group for secretaries. Anne Marie estimates it has reached 100,000 women over the last decade, despite barriers posed by economic instability, a difficult tax environment, and problems with accessing much-needed �nance. Country Context Argentina is highly urbanized, with only 11 percent of its population living in rural areas.1 Throughout most of the 1990s, Argentina had the highest GNI per capita in Latin America, retaining that status even during the 1994-1997 economic crisis.2 But the crisis that rapidly unfolded in the country in 2001-2003 brought growth to a dramatic halt. The poverty rate soared from 28 percent in 1998 to 37 percent in 2001, and to a staggering 58 percent by the end of 2002. started producing goods in the home.5 The Argentine Unemployment rose to 22 percent, with 90 percent of losses government’s workfare program Jefes y Jefas also played 3,4 in the formal sector. Middle-class households became a critical role in preventing a steeper downward spiral of part of the “new poor.� Employment in the informal sector unemployment and poverty.6 served as a cushion: non-working household members, especially women, entered the labor force and families Since the end of the 2001-2003 crisis, Argentina has experienced annual growth rates of at least 7 percent. Bolstered by fiscal and external surpluses, in 2008 GDP GDP per capita (current USD): surpassed pre-crisis levels and reached an historic high.7 8,236 Poverty and unemployment have more than halved during Population, total: 39,882,980 Female Headed Households (% of total): 1 World Bank (2009). Country Partnership Strategy for the Republic of 34 Argentina, 2010-2012. Total Fertility Rate: 2 World Bank (2009), World Development Indicators database. 2.2 births per woman 3 World Bank (2003). Argentina: Poverty Assessment: Crisis and Poverty. 4 Ibid. Sources: World Bank (2010), World Development Indicators database, 5 Ibid. most recent year available. World Bank (2009), Genderstats database, 6 most recent year available. World Bank (2009). Country Partnership Strategy for the Republic of Argentina, 2010-2012. 7 World Bank (2009). World Development Indicators database. 81 Graph 1. Female Labor Force Participation in Formal and Informal Sector 100.0 % 90.0 % 80.0 % 70.0 % 34.9 % 60.0 % 23.2 % 50.0 % 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % a ia il ile ica ic r or a as ico a a ay ru ay a do az in al gu m el bl liv ad ur Pe gu gu Ch R em zu ex nt na Br ua pu ra Bo nd lv ta ra u ge M ne Pa ca Ec at Ur Re Sa s Pa Ho Co Ar Ve Ni Gu El n ica in m Informal Sector Formal Sector Do Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. the recent period, reaching 23 percent and 8 percent, the disadvantage faced by indigenous people, many of whom respectively, in 2007. But in spite of these important drop out as early as primary school.12 ,13 And while female achievements, current poverty rates are still higher than enrollment in secondary and tertiary education is higher than they were in the 1970s.8 The 2008-2009 world financial crisis male enrollment, girls are more likely to be pulled out is expected to push Argentina’s annual growth rate down to of school during a crisis. 9 0-1 percent in 2009 and 2010. Women in Argentina In terms of social welfare, the United Nations Human The Argentine government has actively pursued gender 10 Development Index ranks Argentina second in Latin America. equality. The Women’s Quota Act, which requires that But the country lags behind otherwise comparable middle- women comprise at least 30 percent of representatives in income countries in several social indicators. For example, 20 both National Congress houses, was instituted in 1991 and percent of Argentines do not have access to piped water and extended in 2000.14 Similar acts have been passed for labor only 48 percent have piped sewage; deprivation is significantly unions and the National Supreme Court. Today, 44 percent of 11 higher in indigenous communities. Net secondary school national Senate members and 35 percent of representatives enrolment is currently 78 percent (on a par with other Latin in the Chamber of Deputies are women.15 In 1992, a National American countries such as Brazil and Peru), but this masks Women’s Council was established to create and execute 8 12 World Bank (2009). Country Partnership Strategy for the Republic of World Bank (2009). World Development Indicators database. Argentina, 2010-2012. 13 World Bank (2009). Country Partnership Strategy for the Republic of 9 Argentina, 2010-2012. World Bank (2009). Country Partnership Strategy for the Republic of Argentina, 2010-2012. 14 Government of Argentina (2004). Responses to the United Nations 10 Division for the Advancement of Women’s Questionnaire to Member UNDP (2008). Human Development Indices: A Statistical Update 2008 – HDI Rankings (http://hdr.undp.org/en/statistics/ [last accessed States on the Implementation of the Beijing Platform for Action (1995) September 2009]). and the Outcome for the Twenty-Third Special Session of the General 11 World Bank (2009). Country Partnership Strategy for the Republic of Assembly (2000). 15 Argentina, 2010-2012. Ibid. 82 public policies that support the implementation of CEDAW.16 But, in 2002, the Council lost its State Ministry Primary School Enrolment, Female/Male (%, gross): rank and suffered several budget cuts.17 Recent progress 114 / 116 in women’s rights includes a Reproductive Health Law, Secondary School Enrolment, covering maternal mortality and female participation Female/Male (%, gross): 90 / 80 in pregnancy decisions, and a 2005 Presidential Decree Tertiary School Enrolment, that expands pension coverage to women over 60 Female/Male (%, gross): years of age. 18 80/ 54 Female/Male Adult Literacy Rate (%): 98 / 98 Despite progress on the legislative front, Argentine Female/Male Labor Force Participation (%): 57 / 82 women face distinct disadvantages in the workplace. Administrative and Managerial Positions: Female labor force participation has been increasing since 25% held by women the 1970s and is currently just below 60 percent. But 70 Seats in National Parliament: 42% held by women percent of working women in Argentina have unskilled jobs and only 11.4 percent of senior positions in the Source: World Bank (2009), Genderstats database, most recent year available. 19 private sector are occupied by women. Within the same occupation, women tend to earn 30 percent less than their male counterparts, and, when looking at equivalent a university education.23 Argentine women entrepreneurs educational levels, women with 0-3 years of schooling differ from female entrepreneurs in many other middle earn on average only 64 percent of what men with the income countries in that a higher percentage of them start same level of education earn. 20, 21 This rate increases to their enterprises to capitalize on economic opportunities, 82 percent for women and men with 4-6 years of schooling, rather than out of economic necessity.24 10 percent of but declines drastically for higher levels of education: Argentine women are business owners, and 30 percent of returns to schooling are highest for tertiary education, firms have female participation in ownership.25 but at that level Argentine women earn only half of men’s earnings. 22 Graph 2 shows that over 71 percent of female employment is concentrated in three sectors: education and health It is therefore not surprising that Argentine women (31.6 percent), commerce (21.4 percent), and domestic with higher education such as Anne Marie look at self- service (16.8 percent). The box below summarizes the employment as an opportunity for economic advancement top 5 obstacles perceived by businesswomen and female – 38 percent of women entrepreneurs in Argentina have entrepreneurs, according to Voces Vitales Argentina. 21 Government of Argentina (2004). Responses to the United Nations 16 Government of Argentina (1992). Presidential Decree 1426/92. Division for the Advancement of Women’s Questionnaire to Member 17 Government of Argentina (2004). Responses to the United Nations States on the Implementation of the Beijing Platform for Action (1995) Division for the Advancement of Women’s Questionnaire to Member and the Outcome of the Twenty-Third Special Session of the General States on the Implementation of the Beijing Platform for Action (1995) Assembly (2000). 22 and the Outcome of the Twenty-Third Special Session of the General Ibid. Assembly (2000). 23 Instituto APOYO, in collaboration with the Center of International 18 Private Enterprise, IBM, and the National Foundation for Women World Bank (2009). Country Partnership Strategy for the Republic of Argentina, 2010-2012. Business Owners (2000), “Women Business Owners in Argentina: A 19 Source of Economic Growth.� World Bank (2006). Enterprise Surveys database. 24 20 Ibid. World Bank (2009). Country Partnership Strategy for the Republic of 25 Argentina, 2010-2012. World Bank (2006). Enterprise Surveys database. 83 Graph 2. Occupational Segregation in Argentina 40.0 % 31.6% 30.0 % 25.2% 21.4% 20.0 % 16.8% 14.5% 11.9% 10.7% 9.4% 10.0% 10.0 % 8.7% 7.4% 7.7% 7.3% 7.7% 2.8% 2.6% 1.9% 1.0% 0.8% 0.5% 0.0 % ce es h h n s n th ts n ice c c io tio tio an al iti er Te Te ct rv He ra iv m rv ta ow h ru Se ct ist m Se or ig & st yA -L Co in -H sp d n n tic ille m Co io an ar ry es ry Ad at im st Sk Tr st m uc du Pr du s& ic Do Ed bl In In ie Pu ilit Female Male Ut Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. Finding a Niche and Persevering Grupo SyN’s first product was a guide for executive Anne Marie was an entrepreneur even before she had heard secretaries in Buenos Aires. The business grew rapidly: that term. At 18, she crafted cloth flowers and sold them as between 2000 and 2001, annual revenues grew from a chic hair accessory to upscale boutiques in Argentina. The 300,000 pesos to 500,000 pesos. Its combination of revenue from this first venture covered her graduation trip services (which included an annual convention, training to Europe. A few years later, after completing her university courses, networking events, a magazine, and an online studies in graphic design, she launched a public relations library), made it the go-to organization for secretaries. And firm with a former classmate. The business did relatively major companies came to recognize its convention and well for a while, but suffered from a lack of diversification publications as powerful marketing vehicles for reaching and ultimately sank when a contract with a long-standing young professional women. client failed to materialize. In 2002, the financial crisis shattered Argentina. As Even though that business failed, it helped her find a new corporate sponsorships and advertisements were niche. When one of her clients asked for her guidance in withdrawn, Grupo SyN’s revenues slipped to 400,000 pesos devising a campaign for executive secretaries, Anne Marie annually. Many companies went out of business. But Anne did some research and found that there were over 300,000 Marie persevered, pushed by the responsibility she felt for office secretaries in Argentina. This market was entirely her partners, employees, and the women who benefited untapped. In setting up Grupo SyN in 1998, she sought to from Grupo SyN’s services. She recalls, “I wasn’t even aware create a business that would help generate and improve of how hard it was on me. I realize now that that was my incomes for thousands of other Argentine women while strength during the crisis – the ability to just block it out and making a profit for herself. focus solely on what I had to do.� 84 In Their Own Words: Voces Vitales Argentina The Top 5 Obstacles perceived by businesswomen and female entrepreneurs, according to Voces Vitales Argentina: 1. Gender discrimination in the private sector: • Limited access to high-level jobs • Lower wages for women as compared to men in positions with similar levels of responsibility and educational and professional requirements • Less opportunities for career growth • The existence of sectors that are considered “appropriate� only for men. 2. Difficulties in reconciling professional and personal roles. This situation is worsened by the lack of regulation and policies supporting flexible work schedules. This obstacle is most salient for pregnant women and those with children. 3. Difficulties in re-entering the labor force after leaving it to take care of children. Women who leave the labor force are unable to get managerial or director-level positions, and find themselves having to start at the bottom again. 4. Lack of female empowerment: • Lack of female role models in leadership • Lack of visibility of successful women • Self-imposed obstacles due to gender-based insecurities. 5. Lack of support from the Government: • Difficulty in accessing credit • Lack of laws to encourage and support the development of MSEs • Lack of legal stability. Information provided by Vital Voices Global Partnership and their partners. As the economy began to stabilize two years later, Grupo preparing them.26 The number of tax payments firms must SyN’s growth rebounded. In 2004, Anne Marie expanded make each year in Argentina was reduced dramatically, into the Chilean market, opening an office in Santiago. from 62 in 2005 to 9 in 2008, and is now below the regional Conventions were organized in new cities, including and OECD averages of 33.2 and 12.8, respectively. But it Córdoba, Mendoza, and Rosario in Argentina, and Santiago takes firms in Argentina as many as 453 hours to prepare and Concepción in Chile. As of 2008, Grupo SyN employs their taxes (in contrast to 385.2 in the region and 194.1 40 mostly female staff and generates annual revenues of for OECD countries).27 over US$1 million. Most alarmingly, the total tax rate incurred by the sample Paying Taxes firms in Argentina is equivalent to 108.1 percent of profits, In the Doing Business 2010 report, Argentina was ranked 142nd out of 183 economies, and 23rd in Latin America and the Caribbean in the “paying taxes� category, which includes both the amount of taxes and mandatory contributions 26 World Bank (2009). Doing Business 2010 database. 27 paid by medium size firms and the administrative burden of Ibid. 85 one of the top ten highest rates in the world.28 The federal Were Anne Marie to have worked away from home and paid profit tax in Argentina is only 2.9 percent, but other taxes for childcare, it would have counted as a cost and reduced and mandatory contributions, including those imposed at her taxable income, but she gained no equivalent relief the state and municipal levels, account for the bulk of the when she worked from home. burden. The city of Buenos Aires levies a 3 percent turnover tax, which can shave off as much as 53 percent of profits.29 The value-added tax (VAT) may also be borne disproportionately by women. The VAT rate in Argentina is 21 Anne Marie estimates that she pays: “50 percent of sales to percent – higher than the regional average of 15 percent. Since various taxes, a value added tax (VAT) tax of 21 percent, 3 businesses pass VAT on to consumers, it is highly regressive.31, percent of gross income, another 2 percent for a ticket tax 32 While this phenomenon is not limited to Argentina, “it has implemented 3 years ago, 50 percent on labor, and, finally, been found that women tend to consume goods and services 35 percent on profits.� She says: “That’s why the informal that benefit family health, education, and nutrition, while economy is so huge in Argentina – because taxes are so men consume more of their income on personal items. Thus, high.� Indeed she estimates that 9 out of 10 of the secretaries women may bear a larger burden of indirect taxation.�33 with whom she comes into contact work off the record. Accessing Credit Creatively Due to their preponderance in micro and small businesses, Restrictions on access to credit also emerge as a major women entrepreneurs carry a disproportionate tax burden. constraint among business owners in Argentina. While For instance, in a 2002 survey of business owners, 77 percent a ranking of 61st out of 183 economies in Doing Business of female and 45 percent of male business owners pointed to 2010 for getting credit is not particularly low by regional tax laws as the principal regulation impeding the growth of standards, 38.48 percent of Argentine business owners in their business. 30 In part to rectify this burden, a monotributo the World Bank’s Enterprise Survey cited access to finance as system helps to simplify tax payments for micro and small a major constraint to their business success.34, 35 Moreover, businesses. However, once enterprises exceed a set income credit restrictions have gender and spatial dimensions, such ceiling, they are shuttled into the much more burdensome that women, and especially those outside of greater Buenos conventional tax scheme. This ceiling may discourage SME Aires, face particular obstacles. growth and push businesses into the informal sector. A study conducted in 2000 found that around a third of Anne Marie believes that the tax code in Argentina both female and male business owners in Argentina do indeed imposes a larger burden on women than on not use any source of financing. Among those who do men. For example, when she first started Grupo SyN, her use financing, men are more likely to have bank loans company was home-based – a business structure chosen while women tend to use private sources of finance. 36 by many female entrepreneurs for its compatibility with childcare duties. While the monotributo may take that into consideration, since it incorporates office size into its 32 eligibility criteria, the conventional tax system does not. World Bank (2003). Argentina: Poverty Assessment: Crisis and Poverty. 33 Barnett, Kathleen and Caren Grown (2004). “Gender Impacts of Government Revenue Collection: The Case of Taxation,� Commonwealth Secretariat. 28 34 Ibid. World Bank (2009). Doing Business 2010 database. 29 Ibid. 35 World Bank (2006). Enterprise Surveys database. 30 Instituto APOYO, in collaboration with the Center of International 36 Private Enterprise, IBM, and the National Foundation for Women Instituto APOYO, in collaboration with the Center of International Business Owners (2000), “Women Business Owners in Argentina: A Private Enterprise, IBM, and the National Foundation for Women Source of Economic Growth.� Business Owners (2000), “Women Business Owners in Argentina: A 31 World Bank (2009). Doing Business 2010 database. Source of Economic Growth.� 86 Unsurprisingly, larger businesses are more likely to operate with credit than small businesses. 44 percent of large Endeavor businesses owned by women in Argentina use bank loans, Established in 1997, Endeavor is a non-profit in contrast to 18 percent of medium-sized businesses and organization that provides technical assistance 9 percent of small businesses. The gap in credit access and links to networks and capital to selected between women in greater Buenos Aires and in provincial high-impact scalable enterprises in emerging areas also stands out: 37 percent of women business owners markets. Endeavor currently operates in in provincial areas pointed to “lack of financial support� as Argentina, Brazil, Chile, Colombia, Mexico, South one of the main obstacles faced by their business, compared Africa, Turkey and Uruguay, and has certified 198 to 27 percent of women in Buenos Aires. Moreover, only entrepreneurs from 140 enterprises, selected 7 percent of women business owners in provincial areas from among 14,000 applicants. Endeavor- had used a bank loan in the previous 12 months, while 13 supported enterprises have generated almost percent of women in Buenos Aires did so.37 40,000 jobs and, with Endeavor, have accessed over US$ 800 million in financing. Anne Marie reflects: “One challenge for Argentinean entrepreneurs is access to credit.� She claims that creativity Additional information on Endeavor can be found at www.endeavor.org and www.endeavor.org.ar is required to find financing. “They say that there’s no capital for Endeavor’s work in Argentina. out there but the reality is that they do not know how to look.� While she started Grupo SyN with her own funds, she sought financing from private investors in the business’s it would have failed,� she reflects. “No small business can second year. In 2004, she gained support from a non-profit wait that amount of time.� organization, Endeavor. Endeavor helped Anne Marie develop skills in business planning and proposal drafting so Looking Forward that she was able to attract investors from both within and Despite these hurdles, government efforts to support outside the non-profit’s network. the SME sector in Argentina are benefiting many women entrepreneurs, since their businesses are more likely to There are currently a large number of micro and small be in that sector. Gender-specific training and programs business development service providers operating in that support the extension of credit to business owners Argentina. The most notable ones include the Sub-secretariat in Argentina can also help of Small and Medium Enterprises, a government agency, “If any entrepreneur women’s businesses grow and the Multilateral Investment Fund of the Inter-American believes him or herself and develop resilience Development Bank. Over the years, Anne Marie has become capable and is willing against macroeconomic very resourceful in securing and juggling funding from to face the challenge, shocks. Some of these multiple sources, though she admits that these efforts take he or she can do it.� initiatives are provided time and may get caught up in bureaucratic procedures. by the vibrant network When she was awarded funding from the Sub-secretariat of of women’s business organizations, which advocate for SMEs, for example, the government body took over two years policies supporting female labor market participation to disburse the funds. “If my project had depended on that, and entrepreneurship, offer networking opportunities 37 Ibid. 87 and training, and link entrepreneurs to potential consumers. However, an effort to coordinate government and non Case Study Highlights profits’ efforts could increase their impact on women. • A demanding tax system and difficulties accessing credit are among the principal difficulties As an entrepreneur, Anne Marie prefers to focus on what she for business owners in Argentina, with a can change. She reaches out to emerging entrepreneurs, disproportionate burden falling upon women. giving lectures throughout the region and contributing to a blog. She believes that education is the most critical • Argentine women have resorted to self-employment component to launching and developing small enterprises as a crisis-coping strategy, but others (like Anne and is a committed advocate for entrepreneurialism among Marie) have pursued it by choice, as a place where younger generations. She estimates that Grupo SyN has their education and skills may be more richly already improved the skill sets, networks, and career rewarded. prospects of 80,000 secretaries in Argentina and 20,000 in Chile, most of them women. Looking ahead, she has • Anne Marie found a gap in the market that set her next goal: to build upon this work and launch a enabled her to make profits while helping other social enterprise that will provide secretarial training and working women; her story is one of tenacity and certification to former street youth in Argentina. perseverance. 88 Bolivia María Claudia Méndez Showcasing Bolivia through Indigenous Crafts In 2003, María Claudia Méndez was working as an economist in the male-dominated profession of engineering in Bolivia. She found the work frustrating and felt that being female put her at a disadvantage, so she decided to leave to start her own business. “I analyzed Bolivia potential sectors, searching for one which needed the least amount of investment and had the most opportunities for future growth,� she explains. “I was interested in using Bolivians’ indigenous art and textile practices to design apparel and home wear, such as blankets and furniture throws, using the famous alpaca wool.� She launched Orígenes Bolivia, an upscale fashion company which uses alpaca wool and Bolivia’s indigenous art and textile practices for high-end apparel and home goods. The business took off quickly, and her goods are now sold in the United States, Japan, and Europe. But her success belies a difficult business environment in a nation where the vast majority of entrepreneurs remain con�ned to the informal sector. Aaron Kisner Country Context María Claudia’s native Bolivia has the largest informal economy in Latin America. Around 70 to 80 percent of its employment is concentrated in the informal sector; the regional average is below 60 percent.1 In the urban informal sector, self-employment accounts for the majority of jobs.2 Some of this informality is voluntary, as 44 percent of Bolivians in the highest earnings quintile have informal jobs.3 Nonetheless, informal businesses are generally micro or small in scale and are characterized by relatively low productivity. Earnings in the informal sector in Bolivia (50 employees or more), which provide only 9 percent of tend to be biased against the poor, especially against employment for mostly skilled workers.5 self-employed women.4 Micro and small firms with less than 10 employees account for 83 percent of employment, The limited productivity of the informal sector and mostly unskilled, and 25 percent of the country’s output. In micro and small businesses is due in large part to a lack contrast, two thirds of output is generated by large firms of available skilled labor. Bolivia is one of the poorest and most inequitable countries in Latin America and the Caribbean. As of 2007, the government estimates that 60.1 percent of Bolivians are poor and 37.7 percent are GDP per capita (current USD): 1,720 extremely poor. Indigenous groups are particularly affected: Population, total: 9,694,113 Female Headed Households (% of total): 1 World Bank (2008). Republic of Bolivia: Policies for Increasing Firms’ 20 Formality and Productivity. 2 Total Fertility rate: World Bank (2005). Bolivia Poverty Assessment: Establishing the Basis 3.5 births per woman for Pro-Poor Growth. 3 Tannuri-Pianto, María, Donald M. Pianto, and Omar Arias (2004), Source: World Bank (2010), World Development Indicators database, “Informal Employment in Bolivia: A Lost Proposition?� most recent year available. World Bank (2009), Genderstats data- 4 base, most recent year available. Ibid. 5 World Bank (2005). Bolivia Poverty Assessment: Establishing the Basis for Pro-Poor Growth. 89 66.5 percent are poor and 47.4 percent are extremely poor.6 In rural areas, poverty and extreme poverty rates are 77.3 The Indigenous Population of Bolivia percent and 63.9 percent, respectively. The share of the indigenous population in Bolivia Moreover, while enrolment in primary education, especially has grown over the last 50 years, with one-half at the lower levels, is near-universal, school desertion is of Bolivians now claiming indigenous origin. In high. Net enrolment in secondary education is just 57 2005, Evo Morales Ayma became the first elected percent for both boys and girls.7 In 2002, only 41 percent of indigenous president in the country’s history. The girls and 39 percent of boys 14 years of age had completed staggering inequality in Bolivia is heavily biased 8 years of schooling. In rural areas this percentage was against indigenous groups. Indigenous people far lower, with less than a third of girls and a fifth of boys are more likely to be poor, have informal jobs, having eight years of schooling.8 These figures reflect high and have lower education and health levels than rates of child labor, as 38 percent of girls and 27 percent non-indigenous Bolivians. For each non-indigenous of boys aged 7 to 14 not only study, but also work at least poor, there are 1.4 indigenous poor. On average, 20 hours a week (including work within the household).9 non-indigenous people have over 3 years of Although tertiary education enrolment rates are relatively schooling more than their indigenous counterparts. high for the country’s income (at 33 percent, gross Enrolment rates at the secondary and tertiary levels enrolment is close to Argentina’s 36 percent and Chile’s 37 for indigenous people are half of those of non- percent), tertiary education is plagued by inequity in access, indigenous people. Furthermore, 31 percent of low quality, and inefficiencies in expenditures.10 indigenous children aged 9 to 11 were working in 2002 – four times the rate of their non-indigenous Bolivia experienced significant economic progress during counterparts. the 1990s, following a round of political and economic These inequalities mask the considerable reforms that included deregulation, trade liberalization, contributions of indigenous populations to Bolivian and the decentralization of public expenditures. Investment culture and its image abroad, as artisanal products increased and, for the first time in four decades, the growth using indigenous techniques are one of the most of the Bolivian economy surpassed that of other Andean countries.11 Due mainly to increased public spending, child common faces of Bolivia in the international market. and infant mortality decreased by over 30 percent, the María Claudia recognized this when she started percentage of households without access to safe water her business and tapped into the potential of and sanitation declined from 50 percent to 30 percent, indigenous crafts. and primary school enrolment became near universal.12 Sources: World Bank (2005), Bolivia Poverty Assessment: Establishing a Basis for Pro-Poor Growth. World Bank (2006), Bolivia: Basic Education in Bolivia, Challenges for 2006-2010. But gains in poverty reduction were small, due to at least three factors. First, growth in the 1990s was concentrated in natural resource-based exports, with little spill over into 8 Bravo, Rosa and Daniela Zapata (2005). Las metas del Milenio y la other sectors. Second, there was a preponderance of low Igualdad de Género: El caso de Bolivia. Serie Mujer y Desarollo, CEPAL. productivity firms, especially in the informal labor-intensive 9 Ibid. 10 World Bank (2006). Bolivia: Basic Education in Bolivia, Challenges for 2006-2010. 6 11 Based on national poverty line. World Bank (2009). Interim Strategy World Bank (2005). Bolivia Poverty Assessment: Establishing the Basis Note for the Plurinational State of Bolivia for the Period FY2010-FY2011. for Pro-Poor Growth. 7 12 Ibid. Ibid. 90 Graph 1. Female Labor Force Participation in Formal and Informal Sector 100.0 % 90.0 % 80.0 % 15.2% 70.0 % 53.2% 60.0 % 50.0 % 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % a ia il ile ica as a ay ic r or a ico a ru y a do ua az in al gu m el bl liv ad ur Pe gu Ch R em u ex nt na Br ua pu ug ra Bo nd ez lv ta ra ge M Pa ca Ec at Ur Re Sa n s Pa Ho Co Ar Ve Ni Gu El n ica in m Formal Sector Do Informal Sector Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. sector. Third (and related to these other issues), there was “Female entrepreneurship is common, but informality is so a lack of improved employment opportunities available to high in Bolivia that it is hard to find self-employed women the poor. Furthermore, the small gains that were made in in the formal sector. I can only think of two formal female poverty reduction were largely reversed by the economic entrepreneurs under 40 besides myself here in Bolivia.� 13 shocks of the late 1990s and early 2000s. Inequality Even when self-employed, female business owners earn actually increased between 1997 and 2002, leaving Bolivia significantly less than their male counterparts. Profits as the third most unequal country in Latin America after in male-owned firms are 1.7 times higher than those of Chile and Brazil (countries with average income levels four female-owned firms.16 14 to five times Bolivia’s). Indigenous women are even more likely than their non- Women in Bolivia indigenous counterparts to be in the informal sector and Bolivian women have one of the highest labor force self-employed. More than 60 percent of indigenous women participation rates in Latin America, but are over- in the labor force are self-employed in the informal sector, represented in the informal sector, especially in informal in contrast to around 40 percent of non-indigenous women. self-employment. About 15 percent of formal jobs and more Moreover, the average earnings for indigenous women are than half of all informal sector jobs are filled by women. 60 percent of the average for non-indigenous women.17 65 percent of women in the urban labor force are in the Cunningham and Jacobsen (2008) found that indigenous informal sector, compared to 57 percent of men. Within women have the highest earnings inequality among all the informal sector, 77 percent of women, compared to 58 gender and ethnic group intersections in Bolivia.18 percent of men, are self-employed.15 María Claudia explains, 16 Ibid. 13 Ibid. 17 Ibid. 14 Ibid. 18 Cunningham, Wendy and Joyce P. Jacobsen (2008). “Earnings Inequality 15 World Bank (2009). Gender in Bolivian Production: Reducing Within and Across Gender, Racial, and Ethnic Groups in Four Latin Differences in Formality and Productivity of Firms. American Countries.� Policy Research Working Paper 4591, World Bank. 91 As discussed below, Bolivia has very strict labor laws, Primary School Enrolment, making it difficult for firms to hire workers. Regulations Female/Male (%, gross): designed specifically for women workers act as additional 108 / 108 Secondary School Enrolment, disincentives for firms to hire female employees and Female/Male (%, gross): probably contribute to a preponderance of women in the 81 / 83 informal economy. Labor regulations mandate shorter work Tertiary School Enrolment, Female/Male (%, gross): hours for women, bar women from working at night and do 35 / 42 not allow maternity benefits to be shared with husbands. Female/Male Adult Literacy Rate (%): In addition, anti-discrimination laws are weakly enforced.23 86 / 96 Female/Male Labor Force Participation (%): 64 / 83 A male-dominated culture can also hinder the success of Seats in National Parliament: aspiring women. Some women note that their husbands 17% held by women do not allow them to work outside their homes, eliminating Source: World Bank (2009), Genderstats database, most recent year available. income-generating options except for home-based self- employment. María Claudia was not immune to this cultural bias. “When I went to a bank,� she recalls, “the managers Women’s lower education levels account for some of these were surprised that a young woman like me would be gender-based disparities in employment and earnings. interested in opening her own business.� The national female illiteracy rate is 14 percent, almost twice as high as the male illiteracy rate of 6.9 percent.19 Graph 2 shows that more than three-quarters of working In 2002, only 33 percent to 41 percent of 40 to 55 year-old women are concentrated in three sectors: primary activities women had completed primary school, in comparison to (40.5 percent), commerce (28.5 percent), and education and 47percent to 61 percent of their male counterparts. Added health (10.5 percent). to this are women’s greater burdens due to childcare and household responsibilities.20 As a woman entrepreneur Starting a Formal Business in a Largely Informal explained in a focus group discussion: “A woman has to Economy work triple: the home, the children, and in the business. In María Claudia was undeterred by the cultural obstacles this type of [informal] work, I can take care of my children, facing working women. She launched Orígenes Bolivia after my home, my work, and not have to leave my house.� 21 she recognized a potential international market for Bolivian The Women’s Economic Opportunity Index indicates indigenous artwork and Alpaca wool textiles. Having that Bolivian women lag far behind either their regional attended university in the United States, she explains, “I or global counterparts in terms of support for small and knew what I liked, and saw what was missing in American medium enterprises, access to childcare and vocational name-brand stores. I realized that using Bolivia’s indigenous training. 22 art and textile practices as well as the highly-demanded Alpaca wool from the Andes was a unique opportunity 19 World Bank (2009). Country Partnership Strategy for the Republic of to introduce Bolivia’s rich and valuable culture to the Argentina, 2010-2012. 20 international fashion market.� World Bank (2009). Gender in Bolivian Production: Reducing Differences in Formality and Productivity of Firms. 21 World Bank (2008). Reducing Gender Based Differences in Formality & Productivity, Report, p. 33. 22 23 Economist Intelligence Unit (forthcoming). Women’s Economic World Bank (2009). Gender in Bolivian Production: Reducing Opportunities Index. Financed by the World Bank. Differences in Formality and Productivity of Firms. 92 Graph 2. Occupational Segregation in Bolivia 50.0 % 47.3% 40.5% 40.0 % 30.0 % 28.5% 20.0 % 12.0% 11.6% 10.5% 9.6% 8.8% 10.0 % 7.7% 6.6% 6.5% 2.8% 2.6% 2.0% 0.6% 0.8% 1.0% 0.6% 0.0 % ce es h n s n th ts n ice c io tio tio an al iti er Te ct rv He ra iv m rv ta ow ru Se ct ist m Se or & st yA -L Co in sp d n n tic ille m Co io an ar ry es Ad at im st Sk Tr m uc du Pr s& ic Do Ed bl In ie Pu ilit Female Male Ut Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. Although Bolivia is a resource-rich country with unique business in Bolivia is equivalent to 99.2 percent of per indigenous crafts, María Claudia’s decision to start a formal, capita income, in contrast to an average of 36.6 percent export-oriented business was daring. In the World Bank in the region and 4.7 percent in OECD countries.26 Even Doing Business 2010 report, Bolivia was ranked 161st out this is a significant improvement from 2004, when average of 183 economies in terms of the overall ease of doing registration costs equaled 184.4 percent of income per 24 business, just behind Zimbabwe and Afghanistan. In LAC, capita.27 The initial registration process cost María Claudia it is ranked second to last, after Venezuela. The index is an around US$2,000, as she had to hire a lawyer to register the aggregate of 10 dimensions associated with conducting a company and obtain the proper licenses. “It was beneficial business, such as starting a business, employing workers, to have the right contacts, lawyer, and consultants to help and getting credit. Except for the ease of closing a business, me out with complicated issues associated with starting Bolivia is ranked on the bottom half in the world and the a business,� she recalls. While she was fortunate to have 25 region in all other nine dimensions. recourse to professionals to help her navigate the process, many other women cannot afford this assistance. Moreover, Unlike many other women, María Claudia had sufficient given Bolivia’s continued gender gaps in education, resources – money, education and contacts – to overcome understanding such procedures without professional help the barriers to starting a business. The Doing Business may be too difficult for many women. report estimates that the average cost for starting a 24 26 World Bank (2009). Doing Business 2010 database. Ibid. 25 27 Ibid. Ibid. 93 Strict labor regulations also discourage small businesses and contributions (15.5 percent) are close to the average from formalizing. Non-wage benefits, mainly contributions for Latin America and the Caribbean (13.2 percent), other to social security, can take up as much as 8 percent of business taxes amount to 64.6 percent of profits. In all, 28 profits. Understandably, micro- and small firm owners in medium-sized firms in Bolivia effectively pay 80 percent Bolivia often choose to keep their businesses informal, or taxes on profits – almost twice the regional average of comply with only some of the formal regulations, since the 48.3 percent.33 high costs of formalizing are generally not offset by the benefits at those levels. A 2009 World Bank study found Adding to the tax burden, María Claudia has found it very that for microenterprises and large enterprises in Bolivia, difficult to deduct from taxes business expenses such as formalizing actually has a negative impact on profits, and transport and office space rent costs. While firms in Bolivia only firms with three to five workers stand to increase can deduct the value-added tax (VAT) on purchases from 29 profits by becoming formal. other formal firms, this does not apply to purchases from firms registered in the simplified tax regime, which is In focus groups of women business owners, fear of targeted at small firms. That is, the simplified tax regime corruption was raised as a deterrent to formalization. does not necessarily increase the client base for small firms, According to a 2009 World Bank report, “the women felt that and formal firms can only deduct the VAT on purchases from by formalizing their business, the problem for corruption and non- simplified tax regime formal businesses – a relatively extortions would only become worse as it would put them small number of mostly larger firms in Bolivia.34 under greater scrutiny.�30 An increase in firm size from micro to small is associated with a lower exposure to corruption.31 Formal companies are, however, allowed to declare But since many female-run businesses are micro in scale, goods and services bought from informal businesses and they are particularly vulnerable. employees through a tax retention mechanism. María Claudia explains that Orígenes Bolivia contracts work Taxing Business through legal agreements to several workshops of artisans, In the Doing Business 2010 report, Bolivia is ranked 177 most of them informal. When calculating compensation, she out of 183 countries in terms of paying taxes, with only subtracts taxes to be withheld. “I deducted from them the Venezuela ranking worse in Latin America. 32 The tax filing amount they have to pay to the government� , says María and payment process for a medium-size company in Bolivia Claudia. “This is the formal way to make it work within this is much more cumbersome than the regional average. informal system of doing business.� The time Bolivian firms spend on taxes (1,080 hours per year) is almost three times the average of the region (385.2 Employing Indigenous Workers hours), and the number of payments is around 25 percent Bolivia was ranked last among 183 countries in terms of more (42 versus 33.2 per year). Although total labor tax employing workers in the most recent Doing Business report.35 The cost of hiring (women or men) in Bolivia is high by regional standards, as term contracts can only 28 World Bank (2005). Bolivia Poverty Assessment: Establishing the Basis for Pro-Poor Growth. 29 World Bank (2009). Gender in Bolivian Production: Reducing Differences in Formality and Productivity of Firms. 30 33 Ibid. World Bank (2009). Doing Business 2010 database. 31 34 World Bank (2008). Reducing Gender Based Differences in Formality & World Bank (2005). Bolivia Poverty Assessment: Establishing the Basis Productivity: p.33. for Pro-Poor Growth. 32 35 Ibid. World Bank (2009). Doing Business 2010 database. 94 be used for specific tasks and are limited to three years.36 Payroll taxes are also high and include 10 percent of workers’ wages to cover sickness, maternity, and disability benefits, 1.7 percent for permanent disability and survivor benefits, and 2 percent for housing.37 The costs of firing workers further discourage Bolivian entrepreneurs from making formal hires. Bolivia and Venezuela are the only two countries where dismissing workers because of redundancy is not allowed. Even for dismissals within the allowable reasons, employers in Bolivia must compensate workers with a payment equivalent to during the potato harvesting and planting seasons they 100 weeks of salary.38 Adding to these obstacles, a decree go back to their hometown, where they own and work the issued in 2006 in Bolivia requires employers to secure land. This is a cultural phenomenon in the Andes.� While permission from workers before firing them. “No workers are recognizing these traditions, María Claudia notes that, being fired as a result, but few new workers are hired either,� from a business perspective, it is important to know her explains the Doing Business 2007 report.39 workshops’ schedules “When I went to a bank, so she can plan in Like many other formal business owners in Bolivia, María the managers were advance. To that end, Claudia navigates the strict labor laws and cultural practices she writes contracts that by keeping her staff small and contracting work out as surprised that a set reasonable goals needed. Orígenes Bolivia has five full-time employees, young woman and allow flexibility in but is affiliated with 12 indigenous workshops with over like me would the division of labor. 100, mostly female, artisans. Most of these artisans are be interested in opening She explains, “Above all, of Aymara origin, and their workshops are traditionally her own business.� one has to be a good organized around family groups. Through a legal agreement boss. I have been socially with Orígenes Bolivia, the workshops regulate their own conscious, complying with fair trade rules. My international hours and payment distribution. María Claudia is proud that clients ask me to abide by certain rules, including not to she is able to employ so many women. She reflects, “For the abuse animals or force employees to work unfairly. Here first time in my career, I am working with mostly women.“ in Bolivia, when employees feel that they are not being reasonably compensated, they simply do not show up For María Claudia, contracting with artisans is sometimes again.� a challenge, although she admits that having the products made in-house would be costlier. In her experience, “many María Claudia also offers training on business practices, indigenous people prefer to be seasonal workers, since encompassing professional conduct, marketing, and entrepreneurialism. Aware of her stature as a role model, 36 World Bank (2009). Gender in Bolivian Production: Reducing María Claudia has also turned to helping other young Differences in Formality and Productivity of Firms. 37 World Bank (2006). Doing Business 2007: How to reform. women. Following her participation in a FORTUNE/U.S. 38 World Bank (2009). Gender in Bolivian Production: Reducing State Department Mentoring program in the United States Differences in Formality and Productivity of Firms. 39 in 2006, María Claudia was inspired to influence young World Bank (2006). Doing Business 2007: How to Reform. 95 Mentoring Women Entrepreneurs - A Path to Increased Business Success Since 2006, Vital Voices has partnered annually with the US State Department and the FORTUNE Most Powerful Women’s Summit to provide potential female leaders in business the opportunity to develop their leadership, management, and business skills. This program combines the study of American business culture with a working mentorship program that enables emerging female business leaders across the globe to spend a month in the US to enhance their capabilities and propel their careers forward. María Claudia is one of the lucky women who have benefited from this unique program. “The experience radically changed my life,� she reveals. “When I went back to Bolivia, I wanted to share what I learned with other women.� Recently, María Claudia helped set up a mentorship for Bolivian entrepreneurs in La Paz. Source: Communication with Eugenia Podesta, Vital Voices. Interview with María Claudia. women in her own country (see box). Since 2007, she has Bolivia experienced significant trade liberalization during worked to create the first mentoring program for young the 1980s, and has since achieved one of the highest entrepreneurs in Bolivia, and her company continues to export-to-GDP ratios in Latin America and the Caribbean.40 support the program’s operations to this day. Such efforts are commendable and necessary in a nation where women’s Yet Bolivia is landlocked (with the closest major port located economic potential has yet to be fully tapped. As María at Arica, Chile), which makes its export market acutely Claudia says, “I have learnt that no matter how big or small dependent on efficient your company you can do things the right way – and much “I learned that, no transport and communication of what I do in my business I owe to mentoring. Now it is my matter how big or logistics. According to a 2009 turn to contribute�. World Bank study, “exports are small your company, delayed for months in some you can do things Exporting Bolivian Crafts parts of the country… [and] the right way…� From the start, María Claudia envisioned Orígenes Bolivia trucking costs appear to be as an export-oriented business. Aware of the preferential competitive by international trade agreement between the United States and Bolivia standards but the predictability of trip time remains a under the United States-Andean Trade Promotion and Drug challenge.�41 The country’s communications infrastructure Eradication Act (ATPDEA), María Claudia sought out the is also weak, limiting its access to international markets and American market. Enacted in 2002, ATPDEA has allowed ability to adapt to its landlocked circumstances by boosting duty-free access to the United States to a range of exports its services sector.42 from Bolivia, Colombia, Ecuador and Peru. María Claudia seized the opportunity. “I literally packed my bags and took samples to New York,� she recalls. In 2004, she joined a mission organized by the Bolivian Export Chamber, visiting 40 World Bank (2009). Strengthening Bolivian Competitiveness: Export American retailers and showcasing her products. She made Diversification and Inclusive Growth. her first sale to a well-established New York-based company 41 Ibid. 42 during that trip. Ibid. 96 In 2008, Bolivia was excluded from ATPDEA. This has damaged María Claudia’s business. She explains, “Very few of our American clients are still buying our products, in part because of the economic crisis, but mostly because Case Study Highlights Bolivian merchandise is now about 18 percent more • Bolivia presents a difficult environment for expensive for them after paying duties.� This is particularly starting and running a business, and women true for the non-traditional export sector, which depends (and especially indigenous women) face on preferential agreements to compete in the international additional hurdles. market. It is estimated that the nonrenewal of the ATPDEA could reduce economic growth in Bolivia by 0.6 percent.43 • María Claudia’s business demonstrates the potential for successful partnerships between To cope, María Claudia has sought out other international formal and informal sectors. markets for Orígenes Bolivia in Latin America, Japan, and • Mentoring emerges as a useful way that women Europe. She is also looking at domestic sales, opening a can help each other to get ahead. new duty-free store in the international airport. “In a crisis,� María Claudia reflects, “for a business to stay afloat, one must seek out and pursue new business opportunities.� 43 Ibid. 97 Brazil Nara Pereira Sowing Leisure, Reaping a Business Nara Fauth Pereira, a psychologist, and her then husband, a lawyer, bought a ranch outside the city of Porto Alegre in 1979 as a weekend getaway for the family. But after a life-altering experience in 1985, Nara became increasingly involved in the day-to-day management Brazil of the ranch. After a divorce, Estância Boa Vista da Quinta became entirely Nara’s, and in 1997 she became the sole manager of the 10,600 hectares of land, grazing 700 heads of cattle and cultivating 1,000 hectares of rice. Country Context Jefferson Bernardes Brazil is the fifth largest country in the world in terms of population, and the ninth largest by GDP. It is also one of the most unequal countries in the world, with the top quintile holding an income share 33 times larger than the share of the bottom quintile.1 Blacks and pardos (mixed-race blacks) comprise over 40 percent of the population, and while the majority of the population is of European descent, significant minorities include Asian and Middle-Eastern populations. Brazilians have witnessed substantial economic advances European exports to and imports from Latin America, 2 and, over the last two decades, including a drop in inflation from in 1995, an Interregional Framework Cooperation triple- to single-digits, privatization, and trade liberalization. Agreement between the two economic blocs was signed. In the 1990s, Brazil, along with Argentina, played a leading In part as a result of these agreements, Brazil experienced role in creating Mercosul, a regional economic agreement significant growth in agricultural exports during the 1990s; for the creation of a common market. Currently, Argentina, and is the fourth largest agribusiness exporter in the world. Brazil, Paraguay and Uruguay are parties to the agreement, which eliminated most trade barriers between member Economic stabilization has also led to social progress. countries during the 1990s. Mercosul accounts for half of Extreme poverty declined from 22 percent in 1990 to 15 percent in 2001, and poverty has remained at 28-30 GDP per capita (current USD): percent after a peak in 1992/3, despite international shocks 8,205 and crises.3 But inequality remains a major challenge, Population, total: 191,971,506 encompassing issues of race, location, gender, education Female Headed Households (% of total): 26 Total Fertility Rate: 1 World Bank and IPEA (2003). Brazil: Inequality and Economic 1.9 births per woman Development. Volume I: Policy Report. 2 Monteagudo, Josefina and Masakazu Watanuki (2003). “Regional Trade Agreements for MERCOSUR: A comparison between the FTAA Sources: World Bank (2010), World Development Indicators and the FTA with the European Union.� Economie Internationale, CEPII database, most recent year available. Fundação Carlos Chagas Research Center, 2Q-3Q. (2009), “Mulheres, Trabalho e Familia.� http://www.fcc.org.br/mulher/ 3 World Bank (2003). Country Assistance Strategy 2003-2007 for series_historicas/mtf.html. the Federative Republic of Brazil in Support of a More Equitable, Sustainable, and Competitive Brazil. 99 Graph 1. Female Labor Force Participation in Formal and Informal Sector 100.0 % 90.0 % 80.0 % 70.0 % 26.4 % 32.8 % 60.0 % 50.0 % 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % a ia il ile ica r or a as ico a a ay ic ru ay a do az in al gu m el bl liv ad ur Pe gu gu Ch R em zu ex nt na Br ua pu ra Bo nd lv ta ra u ge M ne Pa ca Ec at Ur Re Sa s Pa Ho Co Ar Ve Ni Gu El n ica in m Informal Sector Formal Sector Do Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. and labor. For example, white Brazilian men have 2.5 years Family-based farms encompass only one-third of the arable more of schooling on average than black Brazilian men, and land, but employ 77 percent of the rural labor force. Large this gap is constant throughout different age cohorts. Mean landholdings, on the other hand, take up the remaining earnings of blacks and whites are around ¼ and ½ the mean two-thirds of the land but yield less than half the earnings 4 earnings of Asians, respectively. A study conducted by the per hectare of family-based farms.7 World Bank and IPEA (2003) found that 12 percent of the inequality in income in Brazil is accounted for by skin color Human development, as measured by health and alone, while differences in education explain another 29 education, has progressed unevenly. Although Brazil percent of the gap. Since the average schooling rate in Brazil has gradually improved its education outcomes over is low for the country’s income – less than 10 percent of the last two decades, it has fallen behind several other the working age population has post-secondary education Latin American countries with faster improvement rates, – skill premiums are high, and they exacerbate inequality.5 including Mexico and Ecuador.8 Enrolment in primary education is now nearly universal, but this masks high One-fifth of the Brazilian population lives in rural areas, repetition rates.9 On average, Brazilian students take 10.3 and, at 53 percent, rural poverty is more than twice as years to reach the end of 8th grade; 9th grade completion is high as urban poverty (20 percent). Rural inequalities are less than 10 percent for the bottom half of the population. explained largely by inequalities of land ownership: land Only 5 percent of spending on secondary school goes to is concentrated among large landowners, and a 1996 the poorest quintile, since most children from this income agricultural census found that as many as 4.5 million rural group do not make it past primary education.10 households do not have enough land for subsistence.6 4 7 World Bank and IPEA (2004). Brazil: Inequality and Economic Assunção, Juliano Junqueira (2003), “Distribuição de Terra e as Políticas Development. Volume I: Policy Report. Públicas voltadas ao Meio Rural Brasileiro.� (2003). Background paper 5 Ibid. for World Bank and IPEA Volume II. 6 8 World Bank (2003). Country Assistance Strategy 2003-2007 for World Bank and IPEA (2004). Brazil: Inequality and Economic the Federative Republic of Brazil in Support of a More Equitable, Development. Volume I: Policy Report. 9 Sustainable, and Competitive Brazil. Ibid. 100 Progress in health and sanitation has likewise been mixed. Since the early 1990s, infant mortality in Brazil has Primary School Enrolment, Female/Male (%, gross): decreased by one-third, and vaccine-preventable deaths 125 / 134 among children have been almost eliminated. But the Secondary School Enrolment, percentage of the population with access to safe water and Female/Male (%, gross): 105 / 95 adequate sanitation has barely changed. The former fell by Tertiary School Enrolment, just 2 percent, to 22 percent and the later by 8 percent, to 31 Female/Male (%, gross): 34 / 26 percent, between 1990 and 2002.11 In rural areas, advances Female/Male Adult Literacy Rate (%): have been more marked, but levels remain low. The 90 / 90 percentage of rural households with access to safe water Female/Male Labor Force Participation (%): 64 / 85 more than doubled between 1981 and 1999, but, at the end Seats in National Parliament: of the period, 48 percent of households in rural areas were 9 % held by women still without safe water.12 Source: World Bank (2009), Genderstats database, most recent year available. Women in Brazil Important recent advancements for women in Brazil include In the 15-24 age group, limited access to school is the main a significant increase in access to and use of contraceptives reason for abandoning school for women in rural areas, (which is helping to reduce the adolescent fertility rate) , 13 while the need to work is the principal cause of dropping an increase in female labor force participation, and a 2006 out in urban areas.17 Domestic work is an important source law against domestic violence. But major challenges of female employment, especially among younger cohorts. remain. In the 1990s, Brazil had one of the largest gender In 1995, almost 5 million women had domestic jobs in Brazil wage gaps in Latin America. Since then, the gap has been (versus 250,000 men), with two-thirds of them earning closing, but female earnings are still 29 percent lower less than the minimum wage. One in every four domestic than male earnings. Accounting for age, education, and workers is between 10 and 17 years old.18 hours worked actually increases the shortfall to 34 percent, mainly because women have surpassed men in educational In rural areas, labor force participation has been under- attainment. 14 For the same reason, in the Northeast – the recorded, especially for women. In 1991, several rural poorest region of Brazil – female-headed households are women’s associations led a movement to change the just as likely as male-headed households to be poor, but definition of rural “work� and campaigned to encourage they are much more likely to be poor, after accounting for women cultivating small plots of land or rearing a few education and other individual characteristics.15 animals to identify themselves in the Brazilian national census as workers rather than housewives. Between 1990 Among younger Brazilian cohorts (those born since the and 1995, female participation in agriculture increased from late 1950s), women tend to have more years of schooling 14 percent to 23 percent; male participation in agriculture than men, although both levels – just over 7 and 6 years, stayed constant at 28 percent.19 But a more recent survey respectively – are low given the country’s income per capita.16 14 World Bank and IPEA (2004). Brazil: Inequality and Economic 10 Ibid. Development. Volume I: Policy Report. 11 World Bank (2006). Country Assistance Strategy Progress Report for 15 World Bank (2002). Brazil Gender Review: Issues and Recommendations. the Federative Republic of Brazil for the Period FY2004-2007. 16 World Bank and IPEA (2004). Brazil: Inequality and Economic 12 Assunção, Juliano Junqueira (2003). “Distribuição de Terra e as Políticas Development. Volume I: Policy Report. Públicas voltadas ao Meio Rural Brasileiro.� Background paper for 17 World Bank (2002). Brazil Gender Review: Issues and Recommendations. World Bank and IPEA (2003) Volume II. 18 Ibid. 13 World Bank (2009). World Development Indicators database. 19 Ibid. 101 Graph 2. Occupational Segregation in Brazil 30.0 % 25.2% 21.5% 22.0% 20.1% 20.0 % 17.1% 16.1% 10.6% 9.9% 10.0 % 8.8% 7.6% 7.3% 6.0% 6.4% 5.2% 4.4% 5.4% 3.5% 1.5% 0.4% 0.9% 0.0 % ce n th es h h n s ts n ice tio c c io tio an al iti er Te Te ct rv He ra iv m rv ta ow h ru Se ct ist m Se or ig & st yA -L Co in -H sp d n n tic ille m Co io an ar ry es ry Ad at im st Sk Tr st m uc du Pr du ic s& Do Ed bl In In ie Pu Female Male ilit Ut Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. (1997) found that 39 percent of women participating in form of identification card, a requirement for securing land agricultural labor are unpaid workers, while another 42 percent through the reform.21 are subsistence farmers. In other words, 81 percent of women Graph 2 shows that over three quarters of employed employed in agriculture in Brazil are not paid for their work.20 Brazilian women are concentrated in four sectors: education and health (22.0 percent), commerce (20.1 Women have also been excluded from land ownership in percent), domestic service (17.1 percent), and primary Brazil. Only 12.6 percent of individuals given land title in activities (16.1 percent). their name through the agrarian reform carried out in the late 1980s and early 1990s were women. Similarly, women Reaping Profits from the Land comprised only 7 percent of beneficiaries of the rural When Nara and her now ex-husband first bought a ranch, National Program for the Strengthening of Family-based Estância Boa Vista da Quinta, in 1979, they saw it as a place Agriculture (PRONAF). Although explanations for these where their three children could enjoy nature the way Nara low rates are not fully documented, it is estimated that as had when she was growing up, playing at her grandfather’s many as 45 percent of female rural workers do not have any farm. She was a psychologist, her ex-husband, a lawyer; neither of them planned to manage the ranch. Rather, they hired professionals to make the majority of management 20 Barsted, Leila Linhares (2002). “Gênero e Legislação Rural No Brasil: A Situação Legal das Mulheres Face à Reforma Agrária.� Ministry of decisions for the 10,600 hectares of land. Agricultural Development – MDA, National Institute for Colonization and Agrarian Reform – INCRA, and UN Food and Agriculture Organization – FAO. Following the couple’s divorce, the ranch became solely 21 Rua, Maria das Graças and Miriam Abramovay (2000). “Companheiras Nara’s, and, as she recovered from the loss of her youngest de luta ou ‘coordinadoras de panelas’? As relações de gênero nos assentamentos rurais.� UNESCO. daughter in a car accident, she immersed herself in managing 102 the land. She enrolled in technical courses on agricultural methods, became active in the Agricultural Federation of Rio In Their Own Words: Business and Professional Grande do Sul (FARSUL), and spearheaded an initiative to Women International (BPW) São Paulo create an animal auction – 100 % D’Elas (100 Percent Theirs) The São Paulo branch of BPW International compiled – exclusively for female producers. The first auction took a list of the top 5 obstacles faced by female place in 1997. Since then, it has brought female producers entrepreneurs. The first echoes a push-out factor from various parts of the country and has even been described in greater detail in the first part of this study, replicated in other regions of Brazil. “Initially, we came up while the other four describe difficulties faced by with 100 % D’Elas as a marketing strategy for our business,� women business owners in Brazil. Nara confesses, “but after the first event we realized that showcasing female agricultural producers is an important 1. The glass ceiling. Although arguably there are feat, since it is often assumed that they only provide support more capable women than men given their higher to the male producer and work behind the scenes.� education levels, women still find it very difficult to reach high positions in companies. As noted above, the vast majority of women employed in the 2. Difficulty obtaining credit. Brazilian agricultural sector are unpaid or subsistence workers. 3. Work-life balance: how to balance professional As 100 % D’Elas became better known in the region, several activities and family responsibilities – women face male producers contacted Nara, seeking to participate. double shifts. When she emphasized that the auction was for women only, 4. Lack of credibility on behalf of customers, suppliers some suggested giving their wives’ names while noting that and shareholders, because of the macho culture and the women “didn’t really work in the farm.� Nara bemoans patriarchal society. the prejudice held by male farmers as one of the principal 5. The belief that women can only establish and run obstacles to running her business. “Male farmers are surprised companies that are feminine in nature, such as those when I tell them that I am a producer, and often assume that in cosmetics, fashion, and food industries. there must be a man actually running my ranch.� She explains, Information provided by Vital Voices Global Partnership and its partners. “They do not take women as seriously, and even in one of the events held by 100 % D’Elas, the master of ceremonies referred to us as ‘girls,’ as if our work was mainly play.� determinant to becoming an entrepreneur is family characteristics, namely socio-economic status.22 Like all In 2001, a Committee of Women Producers was created Brazilian entrepreneurs, Nara has faced barriers to starting within FARSUL, and, although Nara recognizes that as an and running a business, irrespective of her privileged accomplishment, she also believes that women should background. With the exception of two categories (“getting be integrated throughout the Federation rather than only credit� and “protecting investors�), Brazil is ranked in the represented through the committee. She points to the fact bottom half for all indicators in the Doing Business 2010 that a female producer is now part of FARSUL’s governing report. Even within Latin America and the Caribbean, council as an important step in the right direction. Brazil is in the lower 50 percent of countries in almost every indicator.23 Employing Workers Nara is privileged. She has both the means and the 22 Djankov, Simeon, Yingyi Qian, Gérard Roland and Ekaterina education to run her own business. A recent study on Zhuravskaya (2007). “What Makes a Successful Entrepreneur? Evidence from Brazil.� Brazilian entrepreneurship found that the strongest 23 World Bank (2009). Doing Business 2010 database. 103 Zica and Leila: Turning a Personal Frustration into a Business Solution Helena “Zica� de Assis and Leila Velez are an extraordinary example of entrepreneurship’s power to overcome gender, racial, economic and administrative barriers and to create a successful business from the base of the pyramid. Their company, Beleza Natural, offers health and beauty products and services targeted at a clientele that is predominantly lower and middle income and Afro-descendant. Beleza Natural’s sales exceeded 60 million reais (US$21.5 million) in 2008, generating over 1,000 jobs and serving over 55,000 clients a month. Zica and Leila’s success story is not only inspirational to thousands of women entrepreneurs, but it is also emblematic of shifts in Brazil’s socio-economic landscape. Leila and Zica both grew up in Rio’s working-class favela of Catumbi Hill. Without access to higher education, Zica and Leila’s career prospects were somewhat bleak. From adolescence, Zica worked as a nanny and domestic help and Leila started as a cashier at McDonald’s. The two met when Leila became engaged to Zica’s brother, Rogerio. Brazilian women are notoriously invested in their personal hygiene and appearance – the country has one of the top five largest cosmetics and personal care markets in the world, and 26 percent of it is dedicated to hair care products alone, according to data from the Cosmetics and Personal Care Market in Brazil For women of African or mixed heritage, the issue of hair is particularly complex and sensitive. When working as a domestic employee, Zica was told by her employers to cover her hair with a scarf so as to not reflect poorly on the household. Her naturally coarse and curly hair became a burden on her self-esteem. Zica entered a cosmetology program and became fascinated by the biology and chemistry of hair care. She decided to apply her newfound knowledge to creating a product that would tame her rebellious curls. It took over ten years to fabricate the first version of Super-Relaxamento, launched in 1992. Zica began offering the treatment to other residents of Catumbi Hill and the response to the product was remarkable. The constant deluge of neighborhood customers proved this could a viable business and Zica left her job as a domestic servant. Zica’s husband sold the only asset the household had, a 1979 Volkswagen Beetle, to buy her first stylist chair, and, together, they created a makeshift parlor in a nearby lot. For their business to take off, Zica and her husband needed seed capital. Relying only on their meager savings would delay their business venture by years; so, after being rejected for various loans, the couple turned to family members. Zica’s brother Rogerio and his fiancée Leila had been saving for years in preparation for their wedding and first home. Zica convinced them to delay their home purchase and invest in Beleza Natural as company partners. This partnership delivered US$3,000 in seed capital, covering the cost of equipment and rent for the salon’s opening. In addition, Leila and Rogerio contributed with nearly a decade of experience within McDonald’s, in which both had ascended to management positions, and had acquired knowledge of assembly line production, corporate operating procedures and customer service. Fifteen years later, Beleza Natural has annual revenues exceeding US$21 million over its nine branches. But for Zica and Leila, the success of Beleza Natural does not revolve around profits alone. “Being an entrepreneur is about more than earning money. It is about investing passion and innovating and delivering something special. As entrepreneurs, our satisfaction comes most of all from making a difference and generating employment.� Source: Interview with Leila and Zica. 104 Brazil scores poorly (138th of 183) on the ease of employing of them are active in the community, and I wouldn’t be workers, given its high payroll taxes and social security surprised if one of them even ran for city council.� obligations, as well as a severance payment requirement that effectively prices low-skilled workers out of the formal But she laments the absence of vocational training courses sector. Together, these requirements can add as much as specifically targeted to women; the only female-specific 24 35 percent to the cost of employment. Unsurprisingly, courses that she knows of focus on women’s traditional over half of Brazilian employers (57 percent) identify labor roles. Echoing Nara’s impression, Ruas and Abramovay regulations as a constraint to their business, a share five (2000) observe that capacity building programs offered 25 times higher than the world average (11.8 percent). to Brazilian women in rural areas focus on house chores, such as cooking and sewing,26 and Barsted (2002) finds that Nara navigates within these barriers, providing housing “there is no evidence of female access to technology that for her employees within Estância Boa Vista da Quinta and allows them to work faster and increase productivity.�27 sometimes hiring her employees’ spouses as well. She says that she doesn’t mind the cost of employees, as long as they Enforcing Contracts are qualified. She believes that, especially in the agricultural Brazil ranks 100th in the world and 13th in Latin America and sector, finding people with the right qualifications is one of the Caribbean in terms of enforcing contracts. On average, the highest obstacles to running a business in Brazil. When it takes 45 procedures and 616 days to settle a payment she first started, Nara set up reading and writing lessons dispute in Brazil, roughly 50 for all adults living in the ranch, and today she encourages percent more than the OECD “In Brazil, I have no them to take courses at the local branch of the National average of 30.6 procedures problem being a woman. Rural Training Service (SENAR). “The courses are very good, and 462.4 days.28 Contract I do, however, have a lot but I need to convince them that they have to take them. enforcement varies by state in of trouble being a female Many of them feel that they do not need those classes Brazil, and a Doing Business rural producer.� since they come from agricultural families,� she explains. study conducted in 2006 “I usually get them to go to just one class, and if they don’t found that Rio Grande do Sul, the state in which Estância like it, they can quit. Most of them end up staying, and I Boa Vista da Quinta is based, has the slowest judicial eventually see them using the new techniques in the ranch.� procedure for payment disputes out of the thirteen Brazilian Nara also works with other ranch owners, surveying them states in the assessment. As the report describes: on which courses they believe could be useful for their staff [In Brazil] trials can last for years; multiple appeals are common and relaying popular requests to SENAR. – increasing costs and uncertainty. As a result, small businesses avoid judicial processes as much as possible… Total time in court, including Nara has seen significant changes in Brazilian women’s enforcement, is approximately 18 months in São Paulo. Compare that economic roles since she first owned the ranch (the story with Rio Grande do Sul, where the process to enforce a contract takes of Leila and Zica provides further evidence of such a over 4 years.29 transformation, see box). She recalls, “When I first started here, there were only men. All of the employees were male; 26 Rua, Maria das Graças and Miriam Abramovay (2000). “Companheiras even the animals were all male. But as I became more de luta ou ‘coordinadoras de panelas’? As relações de gênero nos involved in the management of the ranch, one could see assentamentos rurais.� UNESCO. 27 Barsted, Leila Linhares (2002). “Gênero e Legislação Rural No Brasil: the women emerging from their homes. Now, several A Situação Legal das Mulheres Face à Reforma Agrária.� Ministry of Agricultural Development – MDA, National Institute for Colonization and Agrarian Reform – INCRA, and UN Food and Agriculture Organization – FAO. 28 24 World Bank (2002). Brazil Gender Review: Issues and Recommendations. World Bank (2009). Doing Business 2010 database 29 25 World Bank (2009). Enterprise Surveys: Brazil. World Bank (2006). Doing Business in Brazil. 105 COOPA-ROCA: Running a Successful Co-op from a Favela With degrees in teaching and sociology and no prior business experience, Maria Teresa Leal founded COOPA-ROCA (Rocinha Cooperative of Craftwork and Seamstresses) in 1987. Although she came from a more affluent background, she had been involved in the Rocinha since 1981, when, as an art educator, she developed a recycling project with children in one of Brazil’s most famous and largest favelas. Maria Teresa, who also goes by TT, recalls, “One day, I brought in scraps of fabric into the recycling workshop,� but the kids’ mothers protested. “’No! Don’t give them to the children,’ they exclaimed, ‘It’s too nice and they’ll just tear it up!’� In that, Maria Teresa saw a business opportunity, recalling the large volume of textile refusals she had seen from Rio de Janeiro’s growing fashion industry. COOPA-ROCA began as a small cooperative of women producing craftwork pieces such as bedcovers, carpets, and pillows. This model gained significant traction with forward-thinking companies in the fashion industry looking for artisanal work and the opportunity to market a product as made in a favela in Brazil, and today the cooperative receives orders from commercial partners in foreign markets, recently including Lacoste. COOPA-ROCA has 3 regular employees and around 100 artisan members at any given time. All of the members are women and the majority is comprised of single heads of households. About 40% of member artisans had previously been employed – mainly as domestic workers – while more than half did not have a source of income prior to joining COOPA-ROCA. TT explains that many of these women left their jobs to join the cooperative because of its flexibility. “By allowing the artisans to work from home, COOPA-ROCA ensures that its members have the ability to care for and financially support their children,� she notes. For several members, their earnings from COOPA-ROCA, which are directly tied to production (instead of fixed salaries), are an important, and sometimes their only, source of income. Nonetheless, TT finds it important to remind partners that although corporate social responsibility can be a powerful marketing tool, COOPA-ROCA nonetheless produces valuable, high-quality products, and, as such, their partnerships should be rooted in the principles of business, not charity-giving. And while the cooperative has generally been able to enforce these agreements as mutually beneficial, some business obstacles remain. Commercial partners frequently refuse to enter the favela themselves and TT often has to use her own home as a bridge between worlds. Financing has also been difficult to come by. COOPA-ROCA is consistently rejected when applying for loans, except for that provided by the federal government through the Banco Nacional de Credito Cooperativo, which was designed specifically to support cooperatives in low-income communities. TT explains that this is both because COOPA-ROCA is a non-profit cooperative rather than a traditional business and because of the high-risk perceptions surrounding the favela, where gangs of drug traffickers terrorize the population and most locations do not have official land titles. TT has tried circumventing this problem by using her personal microenterprise that she set up to manage COOPA-ROCA’s participation in exhibits and fashion shows. Recently, she was approved for a loan with a low interest rate, and wired the money to COOPA-ROCA the very same day. Maria Teresa credits her business partners and an array of international and domestic organizations with supporting COOPA-ROCA’s success despite the obstacles. The AVINA Foundation, for example, supported consultancy work to improve COOPA-ROCA’s administrative and financial management in 2004-2006. TT is also supported by the Vital Voices Global Partnership, and is a fellow of the Lead International Program and the Environment and Sustainable Development Program run by the Rockefeller Foundation. Brazilian stylist Carlos Miele donated a plot of land for a new and larger headquarters for COOPA-ROCA, and the cooperative is currently looking to move and expand. TT holds COOPA-ROCA’s growth in membership and impact in the favela as a goal, and, borrowing a popular Brazilian phrase, optimistically notes, “A união faz a força,� or ‘unity brings strength.’ This information was provided by Courtney Price Ivins. Vital Voices Global Partnership and their partners facilitated this exchange. 106 Given that the cost of enforcing a contract in Rio Grande do But among all these barriers, Nara finds that the largest one Sul is also higher than the national average, at 20.7 percent for her is cultural. “Agricultural producers are marginalized of the claim, 30 it is natural that many cattle raisers in the by a highly urbanized society,� she explains. “People only region only deliver their products in exchange for cash. hear about the ‘countryside’ when Nara is no exception. After several bounced checks and the Ministry announces an delinquencies from abattoirs and packing plants, she now annual crop or food shortfall, takes only cash for her cattle. Nara explains that although or when the landless movement this practice may lower her profits by limiting her range orchestrates a new land invasion.� In her of buyers (cash-strapped abattoirs and packaging plants role within the agricultural producers’ have trouble purchasing from her), it shields her ranch from associations, Nara has advocated for a coordinated national insurmountable losses due to defaults. agricultural policy, taking the environment, as well as food producers, into account. “In Brazil, I have no problem being Trading Across Borders a woman,� she concludes. “I do, however, have a lot of Although Brazilian businesses have become more outward- trouble being a female rural producer.� looking in recent years and are especially competitive in agricultural and mining products, Brazil still ranks 100th out of 183 countries in the ease of trading across borders. While Case Study Highlights the number of documents required for exporting from Brazil • Brazil has one of the highest gender wage gaps in (8) is not dramatically above the average for Latin America Latin America. Women’s earnings are on average and the Caribbean (6.8), and the time for export is actually one-third less than men’s, after accounting for age, lower than the regional average (12 versus 18.6 days), the education, and hours worked. cost is tremendous. Exporting costs, on average, US$1,090 per container in the OECD, and US$1,244 in Latin America • The high number of procedures required, and the and the Caribbean, are US$1,540 in Brazil.31 28 percent costs associated with enforcing business contracts, of Brazilian firms see customs and trade regulations as a hinder trade within Brazil, as business owners seek to major constraint to their business and only 13.5 percent of reduce their risk exposure. firms export directly, in contrast to regional averages of 16 percent and 15.4 percent, respectively.32 • Business training offered to women is often gender- biased, particularly in rural areas: women are given Estância Boa Vista da Quinta does not export directly but courses on traditional roles such as cooking and works with businesses that do. As such, the cattle it sells sewing. This shuts out many Brazilian women from to the abattoirs and packaging plants must meet various the opportunity to work in higher growth sectors or international standards. “Mercosul and the European Union to use cutting-edge technology. have different sanitation standards,� Nara tells, “and this adds • Stereotypes are also a challenge for women to our costs. Two of our plots are separated from each other entrepreneurs, as they face a lack of credibility by just a few kilometers, but, to comply with European Union from clients, creditors, and peers in their sector. standards, if I bring a cow from one plot to the other, I have to Assumptions that women should work in “feminine� quarantine it first. This takes up land and requires extra care.� sectors, or that successful female-owned businesses are actually being run by men, pose difficulties for 30 World Bank (2006). Doing Business in Brazil. female entrepreneurs. 31 World Bank (2009). Doing Business 2010 database 32 World Bank (2009). Enterprise Surveys: Brazil. 107 Chile Karina Von Baer Bringing New Value to Chile’s Agricultural Riches Karina Von Baer grew up in a rural part of Chile. Her parents were farmers. From an early age, Karina knew the richness of her country’s agricultural resources. In 2000, she invested in her �rst business, a wheat and seed company. She is now the major shareholder in �ve Chile enterprises – Saprosem, GranoTop, AvenaTop, OleoTop and TreeTop – that combined employ almost 100 staff and have an annual turnover of US$50 million. While each of the �ve businesses focuses on a different agricultural product, they are all dedicated to improving the agricultural process. In 2007, Karina was named Entrepreneur of the Year for Chile by Ernst & Young. Country Context Karina turned to entrepreneurship at an opportune time in Chile. Since the return of democracy in 1990, Chile has been one of the fastest growing economies in Latin America, with an average annual per capita growth rate of 4.1 percent. Chile enjoys great natural wealth: salmon, fruit, wine and minerals – especially copper – are significant contributors to its exports. As a reflection of this economic success, Chile is ranked 30th out of 133 economies in the World Economic Forum’s Global Competitiveness Index 2010-2011.1 A reliance on exports has, however, made Chile particularly vulnerable to the current global economic Education and health indicators for Chile are strong relative crisis; economic activity recently contracted, despite a US$4 to other Latin American countries. Net primary and billion government stimulus plan. 2 secondary school enrolment rates are around 94 percent and 85 percent, respectively, with gender parity (and even Economic growth has enabled important advances for the a slight female advantage in the latter). At 52 percent, the country’s population. Between 1990 and 2006, the poverty enrolment rate for tertiary school is one of the highest in rate was cut by two-thirds, from 38.6 percent to 13.7 the region, providing a highly skilled workforce.4 Child percent; extreme poverty fell from 13 percent to 3.7 percent mortality is also very low, with only 0.34 deaths per 1,000 during the same period. 3 children; and the country is well-positioned to reach the Millennium Development Goal of 0.26 deaths per 1,000 children by 2015. GDP per capita (current USD): 10,084 Population, total: 1 World Economic Forum (2009). The Global Competitiveness Report 16,803,952 2009-2010. 2 World Bank. Undated. “Chile Country Brief.� Available online: http:// Total Fertility Rate: web.worldbank.org /WBSITE/EXTERNAL/COUNTRIES/LACEXT/ 1.9 births per woman CHILEEXTN/0,,contentMDK:22255176~pagePK:1497618 ~piPK:217854 ~theSitePK:325273,00.html 3 Source: World Bank (2010), World Development Indicators data- Government of Chile (2008). “Los Objetivos de Desarrollo del Milenio: base, most recent year available. Segundo Informe del Gobierno de Chile.� National Millenium Development Goals Report. 4 World Bank (2010). World Development Indicators database. 109 Graph 1. Female Labor Force Participation in Formal and Informal Sector 100.0 % 90.0 % 80.0 % 70.0 % 60.0 % 26.9% 50.0 % 20.2% 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % a ia il ile ica r or a as a ay ic ico a ru ay a do az in al gu m el bl liv ad ur Pe gu gu Ch R em zu ex nt na Br ua pu ra Bo nd lv ta ra u ge M ne Pa ca Ec at Ur Re Sa s Pa Ho Co Ar Ve Ni Gu El n ica in m Informal Sector Formal Sector Do Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. Nevertheless, Chile is plagued with high rates of inequality. to the patterns found in many poor countries, in Chile, In 2003, the average income of the richest 20 percent of the poorer women are less likely to work than their wealthier population was more than 14 times that of the poorest 20 counterparts: 26 percent of women in the lowest income 5 percent. Poverty rates vary dramatically by region, ranging quintile and 57 percent of women in the highest quintile from 6.3 percent in Magallanes to 20 percent in Biobío and participate in the job market. Chile has one of the highest La Araucanía.6 A similar pattern of regional variation can be earnings gaps between women and men: female earnings observed in education levels. are, on average, only 67 percent of male earnings. When Women in Chile Karina has found success during a period of growing gender Primary School Enrolment, equity in Chile. In addition to helping to elect their first Female/Male (%, gross): ever female president, Chilean women have experienced 103 / 108 Secondary School Enrolment, increased parity in terms of their access to education, Female/Male (%, gross): health, legal rights and political voice.7 92 / 89 Tertiary School Enrolment, Female/Male (%, gross): Still, the female labor force participation rate is under 50 52 / 52 percent, among the lowest in the region.8 In contrast Female/Male Adult Literacy Rate (%): 99 / 99 Female/Male Labor Force Participation (%): 5 World Bank (2007). “Country Partnership Strategy for the Republic of 48 / 79 Chile: 2007-2010.� World Bank, Washington, DC. 6 Administrative and Managerial Positions: Government of Chile (2008). “Los Objetivos de Desarrollo del Milenio: Segundo Informe del Gobierno de Chile.� National Millenium 24% held by women Development Goals Report. Seats in National Parliament: 7 Fort, Lucia, Indu John Abraham, María Beatriz Orlando and Claudia 15% held by women Piras (2007). “Chile: Reconciling the Gender Paradox.� Latin America and the Caribbean Region, En Breve, April, Number 105. 8 World Bank, Inter-American Development Bank and SERNAM. (2007). Source: World Bank (2009), Genderstats database, most recent year available. “Chile Country Gender Assessment: Expanding Women’s Work Choices to Enhance Chile’s Economic Potential.� Washington, DC. 110 Graph 2. Occupational Segregation in Chile 40.0 % 30.0 % 25.7% 24.7% 19.9% 19.5% 20.0 % 17.9% 13.0% 10.5% 11.0% 10.0 % 8.6% 6.6% 7.1% 7.1% 6.8% 5.0% 3.8% 4.3% 2.9% 3.2% 1.1% 1.5% 0.0 % ce es h h n s n th ts n ice c c io tio tio an al iti er Te Te ct rv He ra iv m rv ta ow h ru Se ct ist m Se or ig & st yA -L Co in -H sp d n n tic ille m Co io an ar ry es ry Ad at im st Sk Tr st m uc du Pr du s& ic Do Ed bl In In ie Female Male Pu ilit Ut Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. controlling for age, marital status, education, and job Legislation designed to ease women’s burdens may have tenure, the gap disappears among poorer cohorts, but had a paradoxical effect. Chilean law mandates that firms remains for those in the highest income deciles. This finding with 20 or more female workers must provide childcare is indicative of glass ceilings, outright discrimination against for their working mothers or subsidize their costs. Also, women, or differing values ascribed to non-salary benefits, women are allowed to use personal days to care for sick such as childcare facilities.9 children. The state also provides for eighteen weeks of 100 percent paid maternity leave and prevents women from Differences in education and training, women’s being dismissed within a year of the leave’s expiry.12 While disproportionate household burdens, engrained attitudes maternity leave benefits are financed by social security about gender roles, and cohort effects driven in part by contributions, employers note there are indirect costs for demographic factors, are among the principal explanations them, such as having to replace the worker while on leave. 13 for continued gender inequality in the labor market.10 Limited childcare options have also hindered women’s Combined, these laws seem to be limiting firms’ incentives ability to work: in a national opinion survey conducted in to hire women: for instance, research points to a large 2001, 58 percent of women in lower income groups and number of firms with 19 female workers (since hiring even 43 percent of wealthier women identified children as an one more woman would entail childcare obligations).14 obstacle to female labor force participation.11 Chile ranked near the bottom (101 of 104 countries) 12 CEDAW(2004). “Chile 4th Periodic Report.� CEDAW/C/CHI/4. United Nations. 13 9 Ibid. World Bank, Inter-American Development Bank and SERNAM. (2007). 10 Ibid. “Chile Country Gender Assessment: Expanding Women’s Work Choices 11 SERNAM and INE (2001). “Mujeres Chilenas: Estadísticas para el Nuevo to Enhance Chile’s Economic Potential.� Washington, DC. 14 Siglo.� Santiago, Chile. Ibid. 111 regarding the impact of maternity laws on hiring women (25.7 percent), education and health (24.7 percent), and in the World Economic Forum’s Executive Opinion Survey. domestic service (17.9 percent). And, while Chile performs relatively strongly for overall ease of “doing business� in the World Bank’s 2010 report, Balancing Home and Work 15 “employing workers� is its second worst category. Karina Von Baer has firsthand experience of the need to balance duties at home and work. In fact, this was one of Chile is paying a heavy cost for its gender inequalities: a her main reasons for turning to self-employment. Karina World Bank assessment estimates that if women’s labor grew up in an agricultural family in a depressed part of force participation rates were closer to regional averages, Chile. After finishing college with a degree in agricultural about 15 percent of total poverty and 20 percent of extreme economics in 1995, she decided it was time to explore the poverty in the country could be eliminated.16 world. Karina moved to Canada where she worked in odd jobs, perfected her English and met her future husband. Both the private and public sectors are recognizing the economic benefits of encouraging female labor force But her home beckoned, and the couple returned to participation. Some companies in Chile are trying to Chile in 1998. “I always knew I wanted to come back, better accommodate women’s dual roles in the home [but it] was difficult to convince my husband,� Karina says. and at work. For example, Procter & Gamble operates a Contributing to her country’s development was on Karina’s timetabling system based on results rather than set hours. mind. “It really makes a difference if you are here or not,� Banco Security offers a “time-bank� of 24 hours a year for she explains. “People who have had the opportunity to employees to meet personal responsibilities.17 learn, they have the duty to come back and give back to the region.� Karina briefly worked for her father, but was The Chilean government has also worked to address the soon ready to explore other jobs. “I realized that I did not lack of affordable childcare options in recent years. Elected have the freedom I needed… I am a very family-oriented in 2006, President Michelle Bachelet built her platform person and wanted to have the time to be with my child, around the theme of equality of opportunity and worked to to go with my child to the doctor, and to decide what I create a gender balanced cabinet. The government started wanted to do every day.� a program of free childcare for poor households. The Chile Crece Contigo (Chile Grows with You) initiative provides The dilemma is a familiar one to many women. But given her subsidies and childcare centers to 40 percent of families experience and higher education, finding a more flexible job with lowest incomes so that the women can work, look for was relatively straightforward for Karina. “As they knew I was work or study.18 These efforts seem to be having positive looking to work by myself, a few farmers in the region came impacts. More than 63 percent of Chilean working mothers to me and asked me if I would pick up the management of recently surveyed said that the new childcare initiative had a two-person company in the wheat and seed industries. I made it possible for them to work.19 agreed to work, but for only two days a week...� More than two-thirds of working women in Chile are The business, which acted as an intermediary between concentrated in three sectors (see Graph 2): commerce farmers and manufacturers, was small, with annual 18 Fort, Lucia, Indu John Abraham, María Beatriz Orlando and Claudia 15 World Bank (2009). Doing Business 2010. World Bank, Washington, DC. Piras (2007). “Chile: Reconciling the Gender Paradox.� Latin America 16 World Bank, Inter-American Development Bank and SERNAM. (2007). and the Caribbean Region, En Breve, April, Number 105. World Bank, “Chile Country Gender Assessment: Expanding Women’s Work Choices Washington, DC. 19 to Enhance Chile’s Economic Potential.� Washington, DC. Statement by The Chilean Minister for Women, Laura Albornoz 17 Ethical Corporation (2009). “Chile – Playing Gender Equality Catch-up.� Pollmann, speaking at the Global Summit of Women in Santiago, Ethical Corporation. Available online. Chile, May 2009. 112 revenue of around US$400,000. But within a year, Karina constraint to their business operations, only 20 percent of realized that the company had real potential. The business Chilean business owners feel the same way.23 provided farmers with an assurance that their crop would be purchased, and enabled manufacturers to coordinate But the path to getting credit is by no means smooth for their demands among various farmers. “For example, some small and micro (and especially female-owned) enterprises. businesses needed wheat with high protein, so they would According to the Inter-American Development Bank, more pay us in advance, and we would get farmers to produce than 60 percent of Chile’s microentrepreneurs are estimated it,� Karina explains. She convinced her husband that they to lack access to bank credit.24 Women are less likely to should buy some shares in the company. But rather than borrow from banks than men – accounting for 38 percent of using their own money, Karina found a creative way to buy borrowers and 26 percent of the total debt in the financial the shares, committing revenues from future production. system. This is in spite of the fact that women are better at repaying their loans: according to one study, 2.3 percent of In a country like Chile, Karina’s investment in Chilean men’s debts and 1.6 percent of women’s debts are entrepreneurship makes good economic sense. A 2006 in arrears.25 study by the Global Entrepreneurship Monitor (GEM) found that 40 percent of Chilean female entrepreneurs “When I started, there were no loan earn incomes above the national average. University- options besides banks and investors, but educated women such as Karina do even better: 61 now there are so many more ways to percent are ranked in the upper-third of the income strata. get money, through the government or Entrepreneurship among Chilean women rose by 68 percent between 2003 and 2006; by 2006 women made up one non-government organizations.� third of all entrepreneurs in Chile.20 These women tend to be well-educated: more than half of female entrepreneurs have Like many new businesswomen, Karina had to be creative 21 received some form of higher education. when she started expanding her holdings. Such were the successes of her business model for the wheat and seed Accessing Credit Creatively industries that after a few years she decided to apply In the Doing Business 2010 report, Chile was ranked 71st the model to canola seed oil, which is used for salmon out of 183 countries in terms of “getting credit.� Chile’s production. Karina estimated that the start-up costs for the score is mainly boosted by the “depth of credit information industry would be much higher than her previous venture index� (measuring the scope, access, and quality of credit – amounting to US$7 million. “I had to fly all over the world information available), for which it receives a 5 out of 6, to get loans and convince investors.� she recalls. in contrast to the average of 3.3 in Latin America and the Caribbean.22 Business owners in Chile are more likely to have loans from banks and less likely to identify access to credit as a business constraint than entrepreneurs in 20 Amoros, José Ernesto et al. (2006). “Chile GEM National Team Report.� Global Entrepreneurship Monitor. other countries in the region. Over two-thirds (69 percent) 21 Ibid. 22 of formal Chilean businesses have lines of credit or loans World Bank (2010). World Development Indicators database. 23 World Bank (2006). Enterprise Surveys: Chile. World Bank, Washington, from financial institutions, as compared to an average DC. 24 Inter-American Development Bank (2009). “Chilean bank expands of 46 percent for Latin America and the Caribbean. And financing for microenterprise with IDB assistance.� News Releases, while 28 percent of entrepreneurs in the region and 31 December 18. 25 Individual Indebtedness in the Financial System; quoted in CEDAW percent around the world count access to finance as a major (2004). “Chile 4th Periodic Report.� CEDAW/C/CHI/4. United Nations. 113 SERCOTEC: A Government Effort to Support Women Entrepreneurs SERCOTEC was established in 1952 to support micro and small entrepreneurs in Chile, offering business training and helping them become more competitive. Most recently, SERCOTEC, which operates within the Government of Chile’s Corporation for Production Promotion, has also led programs that focus on female entrepreneurs. The Competence Generation Program for Business and Entrepreneurial Women offers capacity building through courses covering issues such as financial and human resource management. In 2008, 1,306 women received training through this program; in 2009, 1,904 spots were made available for female entrepreneurs. SERCOTEC works with private banks, offering subsidies and guarantees to reduce the risk faced by banks and encourage their lending to micro entrepreneurs. Female applicants are given priority; between 2007 and 2009, 42.5 percent of loans issued with this program’s support went to women entrepreneurs. To date, SERCOTEC has provided around 5,000 Chilean entrepreneurs with seed capital to start or consolidate their business through a competitive process. Although this initiative is open to men and women, some funds are allocated exclusively to female entrepreneurs through the Seed Capital for Women program, with support from the National Development Fund. Sources: SERCOTEC (2009), “Chilean Experiences in Public Policies Promoting Micro, Small & Medium Business.� Global Summit of Women, presentation, Santiago de Chile. SERCOTEC (2010), SERCOTEC web page, [http://www.sercotec.cl/base/homepage.cfm (last accessed January 2010)]. Now that Karina is an established businesswoman with a banks and investors, but now there are so many more proven track record, she has no trouble accessing credit. ways to get money, through the government or non- Her holdings today encompass five enterprises, held under government organizations.� For example, the government’s one umbrella. With about 35 percent of shares, Karina Technical Cooperation Service (SERCOTEC) has expanded and her husband are the largest investors. Because of the the pool of finance available to female entrepreneurs (see seasonality of the business, she negotiates with banks box), and a number of banks in Chile have reached out annually, borrowing around US$30 million each year. to the female market through publicity campaigns and specially tailored loans. Through her business, Karina is in turn able to help small farmers gain a firmer foothold in the marketplace. “We Doing Business in a Traditional Society provide technology and help them reach government Chile’s regulatory regime is relatively conducive to starting programs that support production and provide market a business. The country is ranked a solid 49th out of 183 access.� She also offers business loans to the small farmers economies in the overall ease of doing business in Doing with whom she works directly to ensure that they can Business 2010.26 In Karina’s experience, “[Registering a produce the following year’s crop. business] is really not that big of an issue. The real issue is your own determination. You have to wake up and Karina thinks that credit is more accessible to smaller (female-run) businesses than it was a decade ago. She reflects, “When I started, there were no loan options besides 26 World Bank (2009). Doing Business 2010. World Bank, Washington D.C. 114 ComunidadMujer’s Mentorship Program ComunidadMujer’s Mentorship Program addresses a need expressed by businesswomen for support in developing their leadership skills, careers, entrepreneurship, and social responsibility. Under this program, women are assigned a mentor (male or female) who will provide guidance and capacity building over 5 months. Together, the mentor and mentee identify the latter’s weaknesses and the skills she should develop, given the challenges she faces. The Mentorship Program is designed to bridge a gap between the mentee’s current state – her vision, emotional state and ability to act – and a place in which she can clearly see her challenges and recognize her talents and leadership skills. Moreover, this initiative from ComunidadMujer aims to facilitate a cultural exchange, encouraging female and male mentors to make their desire to help others a part of their day-to-day activities. The mentor and the mentee both benefit from this connection. On the one hand, the mentee learns from her mentor directly, closely, and in a trusting environment. On the other, the mentor has a venue to pass on what she learned throughout her career and share how she achieved her goals, possibly touching upon areas for future collaboration between the two of them. Within the program, both the mentor and the mentee are also given the opportunity to network among their own cohorts as well. ComunidadMujer’s Experience ComunidadMujer’s Mentorship Program was launched in 2003 with 12 mentee-mentor pairs. Since then, as many as 200 mentees and 100 mentors have participated in the program. In 2009, the program’s seventh year, the program had 64 mentee-mentor pairs. The program has afforded mentees more confidence in themselves and their projects. They have been encouraged to take on more challenges and risks with guidance from their mentors. According to a Qualitative Impact Evaluation of the Mentorship Program, which covered the period between 2004 and 2007, 80 percent of mentees surveyed said their expectations had been completely, or at least partly, met by the program. Over 70 percent of mentees also found the program useful in helping them address their weaknesses, gain confidence, acquire new skills, and become more aware of their abilities and opportunities. For mentors, the main motivation they had in participating in the program was the possibility that they could help women in developing their careers. SERCOTEC and ComunidadMujer In 2009, ComunidadMujer and SERCOTEC partnered to develop and implement a mentorship program targeted at female entrepreneurs who were awarded SERCOTEC’s seed capital in 2008 (see SERCOTEC box). The purpose of the program is to provide close support to 50 female entrepreneurs, and, at the same time, provide capacity building to SERCOTEC staff to ensure the sustainability and expansion of the program in future years. This initiative is based on an alliance established in 2008 between SERCOTEC and ComunidadMujer to implement strategies and training programs to support women in business and entrepreneurship throughout Chile. The “Business Skills for Entrepreneurs� effort focuses on strengthening the skills and presence of women in growth sectors, encouraging pro-activeness and networking to improve their project or business. This alliance kicked off in 2008 with a seminar on personal skills attended by 150 female entrepreneurs from across the country, and has now been tailored into a full- fledged program providing close support to female entrepreneurs who were awarded funding from SERCOTEC. ComunidadMujer organized the focus group study used to inform the first part of this report. Two of the focus groups were comprised of female entrepreneurs from the organization. 115 understand that we need to change the world. No one will they had jointly owned company shares, he had been a come to you and say ‘I have an idea for you.’ People have to forester for a different company. “Now, he manages some understand that they can do things.� areas and I manage others,� Karina explains. As she sees it, involving her husband in the business has also helped her Karina hints that societal norms have presented a married life. “This way, we are going for the same goals, greater challenge to doing business than the regulatory coordinating our professional and family objectives.� environment. “In our society, it doesn’t matter if men come home at 11 o’clock [in the evening] but for a woman [the Promoting Female Entrepreneurship expectation] is different,� she believes. In fact, a survey A number of initiatives are working to encourage a shift rd conducted in 2002 placed Chile in the 23 position out of in women’s economic roles. Chile has a well organized 24 countries surveyed (only after the Philippines) in terms of National Service for Women, SERNAM. And the government 27 attitudes toward women working outside the household. has been pursuing gender equality at the national, regional And 75 percent of respondents in the 2006 GEM study and local levels through mechanisms such as the Council of feel that, in Chile, men and women do not receive equal Ministers for Gender Equality and the inclusion of gender exposure to good opportunities to create a new business.28 issues in the Management Improvement Program.30 As detailed earlier, the World Values Survey revealed Chile to be towards the bottom in the region and around the world Various organizations provide training to ensure that for its gender perceptions regarding female education. Even women are well equipped to participate in the economy. though gross enrolment in tertiary education is 52 percent For instance, the World Vision CECADEM (Centro de for both men and women, when Chilean respondents were Capacitación y Desarrollo de la Mujer – Women’s presented with the statement: “University is more important Development and Training Center) program provides for boys than for girls�, 14 percent (including 12 percent of training opportunities for low income women to improve women) strongly agreed.29 their skills and help them enter the job market.31 Fundación Chile – a public private partnership that focuses on sectors Karina thinks that these cultural norms directly impact with export potential – has developed standard certification her success as a businesswoman. “If I had been a man, the processes for groups such as fruit packers (predominantly company would have probably grown a lot more. I would women). ComunidadMujer offers a mentoring program have made it much bigger and reached out to more clients,� for businesswomen. Based on the success of the program, she muses. “In Chile, it is only normal for men to work hard SERCOTEC has commissioned a two-year mentoring and be an entrepreneur. Women may be entrepreneurs too, program specifically targeting female entrepreneurs. but not at such a large scale, not with such a large business.� Yet others help to expand networks for women. Mujeres But Karina has tackled these obstacles head on, and has Empresarias is an association with a membership base drawn on her husband’s support in building a successful of more than 3,000 women, who pay a small fee of $40 business. About two years ago, Karina’s husband decided per year. Their main activities include business training, to join her business as an active manager. Until then, while an annual convention, a Top 100 Women Leaders Award 27 30 Lehman, Carla (2003). “Mujer, Trabajo y Familia: Realidad, JICA (2006). “Chile: Country Gender Profile.� Planning Department, Percepciones y Desafíos.� Centro de Estudios Públicos. Santiago, Chile. JICA. 28 31 Amoros, José Ernesto et al. (2006). “Chile GEM National Team Report.� Mabuwa, Sem, Natalie Armstrong and Patricia Ruiz Delga (2008). Global Entrepreneurship Monitor. “Vocational Training and Employment for Chilean Women.� World 29 World Values Survey (2006). “World Values Survey for Chile.� Vision Australia. 116 with El Mercurio newspaper and a bi-monthly publication. Fundación Chile and the World Bank are currently partnering on a diaspora network to promote “brain Case Study Highlights circulation.� The network will allow expatriate Chileans to provide mentoring to Chilean entrepreneurs. Two of the ten • Chilean women are on average among the most initial expatriate mentors are women and the first Chilean educated in Latin America, but female labor force applicant, a honey producer, is female. If successful, this participation is one of the lowest in the region. could be an innovative model with potential for replication • Laws that aim to help women in the labor force may in other countries in the region. have unintended consequences. For example, as businesses with 20 or more female employees are Karina herself is becoming involved in a program led by required to provide childcare or subsidies, firms have Endeavor to mentor entrepreneurs. But, naturally, her an adverse incentive to hire women. Many firms in principal focus has been her own businesses, particularly Chile operate with 19 female employees. as the current financial crisis took its toll on the agricultural market. “In addition to the crisis, the salmon industry broke • Recently, Chilean business owners have gained down in Chile because of ISA [Infectious Salmon Anemia] increased access to credit. Nonetheless, women are disease, so we are now exporting canola seed oil as well,� less likely to borrow and tend to have smaller loans she explains. She has also observed higher default rates than men, even in the microcredit market. among farmers to whom she offers loans. • There has been increased interest in supporting Despite such setbacks, she remains optimistic. “The most entrepreneurship in recent years, with business important thing to learn is what you’re good at and what associations, government initiatives, and you’re not. Today, I think I can tell which business plan international efforts springing and gaining traction in will succeed and which will not. The greatest obstacle is Chile. Many of these focus on women entrepreneurs. oneself. If you want to do it, you will find a way to do it,� she cheerfully tells herself and aspiring entrepreneurs. 117 Jamaica Audrey Hinchcliffe and Sandra Palmer-Peart Doing What They Do Best: Perspectives from Two Women Entrepreneurs Jamaica has one of the highest female labor force participation rates in Latin America and the Caribbean, with women comprising 44 percent of the country’s total labor force.1 Yet, as they face lower salaries and higher unemployment rates than men, many Jamaican Jamaica women turn to entrepreneurship for income. Audrey Hinchcliffe had 20 years experience in the health sector in the United States and Guyana. But when she returned to Jamaica in 1987, she found few job opportunities and was frequently told she was overquali�ed for available positions. Dr. Sandra Palmer-Peart had a job in the Jamaican Information Technology (IT) sector, but felt shut out from jobs further up the corporate ladder. In response to these obstacles, both women started their own businesses, relying on what they knew best: Audrey founded a hospital cleaning service, now expanded to a general maintenance service; Sandra started a business technology �rm. Country Context Jamaica is a small, open economy with a population of around 2.7 million. The island has a strong democracy, a favorable regulatory environment, and relatively low inequality compared to the rest of Latin America and the Caribbean.2 But it also has one of the highest public debt rates in the world. After a slight dip in the late 1990s, central government debt has been over 100 percent of GDP since 2001. In 2007, 10.5 percent of GNI was spent on debt servicing alone.3 Inflation declined from 80 Economic growth in Jamaica has been low or negative percent in 1991 to 8 percent since the mid-1990s due to shocks, tight monetary policy, in 1999.5 Drops in inflation and consecutive crises. Nonetheless, poverty has declined are generally considered significantly over the last two decades. In 2004, the poverty pro-poor, as the poor tend to rate in Jamaica was around 16.9 percent, roughly half the have a larger share of their 1989 rate of 30.4 percent.4 This progress is attributed to at assets in currency. Twenty- least two trends: lower inflation and increased remittances. five percent of Jamaican citizens live abroad, and GDP per capita (current USD): remittances play a significant 5,439 Population, total: role in the national economy, figuring into the incomes 2,687,200 for roughly one-third of households. Remittances flow Female Headed Households (% of total): 44 Total Fertility Rate: 1 World Bank (2009), Genderstats database. 2 2.4 births per woman World Bank (2003), Jamaica: The Road to Sustained Growth. Country Economic Memorandum. 3 World Bank (2009), World Development Indicators database. Sources: World Bank (2010), World Development Indicators 4 World Bank (forthcoming), Jamaica Poverty Assessment: Breaking the database, most recent year available. World Bank (2001), “Project Cycle of Unemployment, Vulnerability and Crime. Appraisal Document on a Proposed Loan in the Amount of US$40 5 World Bank (2001), “Project Appraisal Document on a Proposed Loan Million to Jamaica for a Social Safety Net Project� in the Amount of US$40 Million to Jamaica for a Social Safety Net Project.� 119 into rural areas at even higher rates, reaching 41.3 percent Social indicators, on the other hand, are relatively good in 6 of households. The value of remittance receipts is large, Jamaica. Government expenditure on education and health and from the early 1990s to 2002 the average remittance is high compared to other middle-income countries in the receipt increased from 2 percent to 6 percent of total region, and Jamaica has achieved universal enrolment in household income. 7 primary education and near universal enrolment in junior secondary education (grades 7-9). In terms of gender parity, While Jamaican households are roughly evenly distributed the school enrolment rate of girls has in fact surpassed that between rural and urban areas, 80 percent of the poor live of boys.14 in rural areas and less than 10 percent live in the nation’s But educational quality remains an issue. Although capital, Kingston.8 Poor households tend to be larger than enrolment in primary education is universal, attendance non-poor ones, with 40 percent of poor households having is much lower, with acute differences between income 6 or more members. They are also more likely to be headed groups. Around 30 percent of Jamaican sixth graders are by women, so that while 44 percent of Jamaican households functionally illiterate, and 35 percent of children in the are female-headed, women comprise 66 percent of heads lowest income quintile attend school for less than 15 days of poor households.9 High poverty rates among female per month.15 Moreover, even as Jamaicans achieve higher headed households are explained in part by large family education levels, the country loses many of its most skilled to size, in part by single incomes, and in part by women’s migration. In the 1990s, for example, as many as 80 percent disadvantages in the labor market. 10 of the country’s tertiary level graduates moved abroad.16 Although poverty is a largely rural phenomenon in Jamaica, Although Jamaican health indicators are better than those pockets of poverty persist in urban areas and tend to of countries with similar or even higher incomes, the coincide with high rates of violent crime. Jamaica has one of country has been losing ground over the last two decades. the highest homicide rates in the world – over half of which For example, immunization rates for Jamaican infants occur in the Kingston metropolitan area. The phenomenon declined from 93 percent in 1993 to 85 percent in 1999.17 is largely associated with young males, who are both perpetrators and victims.11 While the informal sector is Women in Jamaica relatively small by regional standards, illegal activities, such In Jamaica, female enrolment in primary and secondary as drug sales and money laundering, comprise a significant education has been equal to or 0-5 percentage points above 12 and growing share of it. The World Bank estimates that the male enrolment since at least the early 1990s.18 At the high incidence of crime and violence costs the economy as tertiary level, female gross enrolment is over twice the male much as 4 percent of GDP each year.13 rate: 27 percent and 12 percent, respectively.19 The literacy rate for Jamaican women is 10 percentage points above that 6 Wyss, Brenda and Marceline White (2004), “The Effects of Trade for Jamaican men (91 percent and 81 percent, respectively). Liberalization on Jamaica’s Poor.� Women’s Edge Coalition with UNIFEM, Rockefeller Foundation, and Ford Foundation. 7 World Bank (forthcoming), Jamaica Poverty Assessment: Breaking the 14 Cycle of Unemployment, Vulnerability and Crime. World Bank (2009). Genderstats database. 8 15 World Bank (2001), “Project Appraisal Document on a Proposed Loan in World Bank (2001), “Project Appraisal Document on a Proposed Loan in the Amount of US$40 Million to Jamaica for a Social Safety Net Project.� the Amount of US$40 Million to Jamaica for a Social Safety Net Project.� 9 16 Ibid. Wyss, Brenda and Marceline White (2004), “The Effects of Trade 10 World Bank (2005). Country Assistance Strategy for Jamaica. Liberalization on Jamaica’s Poor.� Women’s Edge Coalition with 11 Ibid. UNIFEM, Rockefeller Foundation, and Ford Foundation. 12 17 Wyss, Brenda and Marceline White (2004), “The Effects of Trade World Bank (2001), “Project Appraisal Document on a Proposed Loan in Liberalization on Jamaica’s Poor.� Women’s Edge Coalition with the Amount of US$40 Million to Jamaica for a Social Safety Net Project.� 18 UNIFEM, Rockefeller Foundation, and Ford Foundation. World Bank (2009). Genderstats database. 13 19 World Bank (2005). Country Assistance Strategy for Jamaica. Ibid. 120 Graph 1. Occupational Segregation in Jamaica 40.0 % 34.0% 30.7% 30.0 % 22.6% 20.0 % 17.6% 15.3% 13.8% 12.1% 10.7% 10.0 % 5.4% 6.4% 4.5% 5.0% 4.6% 5.4% 3.8% 2.5% 2.2% 1.2% 1.7% 0.7% 0.0 % ce th es h h n s n ts n ice c c io tio tio an al iti er Te Te ct rv He ra iv m rv ta ow h ru Se ct ist m Se or ig & st yA -L Co in -H sp ed n n tic m Co io an ar ry ill es ry Ad at im st Sk Tr st m uc du Pr du s& ic Do Ed bl In In tie Female Male Pu ili Ut Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. And among youth (15-24 years old), almost all girls are literate (98 percent) while 9 percent of boys are not.20 Primary School Enrolment, Female/Male (%, gross): 89 / 91 Secondary School Enrolment, Female/Male (%, gross): Jamaica has one of the highest female labor force 92 / 88 participation rates in the region, but working women face Tertiary School Enrolment, Female/ Male (%, gross): 27 / 12 distinct challenges.21 Although women constitute over 50 Female/ Male Adult Literacy Rate (%): percent of the professional labor force in Jamaica, almost 91 / 81 half of them are concentrated in low-paying, minimum Female/ Male Labor Force Participation (%): 62 / 78 wage jobs.22, 23 In the free trade zones (FTZ) in Kingston and Seats in National Parliament: Montego Bay, which focus on apparel production for export, 13% held by women women at one point comprised 90 percent of workers, but Source: World Bank (2009), Genderstats database, most recent year available. the vast majority of jobs were “laborious, poorly paid, and [offered] few opportunities to gain new skills.�24 On average, female earnings are equivalent to only 83 percent of male earnings (not controlling for differences in jobs or hours worked), despite higher female education levels.25 Women 20 Ibid. 21 World Bank (2002). “A Review of Gender Issues in the Dominican are also more likely to be made redundant than men.26 Republic, Haiti and Jamaica.� Wyss and White (2004) estimate that Jamaican women, 22 Wyss, Brenda and Marceline White (2004), “The Effects of Trade Liberalization on Jamaica’s Poor.� Women’s Edge Coalition with UNIFEM, Rockefeller Foundation, and Ford Foundation. 23 25 World Bank (2002). “A Review of Gender Issues in the Dominican World Bank (2002). “A Review of Gender Issues in the Dominican Republic, Haiti, and Jamaica.� Republic, Haiti, and Jamaica.� 24 26 Wyss, Brenda and Marceline White (2004), “The Effects of Trade Wyss, Brenda and Marceline White (2004), “The Effects of Trade Liberalization on Jamaica’s Poor.� Women’s Edge Coalition with Liberalization on Jamaica’s Poor.� Women’s Edge Coalition with UNIFEM, Rockefeller Foundation, and Ford Foundation. UNIFEM, Rockefeller Foundation, and Ford Foundation. 121 Graph 2. Informal SME Ownership by Gender 100.0 % 90.0 % 80.0 % 70.0 % 60.0 % 50.0 % 40.0 % Male Female 30.0 % 20.0 % 10.0 % 0.0 % Own Account Micro (2-4 Small (5-20 (single employee) employees) employees) Source: Reproduced from IDB (2006),� The Infomal Sector in Jamaica� who comprised the majority of those employed in the FTZs, as unwanted pregnancies unduly limit female opportunities in were disproportionately hurt by competition from the North education and full-time employment.32 American Free Trade Agreement (NAFTA). Two-thirds of To navigate their way around the limitations imposed by the persons laid off in 2001 in Jamaica, for instance, were women. 27 labor market, Jamaican women often turn to one of three Moreover, female unemployment is twice as large as male options: the public sector, migration, and entrepreneurship. unemployment (22 percent and 10.3 percent, respectively). Female employment in the public sector is almost twice as Among the population 15-24 years of age, one in three large as male employment: in 2001, for example, 17 percent Jamaican women in the labor market is unemployed.28 Graph of women and 9 percent of men were employed by the 1 shows that over three-fourths of female employment in public sector.33 Similarly, migration plays an important role Jamaica is concentrated in four sectors: commerce (30.7 for Jamaican women seeking employment opportunities: percent), education and health (22.6 percent), domestic 25 percent of Jamaicans live abroad (the vast majority in the service (15.3 percent), and primary activities (12.1 percent). United States), and women make up 55 percent of migrants.34 Other vulnerabilities associated with women in Jamaica Among those who stay in the island, female-headed include gender-based violence and unintended households are slightly more likely to receive remittances than pregnancies. One in five women 25-60 years of age male-headed households: 38.0 percent of female-headed has suffered some sort of abuse in their lifetime, and households received international remittances in 2001, as an estimated 70 percent of pregnancies in Jamaica are compared to 33.5 percent of male-headed households.35 unintended.29 Teen pregnancy rates have been increasing since 1999 and as many as 87 percent of these pregnancies 30 Wyss, Brenda and Marceline White (2004), “The Effects of Trade are unwanted. 30, 31 These high rates reveal an alarming picture, Liberalization on Jamaica’s Poor.� Women’s Edge Coalition with UNIFEM, Rockefeller Foundation, and Ford Foundation. 31 World Bank (2002). “A Review of Gender Issues in the Dominican Republic, Haiti, and Jamaica.� 32 Wyss, Brenda and Marceline White (2004), “The Effects of Trade 27 Ibid. Liberalization on Jamaica’s Poor.� Women’s Edge Coalition with 28 World Bank (forthcoming), Jamaica Poverty Assessment: Breaking the UNIFEM, Rockefeller Foundation, and Ford Foundation. Cycle of Unemployment, Vulnerability and Crime. 33 Ibid. 29 World Bank (2002). “A Review of Gender Issues in the Dominican 34 Ibid. Republic, Haiti, and Jamaica.� 35 Ibid. 122 Despite their high labor force participation rate, Jamaican and Maintenance Services (MMS), replacing CHMC with women were under-represented in micro-entrepreneurship a company that could provide a wider range of services, in the early 1990s.36 Nonetheless, a substantial number of including pest control, landscaping, carpet care, carpentry, Jamaican women currently participate in firm ownership. and plumbing. Today, MMS is the largest facilities One in three Jamaican formal firms surveyed by the World maintenance company in Jamaica, with annual revenue of Bank in 2005, for example, reported female participation in over 700 million Jamaican dollars (currently around US$8.5 ownership, a rate slightly below the regional average (38.94 million) and 1,800 employees. “We are clearly the company percent) but in line with the world average (32.08 percent).37 of choice in the high-end market, and one can easily spot In the informal SME sector, women are increasingly an MMS employee in his uniform anywhere in the island,� represented in the smallest firms. Women own only 21 Audrey beams with pride. “We have created a brand name in percent of small informal businesses (5-20 employees), Jamaica. We now have world recognition and are a member but as much as 42 percent of micro informal businesses of the Cleaning Management Institute and the only Jamaican (2-4 employees). Meanwhile, 58 percent of informal own member in the Building Service Contractors International.� account workers are women.38 MMS has over 200 clients, including telecommunications companies, banks, airports, and hospitals, as well as large Creating Opportunities through Entrepreneurship entertainment and sporting events. Audrey Hinchcliffe had twenty years of experience in nursing and hospital administration when she returned Audrey’s client base frequently overlaps with that of to Jamaica in 1987. Despite her extensive resume, she another successful female entrepreneur in Jamaica, Sandra struggled to find a job. “The beginning was very, very Palmer-Peart. Sandra launched SSP APTEC in 1997, when tough,� she recalls. “I was so confused when I first arrived in she too felt constrained by limited career opportunities. Jamaica that I had to go to several counseling sessions.� She “I had completed an MBA, had overseas experience, and felt like a stranger in her own country and found that she was frustrated in climbing the corporate ladder – always was overqualified for employment opportunities in her field. working very hard but not being rewarded, maybe Noticing the underdevelopment of the commercial cleaning because I was too young and just had to wait my turn.� SSP business in Jamaica, Audrey decided to launch Caribbean APTEC is an information technology consulting company, Health Management Consultants (CHMC). Her first contract providing audio-visual and IT equipment sales and rentals, was with the University Hospital of the West Indies, providing outsourced janitorial and nurse aid services to and strategic advice. Sandra’s clients include several one of its wings. government ministries and agencies, such as the Electoral Office, the Customs Department, and the Ministry of Health, When the Government of Jamaica announced that it as well as large corporations such as the Bank of Jamaica would be outsourcing the janitorial services for several and the Bank of Nova Scotia. of its buildings, Audrey won the bid for the Spanish Town Hospital. In May 1990, she founded Manpower Like Audrey, Sandra had significant experience in the field when she chose to open her own business. She explains, “It hit me – why not do what I have always been doing, what people know me for, and what I know I am good at?� 36 Klein, Emilio and Victor E. Tokman (1993), “Informal Sector and But because of her experience, she also knew that Jamaica Regulations in Ecuador and Jamaica.� OECD, Working Paper, No. 86. 37 World Bank (2005). Enterprise Surveys: Jamaica. already had many IT consulting companies. To distinguish 38 Inter-American Development Bank (2006). “The Informal Sector in Jamaica.� Economic and Sector Study Series. SSP APTEC, she focused on customer service. “I had noticed 123 much inefficiency in the IT business where I had worked once she secured her first few contracts. Sandra launched for so many years, so I started to think how my company her company in a 100 square foot office, away from the can make changes in the industry and really get to know business center where most of her target clientele was and understand the customer.� Sandra reaches higher-end based, with one assistant as her only employee. customers by offering what she describes as a “personalized service.� Accessing Credit Doing Business 2010 ranks Jamaica 87th out of 183 countries Starting Up in terms of accessing credit for businesses.44 But this As the Jamaican public sector shrank in the mid-1990s, ranking, which places Jamaica close to the world median, is many would-be public servants turned to entrepreneurship based on four indicators – legal rights, credit information, for employment. Since 1997, around 35-40 percent of and public and private registry coverage – and masks the employed Jamaicans are self-employed, either as own- competition faced by business owners seeking credit. 39 account workers or employers. The Jamaican regulatory Jamaican government debt is one of the highest in the environment makes it relatively easy to open a business: world; at a level equal to 45 percent of bank deposits, public the World Bank’s Doing Business 2010 survey ranks the debt crowds out entrepreneurs by offering banks relatively th nd country 19 out of 183 (2 in the region) in terms of the low-risk debt.45 In fact, an Enterprise Survey found that 43.8 ease of starting a business.40 In Jamaica, it takes 8 days and percent of Jamaican firms see access to finance as a major costs the equivalent of 5.3 percent of per capita GNI to open constraint to their business operations, in contrast to an a formal business, in contrast to an average of 61.7 days average of 27.8 percent of firms in the region.46 and 36.6 percent of GNI per capita for all of Latin America and the Caribbean.41 Among businesses that remain To launch their businesses, both women had to rely on their informal, the main culprit is a lack of knowledge of the own funds, their friends and family, and their creativity. requirements for formalization, rather than the high costs of With her loan application turned down, Audrey used the last starting and/or conducting formal business cited in many paycheck from her previous employer to start CHMC, and other countries in the region. For instance, in a survey of asked major clients for payment advances for “mobilization informal businesses commissioned by the Inter-American cash.� When she was searching for start up capital to Development Bank, as many as 31 percent of informal launch her next business, she turned to what she knew business owners said they were not required to have a tax best – nursing and hospital administration. Audrey’s book registration number, while 20 percent claimed the process – Taking Care: a Manual for Medical Office Administrators 42 for securing one was too complicated. – was published in 1989. The book’s sales had a dual effect: they promoted her name in the industry and generated Many businesses in Jamaica start small, and most of them the capital she needed to launch her enterprise. She recalls are run from the household. Only 30 percent of Jamaican proudly, “It sold like hotcakes! It was the first manual in 43 enterprises are based in commercial buildings. Audrey Jamaica on how to manage offices, and I still use it for started her business in her home, moving to a small office training programs.� 39 ILO (2009), LABORSTA Internet database, Jamaica. 40 World Bank (2009). Doing Business 2010 database. 41 44 Ibid. World Bank (2009). Doing Business 2010 database. 42 45 Inter-American Development Bank (2006). “The Informal Sector in Wyss, Brenda and Marceline White (2004), “The Effects of Trade Jamaica.� Economic and Sector Study Series. Liberalization on Jamaica’s Poor.� Women’s Edge Coalition with 43 Klein, Emilio and Victor E. Tokman (1993), “Informal Sector and UNIFEM, Rockefeller Foundation, and Ford Foundation. 46 Regulations in Ecuador and Jamaica.� OECD, Working Paper No. 86. World Bank (2005). Enterprise Surveys: Jamaica. 124 Sandra recalls that, despite her MBA, her years of experience Audrey admits that she is frequently in arrears with her in the IT sector, and the detailed business plan she had taxes, often because of delays in payments for services by prepared for SSP APTEC, she could not fulfill the collateral government agencies. She hires tax advisors and attorneys requirements required for a loan. Because an IT consultancy to secure the money and waivers on any interest or company is mainly knowledge-based, she did not have penalties assessed on her business. She counts at least six enough heavy machinery or business equipment to put different types of taxes she must pay as an employer: “There a lien on, and had to rely on friends and family for start- are just too many taxes to pay, and I have to do this twice up money. “The difficulty in accessing capital acts as a a month. So when this clashes with payroll, I have massive deterrent for many women to start their own businesses,� sums of money to pay out and of work to prepare them.� Sandra believes. Even though she succeeded in opening Sixty percent of Jamaican business owners see the tax her company, she wonders what other Jamaican women rate as a major constraint to their business, in contrast with good business ideas, but lacking the necessary with 37 percent of business owners in the region (in spite resources or networks, might do: “There is no structured of the fact that the tax rate on businesses is close to the financing for new business ideas in Jamaica…To open a regional average).51, 52 Potential explanations for this high business, women have to commit their own resources. rate of dissent are the number of tax payments required, Although they might get help from family members, they or a sentiment that, in Jamaica, “tax collections largely go have to rely on their savings too… if they have any.� to pay for government interest costs and other current expenditures that do not contribute to growth.� 53 Paying Taxes At 174th out of 183 countries, Jamaica’s lowest score in The Toll of Crime and Violence the 2010 Doing Business Report is for paying taxes. In In Jamaica, crime and violence are important limiting Latin America and the Caribbean, it is third-to-last on factors to business operations and overall productivity. In a this dimension, ahead of only Bolivia and Venezuela.47 In business victimization survey for the World Bank, 42 percent recent years, the government of Jamaica eliminated some of all managers interviewed felt that they were likely or distortionary tax incentive schemes and decreased business highly likely to be murdered in the workplace.54 Over half registration processing by 22 days by streamlining social of firm owners reported that crime placed a significant security and tax registration procedures.48 Nonetheless, burden on their business by increasing the cost of security. Jamaica is still among the top 10 countries with the highest 39 percent of business owners reported that crime had a number of tax payments required, and half of Jamaican negative impact on their plans for business expansion; 37 firms identify tax administration as a major constraint to percent said that crime limited the investments they made their business.49 While businesses in OECD countries have to improve the productivity of their business.55 Crime to make on average 12.8 tax payments per year and those may also restrict the number of work shifts and days, and, in Latin America and the Caribbean make around 33.2 together with the burdens noted above, it lowers the payments, Jamaican businesses submit 72 tax payments competitiveness of Jamaican businesses.56 per year.50 51 World Bank (2005). Enterprise Surveys: Jamaica. 52 World Bank (2009). Doing Business 2010 database. 53 World Bank (2003), Jamaica: The Road to Sustained Growth. Country 47 World Bank (2009). Doing Business 2010 database. Economic Memorandum. 48 World Bank (2006). Doing Business in 2006: Creating Jobs. 54 Ibid. 49 World Bank (2005). Enterprise Surveys: Jamaica. 55 Ibid. 50 World Bank (2009). Doing Business 2010 database. 56 Ibid. 125 WEConnect International: Leveraging Supply Chains to Level the Playing Field Globally, women own 1/4 to 1/3 of all private businesses. But within supply chains, women-owned businesses represent less than 1 percent of suppliers to governments and large corporations. Audrey and Sandra are exceptional, as they have secured solid and long-lasting vendor relationships with local giants for their businesses. WEConnect International is a non-profit organization, based in the United States that supports and encourages supplier diversity initiatives throughout the world. It estimates that approximately 97 percent of Fortune 500 companies have supplier diversity programs, with 80 percent of them even requiring similar efforts from their tier one and two suppliers. But recognizing that female enterprises are not yet easily identifiable, WEConnect International provides training and sometimes funding to its global affiliates, which are local institutions that certify businesses that are at least 51 percent owned, managed, and controlled by women. With support from several large corporations,including Accenture, Boeing, Ernst & Young, IBM, Pfizer, and Walmart, WEConnect International shares the standards developed by its first affiliate – the Women’s Business Enterprise National Council (WBENC) in the United States– with the rest of its networkin Canada, Europe, India, and China. These affiliates receive support for helping to identify and develop the capacity of local women’s business enterprises, thereby helping national corporations and governments include them in their value chains. The WEConnect International online portal will also provide businesses with easy access to knowledge and networks, so that women can more easily do business with each other, and multinational corporations can more easily include diverse vendors in their bidding process. The World Bank currently works with WEConnect International as well, helping to ensure that the Bank’s procurement process is inclusive of women-owned businesses. Through its network, WEConnect International supports supplier diversity efforts and the engagement of female entrepreneurs globally. Its experience shows that supplier diversity programs are not sufficient in themselves to ensure a level playing field for women entrepreneurs; rather, large corporations and governments need an easy way to identify those businesses. In Jamaica, as in the rest of Latin America and the Caribbean, female entrepreneurship is rising. But without expanded efforts, Audrey and Sandra’s businesses will likely continue to be an exception in supply chains. Sources: WEConnect International brochure and website and interview with Ms. Elizabeth A. Vazquez (2009), CEO and Co-Founder. Women Helping Others Audrey is looking into franchising her business and Audrey and Sandra both have plans to expand their buying a small company in the United States. Sandra’s SSP businesses outside Jamaica. Despite the current financial APTEC has already reached the United States, providing IT crisis, MMS receives more calls for service each month; solutions to businesses in Florida. 126 Despite the masculine name of her business and the Women Business Owners Jamaica (WBO) is a non-profit fact that some of its services (e.g., carpentry and organization promoting women’s enterprises. plumbing) are traditionally male-dominated, Audrey sees her business as naturally fitting for a woman. “The Both women also dedicate their time to teaching and dominance of women in nursing set the stage for my providing learning opportunities to other Jamaicans. Today, business, perhaps because women are identified more Audrey also leads the Institute for Workforce Education and with housekeeping duties,� she reflects. But she fights Development (IWED), an off- against other stereotypes and refuses to join women’s “No bleeding heart shoot of the training program associations. “No bleeding heart for me just because I for me just because used by MMS, which offers am a woman,� Audrey says. “I am a business woman and I am a woman. I am courses to non-employees I need to be treated equally. At work, you show them a businesswoman on skills such as computing, that you are equal to the task. Do what you have to do, cleaning techniques, gardening, and I need to be work, and earn your place and name.� In fact, Audrey and pest control. Recently, treated equally…� has succeeded in taking on other male-dominated roles, IWED was also certified to including that of President of the Jamaican Employers provide vocational training and preparation for public high Federation. She was the first woman to head this trade school exams. Using her business connections, Audrey union, and held on to this position for four years. also runs the Special Youth Employment, Apprenticeship, and Training Project, a government project providing Sandra is all too familiar with operating in a male- training and job placement to Jamaican youth locally and dominated sector. She notes that it can be difficult to internationally. Audrey offers this advice to women in the recruit women for her business because of the small labor force: “Be a woman. Be as professional and feminine number of female graduates in technology. She explains as you can be, but, above all, know your business.� hopefully, “Men have traditionally gravitated towards this field and this is still evident at IT conferences and bid Sandra mentors aspiring entrepreneurs and is a lecturer openings. Nevertheless, quite refreshingly, more women at the University of the West Indies and at the Northern are entering the field and are doing very well.� Currently, Caribbean University. Twice a week, she also hosts a radio SSP APTEC has 21 employees – 13 men and 8 women. show providing advice on starting a business. As a woman in a male-dominated sector, she hopes that the business Unlike Audrey, Sandra believes that a women’s business environment in Jamaica will soon become more welcoming association could help women succeed in the labor market, for female entrepreneurs. “Maybe the rules and procedures particularly in male-dominated sectors. “In Jamaica, there is for being an entrepreneur in Jamaica are the same for both still an old boy’s club. Men do business and hang out, and genders, but the subtleness in the culture still stands out.� they tend to do business with those they know. We should Sandra explains: “Female entrepreneurs continue to be have a girl’s club and other networks of our own too.� Some treated differently by men, maybe a little less business like. steps in that direction have already been taken: Jamaica In a way, female entrepreneurs have to put in so much more was the first Caribbean Community (CARICOM) country to effort to get other professionals to believe that they are 57 have a women’s affairs office in the government, and the committed.� 57 World Bank (2002). “A Review of Gender Issues in the Dominican Republic, Haiti, and Jamaica.� 127 Case Study Highlights • In Jamaica, male and female entrepreneurs face a relatively benign regulatory environment, but competition in access to finance, the complexity of the tax system, and crime and violence represent constraints to doing business. • Even in a relatively equitable environment, women may encounter subtle but significant disadvantages in the labor market. • Cultural limitations on female career advancement can push women toward entrepreneurship, but may also result in brain drain. 128 Mexico María Elena Mendoza Taking Care of Business Above and Below the Ground Starting a business in Mexico is not easy, by international standards. The country is ranked 90th out of 183 economies in the World Bank’s Doing Business indicator on business start-up. As if the average challenges of starting a business were not enough, María Elena Mendoza Mexico chose to launch her enterprise in a highly regulated sector in Mexico: funeral services. After over 30 years of careful management and credit-funded expansion, the family-run Jardines del Recuerdo employs 400 people and has the capacity for 27 funeral services per day. It is the largest funeral services business in Latin America. Country Context María Elena grew up in an advanced middle income country. Following economic and political reforms in the late 1990s, Mexico is well integrated into the global economy. It boasts high creditworthiness, sophisticated financial needs, membership of the OECD, and strong ownership of its development strategy.1 From 1996 to 2005, the Mexican economy grew at a modest 2 percent per capita per year, but its growth has remained positive since 2003.2 Favorable macroeconomic conditions enabled the federal government to reduce its external debt to a historical low of 28.5 percent of total outstanding debt poverty. It took Mexico until 2002 to recover to pre-crisis toward the end of 2006. Global economic growth, high oil levels. In 2004, extreme poverty stood at 17.6 percent, prices and export revenues, favorable external financial and another 30.1 percent of the national population conditions, and increased domestic credit also helped raise lived in moderate poverty (roughly the same as in 2000). economic activity and employment preceding the financial Despite Mexico’s high urbanization rate, 60.7 percent of crisis of 2008/2009.3 the extremely poor are in rural areas, while 62.5 percent of the moderately poor are in urban areas.4 Forty percent Despite these advances, the poverty rate and inequalities of the national income is concentrated in the top decile of across regions and social groups remain high. The 1994/1995 income earners, while the bottom decile earns just 1 percent Mexican crisis reduced real wages and significantly increased of national income.5 The national Gini index for Mexico is 48.11, significantly lower than the 51.87 reached in 2000, but higher than it was two decades ago (46.26 in 1984).6 GDP per capita (current USD): 10,232 1 Population, total: World Bank (2004). Mexico Country Partnership Strategy. 2 106,350,434 World Bank (2010). World Development Indicators database. 3 World Bank (2007). Mexico Country Partnership Strategy Progress Total Fertility Rate: Report. 2.1 births per woman 4 World Bank (2005). Income Generation and Social Protection for the Poor. 5 World Bank (2007). Mexico Country Partnership Strategy Progress Source: World Bank (2010), World Development Indicators database, Report. 6 most recent year available. The Gini index is a measure of inequality ranging from 0 (perfect equality, everyone has the same income) to 100 (perfect inequality, richest person has all the income). World Bank (2009), PovcalNet. 129 Graph 1. Female Labor Force Participation in Formal and Informal Sector 100.0 % 90.0 % 80.0 % 70.0 % 60.0 % 22.1% 27.6% 50.0 % 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % a ia il ile ica ic r or a as ico a a ay ru ay a do az in al gu m el bl liv ad ur Pe gu gu Ch R em zu ex nt na Br ua pu ra Bo nd lv ta ra u ge M ne Pa ca Ec at Ur Re Sa s Pa Ho Co Ar Ve Ni Gu El n ica in m Informal Sector Formal Sector Do Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. Women in Mexico At close to 50 percent, Mexican women’s labor force Primary School Enrolment, Female/Male (%, gross): participation rate is one of the lowest (but fastest- 112 / 114 growing) in the region, and contrasts with a participation Secondary School Enrolment, rate of 85 percent among Mexican men. 7 Average rates, Female/Male (%, gross): 90 / 85 however, hide differences across groups of women. Single Tertiary School Enrolment, women participate in the labor force at a much higher Female/Male (%, gross): 26 / 27 rate than married women. In the Mexican national urban Female/Male Adult Literacy Rate (%): employment survey (ENEU) of 1987-1993, the labor force 91 / 95 participation rates were 24.31 percent for married women, Female/Male Labor Force Participation (%): 46 / 85 51.26 percent for single mothers and 79.25 percent for Seats in National Parliament: single women with no children. 28% held by women Source: World Bank (2009), Genderstats database, most recent year available. These figures reflect two facets of women’s day-to-day reality: married women tend to enter the labor force to supplement existing household income, while single to childcare in Mexico is very close to the Latin American women are often their household’s primary breadwinner; and Caribbean average but significantly below the OECD and women with children need to balance earnings average of 76.7.9 This may imply an accessibility that is high 8 requirements with childcare needs. With a score of 60 in enough to attend to the childcare needs of many single the Women’s Economic Opportunity Index, female access working women with children but still not enough to tip 9 7 World Bank (2009). Genderstats database. Scores range from 0 to 100 and are normalized with data from 8 Cunningham, Wendy (2001). “Breadwinner versus Caregiver: Labor all countries included in the index. Economist Intelligence Unit Force Participation and Sectoral Choice over the Mexican Business (forthcoming), Women’s Economic Opportunities Index. Funded by Cycle,� in The Economics of Gender in Mexico, eds. Katz and Correia. the World Bank. 130 Graph 2. Occupational Segregation in Mexico 40.0 % 37.7% 30.0 % 23.6% 20.0 % 19.1% 18.7% 11.6% 10.7% 10.5% 10.0 % 8.4% 8.1% 7.8% 6.1% 6.9% 7.3% 5.8% 5.8% 5.1% 4.3% 0.7% 0.9% 0.8% 0.0 % ce es h h n s n th ts n ice tio c c io tio an al iti er Te Te ct rv He ra iv m rv ta ow h ru Se ct ist m Se or ig & st yA -L Co in -H sp d n n tic ille m Co io an ar ry es ry Ad at im st Sk Tr st m uc du Pr du s& ic Do Ed bl In In ie Pu Female Male ilit Ut Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. the earnings-childcare balance for many married women to Education levels have increased significantly in Mexico over enter into the labor force. the last 15 years and the female-male gap is closing. Although the female-male gross enrolment ratio in primary school has In addition to expectations regarding women’s role in the stayed at a steady .97-.98 throughout the 2000s, the ratio for home, education explains some of the gaps between male secondary school enrolment flipped from .98 in 1991 to 1.06 and female labor force participation rates. Evidence from in favor of girls in 2007. Gross secondary school enrolment the 1995 national survey of the population and housing rates increased from 53 percent to 90 percent for girls and count (Conteo) shows that although the female-male gap from 54 percent to 85 percent for boys during the same in educational attainment is decreasing, it is still relevant period. Female gross enrolment in tertiary education has also for most working-age cohorts. A higher education gap in increased from 18 percent in 1999 to 26 percent in 2007. Still, favor of men appears in the 20-24 age group and prevails men remain slightly more likely to have tertiary education.11 among all older groups. The urban-rural gap is even larger, as exemplified by the 40-44 age group: in this group rural Working women tend to be concentrated in the service women had an average of just under 3 years of schooling, sector. 12 Graph 2 shows that over two-thirds of Mexican and rural men had almost 4; urban women had over 7 years women workers are concentrated in 3 sectors: commerce 10 of schooling, and urban men almost 9. But even at the same (37.7 percent), education and health (18.7 percent), and low level of education as men, women tend to earn lower wages. tech industry (10.7 percent). 11 10 Parker, Susan W. and Carla Pederzini (2001). “Gender Differences in World Bank (2009). Genderstats database. 12 Education in México,� in The Economics of Gender in Mexico, eds. Katz Katz, Elizabeth G. and Maria C. Correia (2001). “Introduction,� in The and Correia. Economics of Gender in Mexico, eds. Katz and Correia. 131 Starting a Family-Run Business María Elena was 32 and already had five children from a Paying Taxes in Mexico previous marriage when she married José Medleg Ríos, an agricultural economist and successful entrepreneur. “José One in every four countries has systems that enable was an angel. Not many Mexican men would accept a businesses to file and pay taxes electronically. In divorced mother with five kids. He showered my five children Mexico, taxes can be paid online through several with great love, and treated them as his own,� she says. banks. “The steps with bank payments were difficult in the beginning, and we were very nervous and a Like José, María Elena had an entrepreneurial spirit. “I always little scared about the possibility of fraud through the had a yearning to have my own business,� she explains, internet,� María Elena recalls. “But now we’ve been “and at 24 years old, I became an interior designer. At 26, I doing it for four years. Mexico is more and more up to switched to designing my own furniture line and opened date and the government has a website which is more a furniture factory with my first three employees. It was and more current.� Jardines del Recuerdo now pays its my experience in drawing and design that influenced monthly taxes online through a bank card. the decision to create Jardines del Recuerdo, our family- The Doing Business 2008 report recognized Mexico operated funeral service business.� as one of only four countries that improved their tax Starting a business is not easy in Mexico. Mexico currently system in each of the four years prior (the others were ranks 90th out of the 183 economies surveyed for the Doing Albania, Bulgaria and Moldova). In 2005/2006, for Business 2010 report on the ease of starting a business.13 example, the government simplified the tax code. In The process involves, on average, 8 procedures, takes 13 2007/2008, it reduced the profit and labor taxes. The days, and costs 11.7 percent of GNI per capita. 14 corporate tax rate decreased from 33 percent in 2004 to 28 percent in 2007. Even these figures are a marked improvement from just a Mexico continues to make improvements in its few years ago. In the Doing Business 2007 report, Mexico tax system. From the Doing Business 2009 to the was highlighted as the third top reformer for improvements 2010 report, its ranking in paying taxes moved up in business entry, investor protections, and taxes (see box). from 149th to 106th in the world and from 27th to For instance, the number of days required for incorporation 16th in Latin America. The number of tax payments and registration of a business in Mexico was more than required per year was radically cut from 27 to 6, halved, from 58 days in 2005 to 27 days in 2006. Three and although the tax rate only decreased by less weeks were trimmed by allowing notaries to issue a tax than one percentage point, at 51.0 percent it is only registration number at the time of incorporation.15 slightly above the regional average of 48.3 percent. Nonetheless, there is still some room for improvement. But improvements have been uneven, both across the Latin America has the highest number of hours per country and across sectors. Starting in 2002, the Rapid year spent on taxes – 385 hours, in contrast to 194 in Business Start-up System (SARE) consolidated federal, state, OECD countries – and Mexico is significantly above and municipal registration procedures for eligible “low-risk� that average, requiring 517 hours per year. Sources: World Bank (2005-2009) Doing Business reports and Servicio de Administracion Tributaria Mexico (Tax Administration Service, www. 13 World Bank (2009). Doing Business 2009. The Doing Business 2009 sat.gob.mx) report covers the period from April 2007 to June 2008. 14 Ibid. 15 World Bank (2006). Doing Business 2007: How to Reform. 132 Family Businesses According to “Making a Difference,� The PricewaterhouseCoopers Family Business Survey 2007/08, family firms are the most common form of business structure in Latin American countries, ranging from 65 percent to 90 percent of businesses. Gina Zabludovsky, a researcher at the Autonomous National University of Mexico, noted in her studies that in Mexico, businesses with women in high positions tended to be family-owned. Four of María Elena’s children eventually joined the business. “All my children grew up watching their mother work as a young entrepreneur. It was only natural that they all also became so independent and developed their own yearning to start working with me from a young age. My husband José and I were first-hand family examples. Here was a husband and wife business team who were very hard workers. So when they all grew up, they also became hard workers.� One daughter handles administration, the other is an architect. One son is responsible for construction, the other deals with the Mexican government. “There are businesses in Mexico where the kids never really learn to work, but in our family, no one received a salary unless they worked.� Sources: “Making a Difference,� The Family Business Survey 2007/08; and Marilyn Davidson, Ronald J. Burke (2004), Women in Management Worldwide: Facts, Figures and Analysis. SMEs.16 But the program was implemented at different the concession from the government,� she recalls. “That’s a paces in various municipalities, according to government hard part in this industry, and you have to get government priorities, municipal interests, and financial limitations. authorities to support you, have all your paperwork and While the number of start-ups increased by an estimated regulations related to health, cleanliness standards, and 4 percent (mainly in the months following the program’s functioning.� The concession was also a prerequisite for implementation), a number of sectors were not eligible. building the site. “In order to build you need a license and for Bars, hospitals and María Elena’s field – funeral services that you need the concession,� she says. María Elena and José 17 – tended to be among the excluded businesses. worked closely with one another in setting up the business, and benefited from their joint finances, educational levels, María Elena experienced problems with registering a start-up and prior business experience. firsthand. She decided to open her funeral service business in 1970, after her father-in-law passed away and long before Sectors more likely to face these multiple and painstaking any of the reforms described procedures are highly regulated and often need health “…I’m trying to run above were implemented. It and safety permits. They are the least likely to benefit from a business. I do not took her and José three years regulatory reforms, including SARE, but are probably the care what color the to get Jardines del Recuerdo most in need of a program reducing registration steps. cat is, as long as it incorporated and registered. María Elena shows the various licenses she has secured catches mice!� “The most important was to get to run Jardines del Recuerdo, including a hygiene license necessary because of the toxic materials involved. She maintains a daily log of the firm’s byproducts, ready for 16 COFEMER (2003). Mexico’s Federal Regulatory Improvement government inspection. While health and environmental Programme. [http://www.apps.cofemer.gob.mx/documentos/ingles/ cofemer-ingles-febrero2003.pdf ] concerns make the proper disposal of these materials 17 Kaplan, David, Eduardo Piedra and Enrique Seira (2007).“Entry imperative, each encounter with bureaucracy increases Regulation and Business Start-ups: Evidence from Mexico.� The World Bank, Policy Research Working Paper, no. 4322. the costs of doing business. 133 In an Enterprise Survey conducted by the World Bank in income clients; although this led to a 7.6 percent increase in 2006, 22.57 percent of firms surveyed in Mexico indicated the number of informal business owners, the vast majority they expected to make an informal payment to public was male. It was unclear if this was due to women borrowing officials in order to “get things done�, and almost half of less or borrowing funds for non-business related purposes.21 firms identified corruption as a major constraint to running their business.18 While sex-disaggregated data on corruption When José passed away, María Elena took control of the is lacking, a recent decision by Mexico City’s police chief business, including the management of construction to take away ticket writing authority from 900 male traffic projects, employees, and business planning. Today, officers and create an all-female squad is some indication of Jardines del Recuerdo has 400 employees, 30 percent of whom are women. Her female employees work mainly in an association between gender and corruption. administration and upper management, while the men focus on tasks requiring hard physical labor. Managing Besides complying with formal incorporation and her male employees has sometimes proved challenging. registration procedures, starting a business requires capital. “They just do not like to be managed by women and to take The minimum capital needed to start a business in Mexico orders from women. And most of all, they do not like to be is equivalent to 8.9 percent of the GNI per capita, three told what to do by women. So what I do is I send my son to times the regional average of 2.9 percent.19 María Elena and do it, or I previously had my husband tell them what needed José had a “seed fund� that they used to pay for licenses to be done. As I am trying to run a business, I do not care and start their business, but they soon had to tap banks what color the cat is, as long as it catches mice!� for financing for the construction of the site. The credit was not extended by financial calculations alone. María Elena María Elena is proud that her business is in part responsible designed scale models of the funeral home, and broke up for the economic development of the surrounding the overall business plan into smaller steps to be presented neighborhood. She recalls, “When we first ventured to to banks when applying for credit. “Back then people didn’t this outlying area of Mexico City, it was completely barren really know how to read these kinds of plans,� María Elena land with hardly any inhabitants.� But with the creation of concedes, “but with a strong presentation and showing the her business, the neighborhood was transformed. Around vision for the project [you can] prove that you will use the Jardines del Recuerdo, related businesses have burgeoned money well, that you are not going to run away, and that – flower vendors, restaurants, tomb and grave suppliers, and you are honest.� Currently, Jardines del Recuerdo has a large housing services for employees. line of credit, backed by its assets. María Elena’s success is an exception. In Mexico, women- María Elena’s success in securing financing is not typical of owned businesses represent 44 percent of all small businesses Mexican female entrepreneurs. 86 percent of businesses in rural areas, but only 29 percent in urban areas, and in owned by women operate without any bank credit, metropolitan Mexico City, women make up only 14 percent of compared to 75 percent of male-owned ones, and the all formal entrepreneurs.22, 23 Even when they own businesses, likelihood of having financing increases with firm size.20 In 2002, Banco Azteca opened 800 branches targeting low- 21 Bruhn, Miriam and Inessa Love (2009). “The Economic Impact from Banking the Unbanked: Evidence from Mexico.� Development Research Group, Finance and Private Sector Development. World Bank,Washington, DC. 18 22 World Bank (2006). Enterprise Surveys: Mexico [http://www. Sánchez, Susana M. and José A. Págan (2001). “Explaining Gender enterprisesurveys.org (last accessed November 2009)]. Differences in the Microenterprise Sector,� in The Economics of Gender 19 World Bank (2009). Doing Business 2010. in Mexico, Katz and Correia, eds. 20 23 Zabludovsky, Gina. “Women Entrepreneurs in SMEs in Mexico. Zabludovsky, Gina (1998). “Women Business Owners in Mexico: An Universidad Nacional Autonoma de Mexico. Undated. emerging economic force.� 134 In Their Own Words: Asociación Mexicana de Mujeres Empresarias (AMMJE) This box summarizes the main obstacles perceived by requirements for applying and the time it takes to businesswomen and female entrepreneurs, according receive an answer from the bank also act as a hindrance to Rosa Elena Lozano from AMMJE in Mexico: in accessing credit. Addressing gender issues has become a more and more • Regulatory urgent need for our country, as scientific, technological, There is no law or regulation that designates a part legal, and educational advances have yet to be matched of the Federal, State, or Municipal budget to women, by a solution for removing the persistent gender gap. nor a law or regulation providing tax exemptions to The difficulties and obstacles that women face on a women in any circumstance or situation, regardless daily basis seem all too normal, as if they are part of life of their greater disadvantage when compared to men. and are carried on as a tradition. • Social The main determinant of women’s roles today is Below are some obstacles faced by business women in society, and although women and men are set equal Mexico: according to the Constitution, our daily lives do not • Family-based follow that rule. Along with their careers, women are also responsible for • Political raising their children, managing the home, and caring There is still room for improvement in this area, as for their spouses. Furthermore, many women are also women are still treated unequally from men and single mothers, divorced, or widowed, and bear the entire lack the opportunity to participate in political economic brunt of raising a family. decision-making. This is not a matter of laws, but • Labor force of attitudes and political will to allow women to The lack of labor opportunities that offer flexibility so that participate in government. women can also tend to family activities and responsibilities • Educational is another obstacle faced by women on a daily basis and Education is a core theme in the daily lives of all has led to more women becoming entrepreneurs without Mexicans, and, as such, requires the full commitment sufficient economic support to do so. of both the government and society as a whole. Mainstreaming gender into education would ensure Along similar lines, it must be noted that there is a that women have access to childcare facilities and dramatic gender wage gap for the same jobs, as well as that school hours are compatible with female labor a glass ceiling that keeps women from rising to higher force participation. management positions. • Economic and Financial This text has been translated into English and synthesized for this study. Female entrepreneurs lack access to financing from It was written by Rosa Elena Lozano from AMMJE, and does not necessarily banks, as it is very difficult to take out a loan without express the World Bank’s views. This information was provided by Vital Voices Global Partnership and their asset ownership or a credit history. The many other partners. 135 their ventures are likely to be rather small in size. Among decades, traditional gender roles will continue to formal businesses with more than 100 employees, only 4 change and female entrepreneurship rates may percent are owned by women.24 And formal entrepreneurship rise. María Elena’s daughter reflects, “I can say, as the seems to be the only category where participation rates are daughter of a woman who worked her whole life in an comparably low across groups of women, whether they are era when it seemed crazy that she was divorced and married or single, with children or without.25 worked, that we are still a country where the family is the base of society; but, there are more and more The relatively low female participation in formal working mothers.� Two of María Elena’s daughters work entrepreneurship and in large business ownership in Mexico in the family business. Their mother’s example has can be in part explained by gender differences in reasons helped pave the way for their future entrepreneurial for choosing self-employment. Among microenterprise success, as well as that of many other young owners, 57 percent of Mexican women entered the sector to businesswomen in Mexico. complement family income, while only 12.9 percent of men did so for the same reason. On the other hand, 46.5 percent of male and 21.4 percent of female microenterprise owners started their business to become independent.26 This is Case Study Highlights consistent with the finding that, in Mexico, married women • Mexico has been a top reformer on various tend to go into informal entrepreneurship if their household facets of doing business, particularly in labor income falls by more than 50 percent. Single mothers decreasing barriers to business entry and also enter the labor force in response to decreases in reducing the procedures and costs associated household income, but do not appear to give preference with paying taxes. Nonetheless, not all sectors to a particular type of employment. 27 These trends are an have fully benefited from these reforms. expression of the balancing act that women must perform as they attempt to meet the income requirements and care • Higher business regulation can expose needs of their households. entrepreneurs to increased corruption and bribery. María Elena observes that balancing exercise as she manages her business. She notes, “Employing women, we • Female business owners are less likely to have find that they face many problems. Here in Mexico there loans than male business owners, and even new is no ideology that men should help women around the micro-financing efforts in Mexico have not been house, as there is elsewhere in the world. Here all women able to fully address the unbalance. who work still have to come home, clean, and make food for the next day, regardless of whether they are executives • In Mexico, women’s traditional role as family or secretaries.� On average, women comprise 34.7 percent care providers has a strong influence in keeping of full-time employees in Mexican formal firms, just slightly married women’s labor force participation low above the regional average of 31.6 percent. 28 and skewed towards the informal sector. María Elena predicts that as female labor force participation increases in Mexico, following the trend of the last two 26 Sánchez, Susana M. and José A. Pagán (2001). “Explaining Gender Differences in the Microenterprise Sector, � in The Economics of 24 Ibid. Gender in Mexico, Katz and Correia, eds. 25 Cunningham, Wendy (2001). “Breadwinner versus Caregiver: Labor 27 Cunningham (2001). The sample size for single women witout Force Participation and Sectoral Choice over the Mexican Business children was too small to be analyzed. Cycle,� in The Economics of Gender in Mexico, eds. Katz and Correia. 28 World Bank (2006). Enterprise Surveys: Mexico. 136 Nicaragua Ximena Ramírez A Small Business with a National Impact After �ve years of postgraduate studies in France, Ximena Ramírez returned to her birthplace of Managua with her husband Jaime and their Nicaragua two daughters in 1993. At the time, Nicaragua was slowly recovering from over two decades of conflict, economic collapse, and intermittent natural disasters. In this difficult environment, Ximena and Jaime decided to do what many women and men in Nicaragua were doing at the time: open their own business. EuroAmericana started out as a small business publishing a magazine targeted at civil society and distributed for free. Over the past 16 years, it has expanded to cover consulting and tourism services. In 2000, Ximena set up the Permanent Congress of Women Business Owners of Nicaragua, and she has since dedicated over half her time to advocating for business opportunities for women. Aaron Kisner Country Context Because of politically-driven domestic conflict, Nicaragua’s economy collapsed in the late 1980s: from a GNI of US$600 per capita in 1980, the economy peaked to US$860 per capita in 1987 but fell to US$680 the following year and then to US$370 a year later. National GDP growth rates from 1984 to 1993 ranged between -12 percent and 0 percent. Coming to power in 1990, President Violeta Chamorro worked to shift the economy from a centralized to a market-oriented model, stabilize the currency, reduce But the years lost to conflict have not been completely public employment, and privatize enterprises. The economy recovered. Nicaragua is still the second poorest country in gradually stabilized. In 2005, GNI per capita finally surpassed Latin America, with 46.0 percent of its population living in the peak reached in the 1980s. GDP grew at an average poverty and 14.8 percent in extreme poverty in 2005 (down rate of 3.2 percent per year (and 1.7 percent per capita per from 50.3 percent and 19.4 percent, respectively, in 1993).3 year) between 2001 and 2005.1 Under the World Bank and Although there is a relative balance between rural and International Monetary Fund’s debt relief initiative for highly urban populations (with 44 percent living in the former and indebted poor countries (HIPC), Nicaragua had over US$3 56 percent in the latter), poverty rates are highly skewed: 67 billion in public debt forgiven in 2004. Since then, investment percent of people in rural areas are poor and 26.6 percent has increased and economic growth has picked up.2 are extremely poor; rates for urban areas are less than half of that, at 28.9 percent and 5.4 percent, respectively.4, 5 GDP per capita (current USD): 1,163 Population, total: 1 World Bank (2008). Nicaragua: Poverty Assessment; Republic of 5,667,325 Nicaragua (2005). National Development Plan. Total Fertility Rate: 2 World Bank (2007). Country Partnership Strategy for the Republic of 2.7 births per woman Nicaragua. 3 World Bank (2008). Nicaragua: Poverty Assessment; Republic of Nicaragua (2005). National Development Plan. Source: World Bank (2010), World Development Indicators database, 4 Pisani, Michael and José A. Pagán (2004). “Self-Employment in the Era of most recent year available. the New Economic Model in Latin America: a Case Study from Nicaragua.� 5 World Bank (2008). Nicaragua: Poverty Assessment. 137 Graph 1. Female Labor Force Participation in Formal and Informal Sector 100.0 % 90.0 % 80.0 % 70.0 % 60.0 % 17.2% 33.8% 50.0 % 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % a ia il ile ica ic r or a as ico a a ay ru ay a do az in al gu m el bl liv ad ur Pe gu gu Ch R em zu ex nt na Br ua pu ra Bo nd lv ta ra u ge M ne Pa ca Ec at Ur Re Sa s Pa Ho Co Ar Ve Ni Gu El n ica in m Informal Sector Formal Sector Do Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. The slight decline in poverty in the last decade is primarily Women in Nicaragua attributed to the improvement of incomes in rural areas. One in three households in Nicaragua is headed by Agriculture accounts for 50 percent of the income of the women, and, by some estimates, the rate in cities is as high lowest quintile, and agricultural employment and wages as one in two.9 Nonetheless, Nicaragua’s female labor force 6 both rose between 2001 and 2005. participation is just below 50 percent, in contrast to the 82 percent male participation rate. Childcare duties, industrial Some social indicators have improved over the last decade, and economic structures, and social mores are among but many are lagging. The national target of adequate the factors influencing these rates.10 At 8 percent among access to sanitation for 95 percent of the population will women and 7.6 percent among men, unemployment rates likely be reached by 2015. And, considering the decrease in are very similar between genders (although within the infant mortality from 58 to 31 per 1,000 live births between 15-24 age group, it is almost 50 percent higher for young 1993 and 2001, the 2015 target of 20 is within reach.7 But women). Graph 2 shows that more than four-fifths of while maternal mortality was halved over the same period Nicaraguan working women are concentrated in 4 sectors: (from 160 to 88.6 per 100,000 live births), it remains far commerce (36.2 percent, education and health (19.9 above its 2015 target. Education levels are the lowest in percent), low-tech industry (13.8 percent), and domestic Central America; and net primary enrolment and illiteracy service (12.7 percent). rates exhibited barely any progress from 2001 to 2005 – moving from 83 percent to 84.1 percent and from 18.7 Although the overall education level in Nicaragua is one 8 percent to 18.4 percent, respectively. of the lowest in the region, Nicaraguan women tend to be 9 World Bank (2010). World Development Indicators database; Babb 6 Ibid. (1996). “After the Revolution: Neoliberal Policy and Gender in Nicaragua.� 7 World Bank (2007). Country Partnership Strategy for Nicaragua. 10 Monroy, Estela (2008). “Equidad de Género en el Mercado Laboral 8 World Bank (2008). Nicaragua Poverty Assessment; World Bank (2007). Nicaragua.� Cuadernos de Género. World Bank and Inter-American Country Partnership Strategy for Nicaragua. Development Bank. 138 more educated than their male counterparts. In 2006, the female and male literacy rates were both 78 percent; and Primary School Enrolment, the youth literacy rate (15-24-year-olds) was 84 percent Female/Male (%, gross): 116 / 118 among men and 87 percent among women. Primary Secondary School Enrolment, school completion rates were 80 percent for girls in 2005, Female/Male (%, gross): 72 / 64 compared to 73 percent for boys.11 Tertiary School Enrolment, Female/Male (%, gross): Nicaragua has the highest fertility rate among young 19 / 17 Female/Male Adult Literacy Rate (%): women between 15 and 19 years old in Latin America, 78 / 78 a worrying scenario considering that pregnancy is the Female/Male Labor Force Participation (%): 49 / 82 second most common reason (behind lack of money) cited Seats in National Parliament: by Nicaraguan girls for not enrolling in secondary/post- 18% held by women secondary school. The two Millennium Development Goals Source: World Bank (2009), Genderstats database, most recent year available. (MDG) related to women’s health – maternal mortality and access to reproductive health services – are also the least likely to be achieved by 2015.12 Starting Up When Ximena and her family returned to Nicaragua in the The prevalence of gender-based violence is also extremely 1990s, government programs geared towards the private high in Nicaragua. The 1997/98 Demographic and Health sector focused on large industries, and SMEs were suffering. Survey (DHS) revealed that 27.6 percent of women who are A 1993 report revealed that as many as 7,000 formal or were once married had been physically abused by their SMEs had closed during the previous year.16 The country’s partner at least once, and 10.2 percent had been sexually informal sector was growing, while the wage gap between abused. More than 8 percent said they had suffered the formal and informal sectors was widening.17 Still, in severe physical abuse over the previous year.13 Although 1993, despite the uncertainty of the times, average earnings gender-based violence is considered a crime in Nicaragua, for those who were self-employed (whether formal or prosecution is very rare.14, 15 informal) were actually higher than those of wage-earners. And among women, the self-employed-to-waged gap was These inequalities are not lost on Ximena. While her 25.0 percent, compared to 4.6 percent for men.18 Ximena business has flourished, her foremost concern has remained explains her reasoning for setting up EuroAmericana that the same – if opening and running a business was difficult year: “Given that my salary was not enough to meet my for her, it must be extremely difficult for other women in needs, a common problem in Nicaragua, I decided to start Nicaragua who have less education and more difficult my own business. That would allow me to be my own boss, circumstances. make my own schedule, and make more money.� 16 Barricada Internacional (1993). “Recession decimates small businesses.� 11 World Bank (2010). World Development Indicators database. Cited in Babb (1996). 17 12 World Bank (2008). Nicaragua: Poverty Assessment. Funkhouser, E. (1996). “The urban informal sector in Central America: 13 Macro International (1999). Encuesta Nicaragüense de Demografía y household survey evidence.� Pisani, M.J. (2000). “Sectoral labor choice Salud 1998. in post-revolutionary Nicaragua: the evolution of the informal labor 14 World Bank (2006). Country Policy and Institutional Assessment (CPIA), sector in the 1990s.� Both as citied in Pisani and Pagán (2004). 18 Nicaragua: gender equality rating. Pisani, Michael and José A. Pagán (2004). “Self-Employment in the Era of 15 World Bank (2007). Country Partnership Strategy: Nicaragua. the New Economic Model in Latin America: a Case Study from Nicaragua.� 139 Ximena recalls the start of EuroAmericana: “They said it The Nicaraguan Constitution recognizes gender equality would fail. A woman, owning a newspaper and magazine and the international Convention on the Elimination of that was given away for free each month – that was going All Forms of Discrimination against Women (CEDAW) was to fail.� Even with help from Ximena’s father, who is a lawyer, ratified by the government over two decades ago; but not all it took her and her husband three months to formalize of the provisions, especially the economic ones, have been EuroAmericana. incorporated into national legislation.20 In the Women’s Economic Opportunities Index, Nicaragua’s average score for Since Ximena started EuroAmericana, the government of women’s legal rights – combining the country’s ratification Nicaragua has helped facilitate the business registration and enforcement of two key ILO Conventions – is a meager process. One-stop shops at the Ministry of Commerce for 8.3, on a range from 0 to 100. This is dramatically below the SMEs in 10 of the country’s 17 departments mean that regional average of 27.4, which is in itself less than half the applicants can drop off all of their paperwork at once. average score for OECD countries.21 Previously, applicants had to visit several different ministry offices to register their business. This was a hindrance, Women’s difficulties in accessing credit are related to their especially for women in rural areas or those caring for family lack of land and asset ownership. Almost 90 percent of members. Despite these improvements, Nicaragua is ranked Nicaragua’s documented land titles are held individually, th 95 out of 183 economies on the ease of starting a business and almost 80 percent of these are registered in men’s in the Doing Business annual report. names. Only 14.5 percent of land titles are held by individual women and 2.1 percent by couples and families.22 “The Accessing Credit husband is usually the one designated as the owner of any Nicaragua ranks 87th among 183 economies and 18th in real estate purchased during marriage� and it is “socially Latin America (tied with 8 other countries) in the getting and culturally acceptable that real estate purchased credit category of the Doing Business 2010 report. 19 by a common law couple is registered under the man’s But this figure does not reveal women’s particular name, because he is the head of the household.�23 Banks’ difficulties. In this regard, Ximena’s experience was typical. hesitation to extend credit to women individually is not When she applied for credit for EuroAmericana she found surprising, given that men can sell jointly-owned property that she needed her husband’s approval because creditors or real estate without their wife’s consent. And in the event did not think her signature was sufficient. “In our country’s of divorce, real estate acquired under the husband’s name is patriarchal system, like in many other Latin American not considered a shared asset.24 countries, the man inherits the business, the title, and, consequently, the property, so they asked my husband to There have been recent attempts to address this issue. The come sign with me.� Ximena reflects, “The Constitution does Nicaraguan National Development Plan, issued in 2005, not say to treat men and women differently, but when you points to improvements in the regulatory framework and go to the bank, they tell you to bring your dad, or if you have a husband, get your husband, or if you have a grown son, 21 Scores are normalized with data from all countries included in the bring your son. So of course there is differential treatment.� index. Economist Intelligence Unit (forthcoming), Women’s Economic Opportunities Index. Financed by the World Bank. 22 World Bank and IDB (2008). Diagnóstico de Género en la Economia Rural de Nicaragua. 23 19 World Bank (2009). Doing Business 2010. Tijerino, Selma, Anja Taarup Norlund, and Omar de Atrip (2008). “La 20 Tijerino, Selma, Anja Taarup Norlund, and Omar de Atrip (2008). “La Función del Marco Jurídico en la Promoción de la Equidad de Género.� Función del Marco Jurídico en la Promoción de la Equidad de Género.� Cuadernos de Género. World Bank and Inter-American Development Cuadernos de Género. World Bank and Inter-American Development Bank. 24 Bank. Ibid. 140 the expansion of access to financial services as crucial to the creation of new businesses. 25 One step in the right In Their Own Words: Voces Vitales Nicaragua direction is the current review of the Law of Movable Guarantees, which is intended to facilitate the use of The top 5 obstacles faced by business women and non-traditional collateral (such as vehicles, equipment, female entrepreneurs, according to Voces Vitales and checking and savings accounts) to promote access to Nicaragua: 26 finance. In 1995, Law 209 was enacted, giving women 1. Family Roles – If a businesswoman already has priority in accessing loans. And in 2008 the Law of Equal children, it is important for her to remember that Rights and Opportunities was approved.27 Hopefully, these her main role in contributing to the socioeconomic laws will translate into greater financial coverage for women development of her country is seen as ensuring the entrepreneurs in the near future. health, education, and emotional stability of her children. In the meantime, NGOs and microfinance institutions (MFIs) have been instrumental in filling in the finance gap for 2. Social Role – In Nicaragua, it is still somewhat of a women. As of 2004, MFIs in Nicaragua were serving over taboo for women to work outside the home. 300,000 clients, 70 percent of them female, and had a loan 3. Education – Women lack access to entrepreneurship portfolio nearing US$200 million. While the average loan training. amount given to micro-entrepreneurs is US$494, loan sizes 4. Access to credit. from MFIs geared towards women average only US$96.28 5. Self-esteem and Discrimination – A woman’s This in part reflects the fact that women’s enterprises are confidence in advancing her career is determined smaller, but may also be indicative of a discriminatory by her own confidence and by the toll of structural attitude toward women “due to an unfair perception of discrimination imposed by society. being seen as ‘high risk’ borrowers.�29 Ximena finds this situation frustrating. “Women are the best payers in Latin This information was provided by Vital Voices Global Partnership and their partners. America, and yet do not have access to credit,� she observes. “It is absurd! Because of loan costs, their businesses barely survive and cannot thrive.� as MFIs, to place greater value on women’s SMEs. Ximena suggests that alliances with local women’s organizations To address these and other concerns, the government of would also help improve program targeting and expansion. Nicaragua has recently stepped in with a lending program of its own. The Zero Usury Program provides loans of Growing your Business US$50-250 to women at a 4 percent annual interest rate Today, EuroAmericana is a communication and consulting with a 2-6 month grace period. While it is currently small firm. Its best-known product is Páginas Verdes – a magazine in scale and primarily focused on rural areas, the idea of and directory targeted to civil society in Nicaragua. While focusing on women’s enterprises may induce banks, as well Jaime manages the finances and the consulting branch of the firm, Ximena conducts all of the interviews for the 25 Republic of Nicaragua (2005). National Development Plan. magazine. She has talked with 470 individuals (including 26 El Nuevo Diario (2008). “Cámara de Comercio Impulsa Ley de Garantías Mobiliarias,� 12 November 2008. dignitaries, economists, social entrepreneurs, and media 27 FAO (2002). Law and Sustainable Development since Rio: Legal Trends figures) over the years. With her daughter, she sells the in Agriculture and Natural Resource Management. 28 Zamor et al. (2004). Credit Methodologies in Institutions with advertising space in the magazine, which sustains the free Predominantly Female Clients. Instituto de Investigación y Desarrollo publication. At first, EuroAmericana had 15 employees, but Nitalpán. 29 World Bank (2007). Country Partnership Strategy: Nicaragua. by embracing technology, particularly the internet, the 141 couple has been able to expand their business into tourism, Advocating for Women Entrepreneurs in Nicaragua while reducing their staff to 7 full-time employees. “Over the years, my business grew and gained acceptance,� Ximena recalls, “and yet I felt that I was not represented Ximena’s business is in stark contrast to many other women’s in the chamber of commerce and business organizations enterprises in her country, which tend be informal and micro because all of the senior positions were occupied by or small in size. They are often men.� She decided to take action, and, in 2000, she “They said it would fail. home-based and employ other founded the Permanent Congress of Women Business A woman, owning a family members. Women’s Owners of Nicaragua (CPMEN – Congreso Permanente de newspaper and magazine enterprises tend to be smaller Mujeres Empresarias de Nicaragua). “My experience as an that was given away for and have lower revenues and entrepreneur,� she explains, “showed me that if it was this free each month – that fewer employees than men’s: difficult for me, and I am a professional woman, educated in was going to fail.� 44.1 percent of women-owned Europe and the United States, then just imagine how hard it businesses employ just 1 to 2 must be for other women.� The CPMEN convenes and trains workers, versus 38 percent of male-owned ones. Women are female entrepreneurs and advocates for them in business proprietors of 56 percent of home-based businesses and are and politics. Since its founding, it has established chapters less likely than men to employ external workers – 6 percent in every department in Nicaragua and forged numerous of female-owned home-based businesses do so, in contrast partnerships and agreements with local and international to 23 percent of male-owned ones.30 organizations. The congress was also a co-founder of the Mesoamerican and Caribbean Federation of Women Business formalization, Ximena believes, is the key to Business Owners. business growth. “In Nicaragua, it is very common for micro and small enterprises to be not only home-based, but family-based,� she explains. “But in family-based Today, CPMEN encompasses a cross-section of over 2,000 businesses, women can easily fall into ‘apron economics,’ or women entrepreneurs across the country, whose businesses mixing business earnings with household expenses.� While range from rural micro-enterprises to larger, urban firms. family-based businesses may reduce costs and be more In partnership with the government of Nicaragua and the compatible with childcare duties, they are also more likely National Technology Institute, CPMEN offers basic training, to be entrenched in the informal sector, imposing limits on including computer literacy courses, to owners of very their growth. Formalization “is very important,� according small businesses. In collaboration with DFID, they have to Ximena, “as it is the way to access credit, among other trained women in forming sectoral clusters and horizontal things. If you are not legal, you cannot get credit. And if and vertical links to improve their value chains. Recently, you are not legal and do not have credit, you cannot access CPMEN also worked with the UN WINNER program to the benefits of the United States – Dominican Republic help members create websites for their businesses. In part – Central America Free Trade Agreement (CAFTA). That through these efforts, Ximena has seen many members makes it a lot harder for you to sell to the rest of Central grow their businesses beyond subsistence and into the America. You effectively cannot access the global market if realm of serious profits. your business is not legal.� But training and capacity building do not take place in a vacuum, and the growth of women’s enterprises is 30 Monroy, Estela (2008). “Equidad de Género en el Mercado Laboral still subject to constraints set by the broader legal and Nicaragua.� Cuadernos de Género. World Bank and Inter-American Development Bank. regulatory environment of Nicaragua. Aware of this, 142 Ximena’s group has also decided to tackle the policy arena by advocating for reforms to facilitate the growth of women’s SMEs. CPMEN has a consultative status with the Case Study Highlights government on the Complementary Agenda for CAFTA and is closely affiliated with the Nicaraguan Institute on Women • Laws that favor men as asset owners can have and the Ministry of Industry and Commerce. In this capacity, a major negative impact on the scale and it has championed and advocated for laws on behalf of success of female entrepreneurship. women business owners, including some that have been • Nicaragua is taking much needed steps to recently ratified. “We are recognized by the government expand women’s access to credit. and have a platform for voicing our views on laws regarding economics,� Ximena says with pride. She expects that the • Organizations like the Permanent Congress support CPMEN offers to female entrepreneurs, through of Women Business Owners of Nicaragua both policy reform and technical assistance, will ultimately (CPMEN) play a vital role in advocating for reverberate throughout the Nicaraguan economy. “These policy reform. women are empowered, affirming their rights. And we are a great force in the economy�. 143 Peru Flora Reátegui Rede�ning Peru’s Image through Silver and Gold Flora Reátegui had a hand in numerous business ventures before she set up Aranza Joyas – a company selling high-end jewelry that she designs with local stones and metals. Her company is one of the largest jewelers in Peru. Aranza Joyas products can be found in department Peru stores across the country and in Mexico, Chile, and Spain. At a time when the government of Peru is seeking to expand foreign trade, Flora is intent on promoting Peru as a competitive jewelry producer internationally. In the process, she is creating employment for other women, and serving as a role model for aspiring female entrepreneurs. Country Context Peru was one of the fastest growing countries in Latin America over the last decade, reaching impressive GDP growth rates of 9.0 percent in 2007 and 9.3 percent in 2008. Aided by the favorable external economic environment, which boosted mining exports, Peru decreased its public debt from 46 percent of GDP in 2001 to 23 percent in 2008.1 Peru was in a relatively strong position confronting the global financial crisis, given its “high international reserves, healthy financial sector, manageable external current account, and a strong pipeline of foreign investment commitments.�2 But poverty in Peru has not declined to the extent expected from its economic growth: 39.3 percent of Peruvians still extreme poverty was five times higher (40.3 percent versus live in poverty, and 13.7 percent are extremely poor.3 In 7.9 percent).4 64 percent of Peru’s indigenous population 2004, the rural poverty rate was almost twice as high as the (and 80 percent of those in rural areas) live below the urban poverty rate (72.5 percent versus 40.3 percent); rural poverty line.5 The disconnection between economic growth and poverty reduction is explained largely by a concentration of growth in sectors that are highly capital GDP per capita (current USD): intensive (mining and commercial agriculture), or that 4,477 involve low productivity and little wage growth (the Population, total: 28,836,700 informal sector).6 Female Headed Households (% of total): 22 percent Total Fertility rate: 1 World Bank (2009). Country Partnership Strategy Progress Report for 2.6 births per woman the Republic of Peru. 2 Ibid. 3 Sources: World Bank (2010), World Development Indicators database, Ibid. 4 most recent year available. World Bank (2009), Genderstats database, World Bank (2005). Peru Poverty Assessment. 5 most recent year available. World Bank (2006). Country Partnership Strategy for the Republic of Peru. 6 World Bank (2005). Peru Poverty Assessment. 145 similar income levels. 12, 13 In 2006, Peru’s share of the Primary School Enrolment, world’s exports was just 0.1 percent (smaller than its share Female/Male (%, gross): in 1970, which was 0.3 percent). Government efforts to 112 / 113 increase international trade have culminated in free trade Secondary School Enrolment, Female/Male (%, gross): agreements with China, the United States, and Canada, 99 / 96 which have been put in place over the last two years. Tertiary School Enrolment, Female/Male (%, gross): Imports and exports were roughly equivalent to only 36 / 33 15 percent of GDP in 2001. The government’s National Female/Male Adult Literacy Rate (%): Strategic Export Plan 2003-2014 sets targets of 35 percent 85 / 95 Female/Male Labor Force Participation (%): of GDP directed at the international market and US$1,200 61 / 78 per capita in exports by 2011.14 These efforts appear to be Administrative and Managerial Positions: having an impact, as annual growth in exports and imports 23% held by women Seats in National Parliament: averaged 29.8 percent and 25.9 percent, respectively, in 28% held by women 2005-2007, in contrast to 1.3 percent and -4.3 percent in Source: World Bank (2009), Genderstats database, most recent year 1998-2000.15 available. Women in Peru Women in Peru have similar education levels to men. The Peru has one of the highest rates of informality in the world, female primary school enrolment rate has been within a six with 55 percent of men and 65 percent of women estimated percentage-point range of the male rate since 1980, and to be in the informal sector.7, 8 In fact, the majority of the has been equal or higher than it since 2001. Similarly, girls’ country’s urban poor either own or are employees in small, secondary and tertiary education enrolment rates caught informal businesses.9 Even in formal firms, individuals are up with boys’ in the early 2000s, and have since surpassed frequently hired through temporary and informal contracts. them. Although women still lag behind men in terms of the Between 1989 and 1997, for example, employment in adult literacy rate, the gap has narrowed over the last three medium and large industrial firms in Lima increased by 50 decades. Female adult literacy increased from 74 percent percent, but longer-term contracts decreased by 50 percent in 1981 to 85 percent in 2007, while male literacy increased while temporary contracts increased by over 400 percent. from 90 percent to 95 percent. Among youth, female The share of workers without a contract increased by 18-26 literacy is a high 97 percent, almost the same as the male percent.10 This has begun to change with new regulations literacy rate of 98 percent.16 taking effect in 2009, and Peru’s global ranking on the World Bank Group’s Doing Business 2010 “Employing Workers� At 61 percent, Peru’s female labor force participation rate is indicator jumped from 161 to 112 in just one year. 11 one of the highest in Latin America, behind only Paraguay, Peru is also a relatively closed economy, compared to Colombia, and Bolivia. But even when controlling for other Latin American countries and economies with 12 World Bank (2004). “Peru: Microeconomic Constraints to Growth: The 7 Ñopo, Hugo (2009). “The Gender Wage Gap in Peru 1986-2000: Evidence from the Manufacturing Sector.� Evidence from a Matching Comparisons Approach.� 13 World Bank (2006). Country Partnership Strategy for the Republic of 8 World Bank (2004). “Peru: Microeconomic Constraints to Growth: The Peru. Evidence from the Manufacturing Sector.� 14 Ministry of Foreign Trade & Tourism, Peru (2004), Plan Estratégico 9 World Bank (2005). Peru Poverty Assessment. Nacional Exportador (PENX) 2003-2013. 10 World Bank (2004). “Peru: Microeconomic Constraints to Growth: The 15 World Bank (2006). Country Partnership Strategy for the Republic of Evidence from the Manufacturing Sector.� Peru. 11 World Bank (2009). Doing Business 2010. 16 World Bank (2009), Genderstats database. 146 Graph 1. Female Labor Force Participation in Formal and Informal Sector 100.0 % 90.0 % 80.0 % 18.7% 70.0 % 50.5% 60.0 % 50.0 % 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % a ia il ile ca ic r or a as ico a a ay ru y la do ua az in al gu m bl liv ue ad ur Pe Ri gu Ch em ex nt na Br ua pu ug ra Bo nd ez lv ta ra ge M Pa ca Ec at Ur Re Sa n s Pa Ho Co Ar Ve Ni Gu El n ica in m Informal Sector Formal Sector Do Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. differences in educational levels and other characteristics, elections must be female.22 Women are under- men’s wages in Peru are 28 percent higher than women’s.17 represented in many of Peru’s most lucrative sectors, Although the country boasts one of the highest secondary comprising only 11 percent of business owners in the school completion rates in the region, its returns to agricultural sector and 9 percent in mining.23 Although education are low and the opportunity cost of education their entrepreneurship rate is higher than that of their is relatively high.18 Thus, women “are acquiring more male counterparts and is estimated to be among the education, but they are obtaining neither more jobs nor highest in the world, Peruvian female entrepreneurs higher pay,� with gender gaps in wages highest among report lower incomes and higher failure rates than the most educated groups.19 men.24 While this is consistent with trends in many other countries around the world, the figures indicate the Although women comprise 44 percent of those in vast, and only partially realized, potential of women’s professional and technical positions in Peru (one of the enterprises. highest figures in the region), they hold only 12 percent of senior administrative and managerial positions in the Graph 2 shows that over two-thirds of working women private sector and only 19 percent of senior and managerial in Peru are concentrated in two sectors: primary positions in the public sector.20, 21 Since 2002, quotas have activities (34.3 percent) and commerce (33.4 percent). mandated that at least 30 percent of candidates affiliated with any party for congressional, regional and municipal 22 For information on the politics involving the establishment of the quotas, see Schmidt, Gregory D. (2003), “The Implementation of 17 Ñopo, Hugo (2009). “The Gender Wage Gap in Peru 1986-2000: Gender Quotas in Peru: Legal Reform, Discourses and Impacts.� Evidence from a Matching Comparisons Approach.� International Institute for Democratic and Electoral Assistance. 18 World Bank (2005). Peru Poverty Assessment. 23 Instituto Nacional de Estadística e Informática – INEI (2009). Censos 19 Ñopo, Hugo (2009). “The Gender Wage Gap in Peru 1986-2000: Nacionales 2007: XI de Población y VI de Vivienda. Evidence from a Matching Comparisons Approach.� 24 Temple, Agnes Franco (2008). “Perú: Gestión de la Innovación y 20 World Bank (2009). Genderstats database. Competitividad de las PYMEs.� Presented at the XIII Reunión de las 21 OECD (2006). Gender, Institutions and Development Database. Mujeres Líderes de APEC, 12 May 2008. 147 Graph 2. Occupational Segregation in Peru 40.0 % 42.9% 30.0 % 34.3% 33.4% 20.0 % 10.0 % 16.2% 11.0% 9.2% 10.0 % 8.1% 6.7% 7.0% 5.6% 5.0% 4.2% 4.4% 3.9% 3.0% 1.3% 1.2% 1.8% 0.3% 0.4% 0.0 % ce th es h h n s n ts n ice c c io tio tio an al iti er Te Te ct rv He ra iv m rv ta ow h ru Se ct ist m Se or ig & st yA -L Co in -H sp d n n tic ille m Co io an ar ry es ry Ad at im st Sk Tr st m uc du Pr du s& ic Do Ed bl In Female Male In ie Pu ilit Ut Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. Ever an Entrepreneur entire school programs with hand-stitched costumes. As Growing up in the Amazonian highlands, Flora Reátegui business picked up, she designed and sewed constantly to was a natural-born entrepreneur. As a child, she picked meet demand. But the excessive hours and manual labor pomarrosas from trees in her yard and sold them to involved wore her down. Two years later, she was ready passersby. “A long time ago I decided I would not work to move on to a business that would grant her a better for anyone, and I never have,� she explains. “It is too costly work-life balance. to work for others, and I always had the notion that, if one has the skills, it is easy to create wealth.� When Flora was With a friend, Flora launched Goshal, a direct-sales nine years old, her parents moved the family to Lima in intimate apparel company, for the Gaviota lingerie and search of better educational opportunities. This move only apparel brand. Within six months, the company had strengthened Flora’s business drive. She switched to selling a network of over 800 women marketing and selling gum and candy to her classmates. By the time she was in products throughout Peru. But this rapid expansion high school, Flora had learned to sew. She made skirts and proved unsustainable. “We gave credit to our sales force bathing suits by hand and sold them to her peers. after the first year, but didn’t pay enough attention to our bookkeeping and, before we knew it, we were owed In college, Flora majored in business administration. She more than US$35,000. I was horrified!� Flora confides. came across her first post-college business venture by As with many direct sales companies, they allowed clients accident. After making her son a party costume, she to pay for their purchases in installments. But if clients received so many compliments from other parents that she failed to pay, they had no practicable remedies to recover decided to tap into that market. Flora was soon supplying their debts. 148 Belcorp: Using Direct Sales to Empower Women in Latin America Belcorp is a cosmetics company based in Peru, with presence in fifteen countries in North and Latin America and a well- established reputation for high quality beauty products. Using direct sales, the company leverages its 8,300 employees and over 700,000 beauty consultants to generate an annual US$ 1.3 billion in revenue. Claudia Belmont, Belcorp Foundation’s President, reflects, “Twenty years ago, men did not see a cosmetics company as a serious business. But as Belcorp earned a reputation as a solid company, we began receiving more and more applications from highly qualified men than ever before.� Nonetheless, women are Belcorp’s backbone, comprising 80 percent of employees and 77 percent of senior staff. Belcorp is committed to helping to empower its employees and sales partners (known as beauty consultants). Virtually all of Belcorp’s 700,000 beauty consultants are women, the majority of them from low income households. As a direct sales company, it gives beauty consultants the chance to become entrepreneurs, earning income with flexibility. And to help women in its sales force achieve independence and confidence and ensure that any change in their lives is sustainable, Belcorp also incorporates networking and personal support into its core operations. Claudia explains the company’s rationale, “When we help women, we change society at large, since women often play a bigger role in raising children and a have broader participation in society.� And in Latin America, women are also the ones receiving the least help, as reflected in the high incidence of domestic violence and relatively higher illiteracy and school drop-out rates among women in many countries in the region. In 2003, the company started Belcorp Foundation, which reaches out to women beyond Belcorp’s labor and sales force. The Belcorp Foundation educates teenagers on eating and emotional disorders, offers educational scholarships to girls at all levels, and, through its flagship Great Women project, mentors and trains 2,000 women from low-income backgrounds each year through a 2-year program covering topics ranging from health and education to personal finance and domestic violence. Sources: Interivew with Claudia Belmont. World Bank (2009), Private Sector Leaders Forum. In the Doing Business 2010 report, Peru ranks 114th out To market and showcase Gaviota products, Flora and th of 183 countries and 18 in Latin America in terms of the her business partner at Goshal organized events and ease of commercial contract enforcement. Filing a lawsuit fashion shows around the country. Flora was responsible to enforce a contract requires 41 distinct procedures and, for selecting and eventually designing accessories and on average, costs over one-third of the value of the claim. jewelry to complement the clothing and intimate apparel. This is significantly above the OECD average of 30.6 She took coursework in jewelry design and crafting and procedures and 19.2 percent of the claim.25 It is therefore soon added an accessory line to the brand. “I became not surprising that in many instances Flora opted to write fascinated with jewelry,� Flora remembers. “The way you off losses rather than pursue legal action. Though her can fuse elements from natural stones to seeds to crystals business did not succeed, she learned from this painful and even marine products is amazing.� When she was experience. She decided she needed a business that would ready to move on from Goshal, jewelry seemed like an be less vulnerable to defaults. obvious new venture. 25 World Bank (2009), Doing Business 2010 database. 149 In Their Own Words: AMEP Noticing a lack of business associations geared towards women or programs targeted to women in Peru, FCEM (Les Femmes Chefs d’Enterprises Mondiales), an association of women business owners founded in France in 1945, and OAME, its Argentine affiliate, approached Peruvian women entrepreneurs in 2007 to help them start an association of their own. A year later, AMEP (Asociación de Mujeres Empresarias del Perú) was founded. It has since set up several programs for women entrepreneurs, including conferences and business classes in partnership with the Catholic University of Peru. In June 2009, AMEP held its first forum, with support from the Chamber of Commerce of Lima. 270 women attended the event, and were asked to identify the top 5 priorities for women in business in Peru. The main issue, identified by almost 3 out of 4 respondents, was the need for capacity building, which AMEP seeks to address through its activities. The importance of networking and business associations, whether among women entrepreneurs or across genders, was identified as a priority by 60 percent of respondents. Access to credit, starting a business, and trading across borders were the next most important themes highlighted. 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% Capacity-building 73.5% Business networks and associations 59.8% Access to credit 56.9% Starting the business 53.9% International trade 53.9% Protecting investment 45.1% Simplifying business procedures 37.3% Property rights 24.5% Simplying the tax system 23.5% Formalizing a business 23.5% Labor regulations 15.6% Legal guarantees 10.8% Other 13.7% This information was provided by AMEP. 150 Starting a Jewelry Business the National Administration of SMEs.28 Now, in contrast to In 1997, Flora launched Aranza Joyas as a public limited when Flora started her business in 1997, SME formalization company. This enabled her to take advantage of simpler can be expedited through waivers on notarized drafts of procedures and to receive stronger protection from the incorporation documents, and businesses can operate potential creditors. Based in Lima, and able to work with under provisional municipal licenses as they wait to receive a good friend who was a lawyer, Flora completed the a permanent one.29 required registration steps of drafting and notarizing the incorporation documents, depositing capital, getting Accessing Credit certified by the public registry, and obtaining a final In 2000, Flora took advantage of a cooperative lending verification from the tax registry faster than usual and scheme for small businesses offered by a national retail without incurring significant travel costs. The entire process chain seeking to provide credit to its suppliers. It was her took roughly a month, less than half the then-national first attempt at accessing credit. Within a week, she was lent average (subsequent reforms have lowered this average to 25,000 soles to expand her jewelry line to 28 of the chain’s 41 days). stores. Priced for small businesses, the initial annual interest rate on her loan was a hefty 35 percent. Within three years, Peru is one of several countries that do not impose Flora repaid the loan in full and built up her credit history. minimum capital requirements for starting a business. By 2004, her business was eligible for more affordable But at 24.5 percent of income per capita, the cost of commercial credit lines. She received a US$5,000 loan at a registration, including attorney fees, is five times the OECD 19 percent interest rate from Banco Continental just days average (although below the regional average of 36.6 after applying. 26 percent). Flora notes these costs are a serious obstacle to small businesses in Peru and thinks they also explain Since the first Doing Business report (2004), Peru has been in part the high level of informal small business activity highlighted as one of the top countries in terms of the in the country. coverage of its public credit registries. In 2009, the coverage rate was almost three times higher than the regional Over the last decade, however, the government of and OECD averages. In Peru, the public registry covers Peru has made important efforts to ease the burden on 23.0 percent of adults, in contrast to 10.0 percent for the SMEs, which make up more than 90 percent of businesses region and 8.8 percent for OECD countries. (Private bureau in the country. A government agency, the National coverage is significantly lower than the OECD average –31.8 Administration of SMEs, was set up in 2002 to coordinate percent versus 59.6 percent - but virtually the same as the with government, private sector, and civil society players regional average of 33.2 percent.)30, 31 While an extensive to improve the competitiveness, available financing, and credit registry is necessary for ensuring broad access to growth of Peru’s SMEs. 27 In 2003, the Law on the Promotion credit, it is not sufficient. In 2001, Peru’s loan-to-GDP ratio and Formalization of SMEs was enacted. The law created was just 25 percent, indicating that it was likely that banks a national council and twenty-five regional councils on were withholding credit at an excessively cautious rate.32 SMEs, which design and advocate for simpler and more 28 accessible formalization procedures in cooperation with Ibid. 29 Peru Private Investment Promotion Agency (2009), Guide for Micro and Small Enterprises. 30 World Bank (2004). Doing Business in 2004. 26 31 Ibid. World Bank (2009). Doing Business 2010 database. 27 32 Ministry of Labor and Employment Promotion, Peru (2009), website Marechal, Valerie and Raha Shahid-Saless (2008). “Bringing more credit [www.mypeperu.gob.pe/quienes.php?dn=1 (last accesses August to the private sector.� Getting credit case study for World Bank (2009), 2009)]. Celebrating Reforms 2008. 151 An Indigenous Coffee Cooperative (COCLA) with a Special Focus on Women Producers Cooperatives have been a popular business model in Peru since the 1960s, starting with credit co-ops but quickly expanding into the large agricultural sector to provide members with direct access to markets. COCLA (Central de Cooperativas Agrarias Cafetaleras) was founded in 1967 as a consolidation of seven existing coffee and cocoa co-ops in the Quillabamba region. It has grown dramatically over the last 40 years and is currently comprised of 23 primary level family organizations representing over 8,000 producers. The majority of members are Inca Quechua. Sumaq T’anta, the first women’s cooperative in the region, was created in 2003 to assist female-headed households market their own product, and to incubate women’s small business activities, like apiculture and crafts, that supplement incomes outside of harvest season. As Sumaq T’anta President Rosa Bohorque notes: “It is not only about how much money the women earn to support their families, but the boost this gives their self esteem�. Catering to the international market (95 percent of their product is exported), COCLA has secured quality certifications from the Rain Forest Alliance (awarded for attention to environmental sustainability), and Naturland and OCIA/JAS (used by the European and Japanese markets, respectively). COCLA has used its premiums from fair trade to fund a Women, Gender, and Equality program, which is geared towards both female members of the co-op and wives of members. This initiative offers classes and training in basic literacy, hygiene and first aid, as well as microcredit for business ventures outside the co-op. The program also replaces old stoves to protect women from lung disease, a prevalent problem in the region’s rural areas. Sources: COCLA’s website (http://www.coclaperu.com/index.html) and Equal Exchange’s Spotlight on COCLA’s Women’s Program (http://www.equalexchange. coop/spotlight-coclas-womens-program), interviews with Sumaq T’anta President Rosa Bohorque, Health Program Manager Betty Cárdena, and Development Manager Elva Rojas. In the Doing Business 2004 report, Peru was one of eight second in the region (after Guatemala) in terms of access to countries given a score of 0 in terms of creditor rights.33 credit.35 In 2006, the government passed Law 28677, which The existing Secured Transactions Law severely limited the expands the collateral options to include a range of movable variety of immovable assets that could be used as collateral property and to eliminate the requirement for specific for loans, shutting out loan applicants and increasing descriptions of assets.36 That same year, the various existing transaction costs through its high degree of specificity. collateral registries were consolidated and simplified. Within SMEs were particularly marginalized by this law, as many of a year, collateral registrations ballooned 50-fold, as more their assets could not be accepted as collateral. Moreover, firms sought to collateralize and access credit through the the application process itself was problematic, as how to easier process. Since 2003, the total value of loans given out submit, and which pledges should be submitted to which in Peru has grown by 20 percent. In addition to improving 34 registries were not clearly publicized. opportunities for collateralizing, Peru has also sought to increase access to the information that banks need to assess th Following a round of reforms, Peru is now ranked 15 out potential debtors. Borrowers are guaranteed access to their of 183 economies covered in Doing Business 2010 and credit records. In the Doing Business 2010 report, Peru scores 33 World Bank (2004). Doing Business in 2004. 35 World Bank (2009). Doing Business 2010 database. 34 Marechal and Shahid-Saless (2008). 36 Marechal and Shahid-Saless (2008). 152 7 out of 10 for the Legal Rights Index, higher than either the increased, Peruvian jewelry makers have struggled to 37, 38 regional average of 5.5 or the OECD average of 6.8. maintain a foothold. This phenomenon extends beyond the jewelry industry into textiles and footwear, and This environment has also accommodated microfinance has forced Peruvian manufacturers to become more institutions and community banks, which often offer competitive. Since they often cannot compete with not only credit but also training and saving schemes to China on the basis of price, producers turn to other micro-entrepreneurs and are sometimes geared primarily ways of adding value. Flora’s niche has been to focus or exclusively to women. Additionally, larger commercial on the handmade detailing and the higher quality of banks often offer financial products specifically designed inputs used in her jewelry. She reasons that, although for small business owners. As Flora remarks, “The banks consumers may often pick the cheaper product, “when are now coming to us! Today, banks offer so many different they want something special, they invest in quality.� options for entrepreneurs.� Flora looks at trade as an opportunity. “Having to Exporting Amidst Growing International Competition compete with Chinese imports made me realize that After obtaining financing to expand, Flora continued to Aranza really needs to enter foreign markets, too,� she diversify and innovate her product line, showcasing local says. Currently, exports comprise roughly 20 percent of natural materials and adding an eco-friendly line. As her Aranza Joyas’ sales. They are sold primarily to individuals business gained a reputation as a high-end jewelry line, and retailers in Spain, Chile and Mexico. Flora aims to Flora became one of the top five jewelry producers in Peru. increase that share to 80 percent over the next few Until recently, her sales were increasing exponentially. But years, seeing that as a way to increase profit margins and since 2004, she explains, Aranza Joyas and other businesses secure more protection from domestic economic shocks. in the industry have experienced dwindling demand due With the support of the Peruvian Embassy in the United to international competition, particularly from China. States, Flora recently While Peru was until recently the world’s largest supplier “When legality is showcased her latest of silver, China’s jewelry industry is supported by abundant jewelry collection in a privilege available cheap labor and more automated high-volume production Moda Manhattan 2009 only to those with processes. “Chinese products are made by machines and in New York , where produced in large quantities, and it is just impossible for political and she got her first client, us to beat their prices,� Flora says. “Out of the top five economic power, those a Peruvian haute- jewelers in the country, only two of us are left.� excluded – the poor couture designer, who – have no alternative worked his jewelry Peru’s rank in the trading across borders category of but illegality.� collection with her. the Doing Business index is a relatively low 91 out of 183 These were exhibited economies, mainly because of the number of days it takes in several catwalks in New York Fashion Week 2009. to import into and export from the country.39 Before 2004, PromPeru, the body that promotes tourism and exports Chinese imports had made little headway into the Peruvian in Peru, launched a regular monthly meeting for women jewelry market. But as trade between the two countries exporters that Flora says provides additional support. 37 Interbank, “Peruvian Banks: A Motor for National Growth.� 38 39 World Bank (2009). Doing Business 2010 database. Ibid. 153 The Ministry of Foreign Trade and Tourism’s National Strategic Export Plan 2003-2014 has highlighted Case Study Highlights high-end jewelry, particularly jewelry made of gold • Flora Reátegui’s experience with Aranza Joyas and silver, as a vehicle for increasing the country’s demonstrates the importance of perseverance trade competitiveness.40 With Aranza Joyas, Flora has and learning from mistakes as sources of ultimate already translated this ambition into action, seeking success. out international customers and marketing not only her brand but also her country and its jewelry • Peruvian female entrepreneurs identify capacity products. By avoiding the mere replication of existing building, networking and business associations as designs available in the international market and using particularly important for doing business. rare natural materials found in the region, Aranza Joyas has carved out a niche in the international • With appropriate government support, the jewelry market. Flora reflects, “I have sown and sown, international market could become a crucial source and now I can finally reap my success.� of growth for female-owned enterprises. 40 Ministry of Foreign Trade & Tourism, Peru (2004). 154 Uruguay Mónica Avila A Business Gauchos Can Drink To Mónica Avila grew up watching her father, an artisan, painstakingly create handicrafts. But when she �rst ventured into business Uruguay ownership, she focused on a more basic product: food. She opened a supermarket in 1990 and managed it with her husband for almost 15 years. Faced with crippling competition from large supermarket chains, she began to search for a new enterprise idea. She did not have to look far – in 2004, she launched Costumbres Uruguayas, a specialty goods and handicrafts store centered on the Gaucho mate, a traditional tea. Country Context Uruguay has one of the highest GDP per capita rates and the lowest incidence of extreme poverty in Latin America. After a decade of growth, Uruguay experienced a recessionary period from 1998 to 2002, culminating in a 10.8 percent decline in GDP as the 2001-2002 Argentine crisis spilled over.1 The crisis cut bank deposits in half, and household incomes dropped by 20 percent between 1998 and 2002. In 2003, unemployment reached its highest level in 20 years.2 Self-employment sustained by intermittent activities increased, while long-term self-employment declined.3 Despite this dire scenario, extreme poverty did Argentina and Brazil, and commitments to macroeconomic not surpass 4 percent and the poverty rate, which peaked stabilization and expanded social protection ensured a at 32 percent in 2004, remained below that of many other relatively quick recovery.6, 7 Between 2005 and 2008, GDP countries in the region.4 grew an average of 7 percent per year,8 and by the end of 2006 it had surpassed its pre-crisis peak.9 In 2007, the The country’s political stability and its well-established unemployment rate fell to less than 9 percent. The poverty social programs were critical in mitigating the effects of rate declined to 25.2 percent, although household incomes the crisis.5 Favorable export prices, economic growth in were still below 2001 levels.10 GDP per capita (current USD): 1 World Bank (2004). Uruguay Poverty Update 2003. 9,654 2 Ibid. Population, total: 3 Ibid. 3,334,052 4 World Bank (2008). Country Assistance Strategy Progress Report for the Female Headed Households (% of total): Oriental Republic of Uruguay. 5 25 World Bank (2005). Country Assistance Strategy for the Oriental Republic of Uruguay, 2005-2010. Total Fertility Rate: 6 Ibid. 2.0 births per woman 7 World Bank (2008). Country Assistance Strategy Progress Report for the Oriental Republic of Uruguay. 8 Sources: World Bank (2010), World Development Indicators database, World Bank (2009). World Development Indicators database. 9 most recent year available. World Bank (2004), Uruguay Poverty World Bank (2008). Country Assistance Strategy Progress Report for the Update 2003. Oriental Republic of Uruguay. 10 Ibid. 155 Graph 1. Female Labor Force Participation in Formal and Informal Sector 100.0 % 90.0 % 80.0 % 70.0 % 34.8% 26.0% 60.0 % 50.0 % 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % a ia il ile ca as a ay ic r or a ico a ru y la do ua az in al gu m bl liv ue ad ur Pe Ri gu Ch em ex nt na Br ua pu ug ra Bo nd ez lv ta ra ge M Pa ca Ec at Ur Re Sa n s Pa Ho Co Ar Ve Ni Gu El n ica in m Informal Sector Do Formal Sector Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. In terms of social indicators, Uruguay is one of the best Women in Uruguay performers in Latin America with regards to health Uruguay is considered a socially progressive country 11 coverage, life expectancy and education. Primary school by Latin American standards, and Uruguayan women enrolment and completion is universal, and enrolment in are generally spared from gender-biased poverty or pre-primary education has increased over the last decade.12, limited access to education. Female-headed households, 13 The average years of schooling for adults in Uruguay has comprising roughly 25 percent of all households, are 15 been increasing; however, at 8.5 years, it is still relatively percent less likely to be poor (but more likely to receive 14 low for the country’s income level. public assistance) 17 than male-headed households. Female enrolment is higher than male enrolment in secondary Although Uruguay has one of the lowest levels of income and tertiary education; in the latter, female enrolment inequality in Latin America, discrepancies emerge in social has exceeded 50 percent since 2001, in contrast to male indicators. For instance, a high drop-out rate at the secondary enrolment, which is still 47 percent.18 level (currently around 50 percent) is concentrated among the poor.15 And while access to water is universal, over 40 Nonetheless, women still face barriers in the economic percent of Uruguayan households in the lowest income sphere. Although the gender wage gap was reduced 16 quintile still did not have access to sewage systems in 2002. in the 1990s, and women’s earnings jumped from 73 percent to 88 percent of male earnings from 1990 to 2000, no significant improvement has been recorded since.19 11 World Bank (2005). Uruguay: Sources of Growth – Policies for the Development of Human Capital, Integration, Competition and Innovation. 12 World Bank (2004). Uruguay Poverty Update 2003. 13 16 World Bank (2009). World Development Indicators database. World Bank (2004). Uruguay Poverty Update 2003. 14 17 World Bank (2004). Uruguay Poverty Update 2003. Ibid. 15 18 World Bank (2008). Country Assistance Strategy Progress Report for World Bank (2009), Genderstats database. 19 the Oriental Republic of Uruguay. World Bank (2004). Uruguay Poverty Update 2003. 156 Graph 2. Occupational Segregation in Uruguay 40.0 % 28.9% 30.0 % 24.2% 22.0% 20.0 % 17.4% 11.1% 11.2% 10.9% 9.3% 9.0% 9.2% 8.2% 10.0 % 8.1% 7.9% 7.8% 5.8% 3.2% 2.8% 1.2% 1.5% 0.4% 0.0 % ce es h h n th s n ts n ice c c io tio tio an al iti er Te Te ct rv He ra iv m rv ta ow h ru Se ct ist m Se or ig & st yA -L Co in -H sp d n n tic ille m Co io an ar ry es ry Ad at im st Sk Tr st m uc du Pr du s& ic Do Ed bl In In Female Male ie Pu ilit Ut Source: CEDLAS and the World Bank (2009), SEDLAC database, data circa 2005. involvement in agriculture (1.5 percent).20 About two-thirds Primary School Enrolment, of Uruguayan working women are concentrated in three Female/Male (%, gross): 113 / 116 sectors: education and health (28.9 percent, commerce Secondary School Enrolment, (22.0 percent, and domestic service (17.4 percent), as shown Female/Male (%, gross): in Graph 2. Considering that agriculture and industry 91 / 93 Tertiary School Enrolment, contribute 9.1 percent and 32.3 percent of GDP in Uruguay, Female/ Male (%, gross): respectively, and that agriculture alone accounts for over 82 / 47 60 percent of the country’s export earnings, women’s Female/ Male Adult Literacy Rate (%): 98 / 98 disengagement from these sectors may point to a loss of Female/ Male Labor Force Participation (%): economic opportunities.21, 22 64 / 85 Administrative and Managerial Positions: 35% held by women In many developing countries, women flock Seats in National Parliament: disproportionately to the self-employed sector in order to 12% held by women balance work and childcare obligations or because they Source: World Bank (2009), Genderstats database, most recent year face a lack of opportunities for salaried employment. By available. 20 OECD (2009). Gender, Institutions and Development Database 2009. Moreover, occupational segregation remains strong. [http://stats.oecd.org/Index.aspx?DatasetCode=GID2 (last accessed December 2009)]. Uruguayan women are overwhelmingly concentrated 21 Ibid. 22 in the services sector (85.7 percent), with a nominal World Bank (2005). Uruguay: Sources of Growth – Policies for the Development of Human Capital, Integration, Competition and participation in industry (12.8 percent) and barely any Innovation. 157 contrast, in Uruguay, 72.7 percent of the economically active Acá, in 2000. Hecho Acá, launched by Uruguay’s former women are salaried staff and women are less likely than first lady, Mercedes Menafra, is an organization promoting men to be self-employed (24.0 percent versus 31.3 percent). economic opportunities and the Uruguayan culture by But it is likely that some pressures remain. Mónica believes providing technical assistance and facilitating market access that is the case. “There are many female entrepreneurs to artisans across the country. Hecho Acá helped Mónica in Uruguay due to necessity,� she asserts. “In not being refine her products, formalize her business, and solidify her able to get jobs, because of lack of education, knowledge commercial client base. of technology or English, or of skills needed in this new economy, women are pushed to become entrepreneurs.� Soon, Mónica was able to move her business into a larger commercial space accommodating both production and Creating a Business around a Tradition sales. This enabled Costumbres Uruguayas to expand Although she owned her first business venture, a production and secure wholesale deals with retailers, as supermarket, with her husband, Mónica chose to launch well as to engage customers by allowing them to observe Costumbres Uruguayas on her own. She is the chief artisans preparing the mate items. In 2006, Mónica also operating officer, and her husband is one of her employees. launched a company website to attract foreign customers, “All the bills, banking forms, government forms, loan keep in touch with new and potential clients, publicize applications, they’re in my name. I’m the businesswoman,� events, and strengthen her branding. “We differentiate she says with pride. ourselves,� she explains. “Our advantage is in being formalized, our craftsmanship, and our customer service. Costumbres Uruguayas revolves around one of Uruguay’s We offer customer service guarantees and are always most deeply embedded traditions, selling items associated raising the bar.� with mate-drinking. Mate is an herbal drink consumed abundantly by men and women throughout the country Registering a Business and in neighboring regions of the Southern Cone. Special Uruguay ranks 132nd out of 183 countries and 23rd in receptacles, also called mate, are used for brewing, and silver Latin America and the Caribbean on the ease of starting or metal sieves, called bombillas, are used in lieu of straws. a business. For the average public limited company (PLC), In addition, mate aficionados use pouches – materas – for registration requires 65 days. Although the government portability. Mónica centers her enterprise on this national of Uruguay eliminated the minimum capital requirement drink, offering upscale mates, bombillas, materas, and for starting a business in 2009, registration costs alone are other accessories. equivalent to 40 percent of income per capita.23, 24 These levels are only slightly above the regional average, but are Given the popularity of mate in the country, Costumbres dramatically higher than the OECD average of 5.7 days and Uruguayas naturally faces significant competition. Mónica 4.7 percent of per capita income, respectively. estimates that there are probably thousands of producers of mate-related items in the region, and for the first few years Mónica originally hoped to register Costumbres Uruguayas she struggled to generate demand and create a niche for as a PLC, as this would have enabled her to have greater the business. She participated in exhibits and fairs, used radio advertising, and established partnerships with other businesses. A major turning point for her, she believes, 23 World Bank (2009), Doing Business 2010 database. was connecting with a non-profit organization, Hecho 24 World Bank (2008), Doing Business 2009. 158 access to finance. But she lacked the finances necessary Paying Taxes to register under this classification, and decided to register Despite undertaking a comprehensive tax reform in 2006 Costumbres Uruguayas as a sole proprietorship instead, – including lowering the VAT rate, unifying social security which took only 3 days to process, at roughly half the cost. contributions and eliminating 15 different taxes – Uruguay remains among the worse countries in terms of the taxes Accessing Credit assessed on businesses.27, 28 It is ranked 159th out of 183 Out of 183 countries, Uruguay is ranked 43rd in the latest countries and, at 53, the number of required payments Doing Business study in terms of accessing credit. This per year is significantly above the regional average of 33.2. ranking, however, is based on four indicators – one Moreover, a medium-sized company in Uruguay spends addressing legal rights and three on credit information about 336 hours per year preparing and paying taxes, in – and overlooks the cost of accessing credit.25 In Latin contrast to 194 hours in OECD countries.29 Unsurprisingly, America, the value of the collateral needed for a loan is an 66 percent and 31 percent of Uruguayan business owners average of 134 percent of the loan amount. In Uruguay, see tax rates and tax administration, respectively, as major business owners need to provide collateral worth twice constraints to their businesses. as much: 226 percent of the loan amount. Unsurprisingly, 31 percent of Uruguayan entrepreneurs point to access to Naturally, high taxes can be particularly hard on micro- and 26 finance as a major constraint to their business. nascent enterprises. Uruguay has assuaged some of the burden and taken a progressive approach to promoting When Mónica first decided to open Costumbres Uruguayas, entrepreneurial growth with the “monotributo� tax system, the only asset she owned that could be used as collateral designed exclusively for small enterprises earning below was her home, but even its value was too low given her a set income ceiling.30 The system allows consolidation of needs. Instead, Mónica and her staff spent the first several most national taxes with reductions that vary according to years focusing on local exhibits to save enough to buy the income, family size and social assistance. The program was machinery and inputs necessary for larger-scale production. expanded in 2006 as part of an effort to support private Shortly thereafter, she was able to use those newly sector growth. purchased assets as collateral for a small loan. But with a high interest rate and fees, she ultimately paid 60 percent Mónica admits that the “monotributo� system was a blessing more than she had borrowed. Since then, she has vowed to when she first launched her business. However, in 2003, never use credit again. Costumbres Uruguayas’ earnings exceeded the ceiling for inclusion in the system. Since then, tax administration “There are many female entrepreneurs has consumed more of the firm’s time and resources. in Uruguay due to necessity. In not being Mónica estimates that her tax payments have more than able to get jobs, because of lack of education, quadrupled, although she notes that there is a tremendous knowledge of technology or English, or of skills variance in her payments between tax periods. needed in this new economy, women are pushed to become entrepreneurs.� 28 World Bank (2008). Country Assistance Strategy Progress Report for the Oriental Republic of Uruguay. 29 Ibid. 25 30 World Bank (2009). Doing Business 2010 database. Government of Uruguay (2009). “Que es el monotributo?� [www. 26 World Bank (2006). Enterprise Surveys: Uruguay. montevideo.gub.uy/pymes/monotributo.pdf (last accessed December 27 World Bank (2007). Doing Business 2008. 2009)]. 159 Support for Small Businesses most small-business owners, particularly in the handicrafts As a growing body of research demonstrates, promoting sector, the cost of commercial space is prohibitive. This women’s enterprises is fundamental to strengthening underscores the importance of Hecho Acá and similar private sector development as well as gender equality. In organizations that market on behalf of the sector. 2007, Uruguay launched a National Plan for Gender Equality and engaged several ministries, including the Ministry Because most of Mónica’s staff provides artisanal labor, of the Interior, the Ministry of Economy and Finance, and she also laments the lack of administrative and financial the Ministry of Foreign Relations. The National Women’s support. “We don’t have much monitoring and tracking of Institute is responsible for coordinating gender-focused sales and returns; it’s something we do intuitively.� With initiatives with the Ministries. Its economic empowerment so little staff and so little expertise in administration, there initiatives have been centered on labor market inclusion. are lost opportunities. For example, since Mónica lacks the time and resources to do in-depth market research about As women business owners are highly concentrated in the competitors and trends, her strategy is to continuously SME sector, public policies and programs that serve the introduce new products and features. “Innovation is what sector tend to inadvertently reach higher proportions of generates recognition, copies are just copies,� she believes. female entrepreneurs. Uruguay’s National Administration of Small and Medium and Handicraft Business (DINAPYME) was established in 1990, and has since been cooperating Case Study Highlights with ministries, international donors, local governments and civil society to reach thousands of small businesses annually. • Even in countries where the legal and cultural At the local level, agencies like the Superintendency of framework is generally supportive of female Montevideo’s SME Unit provide counseling and training entrepreneurship, women can become locked services to promote competitiveness, including guidance in cycles of low productivity by virtue of their 31 in developing a business plan to secure financing. There preponderance in micro and small enterprises. is, however, no formal partnership between the National • Efforts to boost small and medium enterprises can Women’s Institute and agencies to promote the SME sector, have an unintended impact on female entrepreneurs such as DINAPYME. (given their concentration in the sector), but are best complemented by gender-sensitive policies. Mónica has managed to establish a successful business. However, the limitations that she currently faces are • Mónica Avila’s experiences with Costumbres indicative of the work that still could be done to help female Uruguayas and Hecho Acá demonstrates the entrepreneurs prosper. She dreams of opening a branch of potential role of non-profit organizations in providing Costumbres Uruguayas in a shopping mall, where she can technical assistance and facilitating market access for attract more customers, upgrade her branding, and create female entrepreneurs. more jobs. She is saving her resources towards this goal. For 31 Superindency of Montevideo (2009), “PYMES: Plan de Negocios.� [http://www.montevideo.gub.uy/empresas/pymes/plan-de-negocios (last accessed January 2010)]. 160 This publication was printed by LEDEL SAC Printers in Lima, Peru. nelmore@ledeleditores.com GTZ Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH Dag-Hammarskjöld-Weg 1-5 65760 Eschborn T +49 6196 79 - 0 F +49 6196 79 - 11 15 I www.gtz.de/gender The World Bank 1818 H Street, NW, Washington, DC 20433, USA Telephone: +1 202 4731000 www.worldbank.org/lacgender IDB 1300 New York Avenue, N.W. Washington, D.C. 20577, USA Tel: (202) 623-1000 Fax: (202) 623-3096 www.iadb.org The World Bank