Local ceramics, global customers

Local ceramics, global customers

Cerámica Perú´s owners and venture capitalist Andrés Blondet

From the outside, Ceramica Perú looks like another nondescript adobe dwelling by the roadside in Ńańa, a bleak, wind-swept suburb of Lima. But inside is a scene of bustling business activity, as workers urgently but gingerly negotiate their way between stacks of plates, pitchers, mugs and cups in various stages of completion, some clay, some glazed, others bursting with raw handpainted color.

Owners Jorge and Cecilia Balcázar and their 44 employees, working in eight different crammed locations, produce more than 14,000 mugs, plates and other ceramics products each month for export. The Balcázars are happy to work practically around the clock, because they now are realizing their dream of becoming successful exporters.

The couple started Cerámica Perú in 1992 after selling their house to raise capital. Within a few years they had begun supplying hand-painted kitchenware and other ceramics to Mesa International, a U.S. wholesaler and importer whose clients include L.L. Bean, Pier One Imports and Macy's. But in order to fulfill large orders, Cerámica soon needed to expand its facilities, and for this it needed financing. In the beginning, the Balcázars lacked collateral for a bank loan; later, when exports increased, they were reluctant to see their modest profit go to servicing debt.

Then, in early 1997, Cerámica received a $180,000 equity investment from the Fondo de Asistencia a la Pequeńa Empresa (FAPE), a new venture capital fund for small businesses in Perú in which the IDB-administered Multilateral Investment Fund owns a 49 percent equity share. With working capital in hand, the Balcázars doubled sales and exported $300,000 worth of ceramics by the end of the year. Today they are building a new plant that will enable Cerámica to triple its number of employees in order to keep up with growing export demand.

The agreement for a five-year investment gives FAPE 35 percent of the company's shares, and the fund expects to realize a 32 percent rate of return on its investment. For the Balcázars, sharing their profits with FAPE will be more than offset by revenues from increased sales.

"A bank's business is to give me credit. But FAPE's business is to help me produce more in order to be more profitable," explained Jorge Balcázar. "It's not so much that FAPE helps us technically in producing the product. What they have done is help us become more business-like in our management and administration in everything from accounting to obtaining building permits."

The equity is also key to building Ceramica's relationship with Mesa by enabling the Balcázars to be able to produce wholesale quantity.

"Without the FAPE investment", says Mesa CEO Jerry Barnes, "I would question whether Cerámica could grow to impact the market. I tell all the factories we work with that they must be globally competitive. They have to improve their technology and productivity."