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Competitiveness improves quality of life in Otavalo, Ecuador

Small business owners transform their household economy through a project to support competitiveness

Each week the colorful "Plaza de Ponchos" (Poncho Plaza) in Otavalo, Ecuador, displays handicrafts made by more than 250 artisans. They are members of community microenterprise networks, created as part of a project being carried out by the local municipality with support from the Inter-American Development Bank (IDB).

Otavalo is an Ecuadoran icon of handicrafts, tourism, and indigenous culture, drawing more than 250,000 visitors annually. The project has helped improve the business environment for small-scale entrepreneurs through activities carried out in partnership with local authorities.

In the project, entrepreneurs have developed technical skills and received strategic advice that has enabled them to better address marketing challenges and achieve more and better sales. About 21,000 people have benefitted from the project, which began in January 2007 and concluded in last December.

René Zambrano, a small businessman, said that the program has helped to unify his community, build confidence, and move ahead on a project for a living museum in Otavalo. "We have a new life, renewed pride for our race, and new confidence for addressing our major challenges, such as how to proceed with the museum and pay the loan we used to acquire the building that houses it,” said Zambrano, who is president of the community that manages the museum.

"Before we didn’t even think about carrying out such a project,” said Zambrano. “We were afraid. But now, everything is being done legally, and we have the trust and hope of preserving our culture and sharing our earnings as brothers. We are proud to know that we can do this," he said. The museum, which is owned by 16 communities, is a showcase for Otavalan art and culture , which is internationally known for craft production and marketing as well as Andean musical traditions.

Visitors can watch craftspeople using handlooms to create textiles and clothing and learn about aspects of everyday life. Project unites people and boosts productivity.

The 16 microbusiness networks established by the project have changed the lives of their members and of their families. Sales have increased on average 16 percent since the project beganbecause of new product designs and measures to diversify marketing channels. Support provided to legalize firms and create microenterprises is improving business practices, benefitting entrepreneurs by allowing them to get greater access to financing, boost productivity, and get better prices for raw materials, finished handicraft products, and tourism services. The municipality and the State have also benefitted from the higher levels of formalization with increased tax revenues.

The microenterprise networks have business plans that address the actual conditions in which they operate. The project is financed by the Multilateral Investment Fund (MIF) with a $826,000 grant and the Municipality of Otavalo, which is providing $332,230 in counterpart funding. The project supported the implementation of of enterprise networks and a one-stop enterprise window, which provided simple solutions relating to business registration, intellectual property, handicrafts benefits, and taxes.A positive experience with a good future

"The project has operated on two levels: those of the authorities and beneficiaries,” said Marco Macías, a specialist at the MIF. “It fostered a dialogue among members on mutual assistance that facilitated the identification of the realities and needs of the population. This made it possible to identify priorities, challenges and opportunities, and make optimal use of resources," he said.

"The municipality has studies on investment areas and projections of development and growth. This is an asset with great potential for future investors in this city. Because of the excellent results we obtained, in this project, we are looking into supporting the expansion of the city’s market infrastructure, where tourism and trade set the paceof urban life, "said Macías.