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Reason for smiles in Ecuador's blue city

When José Antonio Lanusse first arrived in Pelileo, a town of 12,000 people in the mountainous Sierra region of central Ecuador, there were hardly any proper buttonholes.
What would be an inconvenience for most places was an economic hardship for Pelileo, because its main industry is manufacturing denim clothing. In fact, the town is so identified with the denim industry that it is known as "la ciudad azul" (Spanish for blue city) for its thousands of pairs of blue jeans drying on roofs.

At that time, most of the modest workshops and small factories made buttonholes by cutting small slits in the trousers, a crude technique that condemned their products to a short life before they started fraying. Only one medium-sized maker owned a buttonhole sewing machine, and he was not about to help his competitors by sewing buttonholes for other firms. (However, a disloyal watchman at the factory surreptitiously used the coveted machine to make buttonholes for other manufacturers, but his fees were too high for most potential clients.)

What was a headache for Pelileo's jeans makers was a golden opportunity for Lanusse, an Argentine lawyer who runs INSOTEC, a nongovernmental organization that provides business development services for small and microenterprises in Ecuador. His plan was to introduce sorely needed technology into Pelileo's textile industry.

In 1994 INSOTEC used funds from an IDB soft loan to buy a buttonhole machine and installed it on the floor of its business service center in Pelileo. It charged jean makers 10 cents a buttonhole and disseminated information about the real cost and the source of this technology.

Today there are about half a dozen similar machines in the town. The cost of making a buttonhole has dropped, garment quality has improved, and so have the prices fetched by Pelileo's products.

Soon realizing that the buttonhole business could not remain profitable for long, insotec moved into new activities, such as embroidery work and bulk purchasing of raw materials, and plans to move into new areas, such as stone washing of fabric. It also has organized business missions to cities in neighboring Colombia so that local manufacturers can see how more modern factories are run.

Created in 1980 as a social and economic research institute, INSOTEC gradually focused its mission and set itself achievable, measurable goals. Lara Goldmark, an IDB microenterprise specialist, credits INSOTEC's successful transformation to its emphasis on human resource development, a first-rate management information system and a market-based product development strategy which regards all of its services and offices as profit centers.

"INSOTEC drives home the idea that business development services for microenterprises can be for-profit, sustainable activities," she said.
Lanusse himself attributes INSOTEC's success to the discipline imposed on it by supporters such as the IDB and USAID, which insisted that beneficiaries be billed for services. "We found what services microentrepreneurs really wanted by seeing what they were willing to pay for," he explained.

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