Challenges and Opportunities for SMEs Leaded by Women in the Context of CAFTA-DR


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Challenges and Opportunities for SMEs Leaded by Women in the Context of CAFTA-DR

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Challenges and Opportunities for SMEs Leaded by Women in the Context of CAFTA-DR

  1. 1. Challenges and opportunities for SMES Leaded by women in the context of CAFTA-DRJeffrey Orozco,, CINPE, Universidad Nacional, Costa RicaRoxana Durán, Universidad Nacional, Costa RicaMarch, 2011PAPER PRESENTED TO GLOBELICS 2011- AbstractThis paper studies the impacts of the CAFTA free trade agreement among CentralAmerican countries, USA and Dominican Republic on firms leaded by women. The studyis based on the analysis of trade statistics and interviews to women leaden firms in CentralAmerica. The theoretical framework is on system of innovation and performance. Withthis, we consider the main factors and components in the systems of innovation that arehaving impacts on the performance (economic, social and environmental) of the firms. Aconclusion is that a free trade agreement it is not a panacea or a disaster, as some of themore extreme groups argued. The challenges and opportunities depend of the sector inwhich the firms compete. For most of the firms in the study it seems that the changes willbe very small. For some other firms, improvements in the access to USA markets mightopen new opportunities to export in better conditions. Some other firms will receive astronger competition due to the better conditions to the USA firms. Most of the womenleading firms consider that there are very good opportunities but the main challenges is tointroduce innovations. The women in the study argue that there are many institutionalissues that are affecting the possibility to manage the key issues determining thecompetitiveness of their firms.
  2. 2. 1. IntroductionAs in most of the world, the Central American countries have been part of a process ofglobalization, promoting a growing open economy. From the decade of 1960 started theprocess of the Common Central American Market, which combined free trade in the regionwith a regimen of protection towards other economies. But in the 1980s the process ofliberalization of the economy was accelerated with a new regimen of a more open economycombined with export promotion. The process was complemented with the adhesion toGATT and from 1995, to the WTO. With this, Central America adopted the multilateralrules for trade and investment, which in several ways conditioned the national policies.From 1990s a new instrument for the region has been the negotiation of free tradeagreements, promoting the elimination of tariffs and other barriers for trade. CAFTA-DR isone of these free trade agreements, maybe the most important for Central America, becauseUSA is the main commercial partner for the region.CAFTA-DR is an agreement in more than twenty topics including barriers for trade fall,service provider gain access, investment opportunities open and greater prosperity andstability in the region. Due to the agreements, CAFTA-DR has a direct influence in thenational policies of the Central American countries and Dominican Republic. The processto negotiate and approve CAFTA-DR was long. Many groups in the different countries haddistinct positions. Key points in the negotiation opened expectative about the possibleimpacts in different sectors and especially in SMEs. One of the main arguments by groupsagainst the free trade agreement was that the Central American countries were not preparedto compete in many sectors with USA firms. Other groups argued that even the agreementis not a panacea for the development of the Central American economies; it would openplenty of opportunities. Considering the different arguments, we decided to research on thechallenges and opportunities for SMEs in distinct sectors. Using a framework of inclusivegrowth, we studied the possible impacts of CAFTA-DR in a group of firms leaded bywomen. The main objective was to understand the strategies the firms are using to succeedand their perception about the challenges and opportunities in the framework of the newinstitutional framework introduced by CAFTA-DR.The theoretical framework is on system of innovation and performance. With this, weconsider the main factors and components in the systems of innovation that are havingimpacts on the performance (economic, social and environmental) of the firms. The maintheoretical argument is that innovation is a mean to promote performance improvements.The analysis also considers the role of the systems of innovations. The argument is thatbecause innovations are the result of interactive processes, the systems of innovation arekey determinants of performance changes. The results of innovation are performanceimprovements, related to the specific kind of targets the firm desire to reach, which aredefined in the economic, social and environmental dimensions. Because firms have targetsin different dimensions, the results of innovations are any, of economic, social orenvironmental significance, or a combination of them. The research questions for the studywere: what are the main factors explaining innovation and performance of the firms? Whatare the main challenges for the SMEs owned by women due to the institutional changes
  3. 3. introduced by CAFTA-DR? What are the strategies that the firms are following tostrengthen competitiveness in the framework of CAFTA-DR? How to improve the systemsof innovation in order to improve the performance of the SMEs in particular for firmsleaded by women?We used a case study methodology combined with the analysis of the institutional changesintroduced by the agreement and some statistics on trade in the sector in which the firmsparticipate. The case studies were aimed to understand the factors explaining theperformance of the firms. The specific objectives for the case studies were: to understandthe factors improving the performance of the firms, according to the women; to understandthe concept of success and performance used by the women leading the firms; to identifythe main barriers hindering innovation; to investigate the challenges and opportunities forthe firms in the framework of CAFTA-DR; to generate policy recommendations. Theapproach is mainly qualitative rescuing the experience of a group of firms leaded bywomen, and complemented with some statistics on trade and scenarios about the changesintroduced by CAFTA-DR. To collect the information we had interviews, directobservation and review of documents. To select the firms in the study we consider severalcriteria: age of the firm, women as leaders and real participation in the market.A conclusion is that a free trade agreement it is not a panacea or a disaster, as some of themore extreme groups argued. The challenges and opportunities depend of the sector inwhich the firms compete. For most of the firms in the study it seems that the changes willbe very small. For some other firms, improvements in the access to USA markets mightopen new opportunities to export in better conditions. Some other firms will receive astronger competition due to the better conditions to the USA firms. Most of the womenleading firms consider that there are very good opportunities but the main challenges is tointroduce innovations. The women in the study argue that there are many institutionalissues that are affecting the possibility to manage the key issues determining thecompetitiveness of their firms. Some policies suggested are: to improve the institutionalset-up in order to facilitate the procedures for formalization and operation of the firms; todevelop systems of information to facilitate innovation; to strengthen networks ofcollaboration among firms, universities and governmental agencies; to develop moreefficient schemes of funding for SMEs; and to strengthen the educational and trainingsystems. 2. Theoretical frameworkOur point of departure is the argument that innovation is a key determinant of theperformance and success of firms. Because of that, the main factors determining innovationare key factor to determine the performance of firms (Orozco, 2004 and 2010). The mainfactors determining innovation and therefore the performance of firms can be grouped as:institutions, the processes of learning and generation and transmition of knowledge, and thequality of interactions. Quality of interactions is a key for the performance of the systems ofinnovation, affecting the innovation processes and the performance of firms (Orozco,2004).
  4. 4. The impacts of innovation on performance have been studied by different writers. Some ofthem consider that innovation does contribute substantially to organisational survival1 byoffering new growth opportunities. See for example Brouwer and Kleinknecht, 1994;Audretsch, 1995; Metcalfe, 1995; Archibugi and Pianta, 1996; Lawless and Anderson,1996. For Wakelin (1998) the benefits of innovation at firm level are related to costreductions, new markets and potential monopoly rents.Many studies agree that, in general, innovation has an impact in some of the relevant issuesof performance. There is considerable macroeconomic evidence on the influence ofinnovation can influence export behaviour (see for instance Fagerberg, 1988, for the OECDcountries and Greenhalgh, 1990, for the UK). Wakelin (1998), Greenhalgh (1990), Buxton(1991) and Greenhalgh (1994), have found some evidence of a positive role of innovationon trade performance. Improved skills are another result of innovation processes. Firmsaccumulate skills from using new technologies, learning via the production process, andfrom the implementation of innovations (Wakelin, 1998). Starlacchini (1999) concludedthat innovations provide countries and sectors with comparative advantages stronger andmore durable than those based on unit labour costs.The differences in the innovative capabilities among firms will result also in differentperformance among them. Innovation becomes a cumulative process (Lundvall, 1992,Edquist, 1997, Rosenberg 1982) which is at least partly specific to the firm. “One outcomefrom these firm specific innovation patterns is that asymmetries exist among firms in termsof their technological capabilities and their general economic performance” (Wakelin,1998)When firms improve their performance, they also improve their innovative capacity. In thisway innovation becomes a virtual circle, resulting in performance improvements thatimprove innovative capabilities (Orozco, 2004). However, past performance improvementscould also result in less innovative efforts and poor performance could give incentives forinnovation. In some cases “good performance induces managers to believe that they have„gotten it right‟, making them reluctant to change, whereas poor performance widens thegap between managerial aspirations and achievements and thus motivates remedial action.Success can blind managers to the need for action, whereas failure provides managers withan incentive to scan their environments to find out what is wrong” (Meeus and Oerlemans,2000: 4).The role of the systems of innovation on performance is derived from their role oninnovation processes, especially on the fact that innovation is an interactive process(Orozco, 2004). Edquist (2001) argues that the most important function of the systems ofinnovation is to produce, diffuse and use innovations. The relationships betweeninstitutions and organisations in a system of innovation influence innovation processes andthereby also the performance of the system (Edquist and Johnson, 1997).1 In these studies “organisational survival” is used as a proxy of performance. In other studies the “proxy” iscosts, new markets, exports, international trade, etc. These studies are not using the same concept ofperformance. Actually they don‟t present a clear definition of the concept (see the discussion in chapter 2).
  5. 5. The role of the systems of innovation is strong even in particular firms. Firm‟s efforts andcompetencies are supported and shaped by the system or, as Nelson has pointed out, “whatfirms do, and the technologies they employ and develop, are influenced to a considerableextent by the environment they are in” (Nelson, 1998: 512). Cimoli (1998) arguedsomething similar. He considers that the interactions between competencies (referring to afirm, organisation or country abilities to solve both technical and organisational problems)and performance (as measured by variables such as competitiveness and contribution toindustrial growth) are shaped by the systems of innovation. He also argues that economicperformance depends on how each country implement policies and organises itsinstitutions, which are also part of the system of innovation. Some other studies emphasisesthat growth and catch-up potentiality are clearly related to a country‟s historical path and tothe development of the systems of innovation (Katz, 1997; Kim, 1997; Lall, 1997).The discussion on the determinants of innovation it is not an easy task. From a theoreticalperspective there are many factors that could determine the innovation processes. The listfrom the literature on innovation and systems of innovation includes factors as theinstitutional set-up, knowledge and learning, infrastructure, patterns of demand, productionstructures, government policies, feedback mechanisms, the science, universities and otherorganisations, the size and degree of affluence to the markets, the base of natural resources,the performance of the industry in which a firm is situated, the education and trainingsystems, capabilities and stimuli generated within the firms, financial facilities,macroeconomic trends, technological bottlenecks, the R&D system, the possibilities ofappropriation of the benefits in innovation processes, and asymmetries among firms andother organisations. For Gregersen and Johnson (1998) the different factors are notindependent of each other, but are developing in interaction with each other. They alsoargue that there are feed-backs mechanisms between the performance of a system ofinnovation and its innovation determining factors.The literature does not give any model prioritising the relevance of each determinant. Thiskind of weighting is only possible in empirical studies. However, from a theoretical pointof view it is possible to generate models organising the different factors determininginnovation. Figure 1 was designed as a general model grouping the factors, according to themain groups of actors in the systems of innovation. The model also considers some factorsbeing relevant for each group and for any innovation. This is the case of institutions,knowledge and learning processes and quality of interactions. In that sense, the modelconsiders these three processes as the most relevant. There are also two more factorsaffecting innovation processes in general: path dependency and the level of uncertainty2.The other factors are grouped according to the different groups of actors who can haverelations with firms and with each other (see the original development of the model inOrozco, 2004).The main groups of actors in the sectorial systems of innovation in the model are: 1)suppliers and related industries; 2) educational, training and R&D systems; 3) customers2 Path dependency is considered as a “factor” in the sense that it has impacts on innovation processes in thepresent and in the future. Uncertainty is a characteristic of innovation processes, but the level of uncertaintycan be considered as a factor because different levels can have different impacts on innovation processes.
  6. 6. and competitors of relevant markets; 4) regulatory authorities, including all kind of policymakers; 5) other stakeholders; 6) the firm.The model for explaining the factors facilitating or hindering innovation is built consideringboth the groups of actors and the network domains which define interactions into thesystems of innovation. For developing the model, I considered the factors in the literatureand organised them according to the main groups of actors. Figure 1 Factors facilitating or hindering innovation S y s t e m o f I n n o v a t i o n Institutions 1. Suppliers & related industries (Laws, property rigths, Performance of the industry customs, work norms, Asymmetries among firms trust, policies, Technological bottlenecks in the industry financial facilities, etc) Path dependency 3. Market customer 2. Educational Quality 6.Firms and competitors training & R&D of systems Patterns of demand, Internal capabilities, Interactions Their resources and quality resources, organisation Production structure, and stimuli Market pull Appropriation of benefits Level of Uncertainty 4. Regulatory authorities Knowledge and policy makers 5.Other stakeholders and Public opinion and Learning Policies and regulations reperesentation, legitimacy processes Source: Orozco, 2004There are several factors facilitating or hindering innovation in the literature that are relatedto the group of suppliers and related industries. This is the case of the performance of thesector in which a specific firm operates; the existence of asymmetries among firms; and theexistence of technological bottlenecks in the sector.Into the educational, training and R&D systems the main factors are the resources theyhave and the quality of these systems. In the group delimited by market customers andcompetitors the main factors facilitating or hindering innovation are patterns of demand,production structure, market pull, and financial facilities into the markets. Policies andregulation, including financial facilities3 for innovation generated into the systems ofinnovation are the main factors into the group of regulatory authorities and policy makers.Finally, public opinion and representation as well as legitimacy are the main factors into thegroup of other stakeholders.3 Financial facilities are part of the institutions relevant for all the groups of actor.
  7. 7. Into the firms, the main determinants of innovation are the internal capabilities, resources,forms of organisation, and stimuli to innovation. The possibility of appropriation of thebenefits in innovation processes is another relevant factor within the firms. 3. General description of the firms in the studyThe companies that participated in the study present some similarities but also importantdifferences. The common factors are: a) female leadership (own the business or work ingeneral management positions); b) production originates in Central America; c) the servicesand products are for export; c) there is commercial relationship with the United States ofAmerica; d) export experience of at least one year; e) productive activity dating at leastthree years back; f) have a staff of ten members.Among the differences, highlight the following: a) firms are located in different sectors ofthe industry (food, agriculture, precision mechanics, handicrafts, textiles and fishing items,and, personal hygiene items); b) are located in urban and rural areas; c) some have the freezone regime; and, d) their organization is different, some are under the form ofassociations, other corporations and some are cooperatives.The organizations analyzed are grouped into two blocks: the first consisting of corporationsand the second of cooperatives and associations. In corporations, the primacy objective isprofit from the effort, the commercial relation and, production of a service or product. Itsorganization is determined by a joint venture between founding partners whose contributionis generally working capital. The corporations analyzed are unique in that the foundingmembers work in their own business, run and manage the firms. Most of the members arealso involved in the production and marketing process. This is a form of self-employmentsubsistence. Furthermore, as demand and supply grows, the business is associated with analternative way to stimulate the local economy with employment, education, culture, health,and, in general improving the basic conditions of the communities directly involved.The second largest group belongs to the companies organized as cooperatives andassociations. In practical life, besides generating self-employment, these companiesestablish and promote forms of organization structures and partnerships that facilitate andstrengthen groups, in this case, groups of entrepreneur women. One of the most interestingand outstanding aspects is the organizational capacity of the production process linkages;knowledge sharing and development of women in areas such as social, cultural, economic,family and personal. One of the themes of interest of this type of organization is that thereality of communities and in particular of women is addressed in a comprehensive mannerand therefore the development of cooperatives and associations affects the dynamics andlifestyle of communities comprehensively. The productive systems shelter providers(organized into groups of cooperatives and unions), customers (members of womensgroups, types and consumer groups –fair market4- and groups of cooperatives and others).The impact on communities results then, in contributions such as employment,4 Fair market is a form of marketing that aims to reduce intermediation processes, in order to benefit bothconsumers and providers. The remuneration for the direct participants in the marketing chain is expected to beequitable. Also is governed by values of social and environmental responsibility.
  8. 8. infrastructure expansion, development of quality of life and addressing local growth andplanning. TABLE 1. Main characteristics of the firms studied Country Firm Characteristics Candelas Aromáticas Pilandros, S.A. Dedicated to handmade candles and decorative accessories. Guatemala Exports handicrafts related to the ancestral tradition of the De La Selva, S.A. Mayan culture. Antigua, Guatemala. Frutas Tropicales de Guatemala, Exports fruits and vegetables (mango, snow peas, FRUTESA, S.A. blackberries) Guatemala. Dedicated to the industrialization of canned comfort food Crafts, S.A. (tamales, lorocco and parental seed). El Salvador Shuchil: Productos Naturales, Dedicated to the export of organic products for skin and fabricantes y distribuidores, S.A. hair care. It also has a line of products for dog hair care. Cooperativa Regional de Producción Mainly devoted to processing and marketing of cashew Agropecuaria “La Sureñita”, Ltda. nuts. Other products include: wine, orange and cashew (COREPROSUL) raisings. Honduras Coordinadora de Mujeres Exports organic coffee to Europe. Campesinas de La Paz (COMUCAP) Cooperativa Nuevo Amanecer de Manufactures and sells paste5. Soledad del Paraíso. Nica Flies y Compañía Limitada, Elaborates clothing and textile accessories and fishing S.A. hooks. Nicaragua Cooperativa Maquiladora Mujeres de It is a assembly plant enterprise of "organic” clothing, shirts Nueva Vida Internacional R.L. and other cuts (socks, bags, etc.) made from cotton (COMAMNUVI) produced in organic farming systems. Konig Sabrosa, S.A. The company is dedicated to produce healthy bread Costa Rica Asociación de Mujeres Agroindustriales de San Roque de Export Anthurium flower and orchid plants. Naranjo. Works the field of Metal Mechanics (Parts, automation, die Costa Rica Desarrollos AKA Precisión, S.A. and mold).To understand the core of the study is important to note that entrepreneur women havedeveloped, mainly by implication, a number of concepts that are useful for strengtheningtheir business, including those of management, administration and consequently the notionof success. The concepts have been generally associated with community and businessrealities of organizations, for example: the success of a case associated with efforts to getout of extreme poverty, or, the access to educational processes of women‟s personaldevelopment. This issue is addressed further in the second part of the study.To develop the study thirteen companies, led by women, are selected. In most cases, thewomen own the companies and in others they are managers. The general characteristics ofthe organizations are summarized in table 1. 4. Challenges and opportunities for the companies since CAFTAIt is expected that economic policies derive from the free trade agreement between CentralAmerica and the United States, generate changes in the conditions faced by firms, resulting5 Costa Rican products. Plant that can be used as a sponge for baths.
  9. 9. in a combination of challenges and opportunities. This section examines the issue ofchallenges and opportunities since CAFTA for female entrepreneurs interviewed. It appliesa combination of two types of methodology. On the one hand, it continues with theprevailing methodology in the study, in which women are asked their opinions. Theanalysis is complemented with a study of trade policy changes arising since CAFTA foreach of the sectors in which researched firms are located. Some insights about the changes -or gaps- are added, generating commercial agreement regarding the institutional policyframework to enhance innovation and, in general, the performance of companies.To prepare the analysis of the challenges and opportunities from changes in businessconditions, the study focuses in two fundamental aspects. In first instance, it focuses on theimportance of trade flows between Central America and the United States for the mainproducts generated by the companies in the study. In this regard, we analyze the relativeimportance of each country as an export destination for the specific product and the weightthat each country has, as an origin of imports of that product. With this, we study thecomposition of the market, to determine whether it is likely that changes in tariffs may posethe risk of losing or gaining a competitive edge to the participants in the treaty.The analysis is then supplemented with a study of the tariff structure before and afterCAFTA, to appreciate how significant are the changes to motivate firms for changes intrade volumes and flows. This part of the analysis incorporates a comparison of theconditions that the United States gives in tariff in other countries, so that one could generateconclusions about the effective benefits that are generated with CAFTA for CentralAmerican countries.4.1 Products of GuatemalaThe main products of Guatemalan companies in the study are mangos, strawberries, snowpeas, blackberries, raspberries and candles. All these products have the same tariffconditions in Central America today, with tariff of 15%. Current conditions in the UnitedStates varies somewhat, being candles free from taxes, while the mango has a current tariffof 6.6 cents per pound, strawberries 0.18 cents per kilo, snow peas a cent per kilo andblackberries and raspberries 0.18 cents per kilo. Tariff conditions in which the products arewith CAFTA in the United State free trade are imports from Central America, and equalconditions to other countries with which the USA has signed free trade agreements. TheFTA introduces some degree of advantage over countries with which the USA has no tradeagreements because they are still charging fees (see Table 2). The allowance negotiated inGuatemala is in the basket A for mangos, the B for strawberries, blackberries andraspberries, and the C for snow peas and candles.In general, Guatemala has a strong trade surplus in all products tested. Although for somecandles and mangos there are significant imports in the period studied, they are much lowerthan exports. The USA market is very important for Guatemalas exports of snow peas,candles, raspberries and mangos. The greater openness that involves the CAFTA by theUnited States seems then to turn into an opportunity to strengthen the export capacity ofGuatemala. The fact that CAFTA will make a difference with respect to countries with
  10. 10. which the USA has not signed free trade agreements, and equated with other countries withwhich that country has already signed an FTA, it also seems to open a further opportunityto consolidate exports. In the case of strawberries, the United States is not a very importantmarket for Guatemala, while El Salvador is the lead partner. Greater openness in ElSalvador would also provide greater opportunities to strengthen exports to that country. TABLE 2. Guatemala: Relative importance of USA and Central American Countries as destination of exports and origin of imports. Selected products. 2000-2009 Exports Destination of exports Productos Exports Costa USA El Salvador Honduras Nicaragua Otros Rica Snow peas $147.924.439 72,66% 0,24% 0,13% 0,01% 0,03% 26,93% Candles $54.911.579 94,29% 2,34% 0,40% 0,91% 0,35% 1,71% Blackberries $21.576.505 86,03% 1,25% 0,03% 0,01% 0,41% 12,27% Strawberries $6.308.339 47,87% 49,00% 1,93% 0,52% 0,12% 0,56% Mangos $22.745.904 69,43% 1,72% 3,53% 0,01% 0,00% 25,31% Imports Origin of imports Productos Imports Costa USA El Salvador Honduras Nicaragua Otros Rica Snow Peas $434.023 27,36% 0,04% 0,29% 0,00% 0,01% 72,31% Candles $4.464.111 49,48% 3,16% 0,25% 0,01% 0,42% 46,67% Blackberries $4.513 46,33% 0,00% 53,67% 0,00% 0,00% 0,00% Strawberries $165.125 97,64% 0,03% 1,17% 0,00% 1,13% 0,04% Mangos $421.727 17,83% 41,14% 0,22% 14,52% 0,25% 26,05% Source: own elaboration with data by SIECA.The risk of significantly increased imports is not very pronounced for the cases ofstrawberries and snow peas, at least in the short term, given that the country is a netexporter of those goods and only small imports has been done, and since opening is givento five and ten years respectively. In the case of mangos, which comes in an opening, itseems not to present a high risk of massive imports because the country is an establishedexporter. In any case, we must keep in mind that exports could increase from neighboringcountries, especially from El Salvador, although previously imported volumes suggest notmuch of an opportunity of massive imports from that country.The greatest risk is not given by changes in business conditions, since in fact the market inboth directions has been quite open, but in other conditions, especially non-tariff barriersthat the USA could continue to apply. As mentioned in the interview, food exports to thatcountry has been highlighted by the requirements and health controls, among others.In the case of candles there is greater risk of increasing imports from the USA in the middleterm. There has been a flood of imports from that country, and the gradual opening wouldopen up space to expand. However, it is also very likely that the Guatemalan companiesconsolidate competitively, because the country has demonstrated competitive advantages toexport the product. Imports only reach about 10% of exports during that period, but
  11. 11. CAFTA favors in the middle term USA companies regarding current conditions. As theUSA market and other countries have been opened, the entrepreneurs interviewed in thissector do not see great opportunities. What presents are some risks of non-tariff measures tobe applied at a disadvantage to their companies, for example poor handling of goods atcustoms.USA is a less important destination for exports of strawberries from Guatemala;nevertheless, it is the main source of the few imports that have been given to this item. Forthis product the main export destination is El Salvador. Guatemalan Market opening willtake place in five years; consequently, opens some risk of increased imports from the USAin middle term. However, the FTA also opens the USA market immediately, which alsohappens in the case of El Salvador. Then, conditions are given for the strawberry industryto be consolidated prior to their opening in Guatemala. Must be taken into account,however, that parallel to that, other Central American countries will be opening theirstrawberry markets in five years, so that Guatemala will also have to compete with USAexports to those markets. Measures are necessary to be applied in order to maintaincompetitiveness in the middle term.For souvenirs and its exports, in the company La Selva, there is no official trade statistics.It was not possible to find the specific tariff headings assigned to the product, which wasnot possible to analyze the current tariff structure post-CAFTA. The analysis is then basedon the opinion of the women interviewed. In general, the conclusion to be drawn is thatwith or without CAFTA, the important thing is to strengthen the competitive capacity ofenterprises to be able to face the market. In this particular case, innovation in products is ofvital importance, and there is a mechanism to stay in the market. It is also essential that thestate apparatus contribute to competitiveness, through the simplification of exportprocedures.It is important to note that many of the women interviewed have uncertainty in the resultsof CAFTA, because they are cautious given some adverse conditions that are not easy toidentify. Some say that some conditions are given, and do not see significant changes as toidentify opportunities or challenges clearly marked, but still believe that the USA will bebenefited. TABLE 3. Innovation challenges faced by the Guatemalan firms to strengthen competitiveness Firm Innovation Challenges - Packaging raw organic material. Candelas Aromáticas Pilandros, S.A. - Stay in first place (get the product in the market before the competition) - Support from the National Education System (education of the population) De La Selva, S.A. - Analysis of the price system to begin USA sales strategy Frutas Tropicales de Guatemala, - Insertion in the domestic market. FRUTESA, S.A. - Promote literacy programs to the public, with government participation
  12. 12. Entrepreneur women in Guatemala raise the need to promote innovations in different ways,which is seen as a challenge to be faced by the market, especially, given the increasedopenness implied by the CAFTA. The following table summarizes the innovationchallenges that surface in each company (see table 3).4.2 Products of El SalvadorFor the Salvadoran case, two main products were studied: soap and shampoo. The otherproducts in the category of comfort products do not have adequate statistics. In the lattercase we refer only to the assessments made by the women interviewed. In the case ofshampoo, El Salvador shows a positive trade balance in the period. However, the amount ofimports is equivalent to 89.36% of exports. Thus, the flow of trade takes place sharply inboth directions. However, the export destination is very different from the origin ofimports; countries with which they trade are different depending on the direction of tradeflows. The destinations of exports are the Central American countries, especially CostaRica. Exports to the USA have been minimal (see table 4). TABLE 4. El Salvador: Relative importance of USA and Central American Countries as destination of exports and origin of imports. Selected products. 2000-2009 Exports Destination of exports Productos Exports Costa USA Guatemala Honduras Nicaragua Otros Rica Shampoo $19.611.909 3,10% 17,35% 16,41% 35,35% 24,89% 2,90% Soap $89.147.598 0,59% 14,86% 29,11% 37,29% 13,09% 5,07% Imports Origin of imports Productos Imports Costa USA Guatemala Honduras Nicaragua Otros Rica Shampu $112.947.444 9,08% 16,95% 0,42% 0,01% 0,34% 73,21% Soap $340.332.546 3,23% 27,46% 55,61% 5,28% 3,12% 5,30% Source: own elaboration with data by SIECA.In the case of imports show a different situation. The main supplier is Guatemala. Othercountries, especially Mexico and USA are also significant suppliers. Although the market isquite open, the shampoo category still has 15% tariff on all Central American countries,while USA is free trade (zero tariff). The FTA negotiations would lead to an opening tofive years in Honduras, El Salvador and Guatemala, and an opening in ten years in CostaRica and Nicaragua.What can be expected along these lines opening in Central America is that Salvadoranexporting firms could face a much higher level of competition in the middle term,especially from USA companies. Also face greater competition in the local market, both ofGuatemalan companies as USA companies. No additional benefits are displayed for exportsto Central America, because tariff changes will be parallel to all the countries of the region.Deprive then the challenge of facing benefits acquired by USA companies.
  13. 13. In the case of soap, El Salvador has a negative trade balance. For the category of soapstrade flow occurs markedly in both directions, being the other Central American countriesmajor trading partners. Costa Rica is the main destination for Salvadorian exports of soap.Exports to the USA have been very low. Most imports come from Central Americancountries also. Thus, imports coming from the United States account for 6.9%.The soap market is quite open in Central America, but still maintains tariffs of 15% in allcountries. Meanwhile, in USA there is free trade (zero tariff) for that item. The FTAnegotiations lead to an immediate opening in Guatemala, five years in El Salvador andNicaragua, and an opening in ten years in Honduras and Costa Rica, although Hondurasrose in equal annual tracts and Costa Rica in a non-linear form.It is anticipated that with these guidelines for opening in Central America, Salvadoran firmssee soap exporters facing increased competition level in the middle term, especially fromUSA companies. Correspondingly, face greater competition in the local market, both ofGuatemalan companies and companies in Honduras and the USA It is not expectedfavorable conditions compared to other countries in the region, because the tariff changeswill be parallel to all countries. Although imports from USA have not been very high, withthe highest degree of openness in the middle term, it generates the challenge of facing theadvantages acquired by USA companies. TABLA 5. Innovation challenges that surface each Salvadoran firm to consolidate competitiveness Firm Innovation Challenges - Creation of a food plant attached to standards and best practices to Crafts, S.A. increase quality, differentiation and meet market requirements. - Industrialization of lemon grass - Access to information through AGRONATURE Shuchil: Productos Naturales, fabricantes - Insertion in Ecotourism y distribuidores, S.A., - Improvement of technology with government support El Salvador. - Development of a different marketing strategy - Insertion in dehydrated vegetable technology - Involvement in agribusiness programs.The entrepreneurs we interviewed are aware of these new challenges, but are clear thatsurvival in the market will depend on the competitive capabilities that are consolidated bythe companies, especially in the differentiation of products for ecological and socialcharacteristics. They also raise the need to promote innovations in different ways as ameans to improve competitiveness and address the consequences of CAFTA. The followingtable summarizes the innovation challenges that surface each company (see table 5).4.3 Products of HondurasThe study also included two Honduran products, green coffee and cashew nuts. In bothcases SIECA statistics were used for analysis. It also includes assessments made by thewomen interviewed. In the case of coffee, Honduras is a net exporter, while importsrecorded very low amounts, so the trade balance is positive in that period. The trade flow isthen given in one direction. The destination of exports is far from Central America, aselsewhere in the region are also exporters. The United States is an important partner,absorbing almost 40% of Honduran green coffee exports. The list of buyers includes other
  14. 14. countries, but that percentage does not represent very high amounts. The USA market is open to imports of green coffee from around the world with zero tariffs. The Central American countries still have a tariff of 15%, except Nicaragua, which has it at 5%. The FTA negotiation leaves open the USA market and leads to an opening in fifteen annual stages in each of the countries of Central America. In this area in particular is not expected that Honduran exporting firms face a much higher level of competition in the middle term, because the USA is not a producer of green coffee. What it is feared, is that more elaborated coffee come to compete in the domestic market. But strictly for green coffee is not CAFTA what are opening opportunities and challenges, but other international market conditions. In this sense, CAFTA seems neutral. In the category of cashew Honduras has a positive trade balance, with imports reaching about 25% of exports. The flow of trade takes place sharply in both directions. The United States absorbs around 40% of Honduran exports, and generating over 95% of Honduras imports (see table 6). TABLE 6. Honduras: Relative importance of U.S. and Central American Countries as destination of exports and origin of imports. Selected products. 2000-2009 Exports Destination of exports Productos Exports Costa USA Guatemala El Salvador Nicaragua Otros RicaGreen coffee $3.430.001.385 19,71% 0,12% 0,28% 0,11% 0,00% 79,78%Cashew nuts $274 0,00% 0,00% 99,64% 0,00% 0,00% 0,36% Imports Origin of imports Productos Imports Costa USA Guatemala El Salvador Nicaragua Otros RicaGreen coffee $66.076 1,32% 0,00% 15,59% 0,00% 0,00% 83,09%Cashew nuts $6.170 100,00% 0,00% 0,00% 0,00% 0,00% 0,00%Source: own elaboration with data by SIECA. The cashew market is quite open in Central America, but still maintains tariffs of 15% in all countries. In the USA there is free trade (zero tariff) for that item. The FTA negotiations lead to an immediate opening in El Salvador, Honduras and Nicaragua, and an opening in ten years in Costa Rica and Guatemala. It is expected that with movements towards free trade in Central America, Honduran companies that produce cashew nuts face a greater level of competition, especially from USA companies. It is also possible that they will face greater competition in the local market, from both Guatemalan, Honduran companies as well as companies from USA It is not visualized on favorable terms to other countries in the region, especially against Costa Rica and Guatemala, where the opening will be slower. Although imports from USA have not been very high, with the highest degree of openness that will immediately, expands the scale of the challenge to address the advantages acquired by USA companies.
  15. 15. Entrepreneur women actually do not see those threats and, conversely, which arise asbarriers are high costs provided by their suppliers and the high costs that means not havingall the technological advances. Some are also concerned by the inability to cope with verylarge orders that exceed their capacity. Subsequently, consider the need to reach separateagreements with clients or with other producers, so that organizers can meet the demands.The challenges of innovation that must be taken to strengthen competitiveness arepresented in the table below (see table 7). TABLE 7. Innovation challenges that must be taken by Honduran firms to strengthen competitiveness Firm Innovation ChallengesCooperativa Regional de Producción - Diversification of the marketAgropecuaria “La Sureñita”, Ltda.(COREPROSUL)Coordinadora de Mujeres Campesinas - Literacy programs to educate La Paz (COMUCAP) - Development of other type of coffee with bigger beans.Cooperativa Nuevo Amanecer de - Development of local tourism.Soledad del Paraíso, Honduras. - Investment in new machines.4.4 Products of NicaraguaIn the case of Nicaragua two main products were studied: hooks and cotton fabrics. Thewomen interviewed provided these findings as well. In the case of hooks, Nicaragua is a netimporter and records very few exports. Further was found that the exports made by thecompanies studied are not registered, due to the fact that official statistics only coveredexports to Canada for a very low amount, but none to the USA, which is where thecompany Nica Fly exports. Imports in the period are $ 63,767, which is a relatively lowamount. The main supplier is Panama.The market of hooks is completely open in all participating countries in Central America.Only Costa Rica and the USA have tariffs greater than zero. In Costa Rica are just 1% and4% in the USA Since CAFTA, the immediate opening in Costa Rica and the United Statesmaintains the situation free of tariffs in all other countries.The USA opening do not seem very significant to drastic changes in the situation.However, some advantages open with CAFTA, as tariffs for other countries with which thatcountry has no trade agreements, are maintained at 4%. Therefore, there is no real threat toCentral American countries, but rather perceived a slight chance of expanding exports tothe USA market. Considering the physical skills of the female population in Nicaragua: themanufacture of hooks requires fine finger dexterity (speed), and the proximity to thesoutheastern USA coast.In the case of cotton in Nicaragua, it presents an enormous trade deficit. In other areas ofthe textile industry Nicaragua is a net exporter, particularly in Maquila, but suitably in thisarea the country is importing tissues. Most of the imports are from the United States.The cotton market has low protection in Central America and the USA The highest tariff ispresented in El Salvador (20%) and the lowest in Nicaragua (5%). Honduras and
  16. 16. Guatemala have tariffs of 14%, while Costa Rica keeps 10%. In the USA varies between 3% and 10.5%, according to different areas. The FTA negotiations lead to an immediate opening in Central America and the USA. (see table 8).TABLE 8. Nicaragua: Relative importance of U.S. and Central American Countries as destination of exports and origin of imports. Selected products. 2000-2009 Exports Destination of exportsProductos Exports USA Guatemala El Salvador Honduras Costa Rica OtrosHooks $4.994 82,76% 0,00% 0,00% 0,00% 0,00% 17,24%Cotton 1/Fabrics $1.759.279 1,02% 16,51% 1,60% 1,61% 74,68% 4,58% Imports Origin of importsProductos Imports USA Guatemala El Salvador Honduras Costa Rica OtrosHooks $404.149 14,47% 0,42% 0,00% 0,00% 0,07% 85,03%CottonFabrics $23.355.777 24,21% 10,01% 27,08% 20,42% 2,31% 15,97%Source: own elaboration with data by SIECA.1/ Include all kind of cotton fabrics. Although tariffs are already very low, it is expected that with these guidelines for opening in Central America, Nicaraguan firms exporting cotton face increased competition level in the short term in their target markets in other Central American countries. Also face greater competition in the local market, both USA companies and other Central American companies. Favorable conditions are expected in markets of other countries in the region, because the tariff changes will be greater in those countries compared to those who must make Nicaragua. Imports from the USA have been in itself very high, and with the greatest degree of openness in the middle term, it creates the challenge of facing the advantages acquired by USA companies. However, this item is widely used as feedstock for other items that were subsequently exported to the USA, so it can also be a chance to place a greater proportion of goods in the domestic market. The entrepreneurs who were interviewed are of the opinion that indeed there are new challenges but also opportunities that come and could be used if firms are consolidated. The respondents are more optimistic and believe they have the ability to emerge strengthened. Some of the challenges of innovation to improve the ability to seize opportunities and confront the challenges that opens with CAFTA are presented in the table below (see table 9). TABLE 9. Innovation challenges that arise for Nicaraguan firms to consolidate competitiveness Firms Innovation Challenges - Besides the Maquila industry they consider insertion in Nica Fly y Compañía Limitada, S.A. designing - Program promotes a culture of conventional and Cooperativa Maquiladora Mujeres de organic cotton in the area, with government assistance Nueva Vida Internacional R.L. and international cooperation agencies. (COMAMNUVI), Nicaragua. - Cotton Spinning
  17. 17. 4.5 Products of Costa Rica In Costa Rica, three main products were studied: bread and flowers, orchids and anthuriums. Other products that the company AKA Precision generates could not be identified in the statistics generated by SIECA, therefore the issue was addressed by the interviews with the entrepreneurs. In the case of anthuriums, Costa Rica is an exporter par excellence and only shows a sporadic importation of a low amount. Thus, the trade balance is positive. USA is the main destination for exports. The other important trading partner is Canada. There are no sales to Central America for this product. Anthuriums market has tariffs of 15% in all Central American countries, while USA tariffs are 4%. With the validation of CAFTA, as negotiated, all countries would enter into free trade immediately. USA remain, however, a 4% tariff for imports of anthuriums that are not from countries with which it has signed trade agreements (see table 10). TABLE 10. Costa Rica: Relative importance of U.S. and Central American Countries as destination of exports and origin of imports. Selected products. 2000-2009 Exports Destination of exports Producto Exports USA Guatemala El Salvador Honduras Nicaragua OtrosAnthuriums $4.879.123 87,84% 0,02% 0,04% 0,00% 0,15% 11,95%Orchids $3.353.789 69,02% 0,72% 0,15% 13,73% 0,47% 15,91%Bread $319.096.347 1,68% 32,09% 11,01% 8,04% 17,99% 29,19% Imports Origin of imports Productos Imports USA Guatemala El Salvador Honduras Nicaragua OtrosAnthuriums $460 0,00% 0,00% 0,00% 0,00% 0,00% 100,00%Orchids $23.546 76,34% 0,00% 0,00% 0,00% 0,00% 23,66%Bread $175.597.935 28,89% 22,95% 0,60% 2,79% 7,65% 37,12%Source: own elaboration with data by SIECA. The country is not importing anthuriums, so it is difficult to predict, even with market liberalization, that there would be dramatic changes to the local market and that it could be attractive for foreign companies to put their production. What we can predict is that the total opening in the USA generate more opportunities, although the reduction of tariffs is just 4%. For the category of orchids, the situation is very similar to that of anthuriums. Costa Rica has made some imports but very small, and has emerged as an exporter. USA is, again, the main trading partner. The other Central American countries also buy from Costa Rica, but in very small quantities. Most imports come from Thailand, Panama and Brazil. There have been imports from Colombia and from Taiwan. Of all the CAFTA countries, the USA is the largest source of imports. There were no imports from other Central American countries.
  18. 18. The market for orchids is also quite open. Still prevails a tariff of 15% in all CentralAmerican countries, while USA tariff is 4%. Once CAFTA goes into effect, as negotiated,all countries will enter into free trade immediately. As in the case of anthuriums the USAwould maintain a 4% tariff on imports of orchids that are not from countries with which ithas signed trade agreements, opening up an advantage, however slight, concerning thecurrent situation.The country is not a heavy importer of orchids; consequently it is difficult that marketliberalization change drastically. However, it is clear that it is facing a higher level ofcompetition, and indeed USA companies gain more advantage to export to Costa Rica.Nonetheless, local market size is not large, and most of the produce is exported, it seemsthat FTA rather opens up new opportunities. The producers of anthuriums and orchids havebeen able to compete in current conditions, thus ability to continue exporting has improved,and still depends on the competitive capabilities of enterprises, focussing primarily onproducing quality and efficiency.For the category of bread, Costa Rica has a negative trade balance in this period, althoughthe amounts of imports and exports are very similar. The flow of trade is quite marked inboth directions. However, the export destination is very different from the origin ofimports, countries with which they trade are different depending on the direction of tradeflows. The destination of exports is mostly Central American countries. Exports to the USAhave been very small. There have also being exports to third countries. In the case ofimports, the situation is different. The main suppliers are the USA and Guatemala.The market is quite open for the category of bread, but still has tariffs of 15% in all CentralAmerican countries, while USA is free trade (zero tariff). The FTA negotiations leading toan immediate opening in Guatemala, and for ten years in the other Central Americancountries, although Costa Ricas opening pose to fifteen years.What appear to be the consequences to these opening lines in Central America are thatexporters in Costa Rica are being faced to a much higher level of competition in the middleterm, especially from USA companies. Also faces greater competition in the local market,especially of Guatemalan and USA companies. No additional benefits are displayed forexports to Central America, because tariff changes will be parallel to all the countries of theregion and instead will have to face competition from the USA, than if they acquiredifferent conditions. What seems to prevail then is the challenge of facing the advantagesacquired by USA companies.The company interviewed in the area of metallurgy (Precision) also sees the FTA as anopportunity. They are aware they will face more competition, but have the capacity to dealwith it. Specialized training, technological upgrading, are some elements that consolidatethe company.The main challenges of innovation to improve the ability to seize opportunities andconfront the challenges that opens the CAFTA, as perceived by the Costa Rican companiesin the study are presented in the table below (see table 11).
  19. 19. TABLE 11. Innovation Challengers faced by costarrican firms to strengthen competitiveness Firm Innovation challengesKonig Sabrosa, S.A. Costa Rica. - Find other alternative marketsAsociación de MujeresAgroindustriales de San Roque de - Exports to new markest, such as EuropeNaranjo. Costa Rica. - Developt new products such as moldDesarrollos AKA Precisión, S.A. Costa - Improve the quality of the customer serviceRica. - Introduce high technologies5 Conclusions: Success features for the companies in the studyThe firms surveyed in the study are a clear indication that the entrepreneurship run bywomen has been strengthened in Central America. These companies have developedcapabilities to be inserted in a competitive market, winning over a series of setbacks andshortcomings of the institutional framework. From the study of these experiences ispossible to draw a series of lessons on the major factors on which success is based. Indeed,despite the fact that the companies studied belong to different branches of productiveactivity and the nature and organization seem antagonistic, they have common factors thathave gradually approach them to success.Aspects such as financial management, marketing strategies, organizational culture andlinkage to collaborative networks have been present in the history of the differentcompanies. In some aspects, it has been presented as previously determined, then for otherfirms, it has become a significant challenge that, however, has been adequately resolved. Insome cases institutional support has been vital, solving several fundamental requirementsfor competitive companies. But in most cases that kind of support has been given by thewomen involved, creating new ways to cover functions that the institutional frameworkshould be generating.This section systematizes the experience of the companies studied, to derive lessons aboutsuccess factors that have been present in different cases.5.1 The concept of success for entrepreneur womenAmong the women interviewed is a widespread belief that business success is associatedwith the effective contribution that the company achieved in family welfare andcommunity. These women associate success to the contribution that their companies hasby opening spaces for the participation of women, and the contribution that is generated onthe welfare of women, the community and especially families. Companies are not seen as anend in itself but as a mean of personal and collective development, which are important notonly for financial results, but also mainly for the changes evaluated in terms ofimprovements in the quality of life.
  20. 20. Thus, the fact of competitively consolidating in the market makes sense for them just as itcontributes to a broader purpose, associated with improvement in quality of life. Is issuccessful, then, a company that generates jobs, contributes to community development,and gives more space for participation of women. It is clear, however, that profitability,however minimal, is a requirement, but it is not, for these women an end in itself.The success is also associated with the capacity for innovation, and that is derived from theopportunity to open the enterprise to the active participation of women, allowing them tomaterialize the innovative potential.Ultimately, the major contribution is the prospect for personal development of women,which becomes tangible in the form of national and international sales. The company issuccessful in both new opportunities for personal and family growth and to develop theinnate potential of work and creativity.The successful business model for the women interviewed is a far from the theoreticalmodel of profit maximization. There are much broader purposes such as generating jobs,increasing the motivation of women, and the welfare of children.In some cases this conception of success on the social contribution prevents fromdetermining the balance in corporate profitability. An example of that is the case ofComucap, where sales levels and income distribution did not maintain equitablerelationship, threatening the stability of the company.Success was achieved in a process in which many issues are of great importance. Noteverything is easily obtained and requires a prolonged period to obtain favorable indicatorsin some areas. However, other aspects, such as growth and improvement, from thebeginning have strengthened the participation of women in their companies.5.2 Financial Management.The way to all financial management and access to financial resources is a factor that allcompanies consider as essential for success.Capital contributions have been a source of great importance in most enterprises of womenin the study. Even in cases where the company emerged as a strategy to address poverty,and where, therefore, women did not have cash to contribute, they managed to make capitalcontributions by means of hours worked. This is the case of the Cooperativa Maquiladorade Mujeres de Nueva Vida Internacional (COMAMNUVI).These capital contributions in many cases come from the reinvestment of profits. This hasmeant the sacrifice of current income, which was much needed to meet basic needs, but thewomen understood that they were of vital importance to strengthen the company. It wasinstituted then, the social fund, which is fed by a percentage of profits that is generated by
  21. 21. the firm6.A key factor for succes has been that the fund have sufficient working capital to enable it tomeet the production processes. Womens groups have managed in different ways to havethat fund. For some companies it is not enough capital the contribution their owners canmake, so it is necessary to resort to other sources. However, access to credit is a limitingfactor in many companies. Thus, the existence of financial programs tailored to smallcompanies is of great importance. In the case of Nicaragua, apparently there have beenchanges in the Nicaraguan Investment Fund, enabling different credit lines for businessesled by women.Several companies have used their relatives to channel some funding. Others have acombination of sources to meet financial needs. Of great importance is the contributionmade by customers through down payments in their contracts, which are combined withloans from different financial institutions. Some of the companies in the study receivedfinancial support in the form of cooperation, which have been given a major stimulus forthe strengthening of the company. For other companies, lack of access to financingbecomes a serious difficulty, which restricts the ability to strengthen the business.The reinvestment of capital, in most cases, follows credit forms from horizontal linkages.Vendors have served as suppliers of credit through billing and soft collection systems. Ingeneral, this form is the product of long-term business relationships, which to date aresupported by references and recording of payment made by the administration ormanagement.5.3 Business ManagementA key factor for business success, as revealed by the women interviewed in the variousCentral American countries, is to make a proper business management. There are severalimportant aspects. For example, some of the entrepreneurs argue that it is vitally importantto have clear mechanisms to form a portfolio of clients. For these companies it has beencontributory the initial support of a customer who has placed their trust and supported themto start their production.In some industries the best has been to focus on fewer clients with projects of a certain size,rather than generate a lot of small projects for many different clients, as in the case of AKAPrecision. It is also vital to keep customers, which is achieved by meeting the qualitystandards and complying with the terms of sale, including delivery datelines.One mechanism for improving marketing has been the system of “referrals”. Indeed,satisfied customers work as a means of advertising, as they provide good references fromthe company. Thanks to this mechanism, some companies have increased their customerdatabase.6 In the case of COMAMNUVI the social fund feeds up of five or six percents of the sales .
  22. 22. There are also institutional aspects that become allies of the marketing strategy. Forexample, the entering into export arrangements as Free Zone creates many advantages forbusinesses, because they decrease the paperwork and transaction costs.The trade fairs have been a mechanism for attaining new customers. Several companieshave resorted to this strategy, often with support of different organizations or governmententities.In some countries, the government has promoted these types of fairs, creating meetingplaces where new businesses are displayed. From that initial impulse companies arebeginning to strengthen their marketing channels and more carefully selecting their targetmarkets. In other cases some companies have been more aggressive, joining businessnetworks that provide space for marketing or, more generally, to do business. Also, havechosen to develop outlets in which to exhibit and sell their products permanently. Thuscapturing new customers who then go generate higher sales.A local mechanism has been used to organize tastings for people to know the products,especially those belonging to the food industry.The support of organizations that promote fair trade has been of great importance for somecompanies. This has opened direct marketing channels in marketplaces that conditions arefavorable, though not necessarily been steadily strengthened.A vital mechanism to visualize new opportunities has been the direct observation ofmarkets to which they want to access, identifying details of the marketing process. In somecases this is achieved by direct visits to supermarkets or other places that could situate theproducts the company wants to sell.Markets and advertising activities have not always been stable. This has meant that womenare very enterprising, identifying new markets and new forms of publicizing. Somecompanies have not yet managed to establish innovative marketing systems and thereforeare forced to use intermediaries. In these cases the firms have the challenge of productdifferentiation and generation of new outlines to sell.Different marketing strategies used are characterized by constant monitoring of the needs offinal customers and intermediaries. The market demands and a continuous process oftransformation and expectations of new business directions, have forced companies todevelop ways of working partnerships that strengthen the quality of supply of services andproducts. Therefore, in most cases, the value added to the product or service, not enclosedin using high quality components, it becomes necessary to include processes channelsinvolved in pre sales and after sales. Here is how, processes and procedures forprocurement, production, sales and after sales are part of the components that help thequality of commercial relationships.
  23. 23. 5.4 Developing organizational skills.One of the key factors for business success, as the women interviewed expressed, is thatcompanies develop a flexible organizational structure to adapt to changing circumstances,and allow a proper division of labor in which teamwork is promoted and can harness theexpertise that people will reach.According to statements of the entrepreneurs, the organizational culture makes room for ahigh turnout of women workers, in a way that leverages their creativity and motivation toseek improved ways of doing the work, while eliminating vices that threaten high laborproductivity.For companies to be successful, we need to promote the development of proactivity andaim at high productivity. And for that, conditions must be generated to analyze theperformance of the staff, and mechanisms to encourage creativity.Of fundamental importance to business is to generate an environment conducive to personalgrowth and job stability. That way the employees feel more secure and work with greatermotivation. The introduction of the philosophy of continuous improvement has been amajor factor for improving firm performance. Companies are facing this philosophy inpractice to improve production processes, quality, productivity, taking the challenge furtherto improve every time there is a breakthrough.It is essential that companies develop information and communication systems that allowthem to properly manage their business. The developing of such systems becomes a keysuccess factor, while weakness in these systems undermines the good businessperformance.Some companies have advanced in the use of tools to evaluate performance, allowingproblems to be identified easily, and then taking corrective measures in a timely manner. Ituses some kind of indication of whether things are going well, according to expectations.According to what an entrepreneur expressed.The most basic practice, present in all companies, is planning, both strategic andoperational activities of daily living. This will present the necessary actions to advance thebest performance and effective program.The diligence with which it organizes and plans the administrative management hasencouraged the consolidation of effective working methods, adaptable to the requirementsof the demand. Rigorous and practical procedures have provided continuous monitoringand evaluation of performance and organizational developments.5.5 Learning process.For companies it is very useful to develop appropriate mechanisms for recruitment anddevelopment of job skills of new workers, consequently, transfering knowledge from olderworkers. It was mentioned, another set of mechanisms that facilitate the learning process as
  24. 24. ongoing training and openness to teamwork.In many cases, recruitment is defined in in-group discussions, involving trusted personaland line managers. The selection process has objective assessment mechanisms. Attitude isa crucial part for the inclusion of new staff in the company. The candidate must be able towork as a team, have knowledge of the position applied for (theoretical and practicalsupport) and open-mindedness, by means of availability and enthusiasm to growprofessionally regardless of the position to perform. Human skills translated into attitudes,behaviors and actions are basic in the learning process.Learning ability and reproduction of knowledge in search of synergies, in most cases, notonly are associated with hired staff skills, but also the mechanisms and methods adopted bythe organization.Some of the most used are the training sessions conducted by the workers themselves.Usually these are done when a person is delegated to receive a workshop (for example, insales techniques, effective inventory techniques) and they return with a commitment to passon to their colleagues the knowledge acquired. Another way is workshop of feedbackderived from a routine checkup or control, in which they are trying to solve or improvesituations.One aspect attributable to conditions contributing to the learning process is job stability.The return of the investment in staff training is secured by means of job stability (providedby the contractor as per the contracted). This mutual engagement is the base of a strong andenduring relationship.Other relevant aspects are those related to access to resources (financial and time), andinformation technology. The sources come from agreements with academic organizations,affiliations and trade organization.5.6 Differentiation of products and servicesThe business success is closely connected to the characteristics of products and servicesoffered. These features are part of the authenticity and rationale of the company, and are themechanisms for market differentiation and gain of customer preference. The fundamentalsare quality products and customer service.In each of the branches is necessary to identify the critical features of the products thatbecome the elements that make the customers choosing to buy or not. In some divisionsfeatures are raised such as texture, size, flavor, color, type of materials used, among others.In other industries the characteristics of the products are associated to issues like health,harmony with nature and social and economic welfare of the population.That is why much of the business-driven activities appeal to the system of fair trade. Andwith marketing efforts are loaded the binomial of quality and service. It envisions a qualityproduct management pre and post sales. It is not enough to deliver the product and forget
  25. 25. about the customer, the product is as important as the relationship with the consumer, whofeeds the production management.Some cases, such as AKA-Precision Developments, reveal the importance of productprocess tailored to meet very specific needs of customers. On the other hand, horizontalalliances with suppliers have been strong for some companies. The high quality of rawmaterial percentages adds significant value. Such is the case of making bread, craft items,candles and fresh fruit.Another instrument of differentiation is the process of selling, in which monitoring andcustomer feedback is the transverse axis of the design of products and customized service.Also integration of processes that minimize negative environmental impacts has been keysuccess factors and market linkages.Networks vision is a label that is printed on the product. Companies that are part of groups,associations and circles at the end, have access to schemes that improve the quality of lifefor residents and promote local development. There is access to technology, updatedinformation and exchange of experiences.Technology aims to improve the product, the techniques of genetic engineering, electronicsand metal engineering development, information tools for research (Internet), techniquesand materials for improving crops and soils, and access to equipment and machinery toimprove processes. These factors combine a stream of improvements in product quality andbusiness management.The cases of genetic modification are most revealing in Crops and Seeds, Orchids,Anthuriums, Cashew, Mango, Paste, Coffee, Blackberries, among others. They useadvanced science to improve the final product. In the case of the Paste is looking to bebigger and colorful.It is necessary to maintain some degree of research and development in new products andnew market niches. In the case of knowledge of food ingredients and raw materials, itpoints to the excellence and product differentiation.How to get to the final consumer also makes a difference, in association with productquality, creativity and reliability maintain the presentation and product presence. AttendingHealth Fairs to promote the product is another strategy, used by Nelia De León en KonigSabrosa, Costa Rica.To add new component to the products many times can take it to be part of the starproducts portfolio. These are cases of companies dedicated to articles of ornaments, textilesand hooks. Changes in color, size or any other aggregated value means being at theforefront (be the first to bring the product to market) and competition. Placing the productbefore the rest of the competition is the key because it allows differentiation. Being first isinterpreted as the introduction of a product or service to an untapped market, whichpositions the company in the lead for a period of time.
  26. 26. On the other hand, homogenize the product quality leads to sales success. Products such asanthuriums flowers, mangos, seeds and fruits in general should be presented in a uniformsize, color, flavor, texture and smell.Broadening the product portfolio is one of the most widely used practices: making candles,handicrafts, items for decorations, exotic fruit, flavored breads, variety of foods for canningand different types of coffee.Searching schemes for certification of products is another way; it adds value to the product.The good manufacturing practices, environmental labels and international standards arepart of the safety arguments provided by the product.Although there have been several ways to reach the differentiation in the product andservice, the central concept is always preserved, which gives meaning to the existence ofthe mission which is more than to accumulate wealth, is to contribute to the common good:making healthy bread using organic products and inputs to protect the environment,designing items to manage stress, entertainment, relaxation, and contributing toemployment generation in the communities.5.7 Collaboration networkIt is emphasized, in the interviews, the contribution of different actors linked to the activity,in particular to resolve critical issues. This is associated with the quality of collaborativenetworks to which the firms have been inserting into. Profound links mark the past, presentand future and significantly affect business success.The relationship with different types of actors is thus a must for all companies. Those aresignificant elements that are derived from the process of knowledge sharing, technologytransfer, support to improve ways of working, access to outsiders for the extension andmodification of patterns of thought and the encouragement of processes to increase accessto funding and to generate appropriate marketing channels.5.8 Sources of knowledge and educationTo stay ahead in the industry or any economic activity, essential nutrients are required toimprove the performance and especially for the performance expected and demanded incompetitive markets. Therefore, staying away from the sources of knowledge and itstransfers becomes lack and, in turn, competitive disadvantage.In the case of Costa Rica, AKA-Precision Company maintains a continuing educationprogram in high technology aimed at all employees and Konig Sabrosa with best practiceprograms in food, product demonstrations and distribution. Organizations that typicallyoffer this service are both from the government such as the National ApprenticeshipInstitute (Instituto Nacional de Aprendizaje, INA by acronym in spanish) and other NGOssuch as CEGESTI. There has also been significant input from the Chamber of Industry. Thecourses offered are focused on technical aspects such as Precision Mechanics and
  27. 27. Electronics and high Administrative and Management topics, Business strategy, amongothers. Likewise, these organizations provide training in other areas such as trade andinternational business rules implementation.Formal educational institutions, meet the staffing needs of companies. In the technical area,students graduated from Vocational Schools7 are received. Others graduated from INA andother private and public universities such as El Tecnológico, Universidad Nacional andUniversidad de Costa Rica.The role of universities and the demands of companies are very clear. For AKA-PrecisionDevelopment and Konig Pan, they have been the means for professional development inacademic careers in business management. In the case of AKA-Precision contribution hasbeen enhanced through technology programs developed by the National Institute ofTechnology (commonly called the Technological). Agricultural Womens Association ofSan Roque stated never having the support or link of national universities.Also, courses are offered in relation to the topics of trade and government policy in thesector. In the case of the Agroindustrial Womens Association of San Roque de Naranjo theinitial contact was made with the University of Puerto Rico West Vallo and PROCOMER,which has contributed to courses in fields of commerce and trade and export assesment.Another ways of knowledge transfer are associations and trade associations. Entrepreneurwomen have access to current information and have the opportunity to participate indomestic groups such as boards and committees. This participatory process provides themwith not only knowledge but also make room for the expression of positions and views onthe industry growth, reaching significant areas of decision-making institutions such as theLegislative Assembly. It also facilitates their contact with companies, national andinternational.As mentioned above, knowledge transfer and feedback comes from various sources. Manycompanies have turned to close relationships with their customers. These are meaningfulcollaboration to define the paths to the satisfaction of needs and tastes of the customer;guidelines that companies fail to capture accurate impressions by the aspirations ofpromising markets.In Costa Rica, the company AKA-Precision Development is one of the most revealingexamples of this relationship because the product is tailored to the customer‟s preferencesand the sales process beyond simplistic relations of buying and selling.Suppliers are also agents of great importance for companies. These actors are important inthe training process, while, the company is responsible for providing the employee withexpertise on the proper management and maintenance of plant, tools and teamwork. Samecontact with different actors generates important information, which feed the decision-7 Vocational schools are part of the formal structure of education system in Costa Rica. The program belongsto the cycle of secondary education, called college. In this system the teenage boy have the opportunity toaspire to a degree as a technical education, the cycle lasts six years.
  28. 28. making processes and establishes policies and standards in the industries and trade.In Honduras, Zamorano University has been promoting organizational processes in thepretense of private enterprise and cooperatives. It has been determined to be a link betweenstaff and communities. Some NGOs have also contributed to the issue of knowledgetransfer.5.9 Integrator Programs: Horizontal chains of trade and productionOne program that draws more attention is running the China-Taiwan Mission, FIAL andMAG8 in Costa Rica. The process of promoting support networks and service circuits isachieved with the participation of twenty-six projects consisting of seventy womenassociations covered by the Union of agribusiness womens organizations in the country.The central activity is to promote womens organization pushing for a strong program basedon production and trade relations. The projects are within a comprehensive structure ofchain of processes: the development of the orchid plant, for example, is made by a womensassociation called AMASAR located at Rosario de Naranjo, where there are plants thatproduce genetically improved climate being a natural ally for the development of theproduction. TROJAS in Greece and Sarchí, AMASIA in Athens, AMASAR in El Rosarioand Conception of Naranjo, and the Association are organizations binding for both thevarious stages of production of the plant to commercialization. There is a permanentstorage facility for marketing "The Fair" sponsored by the government through the MAG.The circuit of trade encourages the rotation of cash flows in the partnerships.Providers have been important partners in the development of corporations. A clearexample is Konig Pan in Costa Rica. Providers supplement the companys financial needsthrough programs of service and customer credit, bills with broad time frames for recovery,provision of equipment and machinery on credit, procurement of high quality raw materialsunder health standards, as well as being part of the crossover quality control of productsand supplies handled through the technical sheet. This control provides oversight in thestore.Companies like De La Selva and La Sureñita have maintained relationships with suppliersand customers in a seamless manner. The chain in the improvement and modification of theproduct begins with information that clients provide on successes or failures of theproducts. These are transmitted to the respective production centers. For example: De LaSelva in which the product comes from the communities, groups or families of smallproducers, the message of improvement and change is the responsibility of the company. InThe Sureñita the owners of properties that are generally spouses or neighbors supply theraw material. In both cases the customer feedback plays an important role: recommendedstyle, size, color, labeling, packaging, among others. Aromatic candles Pilandros ofGuatemala and FRUTESA have been supported by the entity responsible for the countrysexports.8 Ministry of Agriculture and Farming (Ministerio de de Agricultura y Ganadería, MAG, by acronym inSpanish), Governement of Costa Rica.
  29. 29. The opportunities offered by the cooperative sytem have been welcomed by COMUCAP.This has grown associative networks of women in various countries in which they have tiesof solidarity. This encourages the values embedded in Fair Trade. It also ensures some formof sales for a given time.The Sureñita –from Honduras- has also developed links with suppliers, which in manycases are the same couple of associates of the cooperative members, intertwiningrelationships with family. This has contributed to the strength and feedback processes andrelationships.5.10 Other sources of collaborationFamily support has been very important, mainly in the final stages of maturation of thecompanies, with financial loans, property and even labor input, experience and knowledge.Another source of collaboration is the support by programs run by agencies of internationalcooperation aimed at developing productive and social-environmental organizations. Theseprogramas often have been promoters of successful processes.5.11 Relevance of government involvementThe government support to encourage industry growth has been manifested in variousforms. In some cases the Government, represented by the institutions of trade, has played arole in promoting non-traditional exports and in some cases has led to programs to supportsmall and medium enterprises. However, in many cases, government involvement has beenvery poor.Some cases of very specific government support, but that makes the difference, is theexperience of the company Agribusiness Association of Women of San Roque de Naranjoin Costa Rica. With the growing demand for expertise in growing Anthurium, MAG isobliged to provide training to rural organizations applicants. The governments contributionhas been through payments of travel to other countries.The Salvadoran government has specific programs to promote and support exports of smalland medium enterprises. The company Shuchil of natural products has benefited from apromotion program. By contrast, in Guatemala, women entrepreneurs manifest lack ofinterest of the government to encourage exports.The Ministry of Natural Resources of the Government of Honduras has served as apromoter of alternative production systems, such as the industrialization of Paste. Thestimulation of exports in Nicaragua has been channeled through government programs.Joint efforts haven taken place such as organizing international exhibitions and training.They also coordinated a website to support the marketing of the firms.
  30. 30. 6. Conclusions: CAFTA, Challenges and opportunities for the strengthening of innovation systems6.1 General conclusionsThe challenges and opportunities since CAFTA differ for different companies studied. Forthe majority did not foresee significant changes from current conditions. For others,however, the conditions acquired by Central America in the USA market open up newopportunities. Another group of products will face more competition to improve theconditions that USA companies receive.Many of the women interviewed have uncertainty of the outcome of the CAFTA, theyworry that they were given some adverse conditions that are not easy to identify. Some saythat, in the commercial sense, significant changes are not seen as to identify opportunitiesor challenges clearly marked, but still believe that the USA will be benefited. Nonethelessin general, given the uncertainty or specific threats, women entrepreneurs raise the need topromote innovations in different ways.In Guatemala, the risk of significantly increasing imports is not very pronounced for thecases of strawberries and snow peas, at least in short term, given that the country is a netexporter of those goods and has only made very small imports, and because the opening isgiven to five and ten years respectively. In the case of mangoes, which comes in aninmediate opening, it seems not to present a high risk of massive imports because thecountry is an established exporter. In any case, we must keep in mind that exports fromother Central American countries could increase. As is clear from the words of one of therespondents, the greatest risk is not given by changes in business conditions, since in factthe market in both directions has been quite open, but under other conditions, especiallynon-tariff barriers that the United States could continue to apply.In the case of candles, for Guatemala there is greater risk of increased imports from theUSA in the middle term. Already there has been a flood of imports from that country, andthe gradual opening would open up space for higher imports. However, it is also very likelythat the Guatemalan companies could consolidate competitively, because the country hasdemonstrated competitive advantages to export the product.For the sector that produces shampoo, which can be expected with the opening lines thatintroduce the CAFTA in Central America, is that exporters Salvadoran firms see a muchhigher level of competition in the middle term, especially from USA companies. Also facegreater competition in the local market, both of Guatemalan companies as USA companies.No additional benefits are displayed for exports to Central America, because tariff changeswill be parallel to all the countries of the region. The priority is then to face the challenge ofbenefits acquired by USA companies. Salvadoran firms exporters of soap also will be facedwith increased competition level in the middle term, especially from USA companies.Additionally, they will face greater competition in the local market, both of Guatemalancompanies and companies in Honduras and the USA Entrepreneur women who wereinterviewed are aware of these new challenges, but are clear that survival in the market will