Mapping Exercise

of Handicraft
Projects in Latin
America and the
Caribbean

Prepared for the

Inter-American Development Bank
by DAI
Ted Barber, Lead Author
Marina Mutchler and Siiri Morley,
Contributing Authors and Editors

August 17, 2007

Introduction
The goal of this mapping exercise is to provide the Inter-American Development Bank (IDB)
with an overview of recent artisan projects in Latin America and the Caribbean (LAC), based on
available information from donors, development organizations, and the private sector. The study
reviews value chain strengths and weaknesses, project interventions and results, lessons learned,
and perspectives from the marketplace. Based on this information, we offer an assessment of the
approaches identified and a strategy for future IDB support for artisan sector development.

10. DAI RECOMMENDATIONS FOR AN IDB STRATEGY

Our recommendations for future IDB support of artisan sector projects are based on research to
date and follow our assessment of approaches in the preceding section. Our goal has been to
provide a general strategy the IDB can employ as it determines how best to move forward.
Recommendations
1. Determine a target country or region based on criteria established by the Bank, such as
scale of artisan need, opportunity for impact, strong partners, favorable changes in
government policies and/or markets, best project proposals submitted, etc.
2. Fund a comprehensive analysis of the proposed beneficiary value chain(s) that includes an
equally comprehensive market assessment.1 Ideally, basic product and producer information
is obtained first, followed by the market assessment, which then informs the value chain
analysis. The analysis should be driven by market demands and constraints.
3. Once constraints and opportunities have been identified, the Bank can evaluate the expertise
and resources of potential partners: implementing organizations, government agencies,
public and private institutions, and businesses in the target beneficiaries’ value chain(s) or
related value chain(s). Emphasis should be placed on companies with profit incentives to
collaborate and a track record of long-term relationships.
4. Together with its partners, the Bank should identify clear and attainable objectives and
guidelines for a proposed project. Each objective should be individually prioritized
(increasing employment and incomes, supporting women in business, promoting equity and
fair compensation, preservation of traditional cultures and skills, improving health and
working conditions, advancing environmentally sustainable practices, etc.).
5. If the primary objective of a project is increasing employment and incomes, the IDB should
insist on a commercial approach to project design and implementation, and develop
separate but linked interventions to achieve other objectives, ideally implemented by separate
but coordinated personnel.
6. The design of interventions should follow the collective best practices outlined below: a)
Address key constraints throughout the entire value chain(s) from raw materials to end-
consumers; b) Begin and end with the market; diversify risk by promoting access to multiple

1 Though a complete value chain includes distribution channels and end consumers, the value chain analysis and market
assessment are often referred to as independent but linked tasks.

Mapping Exercise of Handicraft Projects in Latin America and the Caribbean 2

 markets (local, national, regional, global, tourist, luxury, etc.) and channels (large chains,
independent stores, direct-purchase retailers, traditional wholesale distributors, other
sectors/value chains for “piggyback” opportunities, etc.); c) Work with groups and
associations; partner with the private sector including intermediaries and leading firms in the
sector; d) Diversify risks associated with private sector by partnering with multiple firms; e)
Build local capacity rather than establish a reliance on outside assistance; f) Emphasize
innovation, continual product development, and improvement in general business skills; g)
Minimize and phase out subsidies; h) Facilitate access to credit from financial institutions; i)
Provide field staff sufficient autonomy to make critical course corrections; and j) Provide
funding for a life cycle of at least five years with interim benchmarks, a baseline data study,
and M&E with a minimum 10-year horizon.
7. Insist that implementing partners hire field staff with relevant business experience for the
project components to develop enterprise and increase employment/incomes. Ideally, there is
an incentive structure that rewards staff for meeting project goals. It is imperative to balance
such incentives with development expertise to ensure that best practices are followed.
8. Recognizing that access to capital is a significant constraint, and that lending institutions
often exhibit reservations about the artisan sector, IDB-funded projects should include an
access to finance component. Partnering with competent microfinance and larger financial
institutions, supporting bank consortiums to address barriers to and gaps in loan access (the
“missing middle”), and using guarantees to promote the development of loan products for the
artisan sector, or for MSMEs in general, are options to consider.
9. Promote pro-MSMEs and pro-export policies and programs among LAC governments,
such as simple business registration, reduced taxes, sensible monetary policy, anti-corruption
initiatives, access to duty-free raw materials, reduction in nontariff barriers that affect artisan
enterprises, programs to support women in business, ongoing business training, etc.
10. Support infrastructure projects that connect artisans groups to national, regional and
global markets, particularly roads, port services, telecommunications and internet access.
11. Support activities that expand markets for artisan products, such as national and
regional trade fairs that highlight craft producers and promotional events at international
trade fairs. IDB funding and networking can significantly increase the participation and
exposure of LAC artisans at these events. A more controversial activity, but highly effective
according to interviewees, is subsidizing sourcing missions for international buyers to
explore potential LAC suppliers. Other ideas include supporting efforts to link LAC artisans
and exporters to successful internet retailers, such as Amazon and eBay, and funding training
seminars at fair trade conferences to help these importers expand into mainstream and
foreign markets.
12. Reach out to other donors for greater collaboration to combine resources, leverage
individual strengths (research, partner networks, contacts, etc.), and avoid overlap. Our
research efforts suggest that there is currently only limited collaboration.
In addition to the recommendations above, there are several reminders from our research that are
worth noting:
ƒ Be wary of encouraging more artisans to produce for limited market demand.

Mapping Exercise of Handicraft Projects in Latin America and the Caribbean 3

ƒ Invest in innovation, product development skills, and market development. Projects
should focus first on products with the best chance for success.
ƒ Differentiate between handcrafted production (artisans who want to produce large
quantities of the same item, all to the same specifications) and unique handcrafts (artisans
who prefer to create unique items). Products from these two different mindsets tend to flow
into different channels with different buyers. Customers and producers should be well-
matched.
ƒ Partner with private enterprise in the tourism industry, as there is potential for creative
approaches to help artisans access stronger local markets.
Countries and Regions
The DAI team was asked to suggest countries and/or regions where IDB-funded projects could
have the greatest impact. There are, of course, many artisan groups that have received little or no
outside assistance—such as indigenous groups in Paraguay, Brazil, Argentina, Guyana and
Suriname. In contrast, artisans in Peru, Guatemala, Bolivia and a number of other countries have
been the focus of at least several major projects over the past few decades. There are also
countries that possess significant potential in the artisan sector, yet face a range of difficult
constraints that require outside intervention. The most prominent of these is Haiti. And there are
countries that appear to have many elements from the list below already in place with just a few
key constraints, such as Brazil and its regulatory barriers to trade.
Opinions vary about where new projects could have the greatest (or quickest) impact and/or
success, but in general interviewees advise donors to work in countries where many of the
following elements exist so that a project can address several key constraints rather than an entire
array of value chain weaknesses and related obstacles.
ƒ There is an artisan tradition with marketable handcrafted products.
ƒ There is complete buy-in from the artisans—they want to improve their products, learn to
innovate, upgrade quality, learn business skills, increase production and earn a living from the
handicrafts.
ƒ Competent private sector partners exist, such as exporters and agents, who are already selling
artisan products or interested in doing so.
ƒ There are potentially strong local and regional markets.
ƒ The government is pro-MSMEs, pro-exports, and open to addressing barriers to trade.
ƒ Reasonably good infrastructure exists.
ƒ There is an entrepreneurial culture.
ƒ There exists a local capacity for design and innovation.
ƒ There exist institutions that can provide long-term support for artisan-based enterprises, such
as business training, credit access, design centers, product development programs at
universities, etc.
ƒ There are microfinance and other financial institutions that can lend to MSMEs.

Mapping Exercise of Handicraft Projects in Latin America and the Caribbean 4

To provide some general guidance in terms of countries in which to work, we can make the
following comments based on our research to date:
ƒ Strong artisan tradition and marketable products: Bolivia, Brazil, Chile, Colombia, Cuba,
Guatemala, Haiti, Mexico and Peru. Although we have insufficient information, the
Dominican Republic, Ecuador, Nicaragua and Panama may also be of interest.
ƒ Complete buy-in from artisans: This varies substantially from group to group within each
country. However, private sector interviewees have commented that while countries like Peru
and Guatemala have business-minded artisans, Haiti and Bolivia (two that were named)
appears to have cultures in which, in general, it is difficult to support enterprise development
among artisan beneficiaries.
ƒ Competent private sector with interest in artisan goods: Brazil, Colombia, Guatemala,
Mexico, and Peru are the countries most often indicated to possess this characteristic.
ƒ Strong local and regional markets: Most of Central America, the tourist destinations in the
Caribbean, Brazil, Chile, Colombia and Mexico. In addition, Panama was referenced as a
possible opportunity for artisan sector development because of the explosive growth in
housing construction along the Canal Zone. Brazil and Colombia in particular have been
identified as having large internal middle-class markets.
ƒ Government is pro-MSME/exports: Chile, Costa Rica, Dominican Republic, Guatemala,
and Peru.
ƒ Reasonably good infrastructure: Chile, Guatemala, Mexico, Panama, and Peru.
ƒ Entrepreneurial culture: Brazil, Chile, Colombia, Cuba, Guatemala, and Peru.
ƒ Most ignored artisans in LAC: Non-Andean communities in South America.
ƒ High potential, but with high barriers to trade: Brazil.
ƒ Local capacity for design and innovation: Cuba, Brazil, Guatemala and Peru.
ƒ Institutions for long-term support: We possess little information about the strengths or
weaknesses of local institutions.
ƒ Existing financial institutions: There are many MFIs that are operating throughout the
region, as well as many larger FIs that are very reluctant to lend to the artisan sector. This
requires further research that is beyond the scope of this report.
Partners
We have found that the most effective projects have a collaboration of several players—financial
institutions, the private sector, artisan associations, export agencies and local government
agencies. By identifying strong and diverse local partners, a project has more potential to create
more long-term, effective change.

Mapping Exercise of Handicraft Projects in Latin America and the Caribbean 5