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

Challenges and opportunities for SMES Leaded by women in the context of CAFTA-DR

Jeffrey Orozco, [email protected], CINPE, Universidad Nacional, Costa Rica Roxana Durán, [email protected] Universidad Nacional, Costa Rica March, 2011 PAPER PRESENTED TO GLOBELICS 2011

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This paper studies the impacts of the CAFTA free trade agreement among Central

American countries, USA and Dominican Republic on firms leaded by women. The study

is based on the analysis of trade statistics and interviews to women leaden firms in Central

America. The theoretical framework is on system of innovation and performance. With

this, we consider the main factors and components in the systems of innovation that are

having impacts on the performance (economic, social and environmental) of the firms. A

conclusion is that a free trade agreement it is not a panacea or a disaster, as some of the

more extreme groups argued. The challenges and opportunities depend of the sector in

which the firms compete. For most of the firms in the study it seems that the changes will

be very small. For some other firms, improvements in the access to USA markets might

open new opportunities to export in better conditions. Some other firms will receive a

stronger competition due to the better conditions to the USA firms. Most of the women

leading firms consider that there are very good opportunities but the main challenges is to

introduce innovations. The women in the study argue that there are many institutional

issues that are affecting the possibility to manage the key issues determining the

competitiveness of their firms.

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11.. IInnttrroodduuccttiioonn As in most of the world, the Central American countries have been part of a process of

globalization, promoting a growing open economy. From the decade of 1960 started the

process of the Common Central American Market, which combined free trade in the region

with a regimen of protection towards other economies. But in the 1980s the process of

liberalization of the economy was accelerated with a new regimen of a more open economy

combined with export promotion. The process was complemented with the adhesion to

GATT and from 1995, to the WTO. With this, Central America adopted the multilateral

rules 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 trade

agreements, promoting the elimination of tariffs and other barriers for trade. CAFTA-DR is

one of these free trade agreements, maybe the most important for Central America, because

USA 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 and

stability in the region. Due to the agreements, CAFTA-DR has a direct influence in the

national policies of the Central American countries and Dominican Republic. The process

to negotiate and approve CAFTA-DR was long. Many groups in the different countries had

distinct positions. Key points in the negotiation opened expectative about the possible

impacts in different sectors and especially in SMEs. One of the main arguments by groups

against the free trade agreement was that the Central American countries were not prepared

to compete in many sectors with USA firms. Other groups argued that even the agreement

is not a panacea for the development of the Central American economies; it would open

plenty of opportunities. Considering the different arguments, we decided to research on the

challenges and opportunities for SMEs in distinct sectors. Using a framework of inclusive

growth, we studied the possible impacts of CAFTA-DR in a group of firms leaded by

women. The main objective was to understand the strategies the firms are using to succeed

and their perception about the challenges and opportunities in the framework of the new

institutional framework introduced by CAFTA-DR.

The theoretical framework is on system of innovation and performance. With this, we

consider the main factors and components in the systems of innovation that are having

impacts on the performance (economic, social and environmental) of the firms. The main

theoretical 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 that

because innovations are the result of interactive processes, the systems of innovation are

key determinants of performance changes. The results of innovation are performance

improvements, related to the specific kind of targets the firm desire to reach, which are

defined in the economic, social and environmental dimensions. Because firms have targets

in different dimensions, the results of innovations are any, of economic, social or

environmental significance, or a combination of them. The research questions for the study

were: what are the main factors explaining innovation and performance of the firms? What

are the main challenges for the SMEs owned by women due to the institutional changes

introduced by CAFTA-DR? What are the strategies that the firms are following to

strengthen competitiveness in the framework of CAFTA-DR? How to improve the systems

of innovation in order to improve the performance of the SMEs in particular for firms

leaded by women?

We used a case study methodology combined with the analysis of the institutional changes

introduced by the agreement and some statistics on trade in the sector in which the firms

participate. The case studies were aimed to understand the factors explaining the

performance of the firms. The specific objectives for the case studies were: to understand

the factors improving the performance of the firms, according to the women; to understand

the concept of success and performance used by the women leading the firms; to identify

the main barriers hindering innovation; to investigate the challenges and opportunities for

the firms in the framework of CAFTA-DR; to generate policy recommendations. The

approach is mainly qualitative rescuing the experience of a group of firms leaded by

women, and complemented with some statistics on trade and scenarios about the changes

introduced by CAFTA-DR. To collect the information we had interviews, direct

observation and review of documents. To select the firms in the study we consider several

criteria: 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 the

more extreme groups argued. The challenges and opportunities depend of the sector in

which the firms compete. For most of the firms in the study it seems that the changes will

be very small. For some other firms, improvements in the access to USA markets might

open new opportunities to export in better conditions. Some other firms will receive a

stronger competition due to the better conditions to the USA firms. Most of the women

leading firms consider that there are very good opportunities but the main challenges is to

introduce innovations. The women in the study argue that there are many institutional

issues that are affecting the possibility to manage the key issues determining the

competitiveness of their firms. Some policies suggested are: to improve the institutional

set-up in order to facilitate the procedures for formalization and operation of the firms; to

develop systems of information to facilitate innovation; to strengthen networks of

collaboration among firms, universities and governmental agencies; to develop more

efficient schemes of funding for SMEs; and to strengthen the educational and training

systems.

2. Theoretical framework

Our point of departure is the argument that innovation is a key determinant of the

performance and success of firms. Because of that, the main factors determining innovation

are key factor to determine the performance of firms (Orozco, 2004 and 2010). The main

factors determining innovation and therefore the performance of firms can be grouped as:

institutions, the processes of learning and generation and transmition of knowledge, and the

quality of interactions. Quality of interactions is a key for the performance of the systems of

innovation, affecting the innovation processes and the performance of firms (Orozco,

2004).

The impacts of innovation on performance have been studied by different writers. Some of

them consider that innovation does contribute substantially to organisational survival1 by

offering 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 cost

reductions, new markets and potential monopoly rents.

Many studies agree that, in general, innovation has an impact in some of the relevant issues

of performance. There is considerable macroeconomic evidence on the influence of

innovation can influence export behaviour (see for instance Fagerberg, 1988, for the OECD

countries and Greenhalgh, 1990, for the UK). Wakelin (1998), Greenhalgh (1990), Buxton

(1991) and Greenhalgh (1994), have found some evidence of a positive role of innovation

on trade performance. Improved skills are another result of innovation processes. Firms

accumulate skills from using new technologies, learning via the production process, and

from the implementation of innovations (Wakelin, 1998). Starlacchini (1999) concluded

that innovations provide countries and sectors with comparative advantages stronger and

more durable than those based on unit labour costs.

The differences in the innovative capabilities among firms will result also in different

performance among them. Innovation becomes a cumulative process (Lundvall, 1992,

Edquist, 1997, Rosenberg 1982) which is at least partly specific to the firm. “One outcome

from these firm specific innovation patterns is that asymmetries exist among firms in terms

of their technological capabilities and their general economic performance” (Wakelin,

1998)

When firms improve their performance, they also improve their innovative capacity. In this

way innovation becomes a virtual circle, resulting in performance improvements that

improve innovative capabilities (Orozco, 2004). However, past performance improvements

could also result in less innovative efforts and poor performance could give incentives for

innovation. In some cases “good performance induces managers to believe that they have

„gotten it right‟, making them reluctant to change, whereas poor performance widens the

gap between managerial aspirations and achievements and thus motivates remedial action.

Success can blind managers to the need for action, whereas failure provides managers with

an 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 on

innovation processes, especially on the fact that innovation is an interactive process

(Orozco, 2004). Edquist (2001) argues that the most important function of the systems of

innovation is to produce, diffuse and use innovations. The relationships between

institutions and organisations in a system of innovation influence innovation processes and

thereby 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” is

costs, new markets, exports, international trade, etc. These studies are not using the same concept of

performance. Actually they don‟t present a clear definition of the concept (see the discussion in chapter 2).

The role of the systems of innovation is strong even in particular firms. Firm‟s efforts and

competencies are supported and shaped by the system or, as Nelson has pointed out, “what

firms do, and the technologies they employ and develop, are influenced to a considerable

extent by the environment they are in” (Nelson, 1998: 512). Cimoli (1998) argued

something similar. He considers that the interactions between competencies (referring to a

firm, organisation or country abilities to solve both technical and organisational problems)

and performance (as measured by variables such as competitiveness and contribution to

industrial growth) are shaped by the systems of innovation. He also argues that economic

performance depends on how each country implement policies and organises its

institutions, which are also part of the system of innovation. Some other studies emphasises

that growth and catch-up potentiality are clearly related to a country‟s historical path and to

the 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 theoretical

perspective there are many factors that could determine the innovation processes. The list

from the literature on innovation and systems of innovation includes factors as the

institutional set-up, knowledge and learning, infrastructure, patterns of demand, production

structures, government policies, feedback mechanisms, the science, universities and other

organisations, 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 training

systems, capabilities and stimuli generated within the firms, financial facilities,

macroeconomic trends, technological bottlenecks, the R&D system, the possibilities of

appropriation of the benefits in innovation processes, and asymmetries among firms and

other organisations. For Gregersen and Johnson (1998) the different factors are not

independent of each other, but are developing in interaction with each other. They also

argue that there are feed-backs mechanisms between the performance of a system of

innovation and its innovation determining factors.

The literature does not give any model prioritising the relevance of each determinant. This

kind of weighting is only possible in empirical studies. However, from a theoretical point

of view it is possible to generate models organising the different factors determining

innovation. Figure 1 was designed as a general model grouping the factors, according to the

main groups of actors in the systems of innovation. The model also considers some factors

being 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 model

considers these three processes as the most relevant. There are also two more factors

affecting 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 have

relations with firms and with each other (see the original development of the model in

Orozco, 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) customers

2 Path dependency is considered as a “factor” in the sense that it has impacts on innovation processes in the

present and in the future. Uncertainty is a characteristic of innovation processes, but the level of uncertainty

can be considered as a factor because different levels can have different impacts on innovation processes.

and competitors of relevant markets; 4) regulatory authorities, including all kind of policy

makers; 5) other stakeholders; 6) the firm.

The model for explaining the factors facilitating or hindering innovation is built considering

both the groups of actors and the network domains which define interactions into the

systems of innovation. For developing the model, I considered the factors in the literature

and organised them according to the main groups of actors.

1. Suppliers & related industries

Performance of the industry

Asymmetries among firms

Technological bottlenecks in the industry

5.Other stakeholders

Public opinion andreperesentation, legitimacy

Figure 1 Factors facilitating or hindering innovation

Institutions(Laws, property rigths,customs, work norms,

trust, policies,

financial facilities, etc)

Quality

of

Interactions

Knowledge

and

Learning

processes

S y s t e m o f I n n o v a t i o n

3. Market customer

and competitors

Patterns of demand, Production structure, Market pull

6.Firms

Internal capabilities, resources, organisationand stimuli

Appropriation ofbenefits

2. Educational

training & R&D

systems

Their resources and quality

4. Regulatory authorities

and policy makers

Policies and regulations

Pathdependency

Level ofUncertainty













Figure Factors facilitating or hindering innovation

Institutions(Laws, property rigths,customs, work norms,

trust, policies,

financial facilities, etc)

Quality

of

Interactions

Knowledge

and

Learning

processes

S y s t e m o f I n n o v a t i o n

3. Market customer

and competitors


3. Market customer

and competitors


6.Firms



6.Firms



2. Educational

training & R&D

systems


2. Educational

training & R&D

systems



and policy makers



and policy makers


Pathdependency

Level ofUncertainty

Pathdependency

Level ofUncertainty

Source: Orozco, 2004

There are several factors facilitating or hindering innovation in the literature that are related

to the group of suppliers and related industries. This is the case of the performance of the

sector in which a specific firm operates; the existence of asymmetries among firms; and the

existence of technological bottlenecks in the sector.

Into the educational, training and R&D systems the main factors are the resources they

have and the quality of these systems. In the group delimited by market customers and

competitors the main factors facilitating or hindering innovation are patterns of demand,

production structure, market pull, and financial facilities into the markets. Policies and

regulation, including financial facilities3 for innovation generated into the systems of

innovation 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 the

group of other stakeholders.

3 Financial facilities are part of the institutions relevant for all the groups of actor.

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 the

benefits in innovation processes is another relevant factor within the firms.

3. General description of the firms in the study

The companies that participated in the study present some similarities but also important

differences. The common factors are: a) female leadership (own the business or work in

general management positions); b) production originates in Central America; c) the services

and products are for export; c) there is commercial relationship with the United States of

America; d) export experience of at least one year; e) productive activity dating at least

three years back; f) have a staff of ten members.

Among the differences, highlight the following: a) firms are located in different sectors of

the 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 free

zone regime; and, d) their organization is different, some are under the form of

associations, other corporations and some are cooperatives.

The organizations analyzed are grouped into two blocks: the first consisting of corporations

and the second of cooperatives and associations. In corporations, the primacy objective is

profit from the effort, the commercial relation and, production of a service or product. Its

organization is determined by a joint venture between founding partners whose contribution

is generally working capital. The corporations analyzed are unique in that the founding

members work in their own business, run and manage the firms. Most of the members are

also involved in the production and marketing process. This is a form of self-employment

subsistence. Furthermore, as demand and supply grows, the business is associated with an

alternative 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 and

associations. In practical life, besides generating self-employment, these companies

establish and promote forms of organization structures and partnerships that facilitate and

strengthen groups, in this case, groups of entrepreneur women. One of the most interesting

and 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 the

reality of communities and in particular of women is addressed in a comprehensive manner

and therefore the development of cooperatives and associations affects the dynamics and

lifestyle of communities comprehensively. The productive systems shelter providers

(organized into groups of cooperatives and unions), customers (members of women's

groups, 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 both

consumers and providers. The remuneration for the direct participants in the marketing chain is expected to be

equitable. Also is governed by values of social and environmental responsibility.

infrastructure expansion, development of quality of life and addressing local growth and

planning.

TABLE 1. Main characteristics of the firms studied

Country Firm Characteristics

Guatemala

Candelas Aromáticas Pilandros, S.A. Dedicated to handmade candles and decorative accessories.

De La Selva, S.A. Exports handicrafts related to the ancestral tradition of the

Mayan culture. Antigua, Guatemala.

Frutas Tropicales de Guatemala,

FRUTESA, S.A.

Exports fruits and vegetables (mango, snow peas,

blackberries) Guatemala.

El Salvador

Crafts, S.A. Dedicated to the industrialization of canned comfort food

(tamales, lorocco and parental seed).

Shuchil: Productos Naturales,

fabricantes y distribuidores, S.A.

Dedicated to the export of organic products for skin and

hair care. It also has a line of products for dog hair care.

Honduras

Cooperativa Regional de Producción

Agropecuaria “La Sureñita”, Ltda.

(COREPROSUL)

Mainly devoted to processing and marketing of cashew

nuts. Other products include: wine, orange and cashew

raisings.

Coordinadora de Mujeres

Campesinas de La Paz (COMUCAP) Exports organic coffee to Europe.

Cooperativa Nuevo Amanecer de

Soledad del Paraíso. Manufactures and sells paste5.

Nicaragua

Nica Flies y Compañía Limitada,

S.A.

Elaborates clothing and textile accessories and fishing

hooks.

Cooperativa Maquiladora Mujeres de

Nueva Vida Internacional R.L.

(COMAMNUVI)

It is a assembly plant enterprise of "organic” clothing, shirts

and other cuts (socks, bags, etc.) made from cotton

produced in organic farming systems.

Costa Rica

Costa Rica

Konig Sabrosa, S.A. The company is dedicated to produce healthy bread

Asociación de Mujeres

Agroindustriales de San Roque de

Naranjo.

Export Anthurium flower and orchid plants.

Desarrollos AKA Precisión, S.A. Works the field of Metal Mechanics (Parts, automation, die

and mold).

To understand the core of the study is important to note that entrepreneur women have

developed, mainly by implication, a number of concepts that are useful for strengthening

their business, including those of management, administration and consequently the notion

of success. The concepts have been generally associated with community and business

realities of organizations, for example: the success of a case associated with efforts to get

out of extreme poverty, or, the access to educational processes of women‟s personal

development. 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, the

women own the companies and in others they are managers. The general characteristics of

the organizations are summarized in table 1.

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It is expected that economic policies derive from the free trade agreement between Central

America and the United States, generate changes in the conditions faced by firms, resulting

5 Costa Rican products. Plant that can be used as a sponge for baths.

in a combination of challenges and opportunities. This section examines the issue of

challenges and opportunities since CAFTA for female entrepreneurs interviewed. It applies

a combination of two types of methodology. On the one hand, it continues with the

prevailing methodology in the study, in which women are asked their opinions. The

analysis is complemented with a study of trade policy changes arising since CAFTA for

each of the sectors in which researched firms are located. Some insights about the changes -

or gaps- are added, generating commercial agreement regarding the institutional policy

framework to enhance innovation and, in general, the performance of companies.

To prepare the analysis of the challenges and opportunities from changes in business

conditions, the study focuses in two fundamental aspects. In first instance, it focuses on the

importance of trade flows between Central America and the United States for the main

products generated by the companies in the study. In this regard, we analyze the relative

importance of each country as an export destination for the specific product and the weight

that each country has, as an origin of imports of that product. With this, we study the

composition of the market, to determine whether it is likely that changes in tariffs may pose

the 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 after

CAFTA, to appreciate how significant are the changes to motivate firms for changes in

trade volumes and flows. This part of the analysis incorporates a comparison of the

conditions that the United States gives in tariff in other countries, so that one could generate

conclusions about the effective benefits that are generated with CAFTA for Central

American countries.

4.1 Products of Guatemala

The main products of Guatemalan companies in the study are mangos, strawberries, snow

peas, blackberries, raspberries and candles. All these products have the same tariff

conditions in Central America today, with tariff of 15%. Current conditions in the United

States varies somewhat, being candles free from taxes, while the mango has a current tariff

of 6.6 cents per pound, strawberries 0.18 cents per kilo, snow peas a cent per kilo and

blackberries and raspberries 0.18 cents per kilo. Tariff conditions in which the products are

with CAFTA in the United State free trade are imports from Central America, and equal

conditions to other countries with which the USA has signed free trade agreements. The

FTA introduces some degree of advantage over countries with which the USA has no trade

agreements because they are still charging fees (see Table 2). The allowance negotiated in

Guatemala is in the basket A for mangos, the B for strawberries, blackberries and

raspberries, and the C for snow peas and candles.

In general, Guatemala has a strong trade surplus in all products tested. Although for some

candles and mangos there are significant imports in the period studied, they are much lower

than exports. The USA market is very important for Guatemala's exports of snow peas,

candles, raspberries and mangos. The greater openness that involves the CAFTA by the

United States seems then to turn into an opportunity to strengthen the export capacity of

Guatemala. The fact that CAFTA will make a difference with respect to countries with

which the USA has not signed free trade agreements, and equated with other countries with

which that country has already signed an FTA, it also seems to open a further opportunity

to consolidate exports. In the case of strawberries, the United States is not a very important

market for Guatemala, while El Salvador is the lead partner. Greater openness in El

Salvador 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

Productos Exports

Destination of exports

USA El Salvador Honduras Nicaragua Costa Rica

Otros

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

Productos Imports

Origin of imports

USA El Salvador Honduras Nicaragua Costa Rica

Otros

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 of

strawberries and snow peas, at least in the short term, given that the country is a net

exporter of those goods and only small imports has been done, and since opening is given

to five and ten years respectively. In the case of mangos, which comes in an opening, it

seems not to present a high risk of massive imports because the country is an established

exporter. In any case, we must keep in mind that exports could increase from neighboring

countries, especially from El Salvador, although previously imported volumes suggest not

much 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 in

both directions has been quite open, but in other conditions, especially non-tariff barriers

that the USA could continue to apply. As mentioned in the interview, food exports to that

country 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 middle

term. There has been a flood of imports from that country, and the gradual opening would

open up space to expand. However, it is also very likely that the Guatemalan companies

consolidate competitively, because the country has demonstrated competitive advantages to

export the product. Imports only reach about 10% of exports during that period, but

CAFTA favors in the middle term USA companies regarding current conditions. As the

USA market and other countries have been opened, the entrepreneurs interviewed in this

sector do not see great opportunities. What presents are some risks of non-tariff measures to

be applied at a disadvantage to their companies, for example poor handling of goods at

customs.

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. For

this product the main export destination is El Salvador. Guatemalan Market opening will

take place in five years; consequently, opens some risk of increased imports from the USA

in middle term. However, the FTA also opens the USA market immediately, which also

happens in the case of El Salvador. Then, conditions are given for the strawberry industry

to 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 their

strawberry markets in five years, so that Guatemala will also have to compete with USA

exports to those markets. Measures are necessary to be applied in order to maintain

competitiveness 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 was

not possible to analyze the current tariff structure post-CAFTA. The analysis is then based

on the opinion of the women interviewed. In general, the conclusion to be drawn is that

with or without CAFTA, the important thing is to strengthen the competitive capacity of

enterprises to be able to face the market. In this particular case, innovation in products is of

vital importance, and there is a mechanism to stay in the market. It is also essential that the

state apparatus contribute to competitiveness, through the simplification of export

procedures.

It is important to note that many of the women interviewed have uncertainty in the results

of CAFTA, because they are cautious given some adverse conditions that are not easy to

identify. Some say that some conditions are given, and do not see significant changes as to

identify opportunities or challenges clearly marked, but still believe that the USA will be

benefited.

TABLE 3. Innovation challenges faced by the Guatemalan firms to strengthen competitiveness

Firm Innovation Challenges

Candelas Aromáticas Pilandros, S.A.

- Packaging raw organic material.

- 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,

FRUTESA, S.A.

- Insertion in the domestic market.

- Promote literacy programs to the public, with government participation

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 increased

openness implied by the CAFTA. The following table summarizes the innovation

challenges that surface in each company (see table 3).

4.2 Products of El Salvador

For the Salvadoran case, two main products were studied: soap and shampoo. The other

products in the category of comfort products do not have adequate statistics. In the latter

case we refer only to the assessments made by the women interviewed. In the case of

shampoo, El Salvador shows a positive trade balance in the period. However, the amount of

imports is equivalent to 89.36% of exports. Thus, the flow of trade takes place sharply in

both directions. However, the export destination is very different from the origin of

imports; countries with which they trade are different depending on the direction of trade

flows. The destinations of exports are the Central American countries, especially Costa

Rica. 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

Productos Exports


USA Guatemala Honduras Nicaragua Costa Rica

Otros

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

Productos Imports

Origin of imports

USA Guatemala Honduras Nicaragua Costa Rica

Otros

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%


In the case of imports show a different situation. The main supplier is Guatemala. Other

countries, especially Mexico and USA are also significant suppliers. Although the market is

quite 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 to

five years in Honduras, El Salvador and Guatemala, and an opening in ten years in Costa

Rica and Nicaragua.

What can be expected along these lines opening in Central America is that Salvadoran

exporting 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 of

Guatemalan companies as USA companies. No additional benefits are displayed for exports

to 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.

In the case of soap, El Salvador has a negative trade balance. For the category of soaps

trade flow occurs markedly in both directions, being the other Central American countries

major 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 American

countries 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 all

countries. Meanwhile, in USA there is free trade (zero tariff) for that item. The FTA

negotiations lead to an immediate opening in Guatemala, five years in El Salvador and

Nicaragua, and an opening in ten years in Honduras and Costa Rica, although Honduras

rose 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 firms

see soap exporters facing increased competition level in the middle term, especially from

USA companies. Correspondingly, face greater competition in the local market, both of

Guatemalan companies and companies in Honduras and the USA It is not expected

favorable conditions compared to other countries in the region, because the tariff changes

will be parallel to all countries. Although imports from USA have not been very high, with

the highest degree of openness in the middle term, it generates the challenge of facing the

advantages acquired by USA companies.

TABLA 5. Innovation challenges that surface each Salvadoran firm to consolidate competitiveness


Crafts, S.A. - Creation of a food plant attached to standards and best practices to

increase quality, differentiation and meet market requirements.

Shuchil: Productos Naturales, fabricantes

y distribuidores, S.A.,

El Salvador.

- Industrialization of lemon grass

- Access to information through AGRONATURE

- Insertion in Ecotourism

- Improvement of technology with government support

- 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 that

survival in the market will depend on the competitive capabilities that are consolidated by

the companies, especially in the differentiation of products for ecological and social

characteristics. They also raise the need to promote innovations in different ways as a

means to improve competitiveness and address the consequences of CAFTA. The following

table summarizes the innovation challenges that surface each company (see table 5).

4.3 Products of Honduras

The study also included two Honduran products, green coffee and cashew nuts. In both

cases SIECA statistics were used for analysis. It also includes assessments made by the

women interviewed. In the case of coffee, Honduras is a net exporter, while imports

recorded very low amounts, so the trade balance is positive in that period. The trade flow is

then given in one direction. The destination of exports is far from Central America, as

elsewhere 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

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

Productos Exports


USA Guatemala El Salvador Nicaragua Costa Rica

Otros

Green 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

Productos Imports

Origin of imports

USA Guatemala El Salvador Nicaragua Costa Rica

Otros

Green 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%


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.

Entrepreneur women actually do not see those threats and, conversely, which arise as

barriers are high costs provided by their suppliers and the high costs that means not having

all the technological advances. Some are also concerned by the inability to cope with very

large orders that exceed their capacity. Subsequently, consider the need to reach separate

agreements with clients or with other producers, so that organizers can meet the demands.

The challenges of innovation that must be taken to strengthen competitiveness are

presented in the table below (see table 7).

TABLE 7. Innovation challenges that must be taken by Honduran firms to strengthen competitiveness


Cooperativa Regional de Producción

Agropecuaria “La Sureñita”, Ltda.

(COREPROSUL)

- Diversification of the market

Coordinadora de Mujeres Campesinas

de La Paz (COMUCAP)

- Literacy programs to educate women.

- Development of other type of coffee with bigger beans.

Cooperativa Nuevo Amanecer de

Soledad del Paraíso, Honduras.

- Development of local tourism.

- Investment in new machines.

4.4 Products of Nicaragua

In the case of Nicaragua two main products were studied: hooks and cotton fabrics. The

women interviewed provided these findings as well. In the case of hooks, Nicaragua is a net

importer and records very few exports. Further was found that the exports made by the

companies studied are not registered, due to the fact that official statistics only covered

exports to Canada for a very low amount, but none to the USA, which is where the

company Nica Fly exports. Imports in the period are $ 63,767, which is a relatively low

amount. 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% and

4% in the USA Since CAFTA, the immediate opening in Costa Rica and the United States

maintains 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 that

country has no trade agreements, are maintained at 4%. Therefore, there is no real threat to

Central American countries, but rather perceived a slight chance of expanding exports to

the USA market. Considering the physical skills of the female population in Nicaragua: the

manufacture of hooks requires fine finger dexterity (speed), and the proximity to the

southeastern USA coast.

In the case of cotton in Nicaragua, it presents an enormous trade deficit. In other areas of

the textile industry Nicaragua is a net exporter, particularly in Maquila, but suitably in this

area 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 is

presented in El Salvador (20%) and the lowest in Nicaragua (5%). Honduras and

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

Productos Exports Destination of exports

USA Guatemala El Salvador Honduras Costa Rica Otros

Hooks $4.994 82,76% 0,00% 0,00% 0,00% 0,00% 17,24% Cotton Fabrics

1/ $1.759.279 1,02% 16,51% 1,60% 1,61% 74,68% 4,58%

Imports

Productos Imports Origin of imports

USA Guatemala El Salvador Honduras Costa Rica Otros

Hooks $404.149 14,47% 0,42% 0,00% 0,00% 0,07% 85,03% Cotton Fabrics $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

Nica Fly y Compañía Limitada, S.A. - Besides the Maquila industry they consider insertion in

designing

Cooperativa Maquiladora Mujeres de

Nueva Vida Internacional R.L.

(COMAMNUVI), Nicaragua.

- Program promotes a culture of conventional and

organic cotton in the area, with government assistance

and international cooperation agencies.

- Cotton Spinning

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

Producto Exports Destination of exports

USA Guatemala El Salvador Honduras Nicaragua Otros

Anthuriums $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

Productos Imports Origin of imports

USA Guatemala El Salvador Honduras Nicaragua Otros

Anthuriums $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%


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.

The market for orchids is also quite open. Still prevails a tariff of 15% in all Central

American 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 USA

would maintain a 4% tariff on imports of orchids that are not from countries with which it

has signed trade agreements, opening up an advantage, however slight, concerning the

current situation.

The country is not a heavy importer of orchids; consequently it is difficult that market

liberalization change drastically. However, it is clear that it is facing a higher level of

competition, 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 seems

that FTA rather opens up new opportunities. The producers of anthuriums and orchids have

been able to compete in current conditions, thus ability to continue exporting has improved,

and still depends on the competitive capabilities of enterprises, focussing primarily on

producing quality and efficiency.

For the category of bread, Costa Rica has a negative trade balance in this period, although

the amounts of imports and exports are very similar. The flow of trade is quite marked in

both directions. However, the export destination is very different from the origin of

imports, countries with which they trade are different depending on the direction of trade

flows. The destination of exports is mostly Central American countries. Exports to the USA

have been very small. There have also being exports to third countries. In the case of

imports, 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 Central

American countries, while USA is free trade (zero tariff). The FTA negotiations leading to

an immediate opening in Guatemala, and for ten years in the other Central American

countries, although Costa Rica's opening pose to fifteen years.

What appear to be the consequences to these opening lines in Central America are that

exporters in Costa Rica are being faced to a much higher level of competition in the middle

term, especially from USA companies. Also faces greater competition in the local market,

especially of Guatemalan and USA companies. No additional benefits are displayed for

exports to Central America, because tariff changes will be parallel to all the countries of the

region and instead will have to face competition from the USA, than if they acquire

different conditions. What seems to prevail then is the challenge of facing the advantages

acquired by USA companies.

The company interviewed in the area of metallurgy (Precision) also sees the FTA as an

opportunity. They are aware they will face more competition, but have the capacity to deal

with it. Specialized training, technological upgrading, are some elements that consolidate

the company.

The main challenges of innovation to improve the ability to seize opportunities and

confront the challenges that opens the CAFTA, as perceived by the Costa Rican companies

in the study are presented in the table below (see table 11).

TABLE 11. Innovation Challengers faced by costarrican firms to strengthen competitiveness

Firm Innovation challenges

Konig Sabrosa, S.A. Costa Rica. - Find other alternative markets

Asociación de Mujeres

Agroindustriales de San Roque de

Naranjo. Costa Rica.

- Exports to new markest, such as Europe

Desarrollos AKA Precisión, S.A. Costa

Rica.

- Developt new products such as mold

- Improve the quality of the customer service

- Introduce high technologies

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The firms surveyed in the study are a clear indication that the entrepreneurship run by

women has been strengthened in Central America. These companies have developed

capabilities to be inserted in a competitive market, winning over a series of setbacks and

shortcomings of the institutional framework. From the study of these experiences is

possible 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 productive

activity and the nature and organization seem antagonistic, they have common factors that

have gradually approach them to success.

Aspects such as financial management, marketing strategies, organizational culture and

linkage to collaborative networks have been present in the history of the different

companies. In some aspects, it has been presented as previously determined, then for other

firms, it has become a significant challenge that, however, has been adequately resolved. In

some cases institutional support has been vital, solving several fundamental requirements

for competitive companies. But in most cases that kind of support has been given by the

women involved, creating new ways to cover functions that the institutional framework

should be generating.

This section systematizes the experience of the companies studied, to derive lessons about

success factors that have been present in different cases.

5.1 The concept of success for entrepreneur women

Among the women interviewed is a widespread belief that business success is associated

with the effective contribution that the company achieved in family welfare and

community. These women associate success to the contribution that their companies has

by opening spaces for the participation of women, and the contribution that is generated on

the welfare of women, the community and especially families. Companies are not seen as an

end in itself but as a mean of personal and collective development, which are important not

only for financial results, but also mainly for the changes evaluated in terms of

improvements in the quality of life.

Thus, the fact of competitively consolidating in the market makes sense for them just as it

contributes to a broader purpose, associated with improvement in quality of life. Is is

successful, 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 the

opportunity to open the enterprise to the active participation of women, allowing them to

materialize 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 is

successful in both new opportunities for personal and family growth and to develop the

innate potential of work and creativity.

The successful business model for the women interviewed is a far from the theoretical

model 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 from

determining the balance in corporate profitability. An example of that is the case of

Comucap, where sales levels and income distribution did not maintain equitable

relationship, threatening the stability of the company.

Success was achieved in a process in which many issues are of great importance. Not

everything is easily obtained and requires a prolonged period to obtain favorable indicators

in some areas. However, other aspects, such as growth and improvement, from the

beginning 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 all

companies consider as essential for success.

Capital contributions have been a source of great importance in most enterprises of women

in 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 capital

contributions by means of hours worked. This is the case of the Cooperativa Maquiladora

de Mujeres de Nueva Vida Internacional (COMAMNUVI).

These capital contributions in many cases come from the reinvestment of profits. This has

meant the sacrifice of current income, which was much needed to meet basic needs, but the

women understood that they were of vital importance to strengthen the company. It was

instituted then, the social fund, which is fed by a percentage of profits that is generated by

the firm6.

A key factor for succes has been that the fund have sufficient working capital to enable it to

meet the production processes. Women's groups have managed in different ways to have

that fund. For some companies it is not enough capital the contribution their owners can

make, so it is necessary to resort to other sources. However, access to credit is a limiting

factor in many companies. Thus, the existence of financial programs tailored to small

companies is of great importance. In the case of Nicaragua, apparently there have been

changes in the Nicaraguan Investment Fund, enabling different credit lines for businesses

led by women.

Several companies have used their relatives to channel some funding. Others have a

combination of sources to meet financial needs. Of great importance is the contribution

made by customers through down payments in their contracts, which are combined with

loans from different financial institutions. Some of the companies in the study received

financial support in the form of cooperation, which have been given a major stimulus for

the strengthening of the company. For other companies, lack of access to financing

becomes 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. In

general, this form is the product of long-term business relationships, which to date are

supported by references and recording of payment made by the administration or

management.

5.3 Business Management

A key factor for business success, as revealed by the women interviewed in the various

Central American countries, is to make a proper business management. There are several

important aspects. For example, some of the entrepreneurs argue that it is vitally important

to have clear mechanisms to form a portfolio of clients. For these companies it has been

contributory the initial support of a customer who has placed their trust and supported them

to 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 AKA

Precision. It is also vital to keep customers, which is achieved by meeting the quality

standards 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 from

the company. Thanks to this mechanism, some companies have increased their customer

database.

6 In the case of COMAMNUVI the social fund feeds up of five or six percents of the sales.

There are also institutional aspects that become allies of the marketing strategy. For

example, the entering into export arrangements as Free Zone creates many advantages for

businesses, because they decrease the paperwork and transaction costs.

The trade fairs have been a mechanism for attaining new customers. Several companies

have resorted to this strategy, often with support of different organizations or government

entities.

In some countries, the government has promoted these types of fairs, creating meeting

places where new businesses are displayed. From that initial impulse companies are

beginning to strengthen their marketing channels and more carefully selecting their target

markets. In other cases some companies have been more aggressive, joining business

networks that provide space for marketing or, more generally, to do business. Also, have

chosen to develop outlets in which to exhibit and sell their products permanently. Thus

capturing 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 some

companies. This has opened direct marketing channels in marketplaces that conditions are

favorable, though not necessarily been steadily strengthened.

A vital mechanism to visualize new opportunities has been the direct observation of

markets to which they want to access, identifying details of the marketing process. In some

cases this is achieved by direct visits to supermarkets or other places that could situate the

products the company wants to sell.

Markets and advertising activities have not always been stable. This has meant that women

are very enterprising, identifying new markets and new forms of publicizing. Some

companies have not yet managed to establish innovative marketing systems and therefore

are forced to use intermediaries. In these cases the firms have the challenge of product

differentiation and generation of new outlines to sell.

Different marketing strategies used are characterized by constant monitoring of the needs of

final customers and intermediaries. The market demands and a continuous process of

transformation and expectations of new business directions, have forced companies to

develop ways of working partnerships that strengthen the quality of supply of services and

products. Therefore, in most cases, the value added to the product or service, not enclosed

in using high quality components, it becomes necessary to include processes channels

involved in pre sales and after sales. Here is how, processes and procedures for

procurement, production, sales and after sales are part of the components that help the

quality of commercial relationships.

5.4 Developing organizational skills.

One of the key factors for business success, as the women interviewed expressed, is that

companies 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 the

expertise that people will reach.

According to statements of the entrepreneurs, the organizational culture makes room for a

high turnout of women workers, in a way that leverages their creativity and motivation to

seek improved ways of doing the work, while eliminating vices that threaten high labor

productivity.

For companies to be successful, we need to promote the development of proactivity and

aim at high productivity. And for that, conditions must be generated to analyze the

performance of the staff, and mechanisms to encourage creativity.

Of fundamental importance to business is to generate an environment conducive to personal

growth and job stability. That way the employees feel more secure and work with greater

motivation. The introduction of the philosophy of continuous improvement has been a

major factor for improving firm performance. Companies are facing this philosophy in

practice to improve production processes, quality, productivity, taking the challenge further

to improve every time there is a breakthrough.

It is essential that companies develop information and communication systems that allow

them to properly manage their business. The developing of such systems becomes a key

success factor, while weakness in these systems undermines the good business

performance.

Some companies have advanced in the use of tools to evaluate performance, allowing

problems to be identified easily, and then taking corrective measures in a timely manner. It

uses 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 and

operational activities of daily living. This will present the necessary actions to advance the

best performance and effective program.

The diligence with which it organizes and plans the administrative management has

encouraged the consolidation of effective working methods, adaptable to the requirements

of the demand. Rigorous and practical procedures have provided continuous monitoring

and evaluation of performance and organizational developments.

5.5 Learning process.

For companies it is very useful to develop appropriate mechanisms for recruitment and

development of job skills of new workers, consequently, transfering knowledge from older

workers. It was mentioned, another set of mechanisms that facilitate the learning process as

ongoing training and openness to teamwork.

In many cases, recruitment is defined in in-group discussions, involving trusted personal

and line managers. The selection process has objective assessment mechanisms. Attitude is

a crucial part for the inclusion of new staff in the company. The candidate must be able to

work as a team, have knowledge of the position applied for (theoretical and practical

support) and open-mindedness, by means of availability and enthusiasm to grow

professionally 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, not

only are associated with hired staff skills, but also the mechanisms and methods adopted by

the 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, in

sales techniques, effective inventory techniques) and they return with a commitment to pass

on to their colleagues the knowledge acquired. Another way is workshop of feedback

derived from a routine checkup or control, in which they are trying to solve or improve

situations.

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 (provided

by the contractor as per the contracted). This mutual engagement is the base of a strong and

enduring relationship.

Other relevant aspects are those related to access to resources (financial and time), and

information technology. The sources come from agreements with academic organizations,

affiliations and trade organization.

5.6 Differentiation of products and services

The business success is closely connected to the characteristics of products and services

offered. These features are part of the authenticity and rationale of the company, and are the

mechanisms for market differentiation and gain of customer preference. The fundamentals

are quality products and customer service.

In each of the branches is necessary to identify the critical features of the products that

become the elements that make the customers choosing to buy or not. In some divisions

features 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'. And

with marketing efforts are loaded the binomial of quality and service. It envisions a quality

product management pre and post sales. It is not enough to deliver the product and forget

about the customer, the product is as important as the relationship with the consumer, who

feeds the production management.

Some cases, such as AKA-Precision Developments, reveal the importance of product

process tailored to meet very specific needs of customers. On the other hand, horizontal

alliances with suppliers have been strong for some companies. The high quality of raw

material 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 and

customer feedback is the transverse axis of the design of products and customized service.

Also integration of processes that minimize negative environmental impacts has been key

success factors and market linkages.

Network's 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 life

for residents and promote local development. There is access to technology, updated

information and exchange of experiences.

Technology aims to improve the product, the techniques of genetic engineering, electronics

and metal engineering development, information tools for research (Internet), techniques

and materials for improving crops and soils, and access to equipment and machinery to

improve processes. These factors combine a stream of improvements in product quality and

business management.

The cases of genetic modification are most revealing in Crops and Seeds, Orchids,

Anthuriums, Cashew, Mango, Paste, Coffee, Blackberries, among others. They use

advanced science to improve the final product. In the case of the Paste is looking to be

bigger and colorful.

It is necessary to maintain some degree of research and development in new products and

new market niches. In the case of knowledge of food ingredients and raw materials, it

points to the excellence and product differentiation.

How to get to the final consumer also makes a difference, in association with product

quality, creativity and reliability maintain the presentation and product presence. Attending

Health Fairs to promote the product is another strategy, used by Nelia De León en Konig

Sabrosa, Costa Rica.

To add new component to the products many times can take it to be part of the 'star'

products portfolio. These are cases of companies dedicated to articles of ornaments, textiles

and hooks. Changes in color, size or any other aggregated value means being at the

forefront (be the first to bring the product to market) and competition. Placing the product

before the rest of the competition is the key because it allows differentiation. Being first is

interpreted as the introduction of a product or service to an untapped market, which

positions the company in the lead for a period of time.

On the other hand, homogenize the product quality leads to sales success. Products such as

anthuriums flowers, mangos, seeds and fruits in general should be presented in a uniform

size, 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 canning

and 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 are

part of the safety arguments provided by the product.

Although there have been several ways to reach the differentiation in the product and

service, the central concept is always preserved, which gives meaning to the existence of

the 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 to

employment generation in the communities.

5.7 Collaboration network

It 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 collaborative

networks to which the firms have been inserting into. Profound links mark the past, present

and future and significantly affect business success.

The relationship with different types of actors is thus a must for all companies. Those are

significant elements that are derived from the process of knowledge sharing, technology

transfer, support to improve ways of working, access to outsiders for the extension and

modification of patterns of thought and the encouragement of processes to increase access

to funding and to generate appropriate marketing channels.

5.8 Sources of knowledge and education

To stay ahead in the industry or any economic activity, essential nutrients are required to

improve the performance and especially for the performance expected and demanded in

competitive markets. Therefore, staying away from the sources of knowledge and its

transfers becomes lack and, in turn, competitive disadvantage.

In the case of Costa Rica, AKA-Precision Company maintains a continuing education

program in high technology aimed at all employees and Konig Sabrosa with best practice

programs in food, product demonstrations and distribution. Organizations that typically

offer this service are both from the government such as the National Apprenticeship

Institute (Instituto Nacional de Aprendizaje, INA by acronym in spanish) and other NGOs

such as CEGESTI. There has also been significant input from the Chamber of Industry. The

courses offered are focused on technical aspects such as Precision Mechanics and

Electronics and high Administrative and Management topics, Business strategy, among

others. Likewise, these organizations provide training in other areas such as trade and

international 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 and

other private and public universities such as El Tecnológico, Universidad Nacional and

Universidad de Costa Rica.

The role of universities and the demands of companies are very clear. For AKA-Precision

Development and Konig Pan, they have been the means for professional development in

academic careers in business management. In the case of AKA-Precision contribution has

been enhanced through technology programs developed by the National Institute of

Technology (commonly called the Technological). Agricultural Women's Association of

San 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 the

sector. In the case of the Agroindustrial Women's Association of San Roque de Naranjo the

initial 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. Entrepreneur

women have access to current information and have the opportunity to participate in

domestic groups such as boards and committees. This participatory process provides them

with not only knowledge but also make room for the expression of positions and views on

the industry growth, reaching significant areas of decision-making institutions such as the

Legislative Assembly. It also facilitates their contact with companies, national and

international.

As mentioned above, knowledge transfer and feedback comes from various sources. Many

companies have turned to close relationships with their customers. These are meaningful

collaboration 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 of

promising markets.

In Costa Rica, the company AKA-Precision Development is one of the most revealing

examples of this relationship because the product is tailored to the customer‟s preferences

and the sales process beyond simplistic relations of buying and selling.

Suppliers are also agents of great importance for companies. These actors are important in

the training process, while, the company is responsible for providing the employee with

expertise on the proper management and maintenance of plant, tools and teamwork. Same

contact 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 belongs

to the cycle of secondary education, called college. In this system the teenage boy have the opportunity to

aspire to a degree as a technical education, the cycle lasts six years.

making processes and establishes policies and standards in the industries and trade.

In Honduras, Zamorano University has been promoting organizational processes in the

pretense of private enterprise and cooperatives. It has been determined to be a link between

staff and communities. Some NGOs have also contributed to the issue of knowledge

transfer.

5.9 Integrator Programs: Horizontal chains of trade and production

One program that draws more attention is running the China-Taiwan Mission, FIAL and

MAG8 in Costa Rica. The process of promoting support networks and service circuits is

achieved with the participation of twenty-six projects consisting of seventy women

associations covered by the Union of agribusiness women's organizations in the country.

The central activity is to promote women's organization pushing for a strong program based

on production and trade relations. The projects are within a comprehensive structure of

chain of processes: the development of the orchid plant, for example, is made by a women's

association called AMASAR located at Rosario de Naranjo, where there are plants that

produce genetically improved climate being a natural ally for the development of the

production. TROJAS in Greece and Sarchí, AMASIA in Athens, AMASAR in El Rosario

and Conception of Naranjo, and the Association are organizations binding for both the

various stages of production of the plant to commercialization. There is a permanent

storage 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 clear

example is Konig Pan in Costa Rica. Providers supplement the company's financial needs

through 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 materials

under health standards, as well as being part of the crossover quality control of products

and supplies handled through the technical sheet. This control provides oversight in the

store.

Companies like De La Selva and La Sureñita have maintained relationships with suppliers

and customers in a seamless manner. The chain in the improvement and modification of the

product begins with information that clients provide on successes or failures of the

products. These are transmitted to the respective production centers. For example: De La

Selva in which the product comes from the communities, groups or families of small

producers, the message of improvement and change is the responsibility of the company. In

The Sureñita the owners of properties that are generally spouses or neighbors supply the

raw material. In both cases the customer feedback plays an important role: recommended

style, size, color, labeling, packaging, among others. Aromatic candles Pilandros of

Guatemala and FRUTESA have been supported by the entity responsible for the country's

exports.

8 Ministry of Agriculture and Farming (Ministerio de de Agricultura y Ganadería, MAG, by acronym in

Spanish), Governement of Costa Rica.

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 ties

of solidarity. This encourages the values embedded in Fair Trade. It also ensures some form

of sales for a given time.

The Sureñita –from Honduras- has also developed links with suppliers, which in many

cases are the same couple of associates of the cooperative members, intertwining

relationships with family. This has contributed to the strength and feedback processes and

relationships.

5.10 Other sources of collaboration

Family support has been very important, mainly in the final stages of maturation of the

companies, with financial loans, property and even labor input, experience and knowledge.

Another source of collaboration is the support by programs run by agencies of international

cooperation aimed at developing productive and social-environmental organizations. These

programas often have been promoters of successful processes.

5.11 Relevance of government involvement

The government support to encourage industry growth has been manifested in various

forms. In some cases the Government, represented by the institutions of trade, has played a

role in promoting non-traditional exports and in some cases has led to programs to support

small and medium enterprises. However, in many cases, government involvement has been

very poor.

Some cases of very specific government support, but that makes the difference, is the

experience of the company Agribusiness Association of Women of San Roque de Naranjo

in Costa Rica. With the growing demand for expertise in growing Anthurium, MAG is

obliged to provide training to rural organizations applicants. The government's contribution

has been through payments of travel to other countries.

The Salvadoran government has specific programs to promote and support exports of small

and medium enterprises. The company Shuchil of natural products has benefited from a

promotion program. By contrast, in Guatemala, women entrepreneurs manifest lack of

interest of the government to encourage exports.

The Ministry of Natural Resources of the Government of Honduras has served as a

promoter of alternative production systems, such as the industrialization of Paste. The

stimulation 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.

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6.1 General conclusions

The challenges and opportunities since CAFTA differ for different companies studied. For

the majority did not foresee significant changes from current conditions. For others,

however, the conditions acquired by Central America in the USA market open up new

opportunities. Another group of products will face more competition to improve the

conditions that USA companies receive.

Many of the women interviewed have uncertainty of the outcome of the CAFTA, they

worry that they were given some adverse conditions that are not easy to identify. Some say

that, in the commercial sense, significant changes are not seen as to identify opportunities

or challenges clearly marked, but still believe that the USA will be benefited. Nonetheless

in general, given the uncertainty or specific threats, women entrepreneurs raise the need to

promote innovations in different ways.

In Guatemala, the risk of significantly increasing imports is not very pronounced for the

cases of strawberries and snow peas, at least in short term, given that the country is a net

exporter of those goods and has only made very small imports, and because the opening is

given to five and ten years respectively. In the case of mangoes, which comes in an

inmediate opening, it seems not to present a high risk of massive imports because the

country is an established exporter. In any case, we must keep in mind that exports from

other Central American countries could increase. As is clear from the words of one of the

respondents, the greatest risk is not given by changes in business conditions, since in fact

the market in both directions has been quite open, but under other conditions, especially

non-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 the

USA in the middle term. Already there has been a flood of imports from that country, and

the gradual opening would open up space for higher imports. However, it is also very likely

that the Guatemalan companies could consolidate competitively, because the country has

demonstrated competitive advantages to export the product.

For the sector that produces shampoo, which can be expected with the opening lines that

introduce the CAFTA in Central America, is that exporters Salvadoran firms see a much

higher level of competition in the middle term, especially from USA companies. Also face

greater competition in the local market, both of Guatemalan companies as USA companies.

No additional benefits are displayed for exports to Central America, because tariff changes

will be parallel to all the countries of the region. The priority is then to face the challenge of

benefits acquired by USA companies. Salvadoran firms exporters of soap also will be faced

with increased competition level in the middle term, especially from USA companies.

Additionally, they will face greater competition in the local market, both of Guatemalan

companies and companies in Honduras and the USA Entrepreneur women who were

interviewed are aware of these new challenges, but are clear that survival in the market will

depend on the competitive capabilities that established by the companies, especially in the

differentiation of products by ecological and social characteristics.

In the case of green coffee is not expected that exporters Honduran firms see a much higher

level of competition in the middle term, because the USA is not a producer of that item.

What it is fearaed is that increased competition of more elaborated coffees come to compete

in the domestic market. But strictly for green coffee, other international market conditions

give rise to opportunities and challenges, and not exactly the changes since CAFTA. In this

sense, FTA seems very neutral.

The greater openness that CAFTA will imply for Honduran companies that produce cashew

nuts will be facing a greater level of competition, especially from USA companies. It also

appears that they will have to face greater competition in the local market, companies both

Guatemalan and Honduran as well as the USA Entrepreneur women that were interviewed,

in reality do not see these threats and, conversely, which arises as barriers are the high costs

provided by their suppliers and the high costs that means not having all the technological

advances necessary.

In the case of hooks produced in Nicaragua, the opening in the USA does not seem very

significant to drastically change the situation. However, some advantages open since

CAFTA, because tariffs for other countries with which that country has no trade

agreements, are maintained at 4%. The business of export hooks sees it as a great

opportunity to merge.

Nicaraguan firms exporting cotton fabrics will be faced with 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

countries. It is expected favorable conditions in the 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 a greater

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 are subsequently exported to the USA, so it can also be a chance to place a

greater proportion of goods in the domestic market.

Costa Rica is not an importer of anthuriums, so it is difficult to predict, even with market

liberalization, that there will be dramatic changes of the local market in order to be

attractive to foreign companies to locate their production. We can predict that the total

opening in the USA generates more opportunities, although the reduction of tariffs is just

4%. In the case of orchids, it is difficult that with market liberalization drastical changes

take place. However, it is clear that will face higher level of competition, and indeed USA

companies gain more advantage to export to Costa Rica. However, local market size is not

large, and most of the produce is exported, it seems that FTA rather opens up new

opportunities. The producers of anthuriums and orchids have been able to compete in the

current conditions, so the possibility of continuing exporting is improved, and still depends

on the competitive capabilities of enterprises, focussing primarily on producing quality and

efficiently. This is what opinion prevails as to the women interviewed.

In the case of bread, Costa Rican export firms will face a much higher level of competition

in the middle term, especially from USA companies. Also face greater competition in the

local market, especially from Guatemalan and USA companies. No additional benefits are

displayed for exports to Central America. What seems to prevail then is the challenge of

facing the advantages acquired by USA companies. Despite these conditions, the

entrepreneurs interviewed assume trade liberalization as an opportunity.

The company interviewed in the metallurgic area also sees the FTA as an opportunity. They

are aware they will face more competition, but they feel capable of dealing with it.

66..22 SSttrraatteeggiieess ttoo ssttrreennggtthheenn tthhee iinnssttiittuuttiioonnaall ffrraammeewwoorrkk tthhaatt pprroommootteess

wwoommeenn’’ss eennttrreepprreenneeuurriiaall mmaannaaggeemmeenntt

The impulse that can be given to women-owned businesses and, in general, all the micro

and small businesses in Central America, passing through the generation of better

conditions to address the critical issues that define competitiveness in each sector. In

general, it will be required more new government and nongovernmental programs to

promote technology transfer. As argued by Herrera (1992), the ability to generate an

alternative orientation of technologies depends crucially on the ability to design and

implement a new approach to development. Thus, an appropriate policy framework for

innovation and technology transfer depends on the ability of society as a whole to

internalize new concepts of development. In particular, society as a whole plays an

important role in defining the rate at which environmental concerns are incorporated. The

government should assume the role of facilitator.

The large number of factors that affect innovation processes and thus the competitive

performance of companies makes clear that an adequate policy measures should be

considered in many fields. The basic elements of a scheme to promote the processes of

innovation and technology transfer include policies in various fields. Some of these are not

directly channeled to innovation and technological development, but significantly affected.

This is the case with policies aimed at macroeconomic stability, exchange rate control,

general market regulations, international trade policy, and environmental regulations,

among others9.

Some of the policies that emerge from the interviews and literature review are:

It is desirable to generate innovative regulations by the government. It is essential

that the government provide the procedures to be followed for companies to operate

under the law.

It is necessary to design an information system to increase the ability to share

information and to facilitate the strengthening of networks and partnerships between

different actors. Many of the interviewed companies already benefit from being part

9 See analysis in Orozco, 1997.

of collaborative networks, but that is not generalizable to most SMEs.

The government should promote access to external expertise, especially for small

businesses through technical assistance schemes. These schemes can deepen the

participation of NGOs and other institutions focused on strengthening SMEs.

Governments should continue with efforts to generalize education campaigns so that

the population has increased potential to access good jobs.

Financing mechanisms. One of the critical aspects to promote innovation and

technology transfer and thereby improve the competitive performance of companies

is the availability of financial resources. You have to generate resources for research

and development schemes to the productive sectors for the incorporation of

technological change. Companies have to adopt explicit allocation mechanisms

resources to research and development, properly coordinated with other public and

private sectors that conveyed such resources or who do research.

Governments should promote systems of certification of environmental

management, systems suitable for SMEs. This will give companies access to many

different markets that pay better.

In coordination with civil society actors and the productive sectors, governments

need to encourage education and training (dissemination of experiences,

demonstration sites, case studies, databases, information networks). The programs

should be designed following methodologies to strengthen the learning processes in

companies and other institutions. The educational and training policies should

include mechanisms to improve the capacity of entrepreneurs, engineers, educators

and staff in general, generating and updating knowledge to have skilled labor and

decision-making capacity. This leads to the need for continuous updating of

curricula, adapting them to the knowledge needed to improve the overall

performance of companies and the most effective mechanisms for transmitting that

knowledge.

The government, as well as universities, research centers and the business sector

should canalized funds to research and development, generating new knowledge

and technologies adapted to conditions in specific productive sectors. A key element

is the ability to adapt technologies to specific conditions, which also requires

investment in research and development (Correa, 1994). Research policies should

not be isolated efforts of public agencies. It should create mechanisms to support

research by the private sector. Also certain mechanisms from the productive sectors

can effectively make use of research results. An important point is to increase the

credibility of research. This is facilitated by the implementation of an adequate legal

and institutional framework, among other things, allows the appropriation of

research results. It is also necessary to change the attitude of employers towards

these institutions, transmitting information about what they do and making them

participants in the research process, by direct targeting specific projects or

participation in the financing of them.

Promote more efficient networks: the governments of the region through the

Ministries of Economy, Science and Technology and Trade, shall promote the

development of collaborative networks in which different actors are integrated to

improve competitive performance of SMEs. To improve the interaction between

different actors in the system, governments must solve several problems such as

gaps between basic researches over applied research. Programs should also

encourage collaboration with the productive sectors where universities and other

research centers can implement the knowledge generation and strengthen joint

research activities.

Measures to encourage innovation and technology diffusion in companies. One of

the main challenges is to strengthen the innovative capacity of enterprises, hence the

need for policies that improve their capacity to access appropriate network work,

and to identify relevant information and technologies relevant to their own

requirements. This leads to constant updating of technical, managerial and

organizational capacities of companies. Then requires higher levels of investment in

research and development, staff training and information technology.

It is essential to create mechanisms to strengthen the channels and codes of

communication between technology producers and users of them (Johnson and

Lundvall, 1988; Ergas, 1988). It is therefore recommended the promotion of

technology partnerships between researchers and users (see Ergas, 1988) or national

business alliances with outside firms (see ECLAC, 1994). There should be a

mechanism for exchange of experiences, opinions and tips between communities

and individuals (NGO Forum, 1992) to seize and, in turn, stimulate technological

development in the local area. Pomareda (1990), suggests the creation of a

technology bank to stimulate the generation and transfer of knowledge and to

stimulate trade. Other mechanisms of transmission such as magazines and Internet

publications are also useful.

The governments of the region should use wisely regulatory incentives that result

from international trade agreements. There has to be a more careful study of what

types of incentives governments can give without violating international agreements

and WTO rules.

66..33 TThhee rreesseeaarrcchh aaggeennddaa

The research has generated valuable information on the factors contributing to the success

of women-owned businesses, as well as the main challenges and opportunities to be derived

from the potential entry into the free trade agreement between Central American countries

and the United States. However, there is lack of certain aspects that warrant further

investigation. First, it is convenient to make a similar analysis for a larger number of

branches of economic activity in the different countries. As demonstrated in the study, the

results are dissimilar for different products. It is then important to identify a greater number

of businesses owned by women and study the potential impacts of the FTA on them.

It is also necessary to study in depth the institutional framework to promote innovation that

facilitates improvements in the performance of women-owned businesses. The study shows

that there are several programs of public agencies, business chambers and organizations.

However, they have not been studied rigorously.

It is important to have a deep analysis of the structure and functioning of markets in

different industries. Aspects such as the number of firms and the relative concentration of

production and trade were not studied here. Such analysis would provide information

valuable to design strategies for both companies and the relevant actors.

In broader terms, there it is missing a more rigorous study to determine the evolution of

national and sectoral systems of innovation in different countries of the region. Such studies

would give a lot more elements to design specific programs to strengthen women's

businesses.

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