LocationsWhat did we learn #InTheField - Part 3
“There has always been an intention to work cooperatively… there is interest and willingness, but believing in a project and putting in your own time is difficult. I think strong and active leadership is needed. I would love for it to work.”Workshop owner
This is the third installment in a series of blog posts about the lessons learned from the implementation of Local as a prototype for a supplier development program in the garment industry. The program worked with 13 garment workshops selected in three territories (Mariano Roque Alonso, Yaguarón, and Pilar), between August 2023 and June 2024. A specialized team from the United Nations Development Program’s (UNDP) Accelerator Lab (AccLabPY) in Paraguay implemented the program, in coordination with national and municipal government institutions, and with financial support from the UNDP Poverty and Inequality Funding Window.
When designing the program, we asked ourselves: how can we develop coordination and cooperation mechanisms to upgrade the garment industry in Paraguay?
The initial premise of Local was that strengthening the relationship between lead firms and MSMEs could drive upgrading. In an earlier blog post about productivity, we relayed the lessons learned about this premise and emphasized the need to broaden the program's focus to include interventions centered on strengthening the managerial and planning capacities of lead firms and incorporating public policies that promote relationships and support the early stages of productive development for MSMEs.
A second possibility, explored by Local, was to enhance associationalism. A key idea in the value chain literature is that upgrading is not only driven by competition alone, but also by cooperation among MSMEs that achieve collective efficiency and competitiveness. Clustering allows MSMEs to achieve external economies passively–reducing transaction and production costs by locating themselves in areas with an accumulation of assets like skilled labor and specialized inputs–and also actively–through joint action, associationalism, and the provision of common services, infrastructure, or political lobbying.
How did Local strengthen associationalism in the clusters?
To encourage collective action and the search for common goals, Local developed training on associationalism in its three clusters, including a reflection on the potential benefits and increased competitiveness of MSMEs through inter-company collaboration.
In Pilar, where the Cooperative of Garment Manufacturers of Pilar is in the process of formation, Local connected representatives of the pre-cooperative with the National Institute of Cooperatives (INCOOP) and provided specific training on the cooperative system, its functioning, formal commitments, legal obligations, and roles within cooperatives.
Additionally, Local’s team provided the leaders of the pre-cooperative in Pilar and the workshop owners in Yaguarón with materials containing guidelines and instructions for the organizational functioning of Garment Cooperatives. This includes a procedures manual that provides guidance for leaders, the preparation of documents, the convening and holding of Assemblies, and the submission of documents to INCOOP to formalize cooperatives.
In Mariano Roque Alonso, where the conditions for associationalism are still at a very early stage, the program conducted general training workshops on experiences and benefits of associationalism and promoted the organization and functioning of the first WhatsApp group among workshops as an initial space for exchanging information and collective experiences.
What did we learn about promoting associationalism among MSMEs?
First, the implementation of Local confirmed that associationalism is still at very early stage and has different origins in the three clusters.
In Mariano Roque Alonso, where the workshops are generally smaller, newer, and more dispersed in the territory, workshop owners have little associative experience. In specific situations, for example, when a workshop receives an order that exceeds its production capacity, they mobilize friendship and family ties among owners to collaborate on production.
In Yaguarón, the Association of Garment Manufacturers of Yaguarón (ACY) has existed for over 10 years and has achieved a basic level of formality, such as having legal status, a Unique Taxpayer Registry, and other documentation. However, conflicts over the distribution of benefits generated by the association have created a legacy of mistrust that persists today and needs to be redirected.
In Pilar, the history of associationalism is closely linked to the company, Manufactura Pilar, and its promotion of small and medium-sized workshops through outsourcing operations previously performed by salaried employees of the factory to reduce and make fixed production costs more flexible. This is the most advanced experience, with lessons regarding the role of the lead firm—or another actor, which can also be the Municipality or the Departmental or Central Government—in promoting collective initiatives like cooperatives.
Second, we observed that the motivations for forming organizations vary in the three clusters and reflect their different origins.
In Mariano Roque Alonso, the workshop owners expressed great enthusiasm for getting to know each other, exchanging productive and commercial knowledge, and establishing collaborative relationships to take on larger orders.
“When we asked the workshop owners what things they could do collaboratively, they said: Complement services between workshops, make joint material purchases, exchange supplies, and lend machinery to each other.” - Local Technical Team
In Yaguarón, the association’s main concern is securing large orders from new clients to sustain a constant workflow in the cluster.
“The association is going through a tough time due to a lack of work, which makes each member search on their own to make a living… we’re working individually because we’re not able to secure a company, a maquiladora, to provide steady work.” - Member of the Association of Garment Manufacturers of Yaguarón
In this association, there is little awareness or recognition of the need to undertake collective activities or investments to improve the cluster’s collective productivity.
In Pilar, the workshop owners see the process of creating the cooperative as a mechanism to access health insurance and potential retirement benefits.
“We are already contributing to the Cooperative so that they (the workers) can also have their year-end bonus because they don’t have IPS, they don’t have insurance, they have nothing. We can’t pay for IPS because it requires permanent employment, and this is not a secure job. I’m still very dependent on Manufactura; I don’t have another business.” - Workshop owner.
The Impact of Local on associationalism
The approach and results of Local's implementation varied across the three cases.
In Mariano Roque Alonso, the team's proposal was to create a flexible coordination tool that allowed for associative work without losing autonomy. The aim was to develop social practices where the workshop owners would cooperate by pooling their efforts and resources for common interests, collectively addressing specific needs, enhancing their individual capacities, securing resources, and undertaking joint actions to reduce costs.
In this context, Local’s most notable result was the fostering of a collective identity for the local garment industry. The census of garment workshops, public activities held at the Municipal offices, and interaction among selected workshops raised awareness of the industry's value, the number of people involved, and the possibilities and benefits of associationalism.
"We believe it's important to go to those spaces and share as workshop owners. It was discussed (in the trainings), and from there, we created a WhatsApp group with about 7 workshops... There was a lady who suggested forming a partnership with other seamstresses. She was going to offer space in her home so they could bring their machines, work there, and share a percentage of the earnings and the profits generated." – Workshop Owner.
In Yaguarón, the priority is to overcome divisions and find new ways to organize the workshops collectively. A key outcome was the creation of group discussion spaces open to workshops that were not members of the association and to introduce new topics into their discussions. This is a crucial step toward broadening participation and democratizing existing organizations.
During the training sessions on associationalism, the workshop owners raised the possibility of forming a Yaguarón Garment Cooperative as a more effective alternative for associative work.
In Pilar, after the initial external push from Manufactura Pilar in the organizational process, the workshop owners have taken ownership of the process and express great enthusiasm about the future possibilities. On the one hand, the workshop owners genuinely express concern for offering labor benefits to their teams, and they show satisfaction in having defined collective mechanisms to pay year-end bonuses and make progress toward mechanisms to cover medical insurance costs.
"We've been doing this exercise since February. We've been paying the cooperative on behalf of the members, and as a member myself, I pay 10% of what we earn from our work, every week, for the end-of-year bonus... It’s going to be a huge change. I think we’re doing quite well, everyone is contributing and doing this exercise... Later on, we want to have an agreement with a city clinic so our people can use their services, as they have doctors from various specialties." – Workshop Owner.
These kinds of expressions show how the small social distance between workshop owners and their teams—previously mentioned in the last blog as a barrier to labor organization and discipline—can serve as a facilitator for building horizontal relationships and associations.
On the other hand, the workshop owners demonstrate high levels of awareness of the need to take action and make joint investments to improve the collective productivity of the cluster’s workshops. For example, this includes funding new machinery purchases, securing new clients, or supporting the development of their own clothing brands.
"We’ve been working with those weekly contributions because idle money doesn't help. So, we bought machines in cash at a much more affordable price and gave them to the members so they could improve their production. We’re seeking higher production in less time with the same quality. Investing in machinery generates changes whose impact is seen very quickly." – Representative of the Pre-Cooperative of Garment Makers in Pilar.
In this context, the training and assistance provided by Local were very concrete in accelerating the formalization and establishment of the cooperative:
"The INCOOP facilitators gave us workshops. Initially, they were virtual, and then there was an in-person session. For the first time, a specialist came, and everything she taught us was excellent—the administrative and legal parts of how to run the cooperative." – Focus Group Participant.
In general, associations must go through long development processes to play a role as drivers of collective improvement. To do so, they must represent their members and convey their needs and demands to other actors, such as leading companies and local and national governments. At the same time, they must communicate the needs of these external actors to their members and ensure compliance with the quality demands and formal requirements of those actors.
These demands currently exceed the capacity of existing MSME organizations in Paraguay's garment industry. However, the case of Pilar shows that, combined with the empathy that exists between the work team and the workshop owners, client demands can provide strong incentives to create and strengthen organizations with these capacities.
In our next blog, we will conclude this series on the lessons learned during Local's implementation with a discussion and possible alternatives on the public policy framework for promoting and formalizing MSMEs in Paraguay.
