The Cherry Street Press

The Ultimate Peru List  – An indispensable guide to Peru: http://www.theultimateperulist.blogspot.com/

Peru – Wikipedia

Manuela Ramos

 

MicroFranchises as a Solution to Global Poverty [pdf] by Kirk Magleby, December 2005

Case Brief: Street Vendor Beatriz Lagos in Cuzco, Peru

Beatriz Lagos sells snack foods from a tricycle cart a few blocks from the main plaza in Cuzco, Peru. She gets up at 5:45 a.m. and retires at 11:00 p.m. six days a week. Her tiny house is far from the center of town, so she must rent a parking space in a secured lot to store her tricycle overnight. She rents her tricycle from her supplier. Her inventory is worth about $150 at replacement cost, but she does not own it. It is on loan from her supplier and she pays interest on it at the rate of 10% per month. Her supplier requires that she make daily interest payments. Since she operates her cart 14 hours per day, a lantern is required for light. Lantern fuel costs $1.80 per week.

Pilferage is a serious problem because all inventory shrinkage reduces her bottom line by the cost of goods plus the carrying cost of her flooring loan. A band of street urchins once overturned her cart and helped themselves to about one third of the scattered snacks before she and a passer-by scared them away. It took Beatriz several months to recover from that financial reverse. She pleaded with her supplier to at least forgive the interest on that distressed inventory, but he refused. Her son now helps her guard the cart during certain hours of the day, even though he is bright and would much rather stay in school.

 

Outdated inventory is a constant concern because her supplier does not rotate stock or manage shelf lives. Once she takes product through her supplier’s door, she cannot return it. She can sell it, consume it, give it away, or dispose of it, but she has to pay for it with interest in any event. Once she was sold a box of D’Onofrio Sublime chocolate bars that were old and full of worms. The box looked fine on the outside. It was only after her customers opened the individual candy bars that the problem became apparent. She tried to return the defective box to her supplier, but he refused to help her. Itinerant beggars stop by her cart frequently asking for a handout and occasionally she gives something away to a particularly disadvantaged person. Irate customers often berate her because of her high prices. Large food processors like Nestlé run TV commercials advertising products at a certain price. Beatriz’ cost from her supplier is often 10-15% higher than the advertised price on TV, so after she adds her markup, many customers complain. About once a week, a police officer comes along, expecting a bribe. Beatriz runs an informal, unregistered business that is technically illegal. If she did not pay off the policeman, he could make trouble for her, so she gives him a little money. On a good day, she takes home $4. Most days it is $2 for an effective pay rate of 14 cents per hour. Beatriz Lagos, for all practical purposes, is a slave. She has been marginalized and is being oppressed by forces beyond her control. She bears most of the risk and realizes little of the benefit in an exploitative relationship. There are hundreds of Beatrizes in Cuzco, Peru, and millions all over the developing world. Any of several institutionalized MicroFranchise systems could liberate Beatriz Lagos as surely as John Mitchell and John L. Lewis liberated Appalachian coal miners by organizing them in the early part of the 20th century.