Lessons from the 2022 Census of Garment Workshops in Yaguarón
Data to drive the development of the garment sector
7 de Diciembre de 2022
One of the most notable characteristics of the micro, small, and medium-size enterprise (MSME) sector in Paraguay is that 70% of the productive units are informal. In addition, official data (National Statistics Institute-INE) indicate that 83.2% of workers in the textile and apparel manufacturing industry do not contribute to social security or other retirement schemes. These characteristics are closely linked to low levels of productivity and competitiveness in the sector.
How can MSMEs get out of the informality trap?
One way to build the competitiveness of MSMEs is through “clustering.” By clustering, MSMEs in a single industry can collectively optimize their access to markets, skilled labor, technological information, and subcontracting and support services. In addition, by forming trade or business organizations, they can invest in shared services and assets for productive improvement and improved relationships with input suppliers, brands and buyers, the state, financial institutions, and international organizations.
The garment industry in Yaguarón in the Department of Paraguarí in Paraguay has many characteristics of an industrial cluster and potential to develop greater collective competitiveness through joint action among MSMEs and public policies. However, the scarcity of basic descriptive data on garment workshops, their capacities, and their collective challenges is a major impediment to the design of a local industrial policy.
The UNDP Acceleration Lab in Paraguay teamed up with the Municipality of Yaguarón and the Association of Garment and Related Industries of Yaguarón (ACY) to implement a census of garment workshops in the cluster in August 2022. The dissemination of the results among local stakeholders served as a starting point for a process of co-creation of development policies and strategies for the cluster.
What does the data from the Yaguarón Garment Census tell us?
The census identified a total of 159 workshops in the city of Yaguarón and characterized their access to infrastructure, production strategies, labor force, employment practices, and access to markets and institutions. The majority (67%) of the workshops are micro- and small enterprises, employing less than 5 workers.
Detailed information on the results can be found here, and below is summary of the main data obtained:
Infrastructure and Production
The workshops are closely linked to domestic spaces: 65% of the workshops with up to five workers carry out their activities inside a family dwelling, and 60% of the workshops with more than 5 workers carry out their activities inside the household, but in a dedicated space. Only 9% of the workshops have an exclusive production facility.
There is a mix of old and new companies in the cluster: in general, more than 30% of the workshops are up to 5 years old, and 27% of the workshops with up to 5 workers have been in operation for more than 20 years, compared to 11% of the larger workshops.
Internet access is unequal: 74% of the workshops with up to 5 workers use cell phone data and 18% use fiber optic connections. Meanwhile 65% of the workshops with more than 5 workers use the cell phone data plan and 25% use fiber optic internet.
The cluster has a productive specialization in pants, but not exclusively: 66% of the larger workshops and 50% of the smaller ones indicated pants as their main product. The rest of the workshops named t-shirts, shirts, coats, uniforms and other products as their main products, and more variation is observed in the main product of the smaller workshops.
Larger workshops generate higher revenue per worker: On average, during a week of high season, workshops generate an estimated Gs.654,549 ($91.00 USD, current exchange rate) per worker. For workshops with more than 5 workers this average revenue amounts to Gs.739,589 ($102.83 USD), while workshops with less than five workers it is estimated at Gs.611,212 ($84.98 USD).
Larger workshops have a greater diversity of equipment: almost 90% of small workshops use up to 3 different types of machines. In contrast, almost 70% of the larger ones use 4 or more types of machinery.
Labor and employment
The average employment per workshop during a high season week is 6.9 workers, with a population of 1,091 workers in the 159 workshops surveyed. Workshops with up to 5 workers have an average of 3 workers per workshop, while those with more than 5 workers have an average of 14.7 workers.
The workshops have a core of permanent staff, supplemented by temporary workers and family workers: 27% of the workers are wage workers and permanent staff, 53% are hired on a piece rate, 16% are hired as day laborers and 4% are unpaid family workers.
Larger workshops make greater use of hiring on a piece rate: 60% of the personnel in workshops with more than 5 employees are hired on a piece rate compared to 36% of the personnel in smaller workshops.
The managerial capacity of the workshops is limited: only 10% of the smaller workshops and 21% of the larger workshops have a manager other than the owner. Seventy-five percent of the workshops do not have a person other than the owner dedicated to accounting.
Market and Institutional Support
There is a high degree of informality in the cluster: 75% of the workshops with less than 5 workers do not have a taxpayer registration (RUC), along with 57% of the workshops with more than 5 workers.
Access to financing is limited, but not absent: 23% of the workshops had access to some source of financing in 2021. There are no apparent differences in access to financing according to the size of the workshops.
In general, the workshops are dedicated exclusively to assembly or sewing: only 16% of the workshops market their own products.
The level of associationalism in the cluster is low, especially among smaller workshops: workshops with more than 5 workers have a greater presence in trade or business associations than smaller workshops (21% versus 6%).
Disseminating the findings: a space to propose joint action
In order to register the reactions of workshop owners and workers, we held a results dissemination day where we explored the findings, listened to the different interpretations of the data, and constructed an analysis hand in hand with the key actors.
Using a methodology we called "thematic stations", participants made stops at work stations that corresponded to the structure of the survey: a) Production and infrastructure, b) Labor and formalization, and c) Market and institutions.
Each station provided a visualization of the data displayed on informative posters and posed a series of questions to the participants: “what do you think about the survey data? And what challenges and proposals can we propose using this evidence?”
Informality limits the opportunities for growth and investment in the workshops; they face restrictions in accessing credit because they cannot adequately justify their income and their ability to pay. In addition, the workshops operate as subcontractors to clients who prefer informal relationships, in most cases without generating invoices or other records of transactions.
"The problem is that we are self-employed and have no proof of income, no one wants to give you credit if you have no way to prove your income."
"To have financing everything is reduced to the RUC [the taxpayer registration], they ask you for the last five VAT payments and we are just paying the minimum to keep the RUC and pay an accountant so as not to lose our registration."
"We have to recover our seamstresses, a lot of people left us, they traveled because we cannot pay them well."
"We are forced to accept the price they pay us and with that we barely break even to be able to pay our staff."
Labor migration to other territories and workshops’ inability to pay competitive wages generates a shortage of skilled labor.
Due to the limited capital for investment in infrastructure and the lack of operating capital, some of the informal buyers lend machinery to the workshop owners. However, this leads to a situation of “capture” that limits the workshops’ ability to diversify clients and reduces their ability to negotiate product prices. Participants explained the prices they receive for their production have remained virtually unchanged over the last decade. However, they face higher costs for inputs and their cost of living in general, which limits their profits and the possibility of paying better wages.
"Until today we are working with prices of 10 years ago, the same price as when we started, but all our costs are going up".
"If you want to work with a big company you have to have an operating capital to be able to pay your staff, you deliver the garments and after twenty days you just get paid."
"We don't have operating capital, that's our biggest problem. I have many machines, but I cannot produce my own garments".
Proposals for further progress
The proposals that emerged among the participants in the dissemination workshop included:
Articulate the work between large workshops with small workshops to generate a production system that, although working from homes, can improve the level of production based on networks and nodes. In this work, the large workshops with greater experience in production quality can provide support to the smaller ones.
Accompany the process of improving production quality and management skills in order to make local branding possible, especially in the local workshops that have more defined processes.
Request the National Service for Professional Promotion (SNPP) to implement on-site training courses. A “workshop school” model was suggested, to permit training workers while producing and connecting with new clients.
Further study of the connection between labor and household relations and between care work and the young workers insertion into the labor market, in order to develop a model of employment management suitable for Yaguarón.
Generate agreements with governmental entities to strengthening the cluster based on the evidence produced by the census.
Highlight the national and foreign brands that are manufactured in Yaguarón in order to create more recognition of cluster.
What does the census leave us with and what are the next steps?
The census provided a new data and a more precise and accurate picture of the most relevant needs of the clusters’ workshops.
This is the first step for Yaguarón's garment manufacturers to define common goals and joint action to diversify production, open up access to new customers, and improve working conditions. These new local data and evidence about the needs of the garment workshops are a key input policy proposal that are appropriate, legitimate, and successful at the local level.
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