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Peru: Garment manufacturing by micro-enterprises in Arequipa

General information
Project location: Arequipa, Peru
Consortium: Majorie Holding BV, Franky y Ricky S.A.
Project Budget: Euro 1,272,400
External financing: 50% grant funding by PSOM
Project period: July 2008 – December 2010

The international market for organic garments that are certified for socially accountable production is in a flux. Majorie Holding B.V. from the Netherlands intends to take advantage of this market trend by initiating SA8000 certified production of basics in Peru, in joint venture with Franky y Ricky S.A. (F&R) and in cooperation with micro-enterprises in Arequipa. In the context of Peru’s textile sector, micro-enterprises are small confectioning workshops with no more than 10 employees, typically working under uncontrolled circumstances using outdated equipment. The plan is to bring 10 micro-enterprises together in a collective workshop on one central location in where micro-enterprises are brought together in a collective to overcome the present drawbacks of their small and dispersed operations. Only in this setting can their situation be uplifted to the point that they operate according to SA8000 standards and competitively produce high quality garments. In this way, micro-enterprises can be participants in the premium garment market that insists on high quality and social accountability.

Contrary to the general situation in Peruvian confectioning micro-enterprises, where workers have to contend with unsafe working conditions and unsecure labour contracts (if any) without social benefits, employees of the micro-enterprise collective will have long-term contracts with over-time, contribution to social funds and taxes paid. In addition, they will benefit from comprehensive training and access to medical care.

Moreover, the partners will establish a social fund to finance social investments benefiting the workers and their families. The capital will be raised from the Joint Venture’s sales and will provide Majorie’s clients in Europe an opportunity to show their corporate social responsibility commitment.

Marjorie, in joint venture with F&R, will invest in the basic infrastructure and machinery, training and certification, whereas the micro-enterprises will bring in their work force. F&R will supply the knitted and dyed textile. The associated micro-enterprises will take work orders from the joint venture. At least 50% of the basics produced by the associated micro-enterprises will be sold as organic.

The project will create direct employment at the collective workshop for over 100 persons who will all have to be comprehensively trained in technical skills as well as SA8000 compliance. Indirect employment and income will be generated in Peru at the smallholder producers of organic cotton, at the cotton gin and spinnery supplying the yarn, and at F&R producing the fabric for the basics.

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