José Ignacio Pérez Palma

Ashoka Fellow
Illustration of a person's face depicting a fellow
Mexico
Fellow since 1991
This description of José Ignacio Pérez Palma's work was prepared when José Ignacio Pérez Palma was elected to the Ashoka Fellowship in 1991 .

Introduction

Jose Perez Palma, a former manager for a government credit bank, is helping poor micro-industrialists organize to play a larger, more competitive role in Mexico's economy. He has begun with pottery producers in the state of Morelos.

The New Idea

Jose sees micro-business as an underdeveloped but potentially important aspect of Mexico's economy. He attributes its underdevelopment to a paradox: those most in need of advice and services–poor families and micro-firms–are the least able to pay for it. Hurt by lack of access to credit and information, and by other inefficiencies in their planning, research, production and marketing, these small producers struggle to stay afloat.Jose is developing a new model that breaks this frustrating cycle. First, he has formed a union of over 4,000 pottery producers in the state of Morelos. Jose and the union then provide the potters with specialized economic training, ranging from production control to taxation and a host of economic advantages of scale enjoyed by larger business, such as bulk purchasing, improved credit leverage, and better exporting opportunities.The union supports itself with membership fees, costs that are more than offset by reduced material costs and higher sales for the members. Jose now wants to apply this model to other micro-businesses throughout Mexico.

The Problem

The development banks and credit institutions in Mexico that try to support small businesses tend to overlook a vast but economically weak segment of that group–the micro-businesses. Micro-industrialists generally cannot individually raise the collateral that conventional banks seek or state their cases well enough to inspire the banks' confidence. Micro-industries seem harder to understand and appear riskier to bankers than larger units, i.e., they require more (expensive) bankers' time yet ultimately produce only tiny deals that cannot compensate for these costs. These institutional and economic barriers are often heightened by the lack of comprehension and communication between classes.

Getting competitive access to credit is not the only problem that a small family business must confront. These businesses have nobody free to research the rapidly changing technologies that could change their–or their competitors'–economics. They certainly can't do their own research. Nor do they have easy, affordable access to information about other changes that may be occurring in their markets.

Their competitive disadvantage doesn't stop with information and technology. It is difficult for masses of tiny producers to gain either purchasing or market power, and because most are not formally constituted as businesses, they are unable to participate in many government credit and other support programs. This lack of legal definition also raises a number of other possible dangers, ranging from demands for bribes to personal liability.

The Strategy

From his perspective as a credit manager, Jose saw that micro-industrialists such as the potters needed to organize in order to promote their mutual interests. Instead of seeing each other as competitors, they needed to see themselves as a special niche in the consumer market that needed promotion and better organization.

To catalyze this process, Jose set up a free training program for representatives of 20 ceramic businesses in Morelos, many of whom he had long known from his managerial days. These weekly seminars, some led by professional friends of Jose's, not only provided beneficial information on such items as taxes and credit, but also illuminated the advantages of turning the educational forum into an organization. The representatives saw the benefits of a common future and founded the Union of Pottery Producers in the state of Morelos.

The union quickly expanded in membership and now addresses many of the needs of the commercial potter, such as: new technology and technical support, common purchasing of raw materials, credit negotiation, commercialization for export, creation of retail outlets for product sales, accounting and legal support, employment referral services, and training.

The union elects an executive decision-making body that manages and further develops the union. Jose insists on not becoming a member, feeling that the producers must exercise full control over their future. Jose also wishes to remain independent so that he may play the role of catalyst in helping other micro-industrial organizations emerge in Mexico.

The Person

Jose, an accountant by profession, has himself succeeded as a business entrepreneur. He founded his own brush factory, which exported successfully to the United States, and sold it three years later to another company.

Jose also brings to his new role experience as a citizen organizer and as a banker. As director of the Red Cross in the state of Morelos, Jose headed a fund-raising campaign to set up Cuernavaca's first intensive-therapy unit. After that, he spent 12 years as a manager for NAFINSA, the national development bank responsible for providing credit for Mexico's industrial development. This experience not only taught him the bankers' skills, it made him sharply aware of the banks' inability to the serve the country's small producers.

Originally from Mexico City, Jose has lived in Cuernavaca, Morelos, for 20 years. His genuine concern for and wide understanding of Mexico's economic problems and their structural causes finally led him to launch this new phase of his life by initiating the Morelos Union of Pottery Producers.