Brazil's social firms aim to craft a brighter future
- 26 June 2014
- From the section Business
On the outskirts of Rio de Janeiro, plastic bottles and posters are being transformed into purses and bags by the workers at a small co-operative.
Established in 2006, the business is called Crafty Women (Mulheres Arteiras). It offers work for 20 people, who as its name suggests are predominantly female.
While trade was slow for the co-operative in its early days, three years ago it was given a major boost when its products started being sold across Brazil by a retailer called Rede Asta.
Rede Asta is run as a social enterprise - a business which puts tackling social problems rather than profit maximisation as its primary motive.
It was set up in 2005 to help artisans from poor communities gain access to a much bigger market, and also to help them build up their skills.
Today Rede Asta works with 53 co-operatives across Brazil, which are mostly run by women and employ more than 700 people between them.
Rede Asta helps the businesses with design ideas, and techniques to increase the quality and value of their products, while encouraging them to hold on to their regional identities, colours and materials.
The best products from each co-operative - such as bags, decorative items and women's accessories, made mostly from recycling materials and typical Brazilian craftsmanship - are then sold through Rede Asta's catalogues, physical shops in Rio and Sao Paulo, and website.
"Rede Asta has been providing us with more sales opportunities," says Marcia da Costa, a 46-year-old artisan from Crafty Women. "And we are improving our products [to make the most of the increased marketplace]."
Commentators say that the relationship between Crafty Women and Rede Asta is just one example of a slow but constant improvement in social businesses in Brazil.
Such enterprises as Rede Asta are moving away from relying on donations and goodwill, and instead are aiming to establish more sustainable commercial models, which can offer investors a small profit on their investment.
In turn this has led to more interest in investing in Brazil's growing number of social businesses.
According to recent data from the Aspen Network of Development Entrepreneurs (ANDE), an international body which promotes entrepreneurship in the developing world, about $200m (£118m) has already been invested in Brazilian social enterprises this year by private investors and investment funds.
This compares with just $76m between 2001 and 2013.
However, this is just a tiny amount of the total $17bn ANDE expects to be invested worldwide in social businesses this year.
And Rebeca Rocha, ANDE's co-ordinator in Brazil, says that despite progress in the country, it still has a long way to go to catch up with other nations.
"Brazil still lacks an environment that encourages social entrepreneurship, something that is happening more steadily in other developing countries such as Mexico and Kenya," she says.
Rede Asta's two co-founders - Alice Freitas, 35, and Raquel Schettino, 37 - used all their savings to set up their business.
They started selling their first products in 2008, but were unable to make any money for the first two years - and almost went bankrupt.
Mrs Fretas says: "We hired a consulting company, planned every detail, called in experienced saleswomen. But it all went wrong."
The company's initial strategy was to use a team of established saleswomen to sell its products door-to-door, but sales were weak.
And so the business has since opened two brick-and-mortar stores, and also started selling via its website.
In addition Rede Asta hired a marketing director and started to focus its sales more on higher-income consumers.
It also replaced the word "handicraft" with "handmade" when describing the products it sold, because Mrs Freitas and Ms Schettino said the former seemed to suggest a degree of amateurism.
"What we offer is handmade design," says Mrs Freitas. "We have built a team to research trends in fashion and home decoration and pass that knowledge on to the producers.
"We value the uniqueness of each product, but want to help the artisans improve what they were already crafting."
Last year, Rede Asta, which directly employs 19 people, sold more than 38,000 items, both directly to consumers, and via wholesale. Its annual revenues reached about 1m reais ($450,000; £265,000).
It says it is on target to balance its budget by 2017, and in the meantime continues to get sponsorship from companies such as Coca-Cola Brazil.
Rodrigo Carvalho, a professor in entrepreneurship at Brazil's ESPM University, says the country is building "an ecosystem for social businesses", with academics like himself contributing by passing on their knowledge to social businesses.
Language school 4You2 is one Brazilian social business which sought such expert advice.
"We were taught how to take care of our brand, improve our processes, and our structure," says Claudia Carolina Fuga, a partner at 4You2, which runs its lessons in poor communities across the country.
4You2, which has its headquarters in Sao Paulo, keeps its fees below the market average by running classrooms inside the offices of non-government organisations, and by hiring foreign teachers using a fellowship programme.
The teachers receive a small monthly payment, and accommodation in a home inside the communities where they work.
According to Ms Fuga, 4You2 started to make a profit after its third month, and that it currently teaches 1,000 students.
Mr Carvalho says social businesses are learning to combine their passion for a social cause with increased business and management techniques.