Economy Takes Toll on Small Businesses

LAST Friday afternoon, Segundo Minope was slowly cleaning one of his lathes while his 17-year-old son tinkered at the back of their small workshop by the side of the Avenida Tupac Amaru in Lima's northern shanty town suburbs. Mr. Minope's business is metal-bashing. He mainly repairs or makes parts to order for trucks. He says he doesn't lack clients. But at that moment he lacked electricity.

Lima experiences frequent power cuts because the near-bankrupt state-owned electricity company is increasingly stretched to repair guerrilla sabotage in which 335 high voltage pylons were blown up last year alone.

This hits hard small businesses like Minope's workshop.

``I urgently need to buy a generator,'' Minope says.

He also wants to buy a third lathe for his shop that would enable him to mass produce metal bolts.

``I feel a bit sad. Before, I used to buy a new piece of equipment every year. Now, the prices get further out of reach all the time.''

The tens of thousands of small, independent businesses like Minope's, many of them not legally registered, have helped to stop Lima's shanty towns from exploding in the face of Peru's twin crises of economic prostration and guerrilla violence.

``If the micro-enterprise didn't exist, Peru would be in the midst of a civil war,'' says Manuel Romero, a former industry minister who is now a business consultant.

``Every year 300,000 Peruvians join the labor force, and the formal economy doesn't generate more than 100,000 jobs,'' the consultant adds. ``The rest go into agriculture and the informal economy - or to terrorism, crime, or the drug trade.''