The PRIME research team has conducted two missions for the case study of private sector support in the tourism sector in Bolivia in June 2014 and February 2016. This resulted in a case-study report, one of the six case studies which we will use to reflect on enablers, barriers and additionality of the support provided by CBI and PUM.
In Bolivia we choose tourism as the focus of our case study. CBI as well as PUM have provided a lot of support in this sector in the past, and will continue to do so in the future. In addition, we prioritized those sectors where there is overlap between PUM and CBI support; which is clearly the case in the tourism sector. The majority of PUM support revolve around the development of new products and marketing activities of hotels and travel agents. CBI has provided export coaching to SMEs and institutional development support to various Business Support Organisations (BSOs). PUM and CBI have both supported more than 20SMEs in the last decade; some of which received support from both organisations.
Overview tourism sector in Bolivia
Bolivia experienced continuous growth over the last decades. According to the economic impact research of the World Travel and Tourism Council, tourism directly contributed 2,5% to total GDP in 2013. When indirect contributions are also considered – including investments, domestic purchases of goods and services dealing directly with tourism and spending of those directly or indirectly employed in travel and tourism – this percentage rises to 6,3%. Forecasts are also positive, with sustained absolute growth, although the relative contribution of tourism to GDP may decrease. In 2013 travel and tourism supported 96.500 jobs (2.3% of the total employment) which is expected to rise to 105.000 in 2024 (1.9% of employment). If indirect employment is also included this rises to 248.500 and 289.500 respectively.
Bolivia is mostly known to tourists for La Paz, the highlands and Lake Titicaca. Yet, Bolivia offers many other tourist attractions less known to the general public (Santa Cruz, Rurrenabaque, Sucre, Potosi, Uyuni etc.). At the moment, travel to Bolivia is mostly combined with a trip to Peru, Chile or Argentina, and not as a stand-alone trip. Moreover, most tourists are low-budget young people and backpackers. The market for mainstream tourism can be developed much more.
Revisiting the key assumption in the intervention logic
In the graph, we identified five key assumptions that might shape or challenge the effectiveness of the support. In this paragraph, we revisit these assumptions in the light of the impressions that we derived from the interviews and data on the support in the Bolivian tourism sector.
Assumption: The support depends on the quality of the business organisations as implementing partners
This case study on support in the Bolivia tourist sector points to the importance of business support organisations that can translate the support provided to individual SMEs, as innovative pilots, into sector innovation and (inter)national competitiveness. The number and size of the companies supported by CBI is, however, very small, and part of a large number of similar firms in the sector. The activities of these small peripheral travel agencies are unlikely to result in a sustained flow of European visitors with impact on sector competitiveness and job creation. However, the role of CBI in innovation and upgrading in the sector through the support in developing new products, branding destinations and the introduction of new quality assurance certification is widely recognised by the sector organisations. Tourist products developed with the support, when successful in some pilot firms, might stimulate other SMEs to replicate. Innovation and quality improvement in the sector is a more likely impact area of CBI support to these (small) travel agencies than an increase in exports or job creation.
Assumption: The selection process of beneficiary firms results in beneficiary firms with growth/export potential and development relevance
CBI is valued for its expertise and approach to develop skills and attract direct clients from Europe, but most agencies do not consider this as their main market for growth. Many interviewed travel agencies see more growth potential in capturing clients channelled to them by the larger inbound travel agencies Crillon and Magri Tours or in targeting neighbouring countries. Likely, support to these larger La Paz-based agencies, as CBI did in the preceding support programme, can be expected to be more effective in creating additional exports. However, due to policy and developmental objectives CBI decided in the new programme to focus on the sector outside La Paz. This illustrates the inherent contradiction in private-sector development support between the objective of increasing exports to Europe with companies that are larger and more professional, versus the selection of companies in a sector/region that are ‘eligible’ for development support and where product innovation and upgrading is in need of external development support but risks are higher and economic impact is lower.
Though these are not the prime target group for PUM support, we observed that PUM worked with several companies in the tourism sector that, at least in Sucre and Tarija, belong to relatively rich families. The lodging costs that hotels have to pay for the expert are relatively low; hotels have generally spare capacity to lodge the expert, and, therefore, at least theoretically, the participation of less capitalised hotels would be possible. The PUM-supported hotels in Sucre and Tarija are in the category of the most expensive ones, just as the CBI-supported hotel in La Paz. This might be inevitable, as PUM and CBI support is considered especially effective in developing services for high-end customers, both national and international clients. Because European travel agencies are interested in this class of higher-end hotels, the synergy between CBI and PUM in tourist development is undoubtedly present. The importance of improving hotels along with developing travel agencies is confirmed by the active participation of four hotel-agency combinations in both support programmes. The interviews with these agencies suggest that visibility of their hotels to larger international and domestic travel agencies may be a more promising venue to generate additional exports to the EU than presenting their small inbound travel agencies in international fairs.
Assumption: The international expert support provided to these firms is additional to existing knowledge and local expertise
The expert support provided by PUM and CBI makes a difference in companies that receive this at the right time, with an expert with the right experience and skills. This timely support is, of course, the intention of CBI and PUM, but, inevitably, will not always be the case. The case study shows that, overall, the beneficiaries are satisfied with the quality of the CBI experts but would like to have coaching consultants that speak Spanish to support them in follow-up actions or implementation of changes in their business. The export coaching is clearly a value-added. However, it seems that the support of CBI in some capacity building courses does not always respond to the real problems of the firms, or would need more support. This explains the fact that some outcomes and business changes are not met yet, though rapid changes could be expected (website development, sustainability measures). We see the most positive outcomes at the sector level, especially in the strengthening of the private sector in order to get access to public sectoral support investments, and in tourist product innovation.
Assumption: The firms are willing to pay the costs associated with the expert support provided
The interviews confirmed the contributory role of CBI and PUM in the changes of knowledge of the SMEs related with product development, financial and non-financial data management, sustainability issues and ideas for sector coordination. However, for most of the SMEs the economic impact of this knowledge was still limited, which also reduces their willingness to pay for follow-up support. For example, the intention of PUM to implement seminars in the tourism sector was unsuccessful (at least until 2016) because participants had low willingness to pay. This is also a product of the tradition of free support by NGOs and the public sector, which has created a culture of not willing to pay for knowledge and advice.
Assumption: The firms are willing to do the necessary follow-up investments
In case of CBI, most supported SMEs in the tourism programme are of a size that they will not make the necessary follow-up investments needed to go to international fairs, without funding. In the case of PUM, necessary investments in the hotels or restaurants are more readily done, as for these investments the short term benefits are clearer.