Topic: Motivations to formalise business activities for poor farmers in a mountainous region of Peru
Keywords: informal business; mountainous areas; motivations
It is estimated that almost 90% of the farms and enterprises operating in the rural and mountainous areas of Peru are unregistered and hidden away from official systems (OECD, 2016). State actors see the formalisation and recognition of these business as vital for a growing economy and seek ways to promote the process, whilst communities regard formalisation as a mechanism to appropriate their profits, and control their outputs (Williams, 2011), and avoid the process.
Operating within a European Aid programme that supports farmers as they formalise their business activities, this paper examines the motivations for 10 Peruvian farmers as they attempt to transition their business activities from informal to formal. In doing so we identify that the reasons of acting informally are not primarily profit oriented and there is a resistant institutional framework and a number of community based prejudices that prevent the acceptance of business formalisation. The farmers involved in the programme believe that the formalisation can make them more profitable and can bring multiple benefits to their communities.
Semi-structured interviews and participant observation of business behaviours were conducted with 10 rural farmers in remote and mountainous communities in the area of Puno in Peru. An inductive approach revealed four key thematic areas of interest: institutional resistance; motivations to formalise; the over-embeddedness of social networks; and concerns over competition.
The research contributes to knowledge by exploring the factors affecting the transition of business activities from the informal to formal economy of rural farms based in peripheral mountainous communities in Peru.