Verónica Canales stands proudly in front of her hardware store, "Distribuidora Central," in Cañete Province, Peru, Wednesday, Oct. 18, 2018. ( Photo/Rodrigo Abd)

Verónica Canales owns a small hardware store within a sprawling market about 70 miles from Lima, Peru. She broke into the male-dominated hardware business in 2017 thanks to a change in Peru’s tax system.

“What I love about my customers is that they demand things from me. That makes me demand more of myself in order to be better, to serve them better, and to have products that satisfy them in every way. That makes them happy,” Verónica said.

She and many of the entrepreneurs in Mercado Mayorista trace their starts to that tax code change. It improved the business climate of the Cañete province and made it possible for many Peruvians to flourish as their own bosses, filling the market with small stores selling food, toys, meat, clothes, flowers, handmade shoes, jewelry, and Peruvian textiles.

Simple reforms changed how small businesses paid taxes in Peru. Today, Verónica and the other entrepreneurs of Mercado Mayorista are prospering.

Hurdles to prosperity

The government previously required business owners to pay taxes long before they ever received payment from those purchasing their products. Maintaining a business in Peru was already costly to begin with, but that barrier made it nearly impossible to produce a steady stream of revenue. Some chose to operate illegally or refused to expand to avoid the crushing financial burden of the formal economy.

“It’s a little different that a woman owns a hardware store, it’s not common. But I have knowledge because I worked, before this business, in a hardware store. I know the suppliers, the clients, how to run the hardware store and how to offer a quality product at a good price,” she said.

Verónica prepares to open Distribuidora Central for the day, in Cañete Province, Peru. ( Photo/Rodrigo Abd)

To be a woman owning a hardware store meant Verónica would have to put in double the work to succeed. Adding government barriers to the challenges was overwhelming.

After first connecting with the team from Asociación de Contribuyentes del Perú, a Lima-based non-profit that advocates for small businesses in Peru, Verónica said she was inspired and believed she could reach her goal.

She participated in “Impulsa Perú,” a program promoted by Asociación de Contribuyentes del Perú. It focused on educating entrepreneurs and start-ups by helping them navigate Peru’s tax system.

“For small businesses, paying taxes is a huge burden,” said José Ignacio Beteta, president of the organization. “It’s not only because some taxes are excessive but because the payment process is difficult and tiring.”

Empowering for success

José and his organization were heavily involved in bringing about necessary reforms to the tax system that started the small business boom.

They had seen firsthand how entrepreneurs were struggling with tax issues, and they stepped in to help. Through advocacy and direct cooperation with the Peruvian government, they were able to bring simple, effective solutions to the table.

The advocates spent years with decisionmakers, discussing reforms and recommendations. Finally, the Peruvian government allowed business owners to pay their taxes after receiving payment for their products—a major turning point for entrepreneurs across the nation.

Verónica makes her first sale of the day, in Cañete Province, Peru. ( Photo/Rodrigo Abd)

It started a rise of opportunity that is spreading to other entrepreneurs both throughout the province and the nation.

“Here at the market, I think that the hardware store and the other business can continue to grow. The zone of Cañete has a lot of potential and many things to offer,” Verónica said.

Today, Mercado Mayorista has become a hub for the community and a place where dozens of small businesses continue to take root, thanks to Asociación de Contribuyentes del Perú’s advocacy and programs, as well as government leaders seeing how commonsense reforms could boost people’s potential.

“To address the problems and challenges that you have day to day in business, have confidence in yourself,” Verónica said. “That’s important.”

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