Analysis of Market Trends and Competitiveness of the Camelid Livestock Value Chain in the North of Chile

3.1. Market Characteristics

The camelid fiber market is a niche and highly specialized market, with a growing demand for high-quality products. Camelid fiber, such as alpaca and vicuña, is valued for its softness, warmth, and durability, and is used in the manufacture of high-end garments.

As 2009 is declared the International Year of Natural Fibers (IYNF; FAO) by the United Nations General Assembly in New York, the objectives of which are: to help agro-industries that employ millions of people and provide economic development opportunities, and to strengthen the demand for natural fiber products, improving the livelihoods of the farmers who produce them and income for countries that export them, the supply of natural fibers has been boosted, to such an extent that each year around 30 million tons of natural fibers are produced worldwide, of which cotton dominates with 20 million tons, wool and jute reach 2 to 3 million tons, followed by other fibers of animal origin.

The use of natural fibers ranges from high fashion to industrial use; in all cases the fibers are subject to competition with synthetic substitutes, which burst onto the market in the 1960s and since then their use has been increasing, far surpassing today the better-known natural fibers such as cotton and wool. The main reason why synthetic fibers took over the textile market was because of their lower processing cost (See Table 1).

According to species and main producers, world fiber production (t/year) is estimated at (FAO [Online]):

• • Mohair (angora goat): 8,000 (South Africa, United States and Turkey)
• • Kashmir (goat): 5,000 (China, Mongolia, Iran and Afghanistan).
• • Alpaca: 4,000 (Peru, Chile and Bolivia)
• • Camel: 2,000 (China, Mongolia, Iran and Afghanistan)
• • Angora (rabbit): 8,500 (China)
• • Flame: 500 (Peru and Bolivia)
• Source: FIA, 2009.

In recent years there has been a greater tendency to use lighter and more comfortable garments; for this, the type of fiber and diameter is important since, in general, the smaller the diameter, the finer the fiber and the more expensive the garment. The table (Table 2) details the average diameters and comfort of fine fibers of different animal origin and between different qualities within the same species.

Llama fiber has the same categories as alpaca fiber, but its fineness in general terms is 10% lower than alpaca values. Vicuña fiber is the finest of all camelids and even finer than cashmere fiber, whose fiber on the market is worth 4 to 5 times more than the finest quality alpaca fiber. The value of dehairing greasy vicuña fiber is 5 to 8 times higher than that of cashmere (UNIDO, 2006).

3.2. Main Characteristics

Fibers from South American camelids are commercially grouped under the denomination of "fine, prized or precious" wool fibers, which represent only 2.6% of the total wool fibers traded in the world; in particular, textile fibers from these domestic and wild camelids constitute 0.1% of the world’s supply.

The fiber characteristics of South American camelids vary from one species to another, between breeds of the same species and within the same breed; moreover, the finest fibers are those of the youngest animals.

The fiber characteristics of South American camelids vary from one species to another, between breeds of the same species and within the same breed; moreover, the finest fibers are those of the youngest animals.

Vicuña is one of the finest animal fibers in the world and is currently part of the specialty fine fiber market, along with Tibetan antelope (shahtoosh), goat (mohair and cashmere), camel (dromedary and bactrian), and other South American camelids (guanaco, llama and alpaca). It is used as an input for the manufacture of high-quality fabrics and garments, with demand concentrated mainly in Italy, England and the rest of Europe.

On the other hand, there are four characteristics that make up the quality of fine fibers required by the market, some of which depend on the natural conditions of the species and others related to the treatment and efficiency of shearing: average fiber length, average diameter, fleece weight and fiber integrity.

In summary, the growth in demand for camelid fiber in recent decades has been determined by important factors, such as: increasing incorporation of this fiber in the fashion market; appreciation of natural textures and colors, as well as its exclusive character; appreciation of the sustainable management of natural resources; greater control of illegal supply; and the incorporation of markets based on textile eco-design.

3.3. Market Outlook

The global camelid fiber market is likely to grow at a significant rate during the forecast period (2019-25) owing to the expanding fashion and apparel industry across the globe. The eco-friendly properties associated with the product offer an opportunity for consumers to wear natural, soft, durable, and warm garments, which is likely to drive industry growth during the forecast period. Growing consumer demand for natural clothing and fashion accessories is expected to have a positive impact on market growth (Grand View Research, 2022).

As an example, the fibers obtained from alpaca is considered a special natural fiber, which is available in 22 shades, being five times warmer than sheep wool. It is lightweight due to the air pockets within these fibers, which also results in a high thermal capacity. The product offers opportunities to manufacture extremely comfortable and versatile winter clothing products. In addition, the hypoallergenic properties associated with the product are likely to offer a competitive advantage over its synthetic counterparts over the forecast period.

Growing awareness among consumers about the benefits of the product is expected to increase demand. In addition, the rapid increase in alpaca fiber fashion stores is expected to provide easy access to these products, which will have a positive impact on the alpaca fiber market. However, the high cost of these garments is expected to hinder the growth of the industry in developing regions.

Based on type, the alpaca fiber market is segmented into Huacaya and Suri alpaca. The fibers obtained from the Suri breed are extremely soft and are mainly used in lightweight fabric applications. While the Huacaya coat is shorter and curlier. It is blended with Merino wool or other fibers for use in knitted garments and couture coats. These products are also used to make floor coverings, socks, gloves, or hats.

Compared to sheep’s wool, the type of fiber obtained from alpacas can be made into a very fine yarn, so it is applied in various products. Growing demand for products for the manufacture of lightweight sportswear is likely to drive its demand over the forecast period. These products are also gaining popularity in cold regions for the manufacture of sweaters and scarves, as well as the toy, apparel, and carpet sectors.

In competition analysis ratifies that Peru is the largest producer of alpaca fiber, as it is home to 80% of the world’s alpaca population. The Ministry of Foreign Trade and Tourism (Mincetur) specified that the country’s alpaca exports increased more than 110% in 2017 in one year, with an increase of more than 14% average per kilogram in the export price (Ministerio de Agricultura y Riego MINAGRI, 2018).

Peru is also the largest exporter of these fibers in the industry and the key destinations for its fiber exports are Italy and China. The Ministry of Foreign Trade and Tourism (Mincetur) offered business opportunities in the industry and launched the luxury fashion brand "Alpaca del Perú" for the sale of high-quality alpaca fiber accessories and garments.

As the industry advances at a significant growth rate, major market players are aiming to produce alpaca fiber with advanced quality to attract more customers. These manufacturers are focusing on alpaca nutrition to improve the quality of alpaca fiber. In addition, efforts made by scientists to use various genetic tools to improve alpaca production and develop fiber quality are expected to drive industry growth over the forecast period.

North America is expected to account for a significant share of the alpaca fiber market due to the growing popularity of these products among consumers. In addition, increasing production of alpaca fiber apparel in the U.S., coupled with the growing number of retail outlets for these garments in the country, is expected to drive industry growth during the forecast period. Australia is likely to be a key potential market due to the increasing penetration of the product in the country to replace traditional winter clothing.

Moreover, Asia has emerged as one of the leading markets for plush toys globally. Increasing population coupled with rising consumer spending power is expected to drive demand for plush toys, which in turn is likely to have a positive impact on industry growth. Europe is also likely to gain high demand for soft and comfortable winter clothing products, which will drive industry growth over the forecast period. High consumer spending power coupled with favorable weather conditions in the region is expected to drive demand for alpaca fiber accessories during the forecast period.

Finally, the U.S. Alpaca Fiber Council will assist producers in the manufacturing, promotion, and marketing of these products. They will also help manufacturers improve product quality to increase profitability in this market space. Prominent players in the alpaca fiber market are Plymouth Yarn, Putuco, Katia, Cascade Yarns, AndeanSun, Berroco, Mary Maxim, Alpaca Yarn Company, Classic Elite Yarns, and Ella Rae.

Facts and figures:

• ▪ The main South American camelid fiber producing countries are Peru, Bolivia, Chile and Argentina.
• ▪ Most of the exports of these fibers go to the United States, Europe, and Japan.
• ▪ According to Peru’s Ministry of Foreign Trade and Tourism, alpaca fiber exports in 2020 reached US$72 million.
• ▪ The value of alpaca fiber exports from Bolivia increased by 33% between 2019 and 2020, according to the Bolivian Institute of Foreign Trade.
• ▪ The average price per kilogram of vicuña fiber is around US$500, making it one of the most expensive fibers in the world.

Emerging sectors:

• ▪ Sustainable fashion is an emerging sector that is driving demand for natural and sustainable fibers, such as South American camelid fibers.
• ▪ The textile industry is also exploring new applications for these fibers, such as in the production of carpets and rugs.
• ▪ The growing demand for products derived from camelid fibers are used for the manufacture of lightweight sportswear.
• ▪ Increased consumption of alpaca and llama meat and dehydrated meat for the agri-food sector low in saturated fat (in its chemical composition, llama and alpaca meat contains low levels of fat (0.49-2.05%), cholesterol (51.1-56.29 mg/100 g) compared to other red meats, 50.34% saturated fatty acids, 42.48% monounsaturated fatty acids, 7.18% polyunsaturated fatty acids).
• ▪ Use of discarded material from underutilized fibers for thermal insulation.
• ▪ Use of alpaca and llama manure for use in agriculture 4.0.

Consumer trends:

• ▪ Consumers are increasingly looking for sustainable and ethical products, which has led to an increase in demand for natural and non-synthetic fibers.
• ▪ Demand for handcrafted, semi-industrial and customized products is on the rise, which has led to increased interest in South American camelid fibers due to their quality and exclusivity.
• ▪ There has been an increase in demand for handmade products using traditional techniques, which has led to a resurgence in the production of local handicrafts.

3.5. Foreign Consumption Potential

Consumers who prefer products derived from alpaca fiber are found in different countries around the world, some of which are:

United States: U.S. consumers are interested in high-quality, sustainable products, and alpaca fiber has become a popular choice for products such as sweaters, scarves, and blankets.

Europe: European consumers, especially in countries such as France, Italy, and Spain, are also interested in sustainable fashion and high-quality products. Alpaca fiber has become a popular choice for luxury products such as jackets and coats.

Japan: Japanese consumers are known for their appreciation of high quality and exclusive products, and alpaca fiber has become a popular choice for products such as winter clothing and accessories.

Australia: Australian consumers are also interested in sustainable fashion and high-quality products. In addition, the purchase of live animals has become a popular option for the development of educational farms and for the development of scientific and breeding initiatives.

Market access: Code and gloss of the local harmonized system in destination countries.

TARIFF CODE	DESCRIPTION
51	Wool and hair, coarse or coarse; horsehair yarn and woven fabrics
5102	Fine or ordinary hair not carded or combed
5101.19	Other
5102.19.30	Of alpaca, llama, vicuña
5112.90.40	Other woven fabrics of alpaca or of llama
6110.10.00.29	Other of alpaca or other fine animal hairs
Source: National Customs Service, 2022.

3.6. Trend Analysis

Trend analysis has become a critical tool for value chain development today. This analysis involves the collection and analysis of data related to the market, competition, consumers, technology, and other factors that may influence the development of a value chain.

Experts in the field of trend analysis have identified the importance of this tool to identify current and future trends in each market or sector (Naisbitt,2017).

Trend analysis enables local entrepreneurs and organizations to make informed decisions about investment in technologies, production of new products or services, geographic expansion, and other business strategies. By identifying current and future trends, informed investment and business strategy decisions can be made.

Emerging trends for the development of camelid livestock VC are identified below:

Socioeconomic	Technological	Environmental
Attraction and recruitment of local human resources	Technological innovation in livestock management	Eco-design
Incorporation of women in the labor market	Livestock 4.0	Circular economy
Attraction of young veterinarians specialized in livestock farming and local economy	Digitalization, automation and use of ICTs	Sustainable breeding and feeding
Governance 4.0	Business models 4.0	Use of bio-inputs
Inclusive value chains	Use of AI for camelid husbandry and management	Waste reuse
Knowledge and learning networks	Genetic improvement	Technological alternatives for climate change mitigation
KPIs oriented to VC profitability and sustainability	Sustainable fashion	Manure generation for marketing and use in coastal and pre-cordillera agriculture.

3.7. Description of the Livestock CFA in the Province of Parinacota

According to the Fundación para la Innovación Agraria (FIA), camelid livestock is the main productive resource of the Aymara families living in the highlands of the Parinacota province. The livestock system is developed mainly in the Putre and General Lagos communities and is characterized by the raising of domestic camelids. The productive activity has a millenary tradition and covers more than 85% of the regional camelid mass.

According to the Servicio Agrícola y Ganadero (SAG) livestock declaration, it is estimated that 86% of the alpacas and 57% of the llamas are concentrated in the altiplano of the Parinacota province. Most of the camelid breeders in Chile are Aymara people from the altiplano who form associations to produce and sell fiber and handmade products.

The regional production potential is estimated at 49 tons of fiber per year, while current production is only 30 tons. In most of the opportunities for fiber sales, the volumes requested by buyers exceed the production capacity of the herd mass, even more so if one considers the demand for fiber thickness and color and length of wick, quality aspects to which producers cannot respond. Currently, the producers combine the transaction of their product between the tripartite fair in Visviri and delivery to artisanal workshops, where in both cases the common factor is the low price, they receive for their product.

From a technical point of view, camelid management generally presents a pool of limitations in key areas such as breeding systems, production processes, insertion, and market stability.

In this context, Aymara ranchers seek to stabilize their production processes, minimize climatic and economic risks by focusing on self-consumption, non-monetary exchange, and capitalization of live cattle, to counteract the complexity of the environment. In addition, and given the inability to generate capital to invest in genetic improvement or infrastructure, they resort to seasonal migration and other off-farm activities, as a way to maintain the survival of their productive and family scheme.

Below is an infographic showing the status of livestock declarations. The data provides relevant information on the decrease in the livestock mass as of the last agricultural census (INE, 2021).

Agricultural infographics of the region of Arica and Parinacota

7.1. Competitiveness Analysis of the Value Chain

Comparative advantage:

South American camelid fiber-producing countries, such as Peru, Bolivia, and Chile, have a comparative advantage in the production of these fibers due to their climate and geography, which are ideal for raising alpacas and vicuñas. In addition, these countries have a long tradition in the production of South American camelid fibers and have a specialized labor force (especially in Peru and Bolivia).

Quality:

South American camelid fibers are valued for their softness, warmth, and durability, which makes them very attractive to consumers. These fibers are considered high quality due to their exclusivity because they are sustainably produced by high Andean communities.

Innovation:

The textile industry is exploring new applications for South American camelid fibers, such as in the production of carpets and rugs. In addition, technology can be used to improve the production and processing of these fibers, which can improve quality and reduce costs.

Competition:

Competition among South American camelid fiber producers can be high, especially in countries such as Peru, Bolivia, Argentina, and Chile. Rivalry centers mainly on the price and quality of the fibers, as well as the ability of producers to meet the specific demands of each market.

Market access:

South American camelid fiber producing countries have access to important international markets, such as the United States, Europe, and Japan. However, access can be affected by economic, political, and environmental factors (the latter caused by climate change that affects the normal performance of camelid livestock feeding).

Sectorized competition:

Alpaca fiber (the VC product with the greatest commercial potential) competes with alternative natural fibers, such as wool, mohair and cashmere. In international export markets, Chilean alpaca fiber competes with Peru’s high-volume product, which has a lower production cost.

Alpaca meat competes with other unique niche proteins such as venison and other exotic meats and is often traded on the international market based on its thinness, low environmental impact, and uniqueness (the latter is only valid for meat sold in the southern part of the country under formal conditions).

The livestock activity under analysis also competes with other high annual value industries in the livestock and agricultural industry for land use, manure generation and capital investment for genetic improvement.

8.1. Definition of Value Chain

The smart specialization strategy (S3) is an approach to regional economic development that focuses on leveraging the unique strengths and capabilities of each region. The value chain based on this strategy involves identifying the specific resources and skills of each territory and using them to create high value-added products and services.

In general terms, the value chain refers to all the activities necessary to take a product or service from its conception to its final delivery to the market. In the context of the smart specialization strategy, the value chain focuses on identifying and developing strengths at each stage of the value chain, from production and marketing to research and development.

This methodology implemented across Europe since 2014 has proven to be effective in fostering sustainable economic growth and job creation.

In this context, the smart specialization strategy can also be applied to camelid livestock, identifying the unique strengths and capabilities of this industry in the region of Arica and Parinacota, to create products and services of higher perceived value.

Specifically, S3 can focus on research and development of new camelid breeding and management techniques to improve the quality of the alpaca or llama fiber produced. It can also focus on the production of high-quality products derived from the fiber, such as yarn, accessories, and handicrafts.

In addition, work can be done on marketing these products locally or internationally, taking advantage of the growing demand for sustainable, high-quality products. The camelid livestock value chain could strengthen the competitive development of activities such as animal breeding and management, fiber production and processing, the manufacture of derived products, and marketing.

Smart specialization approach to value chain development

8.2. Value Chain Data Collection and Storage

Value chain studies, including camelid livestock production systems, are essential for strategic analysis, which, when combined with socioeconomic data collection, is a powerful tool for identifying the main constraints and opportunities for VC development based on the management of priority links. Several studies of production systems and market chains in Peru and Bolivia have been reviewed to contrast their level of sophistication and comparative analysis. Based on these experiences, the data needed for the respective purpose of this technical assistance is prioritized and data collection and analysis tools are recommended for future consolidation.

The following is a summary of the priority information needed to answer key questions for the development of the camelid livestock VC. The data collection process follows a stepwise approach suggested for the development of all its stages.

Key questions on camelid VC

▪

What are the products?

▪

Who are the stakeholders?

▪

How are they involved, what role do they play? Connections/relationships among stakeholders - Level of influence of different stakeholders

▪

How is the institutional landscape at the regional level?

▪

What institutions are present, how strong are they, what relationships exist?

▪

What institutional gaps or barriers may exist, what is the likely consequence?

▪

Practices along the production and marketing chain (including business transaction methods)

▪

What are the consumption trends: quantity and quality of fiber, meat and other products derived from camelid livestock?

▪

Stakeholder profile and classification of consumer groups.

▪

Existing infrastructure in the territory.

▪

Seasonal factors (production, demand, supply).

▪

Analysis of production, transformation, and distribution systems (characterization of the different systems).

▪

Definition of production systems.

Socioeconomic data of the value chain

Socioeconomic data collection should provide an understanding of the incentive structure of stakeholders, for example to meet market quotas in associative marketing systems. It also requires knowledge of existing institutional arrangements and how they may interact with the value chain.

• ▪ Formal and informal contracts between stakeholders, including credit and financing agreements for the development of new VC links.
• ▪ What are the motivations for behavioral change (especially what factors might influence behavioral changes and changes in practices in the Andean cattle CFA)?
• ▪ Value, size, and frequency of productive seasons.
• ▪ Profit margin and sales volume at different points in the chain.
• ▪ Cross-border trade.
• ▪ Contribution of the value chain activity to stakeholders’ household income.
• ▪ Regulatory mechanisms (formal and informal) - Institutions (including possible geographic variation in the capacity and/or regulation of institutions, e.g., veterinary offices in the communes of Putre and General Lagos).
• ▪ Certification / inspection / standards: both the "written" standards and the practical credibility of livestock stock certification.

Reference image of the Bolivian camelid fiber system: Values and contributions to people.

8.3. Conventional Value Chain for Camelid Livestock

The following is the VC for camelid livestock, which includes the processes and activities necessary to produce and market this fiber:

Camelid breeding and care: The value chain begins with the breeding and care of camelids, including alpacas, llamas, and vicuñas. This involves animal selection, feeding, health care and shearing.

Fiber production: Fiber production involves the process of shearing the camelids and classifying the fiber according to its quality and type. Then, the fiber is washed, carded, and spun into yarn (this process can be done in an artisanal, semi-industrial or industrial way).

Knitting and weaving: The next step in the value chain is the knitting and weaving of the final products, such as sweaters, scarves, blankets, rugs, and other textile products. This involves designing the products, selecting the additional materials needed, and producing the final products.

Distribution and sales: Once the products are ready, they are distributed and sold through different channels, such as retail stores, online stores, and trade fairs (including cross-border marketing). Distribution may also involve exporting the products to different countries.

Marketing and promotion: Promotion and marketing are important to raise awareness of products derived from camelid fiber and increase demand for them. This can include participation in trade fairs, advertising in digital or print media, and collaborating with designers and brands to create exclusive collections.

After-sales services: After-sales services are important to maintain customer satisfaction and foster brand loyalty. This may include warranties, repairs, or returns in case of problems with products due to lack of standardization (Yarns and handicrafts).

The camelid fiber value chain involves a series of processes and activities ranging from the breeding and care of the animals to the distribution and sale of the final products. Each stage is important to produce products that meet current market needs.

Reference figure of the value chain of alpaca and llama fibers.

8.4. Value Chain 4.0 for Camelid Livestock

The smart specialization strategy seeks to influence the development of the value chain and, to this end, requires the involvement and coordination of all stakeholders for its effective execution, ensuring that all of them participate in the different links.

In this context, camelid VC includes the following links:

Wholesale of agricultural raw materials: This link is responsible for marketing food and fodder for camelid feed.

Sale of agricultural machinery and equipment: This link offers machinery and tools necessary for raising and handling camelids, such as corrals, fences, feeders, machinery for textile industrialization, veterinary equipment, among others.

Sale of veterinary supplies: Medicines, vaccines, and other supplies necessary for the health care of camelids are sold here.

Technical analysis and R&D in livestock sciences: This link is responsible for conducting research and technical analysis to improve the quality of camelid breeding and management.

Breeding and management of camelids: In this link, camelids are raised and managed for subsequent sale.

Industrial activity to produce yarn: Here, alpaca, llama and vicuña fibers and their derivatives are transformed into yarn for subsequent marketing.

Support activities for camelid livestock: This link is responsible for providing advisory and training services to producers to improve the quality of camelid breeding and management.

Processing of alpaca and llama meat: In this link, alpaca and llama meat is processed for subsequent sale (fresh meat, jerky and sausages).

Production of handicrafts with local identity: Here handicrafts are made with alpaca fibers, with the objective of promoting local and cultural identity in different target markets.

Veterinary services: This link is responsible for providing specialized veterinary services for camelid health care and reproductive systems.

Commercialization and export of fibers: This link involves the commercialization and export of fibers and their derivatives for sale in the domestic and international markets.

Technical and higher education: This link would be responsible for offering training and education programs for producers and technicians in areas such as camelid breeding and management, fiber processing, production of by-products, marketing, and export, among others. The aim is to improve quality and efficiency in the production and marketing of camelid products and to promote innovation and technological development in this sector.

The value chain 4.0 for camelid livestock is illustrated below.

8.5. Proposal for the Organization of the Value Chain Supply

The application of a proposal for the organization of supply for the Camelid VC involves a significant quantitative and qualitative leap in key areas of production, standardization, articulation, and incremental consolidation of strategic business units (SBUs).

Its implementation is based on current local production (productive units), which must be organized to direct efforts towards the development of profitable and sustainable businesses. The effort is supported by a professionalized management platform, with interdisciplinary capabilities (productive and commercial management unit), which actively intervenes in the identification of productive and business units, as well as in their productive and commercial development.

The installation and initial operation of the model relies, fundamentally, on the public and private resources available to support the livestock farming communities and the development of family farming in the highlands of the Parinacota Province. These resources must be used mainly to finance technical support and investments in enabling infrastructure, the equipment of the business units and, to a lesser extent, the operation of the production and commercial management unit (cooperative or second-level organization).

The implementation of the model requires a management environment that gives a strategic sense to the productive and marketing actions of the system and provides support to the productive and business units (Barra, 2009; 2023). The model should assign this role to a central management platform called "Productive and Commercial Management Unit"; subordinated to its strategies, it contemplates a second area located in the producers, who should assume the generation of competitive products adjusted to the expectations of the clients, through the "Productive and Business Units". The development of the latter requires articulation with a third area: the "Business Support Units", which provide technical and financial resources for the development of productive scaling, advisory services and training for producers.

The main role of this unit will be to give an organic character to the associative actions that may be carried out within the framework of the capture, shearing and commercialization of fibers and their derivatives.

The UGPC must have a flexible organizational structure that allows not only the integration of new areas of economic development, but also, and fundamentally, that considers the intrinsic socio-cultural characteristics of the cattlemen and cattlewomen.

The UGPC must provide a set of high-level services to the business units. The provision of these services, as well as their permanent nature, is one of the key aspects of the Model, since it allows operating under a common business strategy, with an interdisciplinary approach, and having access to high productive and commercial management services for its business units, which would be impossible for them to access individually, given the limited resources.

The proposed supply organization model for the camelid value chain is illustrated below:

Illustration of supply organization model

8.6. Main Stages for the Design of an Intelligent Specialization Strategy for the Camelid Value Chain

Identification of areas of specialization: An analysis should be made of the sector’s strengths and weaknesses, as well as the opportunities and threats it faces in the global market. Based on this, areas of specialization on which the sector can focus can be identified, such as the production of high-quality fibers, innovation in products and processes, sustainability, and fair trade.

Selection of strategic projects: Strategic projects should be selected to enable South American camelid fiber producing communities to improve their competitiveness and profitability. These projects may include improving the quality and quantity of production, innovation in products and processes, promotion of demand in the international market, training, and technology to improve sustainable production, and access to financing.

Partnership and collaboration: Partnership and collaboration between producers, public and private institutions, and other relevant actors in the sector should be encouraged. This will allow for greater efficiency and competitiveness of the sector, as well as better identification and exploitation of opportunities in the global market.

Implementation and follow-up: The selected strategic projects must be implemented and their impact on the sector must be constantly monitored. This will make it possible to evaluate their efficiency and make the necessary adjustments to improve their effectiveness.

Evaluation and continuous improvement: A constant evaluation of the sector and its impact on the South American camelid fiber producing communities should be carried out. This will help identify areas for improvement and opportunities to continue strengthening the sector.

In summary, the smart specialization strategy (S3) for the development of the camelid livestock value chain should focus on the identification of areas of specialization, selection of strategic projects, partnership and collaboration, implementation and monitoring, and evaluation and continuous improvement. This will strengthen the sector and generate greater economic and social benefits for the producer communities benefiting from the CORFO-funded ITP.

8.7. Intelligent Prioritization of VC Products

Considering the parameterization of regional, national, and international data, under the following criteria: market demand, consumption trends, profitability of each product, availability of raw materials and local production capacity, it is concluded that the most important strategic business units (SBU) of the camelid livestock VC are distributed according to this order:

UEN	Market Potential	Priority
Sorted alpaca fiber	Increasing demand for natural fibers (sustainability, circularity, eco-design, ethical markets)	High
Dehorned vicuña fiber	Single oligopolistic market with stable demand and high prices.	High
Alpaca fiber yarns	Increasing demand for natural yarns - eco-design	High
Classified flame fiber	Increased demand for flame fiber as an input for thermal insulation.	Media
Meat	Increased demand for domestic camelid meat, due to its low cholesterol level.	Media (Requires regulatory support and enabling infrastructure)
Handicrafts	Traditional practice rooted in the Andean culture that can access new markets with innovative approaches in the interior decoration sector and companies collecting Andean pieces (USA and EU).	High
Manure	Increasing demand for organic fertilizers for precision agriculture.	Media

9.1. Proposed Business Models

9.1.1. Alpaca Fiber

Customer segment: The target customer segment is consumers who value the quality, sustainability, and exclusivity of alpaca fiber garments. This segment may include people with high purchasing power, tourists interested in local and sustainable products, and companies seeking exclusive corporate gifts, including B2C and B2B segments.

Value proposition: The value proposition is based on the quality, softness, and durability of alpaca fiber, as well as its sustainable and eco-friendly origin. Raw fiber or exclusive and customized garments will be offered to the market, with innovative designs and high-quality finishes.

Distribution channels: Distribution channels may include online stores, specialized physical stores, craft fairs and fashion events. Partnerships can also be established with hotels, souvenir stores and other tourism-related businesses.

Customer relationship: Customer relationships are based on customization, attention to detail and customer satisfaction. Alpaca fiber sorting and spinning services can be offered, as well as quality guarantees and color variety.

Revenue sources: Revenue sources include the sale of clean sorted fiber, yarns and exclusive alpaca fiber garments, additional services such as garment design and combination consulting, and wholesale to companies interested in exclusive corporate gifts.

Key resources: Key resources include high-quality alpaca fiber, designers and artisans specialized in making exclusive garments, an online platform for online sales, strategic allies for distribution and promotion, and an effective marketing strategy.

Key activities: Key activities include proper breeding, fiber shearing and sorting, industrial processing, the design, and manufacture of exclusive garments, online and in-store promotion and sales, personalized customer service and efficient supply chain management.

Cost structure: Costs include materials (veterinary inputs, alpaca fiber fodder), staff salaries (designers, artisans), operating expenses (rental of premises, utilities, among others), logistics costs (transportation and shipping), marketing and advertising costs, and other expenses associated with running the business.

9.1.2. Handicrafts

Customer segment: The target customer segment is consumers who value unique, handmade crafts, as well as the quality, sustainability, and exclusivity of alpaca fiber. This segment may include tourists interested in local and sustainable products, people looking for exclusive gifts, and companies looking for customized corporate gifts.

Value proposition: The value proposition is based on the quality, originality, and exclusivity of the alpaca fiber handicrafts, as well as their sustainable and eco-friendly origin. Pieces will be offered, with innovative designs and high-quality finishes.

Distribution channels: Distribution channels may include online stores, specialized physical stores, craft fairs, and cultural events. Alliances can also be established with hotels, souvenir stores and other tourism-related businesses.

Customer relationship: Customer relations are based on customization, attention to detail and customer satisfaction. Advisory services can be offered in design and combination of handicrafts, as well as quality guarantees and returns.

Sources of income: Sources of income include the sale of exclusive alpaca fiber handicrafts, additional services such as advice on design and combination of pieces, and workshops or training courses to teach weaving and design techniques to other interested parties.

Key resources: Key resources include raw material (alpaca fiber), tools and machinery for weaving and design, personnel trained in weaving and design techniques, and a physical space for the workshop or store.

Key activities: Key activities include the design and production of alpaca fiber handicrafts, product promotion and marketing, customer service and financial management of the business.

Key alliances: Key alliances may include alpaca fiber suppliers, local designers and artists, local hotels, and stores to promote products, and cultural or tourism organizations for events and craft fairs.

Cost structure: Costs include fiber, staff salaries (designers, craftswomen), operating expenses (rental of premises, utilities, among others), logistics costs (transportation and shipping), marketing and advertising costs, and other expenses associated with running the business.

This business model can be a good option for local women entrepreneurs looking to create a sustainable, creative, and profitable enterprise that promotes the enhancement of local heritage.

9.1.3. Meat/Charqui

Customer segment: The target customer segment is consumers interested in healthy, nutritious, and sustainable foods, as well as local gastronomy and the exploration of new flavors. This segment may include specialty restaurants, gourmet stores, tourists interested in local culture, and people looking for healthy snack options.

Value proposition: The value proposition is based on the quality, flavor, and sustainability of alpaca meat charqui, as well as its local and traditional origin. It offers a nutritious product, low in fat and high in protein, with a unique and authentic flavor.

Distribution channels: Distribution channels may include online stores, specialized physical stores, specialized restaurants, and gastronomic fairs. Alliances can also be established with hotels and other tourism-related businesses.

Customer Relationship: Customer relations are based on product quality, attention to detail and customer satisfaction. Tastings, advice on food preparation and combination, as well as quality guarantees and returns can be offered.

Revenue sources: The sources of income include the sale of alpaca meat jerky in different presentations and formats, as well as additional services such as advice on food preparation and combination.

Key resources: Key resources include high quality alpaca meat, technical capabilities, and Health Service approved processing facilities.

Key activities:

• ▪ Procurement of high quality, sustainable alpaca meat
• ▪ Preparation and curing of Charqui in the traditional way
• ▪ Product packaging and labeling
• ▪ Promotion and commercialization of Charqui in different channels
• ▪ Quality control and continuous product improvement

Key activities such as procurement of high-quality alpaca meat, preparation and curing of charqui, quality control and continuous improvement are essential to ensure the quality of the final product.

Key alliances:

• ▪ Suppliers of high-quality, sustainable alpaca meat
• ▪ Restaurants specialized in local and sustainable gastronomy
• ▪ Gourmet stores and health food specialty stores
• ▪ Tourism companies interested in promoting local and sustainable gastronomy
• ▪ Producers and distributors of complementary products, such as local wines or healthy snacks

Key alliances with suppliers, restaurants, gourmet stores and tourism companies are essential for the distribution and promotion of alpaca meat jerky. In addition, collaboration with producers and distributors of complementary products can help increase the product’s visibility and attractiveness.

Cost structure:

Production: Includes fixed costs related to the production of alpaca meat, such as labor, machinery maintenance and repair costs, and land and building rental or leasing costs.

Administration: Includes fixed costs related to the administration of the business, such as salaries of administrative personnel, supplies, general expenses, and communications.

Variable Costs:

Raw Material: Includes the variable costs related to the raw material necessary to produce alpaca meat and jerky, such as the cost of purchasing the animals, the cost of feeding and care, and the cost of transportation and storage.

Marketing and Sales: Includes variable costs related to the promotion and sale of alpaca meat and jerky, such as advertising expenses, events and tastings, and the costs of commissions and discounts for distributors and retailers.

Logistics: Includes variable costs related to the logistics and distribution of alpaca meat and jerky, such as the cost of transportation and storage, packaging, and labeling.

9.1.4. Manure/Compost

Customer segment: The target customer segment is farmers and food producers interested in improving the quality of their crops in a sustainable and natural way. This segment may include small and medium-sized farmers, agricultural companies, and cooperatives in the Azapa, Lluta, and Pampa Concordia valleys.

Value proposition: The value proposition is based on the quality and sustainability of camelid guano compost, as well as its ability to improve soil quality and increase crop productivity in a natural way. It offers an organic product, rich in nutrients and free of harmful chemicals.

Distribution channels: Distribution channels may include online stores, physical stores specializing in agriculture, agricultural fairs, and agriculture-related events. Partnerships can also be established with agricultural cooperatives and companies that offer advisory services in sustainable agriculture in the Arica y Parinacota region.

Customer relations: The relationship with clients is based on advice and technical support for the effective use of camelid guano compost, as well as client satisfaction. Advisory services on the use of the compost can be offered, as well as quality guarantees or seasonal deliveries.

Income sources: Income sources include the sale of camelid guano compost, additional services such as sustainable agriculture consulting, and the sale of complementary products such as agricultural tools and supplies.

Key activities:

• ▪ High quality camelid guano production
• ▪ Guano processing and composting
• ▪ Product packaging and labeling
• ▪ Promotion and marketing of compost in different channels
• ▪ Quality control and continuous product improvement

Key alliances:

• ▪ Livestock farmers oriented to camelid guano production
• ▪ Agricultural cooperatives and companies that offer consulting services in sustainable agriculture.
• ▪ Producers and distributors of complementary agricultural tools and supplies
• ▪ Suppliers of materials and equipment for guano production and processing.
• ▪ Distributors and retailers of organic products for the sale of guano.

Cost Structure:

Fixed costs related to the production, processing, and distribution of camelid guano.

Variable costs related to raw materials, personnel, transportation, and storage.

9.3. Key Drivers of Change in Camelid VC

• ▪ Sustainable management of natural resources (access to water, fodder and food diversification).
• ▪ Value chains (specifically those activities most sensitive to greater gender inclusion and oriented towards higher value llama and alpaca products).
• ▪ Income, nutrition, and food security (conducted in a manner that recognizes the significant diversity of the ITP target group).
• ▪ Social capital (meaningful participation in decision making, collaborative organizational leadership and broader community support).
• ▪ Gender equity and empowerment of livestock and artisan women.
• ▪ Active coaching and training to improve livestock community cohesion, self-esteem, and individual and collective empowerment.

9.4. Actions to Promote the Sustainability of Camelid Livestock Raising

Promote sustainable management practices: The implementation of sustainable camelid management practices should be encouraged, including pasture rotation, biodiversity conservation, and sustainable use of natural resources. This can be achieved through training and technical assistance programs for producers benefiting from CORFO’s PTI program.

Promote productive diversification: Productive diversification should be encouraged to reduce economic dependence on camelid livestock. This could include the promotion of complementary activities such as rural tourism, agriculture, and handicrafts.

Implement fiber valorization practices: Camelid fiber valorization practices should be implemented, including processing, and transforming the fiber into value-added products. This can be done through training and technical assistance programs for producers and the promotion of strategic alliances with companies specializing in fiber processing in Italy and the United Kingdom.

Promote fair trade: Fair trade should be promoted to ensure fair remuneration for producers and to promote the economic sustainability of camelid livestock farming. This can be achieved by promoting strategic alliances with companies committed to fair trade and implementing certification programs in Chile, the United States and Spain.

Promote the conservation of traditional knowledge: The conservation of traditional knowledge related to camelid livestock should be promoted, including animal management, feeding and care techniques. This can be done through training and technical assistance programs for producers and the promotion of strategic alliances with organizations committed to the conservation of cultural heritage.

Promote participation in voluntary certifications: at the international level there are various types of certifications (at the product level as well as at the organizational level), specifically, the incorporation of livestock associations or cooperatives in the Province of Parinacota in the Responsible Alpaca Standard (RAS), a voluntary global standard that aims to address the welfare of alpacas, the land on which they graze and social welfare at the local level, can be promoted.