Fair Trade Coffee in Peru: An Economist's Notebook

Travelogue of a social scientist studying Fair Trade on a Fulbright in Peru. Personal anecdotes and interviews with coffee growers, importers, and exporters, as well as Andean cultural leaders, Limeña intellectuals, business people, professors, writers, and anyone else I meet on the journey. Fair Trade as both an alternative to the dominant model of globalization and as a way of life that is practiced by an increasing number of people who testify to its great benefits.

Tuesday, November 21, 2006

Huaycos, waterfalls and bus rides

I am writing from the offices of the Pangoa coffee co-operative, in the little town of San Martin de Pangoa in the central jungle. It is located in a pretty little valley surrounded by mountains. Tomorrow I´m going to go out and spend some time in the chacras (fields) where the coffee, cacao, honey, fruit, and other products are cultivated. But today I sat inside and listened to the co-op´s budget. It was an endurance test, but also an educational experience: I´d never really thought about an agricultural organization in this much detail before. Not surprisingly, there are a lot of elements that go into cultivating, processing and marketing a co-op. A big one is transport: the members mostly don´t have cars, and so the co-op is entrusted with the task of driving the many miles on rocky dirt roads required to collect the members´ coffee. The resulting wear and tear on the trucks makes the maintenance budget for transport enormous, not to mention the gas bill.

Infrastructure. You don´t think about it much until it stops working for you. Another example with the roads: I just went to a conference in Tingo Maria, a town about three hundred miles north in the jungle. The road that goes from Tingo Maria towards Lima climbs up into the Andes to a town called Huanuco. The road between Huanuco and Tingo Maria is extremely prone to washouts, or "huaycos." On my way to the conference, we were delayed two hours because of a huayco. The day I planned to leave, the road was washed out entirely and wouldn´t be available until at least the next day. Along with a fellow gringo named Steve, who had a plane to catch, I caught a taxi to the beginning of the huayco and walked across it with my backpack and computer. There were six mudslides encompassing about a kilometer of road, bracketed on either side by about a hundred trucks lined up going to and from Tingo Maria. Some of those trucks carried perishable items, like pineapples.

Tingo Maria has a bad reputation as a coca town, but it´s actually safe and friendly, and is located in a beautiful setting, with a national park, caves and waterfalls. I´ll post some pictures.

Tonight (at least in theory - the co-op managers are still meeting), Esperanza, Pangoa´s general manager, and I will go over the first draft of my survey. Fingers crossed!

Saturday, November 11, 2006

Lightning jungle adventure

Whew! Just returned from a whirlwind trip to the jungle, planned and executed at a moment's notice. I had been invited by my colleague Amilcar Buleje at the Junta Nacional del Café to attend an event somewhere in the jungle a couple weeks beforehand, and the day before we were supposed to leave, I canceled on him, given two facts: first, that I was in the midst of writing a proposal, and second, that I had been staying in a hostel so uncomfortable that I was feeling like roadkill. I've since moved to a MUCH more comfortable spot, with Internet in my room, above a restaurant with a killer espresso machine and a waitress who delivers the sacred beverage to my room on demand. I should also mention the Brazilian musicians who arrive every Saturday afternoon and play through the evening. Yes, they're playing right now - I just finished enjoying them up close over a Cusqueña, Peru's best beer, and am now enjoying them at a distance.

Well, cancelling on him was a mistake: on Tuesday evening, when we had been scheduled to leave, a feeling came over me that I'm sure some of you are familiar with. It was the feeling of missing something. What was it that I was missing? Well, at first I thought it was the fact that I didn't have dinner plans, which I remedied fairly quickly. Then on Wednesday afternoon, as I was laboring for twenty minutes over a couple sentences of the sample chapter I am scheduled to send away for another scholarship, I realized what it was: I was supposed to be in the jungle.

What happened was this: I presented the idea of going to the event to Lorenzo Castillo, the Junta del Café's director (title: Executive Secretary). I have probably stressed this point before, but I will stress it again: Lorenzo Castillo is an amazing person, among the wisest people I have encountered on Earth up to this point. This man has been largely responsible for the revival of Peru's coffee co-operative movement. And at this moment, he decided not to go to the event, and offered me his seat on the plane. Of course I resisted, until it became clear that this was what he wanted. So I went.

How it happened: woke up at 3:30 AM Thursday morning for my 5:30 AM flight to Ayacucho. Okay, my 5:30 AM flight to Huamanga. Everyone outside this region calls the city Ayacucho, but it is not called Ayacucho, it is called Huamanga, and it is the capital of the department of Ayacucho. The University of Ayacucho (at Huamanga) has a strong philosophy department, and one of its professors was a radical named Abimael Guzmán. Guzmán went a little (OK, a LOT) off the rails with his Maoism, and the result was the Sendero Luminoso, which terrorized Perú during the 1980s and 1990s. They are largely nonexistent today, and Huamanga is a beautiful, bustling colonial mountain town replete with churches and the famous "retablas," or dioramas featuring religious themes and scenes of peasant life. These dioramas, to me at least, look quaint and folksy, even kitschy, outside their context; in the context of the reddish-brown mountains, intoxicating elevation, and stately Spanish colonial architecture of Huamanga, they are beautiful and not to be missed.

From Huamanga I caught a combi (microbus) to Sivia, where the cooperative El Quinacho is located. Sivia is in the jungle at, my guess, 2000-3000 feet elevation. Huamanga is at 9000 feet or so. From Huamanga, you scale two passes, each of which is around 12,000 feet elevation. Yes, that's a lot of elevation change, isn't it? This kind of journey is what Peru is all about, and what makes it both beautiful and a uniquely difficult place to travel, live and work. I don't know of a lot of countries with that type of geography, and not to be a geographical determinist here, but, to me, this is a big obstacle to an integral Peruvian development strategy. The country is three regions: "costa, sierra, y selva," or coast, mountains, and jungle. It is a source of national pride, but also a source of difficulty: traveling between one and the next is time-consuming, and the three regions possess distinct cultures.

We got to Sivia around 6 PM, or rather, I should say, Pichanari, at which point I hopped a canoe across the Rio Apurimac. This was the second crossing, the first of which occurred in the microbus, balanced atop a platform steered by a guy with an outboard motor. Sivia is a sleepy little jungle town where the co-op El Quinacho plays an important role. They occupy a block of the town, with a large warehouse at one end and an office at the other. I had initially told the manager I couldn't make it to his event; Wednesday, the day before I left, I told him I had changed my plans and would be arriving the following day. However, he had been so involved in the event that he hadn't checked his e-mail, and so was startled when I showed up. From his reaction, I guessed that he was thinking of me in a similar category to the inspectors and financiers who periodically show up around the co-op and instigate various forms of rigorous group processes, requiring serious preparation. He relaxed a bit when he realized I was just there to hang out and chat, which I think took a while. Really, that was all I was there to do - and, of course, schedule a time for a rigorous and participative process somewhere down the line. Can you see the tightrope I am walking here? Don't get me wrong, it is fun.

I spent the evening chatting with the co-op's elected officials about their organization, its history and its current state of affairs. El Quinacho was founded in 1970 as part of the national cooperative program started by the populist leader Juan Velasco. In the 1980s, however, terrorism and drug trafficking rocked the Valle del Rio Apurimac (VRAE) where the co-op is based. It had to shut down in the late 1980s, as military took over the building and used it as a base of operations against the terrorists and traffickers. In the 1990s, when the violence subsided, the co-op started up again and is currently in a period of expansion. The leaders were proud of the number of new members that were signing up to join its ranks, and were equally proud of its 100% organic orientation. They took me to dinner, and for a walk around the town, which ended at the Quinacho tree, the co-op's namesake, planted when the organization was founded. That was a nice moment. The paradox of co-ops is that they are at once business enterprises and social institutions: meant to generate profits and create meaning at the same time. This is a reason why neoclassical economists hate them. You're supposed to do your business 9 to 5 and create meaning somewhere else. That is what economic efficiency means. Organizations are supposed to exist for single purposes: schools, for the production of knowledge; firms, for the pursuit of profits; families, for the reproduction of the species. Et cetera.

The critique of this point of view could be of book length. Steve Marglin of Harvard is in fact writing a book of this nature entitled _Economic Myths_. I'll leave it with one question: suppose the notion of efficiency were re-construed such that an organization which served more than one purpose was considered to be efficient, since it fulfilled more than one human need at the same time?

The next morning I attended the second day of the event, dedicated to fostering sustainability and competitiveness among the coffee growers in the VRAE region. Unfortunately, attendance was poor. Perhaps the meaning invested in the co-op by its leaders had apparently not penetrated down to its base. Or perhaps it was simply a question of logistics. From one man in the audience I heard a scathing critique: the socios (members) would only show up if there was alcohol. From Lorenzo I heard a kinder response: the members live far away from the town, and to attend the meeting is a huge sacrifice of time and effort. To foster member participation, the co-op must bring its message out to the members' homes. I will not take a position at this time on which factor is more important for participation, culture or logistics. My hypothesis is that each feeds on the other in a vicious circle.

It was unfortunate that most (though not all) of the members missed out, because the presentations were very good: Lucila Quintana, a fiscal manager at the second-level cooperative CECANOR and the director of CONAMUC, the national organization of female coffee growers, spoke on gender equity in the coffee cooperative movement, and Israel Pisetsky, general manager of CACVRA, the neighboring (and larger) coffee co-op, gave an excellent talk on trends in the global coffee market and the importance of Fair Trade and other certifications. (Note to all MOT: it did not escape me that the chances of this man being of Jewish origin, judging by both name and face, are about 98%, however, I didn't have a private moment to ask him.)

At that point, it was time to go. Quick trip! The route back had the advantage that I was accompanied by Sra. Quintana, Carlos Huaroc of the Naranjillo co-op, and organic inspector Enrique Hacker. Carlos and Enrique were both excellent guys, who had presented the first day and whose work I had missed. The disadvantages: remember that enormous descent? Think about it in reverse. Also, imagine the second 12,000-foot pass in the rain, on a dirt road at night. We arrived in Huamanga at 9 PM or so, in time to eat a delicious pizza and pack Carlos and Enrique off to Lima on the night bus. Lucila and I rested our weary bones in a nice hotel just off the plaza, and caught the 6:45 and 7 AM planes back to Lima. And so it was.

The issues raised during this trip were much more than I have addressed here: it is Saturday evening and I am in the mood to write about personal experiences. I will save the political economy for the next post.

Wednesday, November 08, 2006

Latin American Fair Trade news and more

Well ... I know it's been a while since my last post. It's been a busy couple weeks as I prepare for my first site visit and apply for funding for this project for next year. Meanwhile, tomorrow I'm heading out to an encuentro in Ayacucho at a co-operative called El Quinacho. It will be my first time outside Lima and away from the coast! And it is about time - for fresh air, new experiences, and the all-important reality check.

But first, some catch-up:

Two weeks ago I attended the CLAC - Coordinadora Latinoamericana y Caribeña de Pequeños Productores de Comercio Justo - or, Latin American and Caribbean Small Fair Trade Producers Association - in the Dominican Republic. It was a very interesting conference, full of co-op representatives, traders, and members of labelling initiatives. I ran into Paul Rice, CEO of TransFair USA, whom I worked with as an intern last summer (2005); he introduced me to Miguel Zamora, project manager for Global Producer Services, which brings technical assistance to producers at origin (i.e., in their home countries.) Learn more about them at http://www.fairtradeimpact.org. It's my opinion that the linking of Fair Trade with agricultural development and commercialization projects in developing countries is essential to the future of the movement. So... more about that later.

The conference opened on Thursday morning with opening remarks by the current (and outgoing) CLAC president, Victor Perezgrovas of Mexico, followed by a fiery speech from the Dominican Secretary of Agriculture, who talked about the struggle of small producers in Latin America to get fair prices for their products in a world dominated by transnational companies from the North. This is something most politically aware and educated people in the U.S. are aware of, I _think_ - it's amazing sometimes what people don't know.

Then there were reports from the CLAC Board, and reports from each producer network. Bananas were the most interesting. The issue of Fair Trade bananas is the most interesting, because in that industry, small firms compete directly with transnational companies that own plantations. This means that allowing transnationals into Fair Trade is a lot more complicated than in coffee, where you can allow the big trading firms to buy small producers' coffee without admitting large plantations. In bananas, if you let Dole in, you let them in all the way: Dole-produced bananas get certified Fair Trade. At least that's my current understanding of it.

Small banana producers were afraid that letting the transnationals into Fair Trade would force them out of the market. I don't have data to back this up, but it seems like a natural thing to be afraid of. The problem, as Paul Rice explained it to me, was that the shipping channels for small producers from Latin America to the U.S. are inadequate to handle bananas. They are too slow. So shipments of bananas from small producers were arriving on U.S. shores rotten and being thrown out. The transnationals have their own transport lines, meanwhile. The idea behind allowing bananas produced by transnationals to be certified Fair Trade was that the small producers would be allowed to use the transnationals' shipping. However, for the small producers, allowing transnationals on board was unthinkable. For that and other reasons, the expansion of Fair Trade bananas is currently stalled.

I'll skip forward to Friday, where there was a very interesting presentation by Chris Bacon on the competitiveness of the FLO (Fair Trade) certification model with respect to other sustainable coffee labels. Most of the other labels, from Utz Kapeh to Starbucks' Cafe Practices, use a pure premium model. So in a low market, they still may end up below production cost. However, in a high market they out-compete Fair Trade. This touched off a lengthy discussion about raising the premium. Later in the day, a proposal was generated to raise both the premium and the minimum price. The more business-savvy producer representatives were against it, but this proposal passed with about 95% approval.

Now to Saturday - I'm giving you the whirlwind tour here, a ton of other stuff happened that I'm not going to go into - the CLAC elections took place. Raul del Aguila from Peru's COCLA was voted in. COCLA is the leading coffee co-op in Peru, and the country's fourth-largest coffee exporter. 8,000 families are members, divided into about twenty-five first-tier organizations who send delegates to the General Assembly. The co-op is a smartly run business, which sells a suite of highly differentiated coffees to a variety of niche markets the world over. They use local, national, and international capital markets to raise funds for investment, and are very active in the Junta del Café.

So now the CLAC is moving to Peru, and opening an office in Lima.

It's an exciting time to be here, and to be doing this work.

I could write another twenty pages about the CLAC, but to keep things accurate, I'm going to wait to do so until I've gone over the recordings of the sessions I made with my hand-held digital recorder. I think it's worth the trouble.

More to come!