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, May 23, 2006

How I Got Involved in Fair Trade

A couple years back, in 2001 while taking a course on Economic Development at UC Berkeley taught by Prof. Alain de Janvry, I heard tell of a crisis in the world of coffee. The price had crashed in 1989, leaving most of the 25 million coffee producers worldwide in dire poverty. In response to this crisis was born the movement for Fair Trade in coffee, whereby a third-party, non-governmental agency ensures farmers a price above the cost of production, and labels the products that meet their standards for the benefit of consumers. This way, we know that the people who we're buying from lived and worked under decent conditions.

This was the best system for poverty alleviation I'd come across yet. Instead of providing a pure cash transfer or handout, it rewards people justly for what they are already doing, and provides them with the income to do it better. It also deals with the problems of access to information and infrastructure that lie behind a lot of poverty issues. Coffee growers are selling into a market they don't know, either because they don't have access to the statistics through any of the usual channels - try getting the New York Times in a remote village in Peru - or they may not be able to read at all. The buyers, of course, have no incentive to provide this information and have every incentive to remain in control over the price the farmer gets.

So three years later, in 2004, after applying to graduate schools, enrolling at UMass, and spending a couple years primarily focused on macro issues, the Fair Trade issue came back to the forefront. I think what drew me back to it was a desire to return to the grassroots. Macroeconomics is a great discipline and perhaps one I will return to someday - but for those of us who like to see action on the ground, the macro perspective is a bit distant, like watching the Earth from a spaceship. It's good to go up in the spaceship and try to construct some valid model of the big picture, but it won't help you address local issues and it won't bring you into contact with people whose lives are shaped by these issues. Nevertheless, it was the macro perspective, being aware of global inequality, which got me into the search for grassroots initiatives and brought me back to Fair Trade. I applied to be an intern at TransFair USA and spent the summer of 2005 at their office.

The rest, they say, is history… and I'll save it for later.

Welcome readers!

Welcome to my virtual logbook and journal for my upcoming yearlong research trip to Peru! I'd like to use this post to introduce myself to those of you who don't know me, and give a quick introduction to my project.

I'm a Ph.D student in Economics at the University of Massachusetts, Amherst. At this point, it would be best for you to do away with any stereotypes you may have acquired about economists or economics students. I can not guarantee that I will break them all, but I will almost certainly break some of them. Some of the other hats I have worn in my life have been literature student, online music reviewer, and saxophonist. I have long been interested in the Latin American region, and have traveled in Central America and the Caribbean. This is my first trip to Peru, and to South America generally. I am excited.

The focus of my trip is to gather information - both quantitative and qualitative - about the Fair Trade system of third-party certification for agricultural commodities and handmade crafts. I will be focusing on coffee, since it is currently the most prevalent Fair Trade commodity and a good baseline case for at least the agricultural portion of the system. I have also been drinking coffee for over twelve years, and grew up a mile away from the original Peet's Coffee in Berkeley, California. This places the subject of coffee fairly close to my heart.

Specifically, I aim to understand the impact of Fair Trade on the relationships between Peruvian coffee export co-operatives and international traders. The co-ops are made up of large numbers of farmers that we would classify as poor. The international traders tend to be, though are by no means always, large corporations with a great deal of power. Fair Trade aims to even out this relationship. I want to see how successful it is in doing so and whether it can do a better job.

Stay tuned.