Central America: Fair Trade Taking Root

Author: Danilo Valladares
June 15, 2011

GUATEMALA CITY, Jul 14 (IPS) – “We started out with 10 organisations and now we have 22 cooperatives with more than 19,000 members who grow and export crops with an environmental, social and economic focus,” says an enthusiastic Marvin López, with the Guatemalan network of small-scale fair trade farmers (CGCJ).

Thousands of members of cooperatives in Central America have turned to fair trade production, which is based on the principles of environmental conservation, gender equality, sustainable production, respect for human rights, no child labour, safe and healthy working conditions, and the payment of fair prices that ensure farmers a living wage.

The CGCJ produces some 290,000 quintals (one quintal = 100 pounds) of coffee and 830 tons of sugar a year, which are mainly exported to the United States and Europe. The income offers an opportunity for better living standards to more than 100,000 people in this impoverished Central American country of 14 million people.

“Our aim is to provide organisations of small farmers with opportunities to earn higher incomes by gaining access to a special niche market with a social as well as economic focus,” López told IPS.

But it hasn’t been easy. Lack of financing, limited access to technology and infrastructure for production, and a lack of knowledge about marketing are just a few items on a long list of limiting factors that have made it difficult for small-scale fair trade farmers in the region to compete in the world of global trade.

“We have to be competitive and work hard on these aspects to ensure good production levels and supplies for our customers,” added López, a coffee grower from northern Guatemala.

The seven countries of Central America – Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama – have a combined population of 43 million people, 40 percent of whom live in poverty.

“Fair trade benefits small farmers because it guarantees you a minimum price for your product and gives you a small incentive,” Nelson Guerra, with the Honduran coordinator of small-scale fair trade farmers (CHPP), told IPS.

The cooperative member pointed out that in 2000, during the world coffee crisis, the price of a quintal plunged to 43 dollars on the New York Mercantile Exchange. But at the same time, fair trade certified cooperatives were selling their coffee at 135 dollars per quintal.

“What fair trade represents for small-scale producers is insurance that their product will always be sold at a price higher than production cost and that it will generate enough earnings to support their families for the rest of the year,” Guerra said.

That is the reason for the growth in fair trade production in Honduras, from 5,000 quintals of certified fair trade coffee in 2002 to 200,000 quintals today, the small-scale businessman said.

Nevertheless, fair trade production still represents only a tiny share of the coffee produced in the region.

Guerra said that of the more than five million quintals of coffee produced annually in Honduras, just five percent is produced under fair trade conditions – a proportion similar to that of other countries in the region.

“This is basically because of two things. First, 80 percent of coffee production in Honduras is in the hands of small-scale producers, and it is difficult for them to organise. Of the 105,000 coffee growers, only 10,000 are organised in cooperatives,” he said.

At the same time “there is a lack of access to financing because agricultural production worldwide depends on credit, but in Honduras, a farming country, only one private bank finances 80 percent of the coffee production,” he said.

Producers in Costa Rica face similar challenges. “In relation to the country’s overall trade, fair trade represents a very small share of exports, but little by little our sales abroad are increasing, as are the number of markets our products are being sent to,” Sonia Murillo with Costa Rica’s national fair trade coordinator told IPS.

Some members of cooperatives estimate that fair trade production in Costa Rica, which is mainly of coffee, sugar, fresh fruit, cacao and bananas, accounts for less than one percent of total output.

However, “fair trade has brought together many small-scale producers organised in cooperatives and associations that have improved their situation and conditions in their communities,” said Murillo.

Factors like climate change, global trade and the lack of specific government policies make it hard for small companies, which see fair trade as a life saver because it offers them better treatment and access to a niche market, to get established, she added.

But according to economists, there is one key aspect that would enable fair trade to expand: the elimination of farm subsidies by the world’s big economies.

“The world’s major food exporters, like the United States and European Union, shell out agricultural subsidies, which makes it impossible for us to compete in those markets,” Pablo Urrutia, at the Association for Social Research and Studies (ASIES), an independent research centre and think tank in Guatemala, told IPS.

He also called for more intermediaries, who have been reduced to a minimum in fair trade. “There are many people who have no access to markets because they don’t have middlemen – a mechanism that facilitates trade,” he said.

Urrutia also underlined the importance of other factors, like competitiveness, an improved customs system, and the strengthening of free trade treaties, because “fair trade has immense possibilities here.”



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