The Challenging Road to Self Sufficiency for a Fairtrade Association: TCGA Part II

Uncategorized / Friday, May 16th, 2014
TCGA Office: “Fairtrade guarantees a better deal for Third World Producers”    

I’d like to pick up where I left off at the end of my last blog post. As part of a group visiting the Toledo Cacao Growers Association (TCGA) in Punta Gorda, Belize, I had the opportunity to hear a first-hand account of life in a farmers cooperative from a member farmer, Mr. Justino Peck. One of the challenges that became apparent during our discussion with Mr. Peck is the TCGA’s struggle to become self sufficient.

Despite its status as a Fairtrade-certified organization, the TCGA is heavily reliant on grant funding, mostly from foreign organizations. This was an angle to fair trade I’d never considered before. When I think of fair trade, I think of farmers earning enough to live a better life. I hadn’t considered that their association might not be self sufficient.

A View Inside the TCGA
The TCGA is a non-profit that was formed to support farmer members in marketing their produce. Its goal is to promote the growth of the industry, and to provide a sustainable source of cacao for the market. It also has the goal of trying to provide a stable income for cacao farmers, not one that fluctuates wildly with the commodity price of cacao.

The cacao farmers of the Toledo District have two cacao harvests a year. There is a criollo harvest that begins in October, and then a harvest of hybridized plants from Costa Rica that can last from January to June. Mr. Peck pointed out that climate change has made harvests unpredictable. Some years the harvest continues all year. This was not the first time I’d heard a Belizean farmer mention climate change, which surprised me. I’d always thought of it as an academic discussion that happens among more developed nations. I’d heard climate change mentioned by cacao farmer Eladio Pop, by Cotton Tree Lodge’s Gardener, Armando, and now, Mr. Peck. This was a good reminder that no one knows climate change like a farmer.

Mr. Peck said that the farmers are not at full cacao production capacity because they also need to sell corn, beans, rice and other foods to make a living. While this forced crop diversity means they produce less cacao, it brings many important benefits. It’s good for the environment, it’s good for income stability, and it’s good for the farmers’ families, who always have enough to eat. I have to give credit to Mr. Peck for a quote I have used in more than one blog post, “The Maya people are poor by cash statistics, but they’re rich in food.”

The Association has four full-time employees including a Manager, a Compliance Officer for Organic and Fairtrade, an Accountant and an Administrator. All of them are in tiny cubicles in the building we visited, which was a chemical storage facility before the farmers switched back to organic farming practices.

Mr. Justino Peck in the TCGA warehouse

The Challenging Road to Self Sufficiency
While Fairtrade certification brings some transparency and accountability to the purchase of cacao, it’s an expensive program to implement. In most cases, small holder farms band together to create an association or cooperative that implements Fairtrade standards. This creates administrative costs for the association in the form of employees who certify and audit for Fairtrade compliance. There are also fees to become and remain a Fairtrade-certified organization. It’s an expensive prospect.

The TCGA has a long way to go before it can cover these costs solely through the cacao harvest. Let me illustrate this for you.

The TCGA produces 50,000 pounds of cacao a year from 1,180 farmers. Mr. Peck told us that in order to become independent, the TCGA needs to produce 500,000 pounds of cacao a year. That’s 10x their current cacao production, an enormous gap to fill.

Something dramatic needs to happen to the TCGA if it’s going to reach its goal of self sufficiency. Its business model needs to evolve and it needs to innovate. In the meantime, the TCGA takes a lot of grant money from outside organizations to help fill the funding gap.

Grant Funding and the Odd Priorities it Creates
So who is providing these outside grants to the TCGA? Non-governmental organizations (NGO’s) and governmental agencies including USAID, HIVOS (Dutch-based organization in Costa Rica), the Inter-American Development Bank, the European Bank for Reconstruction and Development and the Fairtrade Foundation.

It was interesting hearing about the projects that some of these organizations have funded.

One of the best examples of the skewed prioritization that can happen when you’re receiving funding from outside sources is the example we saw while visiting the TCGA offices. Mr. Peck said that their office building was built by a project in 1993, but the TCGA still doesn’t own the building. Just this past January, the Ministry of Agriculture said it would grant a lease to the TCGA that would eventually enable the TCGA to purchase its office building. When we visited, the TCGA still didn’t have a copy of the promised lease from the government.

At the same time, Mr. Peck showed us the artist’s drawings for a demonstration farm and Maya Cacao Museum that was going to be built a few miles from town. This lovely artist’s rendering showed a Maya-pyramid-like building with orchards around it. While I’m not entirely clear on the timing for this new venture, it seemed like it was happening in the near future. Given the difficulties the TCGA is having in becoming self sustaining, I was surprised at the prioritization of this project. I had to conclude that the museum was being funded by an outside organization who had put up funds specifically for this project.

This left me with a number of questions about how projects get prioritized. Despite the best of intentions of outside organizations, is this project the best use of the TCGA’s time and energy? Is it the best use of foreign resources?

The TCGA does not have ownership of its own offices, but it’s going to build a beautiful demonstration garden and cacao museum for the tourists to visit. While that might have some impact on the local farming community, producing more of their fabulous cacao would likely have a larger, faster impact, and help them get to self sufficiency faster.

Facing a Competitor
Let me turn back to the 1,180 farmer members of the TCGA who are going to have to produce 500,000 lbs of cacao a year for the TCGA to become sustainable. There’s a wrinkle that developed recently. Not all of those 1,180 farmers are selling their cacao to the TCGA. Now they can choose to sell their cacao to the TCGA or to its competitor, Maya Mountain Cacao (MMC). This makes it even harder for the TCGA to become self sufficient.

MMC Fermentation House

If you read my blog post about MMC, you’ll know that it’s an innovative cacao purchasing company with a triple bottom line. Maya Mountain Cacao is purchasing cacao from the same farmers as the TCGA. While the TCGA administrators see this as a bad thing, I believe it’s a good development.

MMC offers farmers a choice, and it brings new energy and a spirit of innovation and competition to the game that will help take the farmers to the next level. In the long term I think it will be a good thing for the farmers. In the short term, I couldn’t help but sympathize with Mr. Peck’s grave concerns. The TCGA has been working for many years to become self sufficient, and this upstart shows up and makes it even more difficult.

In the meantime, the TCGA and MMC are learning to collaborate on small initiatives. There’s room for both groups to exist, and the rise of a scrappy competitor has forced the TCGA to become more nimble and innovative. For example, MMC purchases wet cacao instead of dry cacao. This enables MMC to control the fermentation, resulting in the kind of consistency desired by craft chocolate makers. The TCGA used to purchase dry cacao from farmers, leaving the fermentation process up to each farmer. Now the TCGA purchases wet cacao and controls the fermentation. This approach enables them to better meet the quality and consistency requirements of craft chocolate makers, making them much stronger competitors.

Outlook for the Future
Not surprisingly, Mr. Peck said that the ultimate goal for the TCGA is to take the value-added route and produce its own chocolate. There are a number of farmers’ cooperatives in Central America who have taken this path, creating more stable income streams for their members. Cooperatives such as Grenada Chocolate Company (Grenada), El Ceibo (Bolivia) and Kallari (Ecuador) all make chocolate.

While some of these cooperatives have been successful at creating quality chocolate that can compete on the international market, some of them have failed. I’ve had to make the hard decision not to sell chocolate from a farmers cooperative because of its poor quality. It’s a very tough decision because I’d love to help the farmers. But I’m not helping them by purchasing chocolate that isn’t going to sell. They’ll never have incentive to ensure their chocolate farming and production is of a quality that will be successful on the international market.

Craft chocolate maker located a few blocks from TCGA office

I have hope, however, when it comes to the TCGA. It has some of the best organic cacao in the world, produced using traditional Mayan farming techniques. Craft chocolate makers are flocking to the area to source cacao, creating a direct feedback loop between the farmers and the chocolate makers. The TCGA benefits from the information it learns from craft chocolate makers about their desired fermentation and quality levels. This knowledge puts the TCGA in a great position to make chocolate that will succeed on the international market. Financial independence, while difficult to reach, is possible.