"Partnering for development" - Frontlines (March-April 2012)

FRONTLINES www.USAID.gov

MARCH/APRIL 2012

PARTNERING FOR

DEVELOPMENT

> FROM BLOOD DIAMONDS TO FISHPONDS > WHEN DOING GOOD IS GOOD FOR BUSINESS

Partnership & Latin America/Caribbean Edition

Photo courtesy of USAID Productive Network II

LATIN AMERICA AND THE CARIBBEAN

Members of a cocoa cooperative from Esmeraldas, Ecuador. Its members are cultivating direct relationships with international buyers thanks to an alliance with Swiss chocolate company PRONATEC.

Alternatives to Drug Trade Aim to Empower Northern Ecuadorans

By Jennifer Hebets and Leah Quin

T

H AT OR DINA RY bag of potato chips you’re eyeing may be anything but. If it’s made from potatoes grown in northern Ecuador, it represents sustainable economic opportunities for small farmers, thanks to a partnership 42

between USAID and snack giant PepsiCo/Frito-Lay. In Carchi—a mountainous region, home to isolated communities that live precariously close to the poverty line— former subsistence farmers will take potato crops to newly constructed

quality-assurance laboratories and bulk storage centers, where they will be prepared for international markets. In this part of the world, jobs generated by global demand are more than just income: They’re a foothold for entry into the formal economy and a bulwark against the narcotics trade encroaching on Ecuador’s northern regions of Carchi and neighboring Esmeraldas. www.USAID.gov

LATIN AMERICA AND THE CARIBBEAN

Photo courtesy of USAID Productive Network II

These provinces’ shared border To draw outside investors to this support to ensure production meets its with Colombia make them vulnera- region, PNII designed a public-private standards—thus increasing farmers’ ble to several woes: Besides drug traf- alliance with the Carchi Provincial understanding of the market. ficking, the region suffers incursions Government, the regional develop“The benefit of this project for small from the FARC terrorist organiza- ment agency (ADECARCHI), and producers is huge because they can sell tion, as well as a flow of refugees from two of the largest agribusiness firms in their product directly, without any Colombia. Crime is on the rise, secu- Ecuador. Each firm devised co-invest- intermediary, to the anchor firm Peprity is weakening, and, because of ment strategies to help farmers improve siCo,” said José María Guerrón Reaslimited job opportunities, the drug production technologies and post-har- cos, ADECARCHI’s extension agent. trade can be an attractive source of vest handling, and to secure steady, “Before, only large producers could employment. high-paying buyers for the products. sell to the buyer directly.”

Enter USAID’s Productive With support from the CarNetwork program (PNII), chi development agency, farmwhich has created public-priers can now access financing vate partnerships to foster two tools that reduce the costs of crucial elements proven effecbuying bulk materials by at tive against the drug trade: a least 10 percent. Frito-Lay is strong state presence and a investing in a bulking center vibrant formal economy. and potato-quality laboratory Alliances with provincial in Carchi so farmers can imgovernments and public-private prove product quality and reregional development agencies duce transportation costs by are generating outside investhalf. In 2012, this deal is exments in three locally grown pected to generate more than crops—potatoes, canola, and $330,000 in potato sales to cocoa—to bolster state presFrito-Lay as well as the equivaence and increase incomes. Prilent of at least 32 full-time jobs. vate “anchor” firms are pivotal “Personally, I believe this allito this success, as they help Potato producers from Carchi, Ecuador’s leading ance will generate many benefits farmers gain market access and producer of potatoes. USAID and snack giant PepsiCo/ for PepsiCo operations in Ecuaaccess to finance while transfer- Frito-Lay are partnering in the region. dor, and will probably serve as a ring technology, management model for other international strategies, and other skills.

The USAID Productive Network operations,” said Rodrigo Quevedo of program took an innovative approach PepsiCo Alimentos Ecuador.

C A RCHI IS ECUA DOR’S lead- by convening public and private secing producer of potatoes, but its porous tors to work on several aspects of the DEM A ND IS SURGING for highborder with Colombia, as well as the value chain at once, including provid- priced canola, a new crop for Ecuador. weaknesses in the value chain—con- ing credit for inputs, formalizing Through an alliance with PNII and stant price fluctuations, scarce agricul- direct relationships between farmers ADECARCHI, large agribusiness buyer tural credit, shifting product quality and buyers, ensuring quality produc- Canola Andina has committed to purstandards, weak integration of the var- tion, and reducing farmers’ transpor- chasing canola from smallholder farmers ious players—hampered the sector. tation costs for producers. As the end in Carchi—launching a new product Past initiatives to improve potato pro- buyer and co-investor, PepsiCo/Frito- line for the region, promoting environduction and quality had limited suc- Lay plays a crucial role: While PNII mentally responsible agricultural praccess because they focused only on one delivers technical assistance, Frito- tices, and increasing employment. After aspect of the value chain.

Lay provides feedback and hands-on continued on p. 49 FRONTLINES • March/April 2012

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Photo by Bita Rodrigues, USAID

LATIN AMERICA AND THE CARIBBEAN

Farmers harvest soybeans in Mozambique, where Brazil’s Agricultural Research Corporation (Embrapa) is helping to make better seeds available to small farmers and promoting updated production practices via radio, video, and other outreach methods.

Alternatives continued from p. 43 receiving training in canola production, over 150 families are expected to cultivate this crop, leading to a projected $660,000 in sales in 2012.

Canola Andina is building two bulking and storage centers in Carchi as well.

“As a crop recently introduced to the [Ecuadorean] market, a capacity-building program for the producers is necessary for a high-quality product, which makes the cost to begin cultivation very high,” said Fidel Lopez, Canola Andina manager. “This investment would not have been possible for Canola Andina if it weren’t for the support of USAID. The Productive Network program enables us to reach the number of beneficiaries needed to achieve sustainability.”

Next door to Carchi, cocoa cooperatives in Esmeraldas are cultivating FRONTLINES • March/April 2012

direct relationships with international buyers, thanks to an alliance with PRONATEC, a Swiss chocolate company. PRONATEC operates under a fair-trade model to ensure all producers who meet its quality standards receive a price premium of 10 percent to 25 percent above the standard market rate.

PNII banded with PRONATEC and the local development agency of Esmeraldas to train cooperatives in business management skills, deliver technical assistance to improve the genetic materials of the cocoa crop, and facilitate quality-assurance certifications. This deal is expected to generate over 454 new jobs and higher incomes for over 600 households in Esmeraldas.

By directly participating in the implementation of these programs, the provincial governments and local development agencies of Carchi and

Esmeraldas are encouraging an attractive business environment in their regions. In turn, firms like PepsiCo, Canola Andina, and PRONATEC clearly show that businesses prefer to invest in regions with a dependable local government counterpart. The presence of these firms reinforces the formal economy in impoverished, remote communities, while the jobs and income they generate boost local resilience against illegal trafficking.

Said one anchor firm representative: “Through these programs, the work of USAID not only benefits small producers of the northern region, providing them with new and better opportunities…[but is] contributing to the development of Ecuador as a whole.” n Jennifer Hebets and Leah Quin are with CARANA Corporation.

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