Revista mexicana de estudios sobre la Cuenca del Pacífico. Tercera época Volumen 6 Número 11 Enero/Junio 2012 Colima, México

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1 Revista mexicana de estudios sobre la Cuenca del Pacífico Tercera época Volumen 6 Número 11 Enero/Junio 2012 Colima, México 11

2 Revista mexicana de estudios sobre la Cuenca del Pacífico Tercera época Volumen 6 Número 11 Enero/Junio 2012 Colima, México Dr. Ángel Licona Michel Coordinador de la revista Lic. Ihovan Pineda Lara Asistente de coordinación de la revista Comité editorial internacional Dr. Hadi Soesastro. Center for Strategic and International Studies, Indonesia Dr. Pablo Bustelo Gómez Universidad Complutense de Madrid, España Dr. Kim Won ho Universidad Hankuk, Corea del Sur Dr. Mitsuhiro Kagami Instituto de Economías en Desarrollo, Japón Universidad de Colima Dr. Ramón Arturo Cedillo Nakay Rector MC Christian Torres Ortiz Zermeño Secretario General Dr. Ricardo Navarro Polanco Secretario de Investigación Científica Dr. José Ernesto Rangel Delgado Director del CUEICP-CEAPEC Licda. Ma. Guadalupe Carrillo Cárdenas Coordinadora General de Comunicación Social Mtra. Gloria Guillermina Araiza Torres Directora General de Publicaciones Índices a los que pertenece: Sistema regional de información en línea para revistas científicas de América Latina, El Caribe, España y Portugal (LATINDEX) Citas Latinoamericanas en Ciencias Sociales y Humanidades (CLASE) EBSCO/México Comité editorial nacional Dra. Mayrén Polanco Gaytán / Universidad de Colima, Facultad de Economía Mtro. Alfredo Romero Castilla / UNAM, Facultad de Ciencias Políticas y Sociales Dr. Juan González García / Universidad de Colima, CUEICP Dr. José Ernesto Rangel Delgado / Universidad de Colima Dr. Pablo Wong González / Centro de Investigación en Alimentación y Desarrollo, CIAD Sonora Dr. Clemente Ruiz Durán / UNAM-Facultad de Economía Dr. León Bendesky Bronstein / ERI Dr. Víctor López Villafañe / ITESM-Relaciones Internacionales, Monterrey Dr. Carlos Uscanga Prieto / UNAM-Facultad de Ciencias Políticas y Sociales Profr. Omar Martínez Legorreta / Colegio Mexiquense Dr. Ernesto Henry Turner Barragán / UAM-Azcapotzalco Departamento de Economía Dra. Marisela Connelly / El Colegio de México-Centro de Estudios de Asia y África Cuerpo de árbitros Dra. Genevieve Marchini W. / Universidad de Guadalajara- Departamento de Estudios Internacionales. Especializada en Economía Financiera en la región del Asia Pacífico Mtro. Alfonso Mercado García / El Colegio de México y El Colegio de la Frontera Norte. Especializado en Economía Industrial e Industria Maquiladora Dr. Fernando Alfonso Rivas Mira / Universidad de Colima. Especializado en Propiedad Intelectual; Turismo Internacional y Desarrollo Regional en el Marco de la Cuenca del Pacífico Dr. Alfredo Román Zavala / El Colegio de México. Especializado en Estudios sobre el Japón y Australia Mtro. Saúl Martínez González / Universidad de Colima. Especializado en Economía Agrícola Dra. Susana Aurelia Preciado Jiménez / Universidad de Colima Dr. Roberto Escalante Semerena / UNAM-Facultad de Economía. Especializado en Economía Agrícola Dra. Melba Eugenia Falck Reyes / Universidad de Guadalajara-Departamento de Estudios del Pacífico. Especializada en Economía Japonesa Dra. Kirstein Appendini / El Colegio de México. Especializada en Economía Agrícola Dra. Emma Mendoza Martínez / Universidad de Colima. Especializada en Estudios de Asia y África Dra. María Elena Romero Ortiz / Universidad de Colima. Especializada en Relaciones Internacionales Dr. Jürgen Haberleithner / Universidad de Colima Especializado en Políticas de Investigación, Desarrollo y Empleo PORTES, revista mexicana de estudios sobre la Cuenca del Pacífico, Tercera época, Volumen 6, Número 11, Enero/Junio 2012, es una publicación semestral de difusión e investigación científica del Centro Universitario de Estudios e Investigaciones sobre la Cuenca del Pacífico y del Centro de Estudios de APEC (CUEICP-CEAPEC) de la Universidad de Colima. Av. Gonzalo de Sandoval 444 Col. Oriental, C.P , Colima, Col., México. Teléfono (+ 52) (312) , ext portes@ucol.mx. Editora responsable: Gloria González. Edición: Jaime Sánchez Hernández y Carmen Millán. Reservas de Derechos al Uso Exclusivo No , ISSN Impresa por la Dirección General de Publicaciones de la Universidad de Colima, Av. Universidad 333, Col. Las Víboras, C.P Colima, Col., México. Teléfono (+52) , ext Este número se terminó de imprimir en octubre de 2012 con un tiraje de 500 ejemplares. Su precio de suscripción anual es de $100 (cien pesos 00/100 MN) o de $60 (sesenta pesos 00/100 MN) $10 dls. (USA) el ejemplar, más gastos de envío (en su caso). Las ideas expresadas en los artículos e investigaciones son responsabilidad de los autores y no reflejan el punto de vista del CUEICP-CEAPEC o de la Universidad de Colima. El CUEICP y el CEAPEC autorizan la reproducción parcial o total de los materiales presentados aquí, siempre y cuando se dé crédito al autor y a la revista sin fines de lucro.

3 Fair trade for coffee producing small-scale farmers in Mexico 1 Namkwon Mun 2 Jihyun Seo 3 Abstract The agriculture played an important role in the industrialization process of Mexico. However, the agricultural policy of State has isolated small scale farmers, giving priority just to large agricultural exporters. This study analyzes the implications that can have fair trade for the Mexican small scale farmers. The fair trade tries to cover the production cost and basic necessities for the small scale farmers, making direct ties between producers and consumers. This type of linkage guarantees the minimum price and the extra social payment to the small scale farmers, grouped in cooperatives o associations. Coffee is one of the most known fair trade product, and Mexico is one of the most important coffer exporters of the world. The fair trade of coffee production where many small farmers work is carried out by cooperative like Uciri (Unión de Comunidades Indígenas de la Región Istmo). The case study shows that fair trade cannot provide complete answers to the all problems that have small farmers. But, since fair trade tries to promote small farmers well-being and many small farmers 1 This work was supported by Hankuk University of Foreign Studies Research Fund of Hankuk University of Foreign Studies. 3 University of Liverpool. Portes, revista mexicana de estudios sobre la Cuenca del Pacífico Tercera época / Volumen 6 / Número 11 / Enero Junio 2012 / P.P

4 Portes, revista mexicana de estudios sobre la Cuenca del Pacífico could get rid of extreme poverty thanks to fair trade, it might be possible to say that fair trade can be one valuable option for the sustainable development of small farmers. Key words: Mexico, Fair Trade, Coffee, Small Scale Farmers, Agriculture. Resumen La agricultura ha jugado un rol importante en el proceso de la industrialización de México. Sin embargo, las políticas agrícolas del Estado han marginado a los pequeños campesinos, favoreciendo a los agroexportadores. En este estudio se analizan las implicaciones que puede tener el comercio justo para los pequeños campesinos. El comercio justo intenta cubrir los costos de producción y sus necesidades básicas a los pequeños productores, creando vínculos directos entre productores y consumidores. Este modo de vínculo les garantiza el precio mínimo y un pago social adicional a los pequeños productores, agrupados en cooperativa o asociación. El café es uno de los productos más conocidos del comercio justo, y México es uno de los exportadores más importantes del café de comercio justo. El comercio justo de la producción cafetalera en que trabajan muchos pequeños campesinos, se hace en torno a la cooperativa Unión de Comunidades Indígenas de la Región Istmo (Uciri). El estudio de caso muestra que el comercio justo no puede dar respuestas completas para solucionar todos los problemas de los pequeños campesinos. Sin embargo, al considerar que el comercio justo trata de promover el bienestar de los pequeños campesinos, y que éstos podían salir de la pobreza extrema, por lo menos participando en el mercado de comercio justo, se podría decir que el comercio justo merece ser una opción valiosa para el desarrollo sustentable de los pequeños agricultores. Palabras clave: México, comercio justo, café, pequeños agricultores, agricultura. Introduction In Mexico, agriculture has played an important role under the Import Substitution Industrialization (Isi) model. The 28

5 Fair trade for coffee producing small-scale farmers in Mexico agricultural sector has played as a provider of basic foods to urban labor forces at a low price and as an earner of foreign currency which was designed to import material inputs for the industrialization. In this process, the State s role was fundamental, and the government s agricultural policies were favorable to large-scale export-led farming at the expense of small-scale farmers, mostly living in the southern part of the country (Cardoso, 1992; Edwards 1993; Reyes, 2011). This exclusion of small-scale farmers has been intensified as they have become more exposed to market forces with structural changes in the agricultural sector: the opening of the agricultural market and smaller interventions of the State in the agricultural sector. The access of small-scale farmers to the State s supports such as governmental agricultural subsidies and technological assistances has been reduced, and the agricultural market has become more and more open to other- domestic and foreign- competitors (Gwynne and Kay, 2004: 47). With the agricultural market more liberalized and unregulated, the import of agricultural products subsidized by the governments in developed countries has increased, and most Mexican smallscale farmers became less competitive with their structural barriers, undergoing the deepening poverty and having little choice but to immigrate towards cities or even outside the country. In Mexico, agricultural producers can be roughly categorized into two with nearly opposite economic and social conditions: large-scale commercial producers and smallscale farmers. Small-scale farmers mostly have less than five hectares of land, lack access to the land of high quality, and have little or no access to technology, credit, storage facilities, and marketing channels. Mexican government expected that the trade liberalization in the agricultural sector would promote uncompetitive farmers to convert their production to other profitable crops, and thus resources would be allocated more efficiently. However, small-scale farmers were not prepared enough to take advantage of greater market opportunities with structural barriers, and thus exposed more to market forces. In addition to lack of access to credit, high transaction costs that small-scale farmers face, government policies have become more favorable to export-led commercial farmers. Moreover, small-scale farmers have faced more competitions from agricultural imports 29

6 Portes, revista mexicana de estudios sobre la Cuenca del Pacífico that have been subsidized from the governments in developed countries, and influenced by transnational agribusinesses with nearly monopolistic power. These market pressures put smallscale farmers more vulnerable since the State s role has been reduced drastically. The livelihoods of small-scale farmers not only have been hard hit, and the emphasis on export-led commercial farming had produced environmental costs as well (Seo, 2010: 49-50). Although trade liberalization has produced economic profits for some of competitive farmers, living conditions have been deteriorated for the majority of small-scale farmers. Despite the importance of economic profits, the marginalized people and their quality of life cannot be ignored as they are important aspects of development. Fair trade concerns the livelihoods of small-scale producers by making direct trading relations between producers and consumers. It aims to provide producers with the minimum fair trade price which covers the production costs, and with social premium that can be invested in various economic and social projects for small-scale farmers who participate in fair trade market through producers cooperatives. In addition, fair trade promotes environmentally sustainable production methods and long-term trading contracts between producers and consumers. As a whole, the focus of fair trade is different from conventional free trade which put economic profits at the core. This study aims to examine if fair trade can be a probable choice for small-scale farmers in Mexico by overcoming their structural barriers caused by strong operations of neoliberal economic model since the early of 1990s in particular. In reality, the marginalization of small-scale farmers in Mexico seems to be intensified with structural changes in the Mexico s agricultural sector. As said, it can be necessary to take small-scale farmers into consideration since the development of a country would not be sustainable without giving attention to the social costs- poor living conditions of the marginalized people- of the economic growth. In this sense, fair trade is likely to be worth considering because it puts the livelihoods of small-scale producers at the center of the attention, and thus promotes the sustainability of the development. 30

7 Fair trade for coffee producing small-scale farmers in Mexico The Evolution of Fair Trade Movement and the Participation of the Mexican Small-Scale Farmers in the Movement Fair trade does not seem to have clearly-set definition yet. Although various fair trade-related organizations or initiatives have their own definition of fair trade, there seem to be some common grounds: Fair trade is based on the direct relationship and the long-term contracts between producers and consumers; It promotes the sustainable development with concerns about the livelihoods of small-scale producers, who otherwise could have been excluded from trade talks, and about the environmentally sustainable production patterns. The structural changes made in the Mexican agriculture by opening of the market and reducing the State s role, have brought both positive and negative results. While some competitive producers and agribusinesses benefited from the lower barriers of the agricultural market, other uncompetitive and inefficient farmers have been severely affected, and their living conditions have been even deteriorated. These uncompetitive and inefficient farmers are mostly small-scale producers, to whom fair trade gives attention. Fair trade has its origin in the 1940s and 1950s with the orientation of relief rather than trade, and since then it has been evolved to become what it is now. In the beginning, religious groups and other politically-oriented Ngos- Ten Thousand Villages (formerly known as Selfhelp) and Serrv Internationaltried to provide more than charity to victims of war, famine, and other devastating events, by buying handicrafts from victims (Mace, 1998: 26). Ten Thousand Village traded directly with producers of needlework from Puerto Rico, joined soon after by Serrv International (also based in the Usa), which began trading with producers in the South (Hutchens, 2009: 63). In Europe, while the goods of Chinese refugees were sold to consumers through Oxfam Uk shop outlets, groups in the Netherlands set up importing organizations for producers goods under the name of Fair Trade Organisatie (1967) (ibid: 63). As a form of trade, not charity or relief, the start of fair trade can be traced back to the 1960s (Seo, 2010: 54). The concept of fair trade is based on the first Unctad in 1964, when the developing countries came up with the slogan of Trade, not 31

8 Portes, revista mexicana de estudios sobre la Cuenca del Pacífico Aid in order to demand fairer and freer trade relationship with the developed countries (Arditi, 2006: 4). Developing countries expressed their demand for just and fair trade again in the Second Unctad in 1968, but there was not much reaction to this demand as in In 1965, there was the creation of first Alternative Trading Organization (Ato), which represents the switch of emphasis from relief to trade of products (Seo, 2010: 55). Atos sought to provide economic assistance by creating a market in the First World for products made by Third World artisans and farmer producers could receive a better price for their products (Mace, 1998: 26). In 1969, the first World shop was opened in the city of Brenkelen, the Netherlands, which aimed to bring the principles of fair trade to the retail sector by selling almost exclusively goods produced under fair trade terms in underdeveloped regions. With the initial positive results, the number of Worldshops increased up to nearly 120 within two years across European countries like Germany, France, Switzerland, Austria, Sweden, Belgium, and the United Kingdom, and the fair trade have gained more recognition (Seo, 2010: 55; Medina et al., 2008: 2). Despite growing awareness in consumer markets about trade injustice through Ato s campaigning efforts, the product range they offered was limited primarily to handcrafts, and the consumer market remained small profits dropped and some Atos faced bankruptcy, many Atos began to look towards consumer needs and to balance these with those of producers (Hutchens, 2009: 64). Since the late 1980s, there have been growing fair trade labeling initiatives in an attempt to expand the distribution of fair trade products, more than handicrafts, so as to increase the market share of the fair trade products. In 1988, the first fair trade certification initiative, Max Havelaar, was created in the Netherlands under the initiative of Nico Roozen, Frans Van der Hoff, and Dutch development Ngo Solidaridad (See Wikipedia- Fair Trade). The first fair trade coffee from Mexico was purchased in Dutch supermarkets. Thereafter, national fair trade labeling initiatives like Max Havelaar have increased across countries in Europe and North America. In 1997, Flo was established in Bonn, Germany, to unite the labeling initiatives under one umbrella and harmonize worldwide fair trade standards and certification. 32

9 Fair trade for coffee producing small-scale farmers in Mexico Since the late 1980s when the first fair trade label- Max Havelaar- was created, consumers can get relatively easier access to fair trade products as fair trade products need not be sold only at Alternative Trading shops as in the previous years. A product with fair trade label would be able to be traded in a wider range of shops to which consumers can have easier access (Seo, 2010: 66; Hutchens, 2009: 65). Since then, the characteristic of fair trade has become more like fair trade labeling initiatives than like fair trade movement. In 1997, Flo, an umbrella body, was created with combined efforts of national labeling initiatives. Flo is responsible for setting international fair trade standards, for organizing support for producers around the world, for developing global fair trade strategy, and for promoting trade justice internationally. The first fair trade label, Max Havelaar, has its origin in a Mexico s coffee producing cooperative called Uciri, and Mexico is one of the largest fair trade coffee exporters. With Uciri s some successes, there have been other attempts of producer s cooperative to sell their products through fair trade in Mexico. The number of producer s organizations involved in fair trade is high in Mexico (See Table 1). 33

10 Portes, revista mexicana de estudios sobre la Cuenca del Pacífico Table 1. Number of Fair trade Certified Producer Organizations in Latin America (2007) Argentina Bolivia Brazil Chile Colombia Costa Rica Ecuador Guatemala Honduras Mexico Nicaragua El Salvador Paraguay Peru Source: 34

11 Fair trade for coffee producing small-scale farmers in Mexico Certimex (Certificadora Mexicana de Productos y Procesos Ecológicos) is a non-profit organization and is created in The organization is founded with the purpose to collaborate in the development of ecological production through quality inspection and certification of agriculture products and processes, farming, agriculture - industry and forestry. Certimex started only to certify organic or ecological products, but in 2000 it elaborated, together with Comercio Justo México A.C., the criteria and procedures for the certification of the fair trade. It started to work with Flo in July 2002, exercising inspections according to the standards of the fair trade organization. With this evolution, Certimex became an organization which is capable of providing inspection and certification services for organic coffee, and fair trade coffee. Comercio Justo México (Cjm) is the Mexico s fair trade system and is created in Cjm is a Mexican civil association that promotes the commercialization of fair trade products and the provision of services for small-scale producers, at the same time it encourages the social, economic, and environmentally sustainable development. The principal mission of Cjm is to increase the distribution of products produced by small producers in Mexico and to encourage fair relations between the organizations of small producers and consumers; promoting a market based on justice; solidarity and sustainability (See more Cjm website.). Cjm is intended to promote fair trade in Mexico, to raise consumer s awareness about it. In addition, it is designed to set the norms and system of regional fair trade, and to make alliances with other fair trade organizations or groups in and out of the country. Principal members of Cjm are Anec (Asociación Nacional de Empresas Comercializadoras de Productores del Campo, Ac), Cepco (Coordinadora Estatal de Productores de Café de Oaxaca, Ac), Invertir (para desarrollo sustentable Ac), Majomut (Unión de Ejidos y Comunidades de Cafeticultores del Beneficio Majomut), Paual (Pequeños Apicultores Unidos de América Latina, Ac), Sipro (Servicios Informativos Procesados, Ac), and Uciri. And honorary members include Alianza Cívica, Amacup (Asociación Mexicana de Arte y Cultura Popular Ac), Cee (Centro de Estudios Ecuménicos, Ac), Cnoc (Coordinadora Nacional de Organizaciones Cafetaleras, Ac), Idear (Impulsora de Alternativos Regionales Sc), Red Todos los Derechos para Todos, 35

12 Portes, revista mexicana de estudios sobre la Cuenca del Pacífico Ac, Rmal (Red Mexicana de Acción frente al Libre Comercio, Ac), and Vamos (Fundación para el Desarrollo Sustentable, Ac). Agromercados, a Mexican fair trade firm, was founded in 2000, with an initial capital of about Us$ 24,000 from producer s organizations. It belongs to dozens of organizations of small producers involved in the production of coffee, honey, cocoa, cereals, milk, orange juice, among others in 17 of 32 states of across Mexico (Johnson, 2002: 67). The profits from Agromercados are designed to be reinvested or to be utilized in favor of farmers or indigenous organizations, and the firm is to receive a fair price in order to guarantee a stable market for small producers. Agromercados main product is organic coffee, and of 65,000 producers participating in Agromercados, nearly 35,000 are producers in the state of Oaxaca, Chiapas, Puebla, San Luis Potosí and Querétaro (Seo, 2010: 80; Johnson, 2002: 67). Coffee is the best known fair trade product among consumers in Europe, North America and Japan because Fair trade coffee was not only the first fairly traded food product but also the first to carry the fair trade label. Although Mexico has not been historically important coffee-producing countries like Brazil, the coffee production in the country has emerged as one of the important economic activities (according to Fao, coffee is the 12 th important exporting agricultural product in the country) and has importance on the livelihoods of smallscale producers. As the first fair trade label, Max Havelaar, has its origin in a Mexico s producers cooperative- Uciri-, Mexico is one of the major fair trade coffee producing countries: Mexico accounted for 21 per cent of the trade of the Flo certified green coffee, followed by Peru, 16 per cent, and Guatemala, 15 per cent, respectively (Flo 2003). In Mexico, the land distribution to farmers after the Revolution has put another characteristic on the country s cultivation. Coffee, an agricultural product of plantations, originally cultivated in Mexico by large landowners, has been converted into a peasant product, planted by indigenous smallholders. Coffee in Mexico is largely produced by smallscale farmers in the aftermath of the land distribution, and thus coffee production became closely associated with the livelihoods of coffee-producing small-scale farmers. 36

13 Fair trade for coffee producing small-scale farmers in Mexico In 1973, as part of President Echeverrias plan to modernize small-scale coffee production and increase Mexico s presence in foreign markets, the Mexican Coffee Institute (Instituto Mexicano del Café or Inmecafe) developed to support coffee producers (Mace, 1998: 18). However, the demise of the state agency in 1989 in the process of reducing the state s role in the economy has put the state-dependent small-scale farmers more vulnerable to the market pressure. Moreover this end of Inmecafe coincided with the demise of International Coffee Agreement (Ica) in that same year, putting more pressure on those small-scale coffee producers. In addition to negative impacts of unregulated market on small-scale coffee producers with the demise of international agreement and of the state agency, small-scale farmers have become more exposed to the power of a few transnational coffee roasting companies. While coffee production involves millions of small-scale farmers, only five large transnational roasting corporations dominated the industry. At the end of 2002, the five largest roasters were responsible for purchasing nearly half of the world s supply of green coffee beans, with Kraft General Foods buying just over 13 per cent of the total, followed by Nestlé (13 per cent), Sara Lee (10 per cent), Procter & Gamble (4 per cent), and Tchibo (4 per cent), which sells mainly in Germany (Fridell, 2007: 117). There are many small-scale farmers cooperatives involved in Fair trade these days in Mexico. As is the situation at the international level, these kinds of cooperatives have been mostly developed in the coffee sector in Mexico. According to fair trade Certified, there are many fair trade coffee cooperatives in Mexico: Cepco, Ismam, Unión Majomut, and Uciri, among others. The first fair trade label, Max Havelaar, initiated through selling coffee from Uciri in Mexico to the Dutch market. Uciri is small-scale coffee producer s cooperative from 54 communities in 20 municipalities located in the Isthmus of Tehuantepec, Oaxaca currently over 2,500 active member families in Uciri, representing over 25,000 people dominant ethnic groups in Uciri included the Zapotec, Mixe, and Chontales, and to a lesser extent Mixtecos and Chatinos (Fridell, 2007: 183). The Uciri has developed in the early 1980s and has become one of the most active small-scale producers cooperatives in and out of the country. 37

14 Portes, revista mexicana de estudios sobre la Cuenca del Pacífico What is Gained and Lost for the Small-Scale Farmers in Mexico It is possible that small-scale farmers benefit from fair trade in various ways. Fair trade guarantees the fair trade minimum prices and social premium. The minimum price can ensure small-scale farmers fairly stable economic incomes in comparison to participating in the conventional free trade market. In addition, small-scale producers are required to take part in democratically-run producer s organizations or cooperatives in order to get involved in fair trade market. Those producer s organizations or cooperatives are designed to invest in infrastructure and other basic services of their communities with social premium. Moreover, small-scale-producers can improve their access to credit through pre-financing, and be provided with technical supports from their long-term trading partners. Small-scale farmers can get involved in the decisionmaking process, by attending in the democratic and transparent producer s organizations or cooperatives as well (Seo, 2010: 81-82). However, there seem to be still limitations and challenges of fair trade from only economic perspective. Since Fair market accounts for very limited portion of world trade, and the consumption of products are largely consumed in the developed countries, despite growing efforts to make and increase the domestic fair trade markets like in Mexico. Moreover, as fair trade has become emphasizing on market increase, the core values of fair trade- the livelihoods of small-scale farmers- seem to be blurred. This issue has been drawing a lot of controversies with a growing involvement of conventional agribusiness in fair trade market, in particular. Since fair trade can be highly spoken of its consideration into various aspects- social, economic, and environmental- of development. Moreover, the fact that small-scale producers are given particular attention has been considered as one of the most important points of fair trade. In the case of Uciri, from 1993 to 2002, the quantity of export-quality green beans processed and sold by Uciri on international markets remained fairly consistent and ranged between around 500,000 kg to 700,000 kg Uciri also sold between 180,000 kg to 290,000 kg annually of non-exportquality coffee on domestic markets Almost all of its international 38

15 Fair trade for coffee producing small-scale farmers in Mexico export-quality coffee was sold as certified organic, and nearly all of it was sold through fair trade (Fridell, 2007: 188). According to Gavin Fridell, the majority of fair trade coffee cooperatives can usually export between 10 and 30 per cent of their beans to fair trade partners (ibid: 188). This good performance of Uciri in the fair trade market can be attributed to its long experiences and its attempts to make relations with diverse fair trade importers (See Table 2) (Seo, 2010: 100). In order to increase sales of their fair trade coffee, Uciri attempts to sell their coffee in the domestic market. Uciri was an important element in the process of promoting Mexican fair trade market and certification system such as Cjm, Certimex, and Agromercados, and now is one of major participant and beneficiary of those systems. In addition, Uciri have tried to make negotiations with large conventional corporations in recent years. The obvious example of Uciri efforts was a ten-year deal 4 that it signed with Carrefour, the world s second largest food chain, in February 2002, for an unspecified quantity of coffee (Fridell, 2007: 190). There have been a lot of controversies over this deal since although the involvement of conventional corporations in fair trade can increase the market share of fair trade products on the one hand, at the same time their participation can blur the core subject of fair trade itself: Fair trade can produce the economic profit as well as social and environmental benefits, taking small-scale producers into principal consideration (Seo, 2010: 101). 4 The coffee will be roasted by Malongo, a conventional roaster in southern France, and then sold insupermarkets owned by Carrefour. Although Carrefour will pay fair trade prices and adhere to fair trade rules, the coffee will not be independently certified by Flo. Instead, the coffee will be independently certified as organic and will be stamped with Carrefour s own quality seal (Fridell, 2007: 190). 39

16 Portes, revista mexicana de estudios sobre la Cuenca del Pacífico Table 2. Major Importers of the Uciri s Fair Trade Coffee, 2002 Unit: 132-1nb bag Comercio Terzo Mondo (Italy) Sacheus (Sweden) Equal Exchange (The U.S.) Gepa (Germany) 5,000 bags 1,500 1,300 1,000 Urtekram (Denmark) Café Campesino (The U.S.) Eza (Austria) Just Us! (Canada) Over Source: Fridell (2007). Taking the case of Uciri, it can be said that fair trade still have several limitations, but simultaneously it produce some benefits for small-scale farmers (Seo, 2010: 102). Uciri distributes the revenue gained from the minimum guaranteed price (minus operating costs) to member households on the basis of the quantity of beans each brings to be processed and sold by the cooperative, and the revenue from the social premium is used to help pay for Uciri s various social and economic projects (Fridell, 2007: 191). Sustainable and stable livelihoods can be built upon sustainable and stable incomes, and thus income is the basis with which small-scale producers may ultimately gain the capacity to acquire savings and make additional income generating investments (Potts, 2007: 13). By participating in Uciri which sell their coffee in the fair trade market, smallscale farmers could get relatively stable income covering their production costs, and could benefit from various economic and social projects in which Uciri invests and manages with social premium of fair trade. This is quite different picture since farmers have been suffered by exploitations and intimidation of middlemen before they organized themselves and participated in fair trade. However, the fair trade minimum prices does not tend to include real social and environmental costs of production since fair trade prices must remain close enough to conventional prices so as to not discourage ethical consumers in the North, and thus fair trade prices, while higher than conventional ones, 40

17 Fair trade for coffee producing small-scale farmers in Mexico are ultimately limited by market imperatives, not an objective assessment of the real costs of production (Fridell, 2007: 192). Therefore, small-scale farmers do not get high incomes enough to overcome their economic poverty completely even though their living conditions have gotten better than before by getting involved in fair trade market. In the meantime, in order to overcome the limited income sources, the union attempted to promote their members to diversify their production, and the union launched a fruit marmalade production project as an effort to diversify its income sources. Fridell (2007: 195) argues that over time, although Uciri has turned toward private and government sources of financing, the fair trade network still plays an important role in the cooperative s financial situation. He also explains the financial benefits from participating in fair trade: First, Uciri s participation in the fair trade network has enhanced its credibility among government agencies, development organizations, and private banks who view Uciri as a stable organization with a degree of market security, leading to the union s easier access to funding and other types of improvements. Second, knowing that pre-financing from fair trade partners is available if needed is an important source of stability for the organization. It allows Uciri some room to maneuver and maintain some independence from domestic lenders and the semi-clientelist relations that inevitably emerge with such connections (ibid: 196). Social premiums gained from fair trade can produce more than economic profits for small-scale farmers: producer s cooperative can invest in the long-term social and economic development with that premium. With this extra premium, cooperatives can invest in infrastructure, and other community projects like education and health programs. Uciri could construct two processing plants, one in Lachiviza and other in the regional center of Ixtepec, and the cooperative s beans are transported by its own two large long-haul trucks and five smaller pickup trucks. The improved infrastructure for Uciri include a hardware store, which gives access to appropriate low-cost equipment; a warehouse for storage and preparation of coffee for export, where they are also preparing to begin roasting 41

18 Portes, revista mexicana de estudios sobre la Cuenca del Pacífico coffee to get higher profits and eventually to export according to European taste; a Center for Peasant Education (Cec) founded in 1986, to provide training for organic production skills through 13 months courses (Almanza-Alcalde, 2005). In addition, a public transportation system like the Union of Zapotec and Mixe Towns of the Isthmus (Upzmi, Unión de Pueblos Zapotecas del Istmo) was introduced, and basic health services were provided with the construction of the health care clinic in Lachiviza in Uciri members can get education and training through the fair trade network as well. Uciri members have been able to acquire a better understanding of how the coffee market operates, including information about permits, paperwork organic certification; the determination of prices ; knowledge of organic production methods and new technological advances through mutual relationship with fair trade and organic licenses, roasters, and affiliated Ngos (Fridell, 2007: 200). Uciri is a producer s cooperative organized of Mexico s small-scale coffee producers in state of Oaxaca, and got involved in the first fair trade labeling initiative- Max Havelaar. As a fair trade pioneer, Uciri has played a significant role in fair trade networks in and out of the country. Through participating in the fair trade market, small-scale farmers could get various benefits. Uciri members could improve their living conditions with the minimum fair trade price and social premium. Although the minimum prices were not high enough to overcome their poverty completely, small-scale farmers could get out of the previous exploitation from middlemen by making direct relationship with fair trade partners. Along with relatively stable economic income, if not high enough, the union could invest in economic and social development projects: investment in infrastructure, public transport system, and basic services like health clinic and education center. Members could get relatively easier access to credit through pre-financing and official credit channels, and be encouraged to promote organic production. In addition, the union could be granted technical supports from their fair trade partners. Moreover, farmers were able to participate in the decision-making process through democratically-run organizational structure of the cooperative. The rapid growth of fair trade markets in recent years can be largely attributed to the fair trade certification system as a wider product range is available and consumer awareness 42

19 Fair trade for coffee producing small-scale farmers in Mexico is rising through social marketing initiatives (Hutchens, 2009: 69). However, there is a growing concern about large-scale brand companies moving into the fair trade markets recently, and there are arguments that conventional brand companies have engaged in tokenism - stocking minimal amounts of fair trade products under new niche brands (Hutchens: 71). At the heart of fair trade lies a fundamental paradox to achieve social justice and alter the unjust terms of trade that hurt small farmers worldwide, fair trade utilizes the mechanisms of the very markets that have generated those injustices it is a hybridsimultaneously a social movement and an alternative market structure (Jaffee, 2007: 1). Managed well, trade can lift millions of poor people out of poverty; managed badly it will leave whole economies even more marginalized when international and national markets do work properly, poor people also need help to overcome obstacles that prevent them from participating on a fair footing (Hellin and Higman, 2003: 1-2). Fair trade has the intention to provide decent living conditions for long marginalized smallscale producers, mostly living in the developing countries, by guaranteeing better trading terms and by raising consumers consciousness of their consuming actions, rather than pursuing the maximization of economic profits. Fair trade guarantees a better deal for producers in the developing world through: a fair and stable price for their product; long-term trading relations and advance payments; investment in local community development; support in gaining knowledge and skills needed to operate in the global economy; environmentally sustainable farming methods. A central goal of fair trade is to create more direct, socially just, and environmentally responsible trade relations- mainly disadvantaged farmers in the global South and concerned consumers in the North (Jaffee, 2007: 1). According to Flo, fair trade has several criteria to be followed: guaranteed minimum prices to producers and social development premium; advance credit or payment to producers; democratically-run producer cooperatives or workplaces; long-term contracts and trading relationships; environmentally sustainable production practices; financial and technical assistance to producers... Here, fair trade minimum price is based on the costs of production and the producers basic living costs. According to Hutchens 43

20 Portes, revista mexicana de estudios sobre la Cuenca del Pacífico (2009: 60-61)., a social premium is the premium which is added to the minimum price in order to enable producers to build business capacities and to diversify to alternative and/ or additional sources of business income; and at a community level to finance the construction of clean and proximate water facilities for domestic use and production, health facilities and access to medicines, community micro-credit schemes and community banks, housing and infrastructure such as roads, electricity, storage warehouses as well as schools and resources for educating children. By guaranteeing fair trade minimum price and social premium, producers can get fair incomes for their products. Also, they can invest in infrastructure, technical training, and basic services like education and health with social premium as producers themselves participate in the decision-making process. Producers can deal with their previous problems of inaccessibility to credit with pre-financing. Moreover, the production of fair trade is promoted to be environmentally friendly (Seo, 2010: 64). Osterhaus (2006: ) demonstrates some of the benefits of fair trade for small-scale farmers like. It is extremely difficult to define with precision the financial benefits of fair trade for small-scale farmers, mainly because cooperatives themselves decide on how to distribute the amounts received among their members the high and stable price they receive for their produce and the additional premium enables cooperatives to build up a small working capital and to invest in quality improvements, differentiation and technical support The combination of the guaranteed minimum price, the social premium, pre-financing and increased access to credit has contributed to greater economic and social stability of smallscale producers training and technical assistance enable farmers to improve the quality of their produce, while access to information helps cooperatives to take adequate decisions about how to produce, market and sell crop.. Conclusion In Mexico, since the late 1980s and the early 1990s, big transformation has been made on the country s structure of agricultural production and on rural livelihoods. In the early 1990s, most trade barriers were reduced and most agricultural commodities got under tariff regime. Trade in some agricultural 44

21 Fair trade for coffee producing small-scale farmers in Mexico commodities was liberalized in 1994 while several sensitive crops were under a process of year-to-year liberalization, so that market for barley in 2003 and for bean, corn, and powdered milk in 2008 were expected to be liberalized. While the liberalization and deregulation of agricultural market made favorable conditions to export-led large-scale farmers mostly located in the northern states of the country, small-scale farmers who have less access to credit and infrastructure became more susceptible under more liberalized and competitive economic environment. Most of small-scale farmers have nearly no or limited access to financial resources and infrastructure so as not to be competitive enough to capitalize on greater market opportunities. Government not only reduced or eliminated supports or subsidies, but also its policies have become friendlier to export-led commercial farmers. The opening of the agricultural market has put more pressure on small-scale farmers with intensifying influences of transnational agribusiness, and pushed them under fierce competition from subsidized agricultural imports. As a result, incomes made by small-scale farmers could not even cover the cost of their production, and sometime, farmers have become compelled to leave their land and get involved in non-farm activities for survival, or to immigrate to nearby cities or abroad, particularly the U.S. Fair trade has evolved from the orientation of relief rather than trade at its outset, and in mid-1960s, there was the creation of first Ato, which represents the switch of emphasis from relief to trade of products, seeking to provide economic supports by creating a market in the First World for products made by Third World artisans and farmers. Since the 1980s, there have been increasing fair trade labeling initiatives in order to increase the market share of more diversified fair trade products, rather than selling handicrafts from the Third World countries only at shops like World shops, or by religious groups. The creation of first fair trade label, Max Havelaar, was a turning point of this trend. Since then, other fair trade labeling initiatives began to spring up, leading to the foundation of one of important international fair trade organizations, Flo, in The organization was the result of efforts made by many national fair trade labeling initiatives, and was designed to set international fair trade standards, and to promote supports for small-scale producers. 45

22 Portes, revista mexicana de estudios sobre la Cuenca del Pacífico Small-scale farmers can be guaranteed with the fair trade minimum prices and social premium, by participating in fair trade market. With fair trade minimum price, smallscale farmers can obtain fairly stable incomes, comparing to participating in the conventional free trade market. Also, smallscale producers are required to take part in democraticallyrun producer s cooperatives in order to join fair trade market. These cooperatives can make investments in infrastructure and other basic services of their communities with social premium. Moreover, the access to credit for small-scale farmers can be increased through pre-financing. Fair trade trading partners can provide them with technical supports and other advices. Small-scale farmers can also get involved in the decisionmaking process, by attending the democratically-run producer s organizations. Coffee is one of the most prominent fair trade products, and Mexico is one of the most significant fair trade coffee exporters. It is necessary for small-scale producers to get organized into a producers cooperative when they intend to partake in fair trade market. In Mexico, there are almost 50 fair trade certified producer organizations, and Uciri is one of them. Uciri got involved in the creation of first fair trade label- Max Havelaar, and since then, the union has become a pioneer cooperative, participating in the domestic and international fair trade market. Uciri members could improve their quality of life with the minimum fair trade price and social premium. Although the minimum prices were not high enough to overcome their poverty entirely, small-scale farmers were not suffered from exploitation from middlemen any more. In addition to relatively better economic conditions, the union could make investments in infrastructure, public transport system, and basic services like health clinic and education center. At the education center, farmers were able to get knowledge of organic coffee production. Relatively easier access to credit through pre-financing and official credit channels is another benefit for Uciri members, along with technical supports from their fair trade partners. Moreover, farmers were able to participate in the decision-making process through democratically-run organizational structure of Uciri. Despite all these benefits of fair trade for small-scale producers, it cannot be said that fair trade is a panacea for all the problems that small-scale farmers face. Fair trade market 46

23 Fair trade for coffee producing small-scale farmers in Mexico still accounts for very small portion of total trade although the market share has been gradually on the rise. However, these labeling initiatives seem to undermine the very core value of fair trade: the livelihoods of small-scale producers. Moreover, the gradual involvement of conventional corporations in fair trade market is controversial in recent years. While the involvement of corporations can increase sales of fair trade products made by small-scale producers, corporations sometimes capitalize on their involvement as public relations. Namely, corporations tend to improve their image while purchasing only small amounts of fair trade products, and do not often commit themselves to the fair trade values. Since these involvements are quite recent trend, there is still lacking guidelines for corporations participating in fair trade market. Another challenge is that the majority of consumers are located in the developed countries. There has been growing efforts to create and increase domestic fair trade market in Mexico, along with the domestic certification system. With the creation of domestic Fair Trade market, domestic consumers are likely to get more information about fair trade and its products, and the reliance on consumers in developed countries could be alleviated. Although fair trade guarantees producers the minimum price and social premium, the fair trade price cannot be high enough if fair trade products are to attract consumers. So it is necessary to diversify the products of smallscale producers. Producers organizations which get involved in fair trade market tend to depend on the production of one crop or product. Although there are efforts to diversify the products as is the Uciri case, the dependence on one product can make small-scale producers more susceptible to price fluctuations. Fair trade is not cure-for-all. However, small-scale farmers who have been long marginalized seem to be able to get out of extreme poverty, with minimum income guaranteed to cover at least the production costs, and to find ways to deal with structural barriers such as access to credit by participating in fair trade market. Fair trade concerns the living conditions of these small-scale farmers, rather than pursuing only the maximization of economic profits. In addition, the social premium is to be invested in long-term economic and social development projects, and the production patterns are encouraged to be environmentally sustainable. In economic 47

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