EcoLogic Enterprise Ventures

"In Guatemala, Organic Farms Sprout on Civil War Turf"
Wall Street Journal - October 9, 1998
by William Fulbright Foote

LAS CONCHAS, Alta Verapaz, Guatemala--During the darkest years of this country's 35-year civil war, local farmers here abandoned their land. As the farms became jungle again and pesticides leached away, wild spices thrived. At the same time, a new market in North America and Western Europe was creating demand for organic produce.

Guatemala's civil war, ironically, was environmentally correct--it helped reclaim the country's native plants. But these plants are not just an environmentalist's dream; they have become a meaningful source of income for some Guatemalan peasants who are capitalizing on the growth in the organic products market. These farmers have learned of the comparative advantages of selling organic premium-priced goods, making them some of the country's first enviro-capitalists.

Thomas Fricke, the president of ForesTrade, a Vermont-based trading company specializing in organic spices, coffee and essential oils from around the world has connected with the Guatemalan farmers. Founded in 1995, ForesTrade began by importing organic cinnamon, pepper, cloves, nutmeg, mace, and ginger from Indonesia and Sri Lanka, buying exclusively from small-scale farmers. Mr. Fricke knew the trend: organic produce markets in the U.S. and Europe had been growing at a rate of over 20% annually since 1990, with an estimated $3.3 billion in U.S. sales alone in 1996. Meanwhile, the ethnic cuisine craze was prompting more Americans to experiment with spices that were once considered exotic. Responding to increasing demand from customers, ForesTrade went searching for supply and found some of Latin America's healthiest soil in Guatemala.

"We received organic certification for cardamom (a staple spice for Indian food) in several months," Mr. Fricke says. "This process can take 3 years in more chemically-laden countries."

Not long ago, U.S. consumers and lucrative organic produce markets seemed far beyond the reach of farmers here, 95% of whom speak only Kekchi, a Maya tongue. Chronic market inefficiencies, typical in the Latin American countryside, together with the language barrier, had impoverished rural producers, which arguably gave impetus to the longest civil war in Latin American history. When peace finally came in 1996, local farmers benefited from an ironic twist of fate: U.S. and European buyers were paying premiums for certified "organic" labels that guarantee the absence of synthetic pesticides, fungicides and herbicides in agricultural production. Their cardamom plants, which thrive under tall rainforest canopies, fetch even higher prices.

This is a typical tropical economy. Agriculture contributes 24% of gross domestic product (estimated at $16 billion last year) and accounts for 75% of exports. But selling eco-sensitive produce into the global marketplace offers Guatemala the chance to compete on something besides price--which it would ordinarily do in the commodity market. In this case, Guatemala has a comparative advantage in organic coffee, cacao, spices and natural dyes and can thus command premium prices. Though the market today is small, its development in rural areas might have an important significance for farmers who otherwise would have to compete in commodities.

For products like spices and coffee, organic farming requires a shift away from the large plantations carved out of the rain forest to the smaller farms where cardamom plants, for instance, are grown. In Las Conchas, this shift has proved a boon to peasant farmers. As Herminio Gonzalez, a former guerrilla turned organic spice farmer explains, "Nobody around here can afford to manage our plants and control pests with expensive chemicals or tractors. Today, with this new market, we can do well with machetes and sweat equity."

Because Mr. Fricke needs a supply of organic produce, he pays premium prices and provides technical support to heighten farmer productivity. To reach their remote suppliers, ForesTrade establishes joint ventures with existing businesses, individual entrepreneurs, community associations, and non-governmental organizations. Through this network, the company forms contractual linkages with small-scale producers. It also hires U.S. "organic" certification agencies (with representatives in Central America) to inspect the farms and monitor product as it moves from the field to intermediary buyers to exporters.

While numerous other U.S. companies are importing organic produce from small-scale farmers throughout Central America--the Organic Commodities Project (cacao), Equal Exchange (coffee), Stonyfield Farms (mangos)--the case of Guatemala merits special attention. Full implementation of the peace accords, signed by the government and the rebel alliance on December 29, 1996, is the greatest challenge facing Guatemala today. People in places like Las Conchas are focused on the economic underpinnings of peace.

At the end of this year, the support that many ex-guerrillas received over the last three years from the United Nations High Commission for Refugees to resettle and rehabilitate their farms is ending. U.S. official assistance to Guatemala, totaling about $965 million since 1986, is also drying up. Yet it is not more aid that the veterans of Guatemala's civil war need, but access to markets, especially ones that promote grassroots development.

The story in Las Conchas is typical of the remote jungle territories in northern Guatemala: Indian peasants--many of whom are former rebels--returning home after being internally-displaced during the civil war; new thatch huts popping up along lonely dirt roads; the gray haze from forest fires that ripped across Guatemala's tropical forests this summer. What is exceptional is that unlike most other places in the country, the humid forests here remain largely intact thanks to a local campaign against an ingrained culture of slash-and-burn agriculture. What's more surprising is that the jungle still stands, and the farmers are living better, thanks to what most former guerrillas would consider a dirty word: the American consumer.