Nicaraguan small coffee producers benefit from fair trade

Fair trade aims to make the global trading system work for disadvantaged producers in the developing world. But has fair trade resulted in improvements in the lives of small coffee producers and their communities? Evidence suggests that fair trade is contributing to poverty alleviation in coffee producing areas of Nicaragua by improving the lives of smallholders.

Coffee is key for development in much of Nicaragua. Around 30,000 producers generate 30 percent of the country’s total export income. Production has been affected by market liberalisation and coffee industries elsewhere. For the first time in Nicaraguan history many coffee workers are experiencing hunger. Smallholders have had to sell their coffee beans for less than the cost of production, forcing them to take children out of school, go without essential medicines and reduce inputs needed for their farms.

Research from the University of Leeds, UK finds that coffee farmers in northern Nicaragua are better able to cope with the dramatic shifts in commodity prices in the conventional international market because of the stable prices offered by the fair trade market.

Although, the fair trade movement lacks the resources to assist Nicaragua’s landless coffee labourers, it has played an important role enabling smallholders to produce coffee for niche markets. Fair trade organisations are helping cooperatives to improve production and processing practices using environmentally-friendly methods and to attract Northern consumers to buy fair trade coffee, both for reasons of social justice and because it tastes better. Though the lack of credit from banks and absence of government support are holding back its expansion, the fair trade movement has provided participating households with basic levels of nutrition, education, and healthcare.

Interviews show that:

• Producers are eager to learn new production methods, even though the transition often means to lower coffee yields and increase time on farming activities.
• Since entering the fair trade market incomes have doubled and producers are less at risk of losing their farms.
• Many cooperatives are in debt – and unable to pay small producers the expected fair trade price – but are gradually paying off their debts.
• While women’s involvement is still minimal the gender equity objective of the fair trade movement is giving women more confidence and management opportunities.

However, it is difficult for communities to benefit as long as extra profit from fair trade products remains very small. The long-term sustainability of fair trade depends on broader political and economic conditions in Nicaragua and trends in Northern markets. It will be important to:

• keep developed country consumers informed of the experiences, successes and setbacks of developing country producer organisations
• undertake research to assess the extent to which fair trade networks can continue to expand and the demand for fair trade coffee can increase
• encourage cooperatives to sell to different markets and diversify their farming practices in order to reduce the impact of major price shifts in conventional or niche markets
• enable producers to participate in fair trade processes and not just be passive suppliers of a product
• provide local leaders with management skills and technical knowledge to adjust to changing developed country demands.

Source(s):
‘Does fair trade make a difference? The case of small coffee producers in Nicaragua’, Development in Practice, Vol 15, (3/4), pages 584-599, by Karla Utting-Chamorro, June 2005 Full document.

id21 Research Highlight: 13 February 2006

Further Information:
Karla Utting-Chamorro
Leeds Institute for Environmental Science and Management (LIfE)
School of the Environment
University of Leeds
Leeds LS2 9JT, UK

Tel: +44 (0) 113 3436461
Fax: +44 (0) 113 3436716
Contact the contributor: karla@env.leeds.ac.uk

University of Leeds, UK

Other related links:
'Alternative models of assistance for Tanzanian coffee smallholders'

'The golden blend – strategies for marketing Fair Trade coffee'

'Comprehensive reforms needed for Tanzanian coffee'

'Counting the cost of a cup of coffee'

'Taming the market: can self-regulated ethical trade control globalisation?'