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Why Authentic Fair Trade Matters: The CESMACH Story Retold

Equal Exchange    Yobo Member
January 19th, 2012



Credit: WikiMedia

By Phyllis Robinson

When the Ecological Farmers of the Sierra Madres of Chiapas (CESMACH) found an important buyer to purchase their coffee, they were elated. “It was a dream come true,” Sixto Bonilla, export manager, says. “For a small-scale farmer organization to have a large company interested in buying their entire production … you can’t imagine a better situation.” Yet, soon after, the buyer began to overstep its bounds and impose practices the co-operative felt undermined their development efforts. “They began telling us how to run our business, where to store our coffee, and where to process it;” Bonilla continues. So, CESMACH got organized. They faxed a letter to Fair Trade coffee buyers across the United States denouncing this company, breaking its contract with them, and inviting Fair Trade buyers to purchase the co-operative’s organic coffee.  Equal Exchange and other coffee buyers stepped in and now the co-operative and their community are thriving.

This was the opening of an article posted last year on the Fair Trade Federation’s website.  Today, I’m reprinting the full story here because the narrative powerfully illustrates the clash between two world views: the organizational development strategy of a coffee producing co-operative of small-scale farmers and the buying strategy of a large, multi-national coffee company. It exemplifies the difference between Authentic Fair Trade and a corporate-centered imitation of Fair Trade.  The former focuses on small farmer co-operatives and a belief that Fair Trade’s mission is to support the development model of organized farmers.  The latter is centered on the goals of the corporation (profit, efficiency, economies of scale, control) ; the farmer organizations in this case are irrelevant, perhaps even contrary to the corporation’s goals.

This story shows how small-scale farmers in Chiapas have, against all odds, organized themselves and built a powerful model of business enterprise, community development, and environmental stewardship.   I hope it helps clarify why the Fair Trade farmer co-ops, Alternative Trade Organizations, and true Fair Trade activists are in such opposition to TransFair’s new Fair Trade for All initiative. Please read on.  Let us know what you think.  Sign on to our statement of support for Authentic Fair Trade.

Introduction:

I first learned of CESMACH in the fall of 2004 when Equal Exchange received their fax asking Fair Trade companies to consider buying their coffee.  The small-farmer Fair Trade co-op announced that they were breaking their contract with a US “imperialist” company and were looking for new buyers that would appreciate the quality of their organic coffee, while also respecting their autonomy as an independent business and community-based organization of small farmers in the region.

We lost no time.  It just so happened that we were looking for an additional source of high quality, organic Mexican coffee.  Todd Caspersen, director of purchasing, and I flew down to Chiapas to learn more.  We weren’t disappointed.  We offered to buy 10 containers of coffee, 60% of their production at the time.

Since then, Equal Exchange’s relationship with CESMACH has grown, developed, and flourished.  We continue to respect their agricultural and business practices, and be impressed by their organization and their commitment to protect the UN-designated biosphere in which their farms are located.  We have visited them many times, bringing Equal Exchange staff and customers.  The following is their story, told to us over those initial visits.

Background:

The CESMACH farmers are located in the buffer zone of El Triunfo, a UN- designated biosphere, rich in flora and fauna, containing many endangered and protected species. Agricultural activities are not permitted within the biosphere, but organic farming is allowed in the buffer zone, which separates the biosphere from the surrounding region, as long as it is done in such a way as to protect the fragile environment of the rain and cloud forest. For thousands of farmers living in this area, coffee is the principal agricultural activity and their only source of income.

When CESMACH began in the early 1990s, coffee sold for only 80 cents per pound and the only outlet for small farmers at the time were the local coyotes (middlemen).  These coyotes had all the power and dictated the price they paid the farmers.  As the only folks with vehicles in the area, they often charged exorbitant rates to transport the beans out of the mountains.  The farmers had no recourse.

The CESMACH Story*:

*as told to us by a group of farmers over several days in the community of Rio Negro, municipality of Toluca.

For many years, the farmers tried to make a living at different agricultural endeavors, but nothing was working.  Eventually, they turned to coffee, but low prices kept them living in poverty and at the mercy of the coyotes.    In the early 1990s, a small number of farmers decided to organize themselves into a co-operative and to study organic techniques. They connected with other farmers nearby and their organization began to grow.  Victorio Velasquez Morales, a founding member and former CESMACH president, remembered, “When the other farmers saw that we were serious, they began to get interested. Shortly after, some other farmers from Colombia, a neighboring community asked to join, and then more from Toluca and Laguna came.”

“Our membership was growing; we had around 240 members. We had lots of coffee in production, but we couldn’t certify it as organic yet and we still didn’t have an export license, so we had to sell it to another co-operative to export for us. For that reason, we continued to get a very low price those first two years. Disappointed by the low prices, in the second year, members began to leave or sell their coffee once again to the coyotes.”

“Finally, in 1996, we got our organic certification, and we exported our first container of coffee. But the members still didn’t have a lot of confidence. So, they only turned in some of their coffee to the co-operative and sold the rest on the local market [to assure themselves immediate cash]. But when we got a great price for the first container, and all the members were really happy. The next year they turned in more coffee and we were able to export two containers.”

“In 1997, we signed a contract to export even more coffee.  But the weather that year didn’t cooperate and still some members held back their coffee. We fell short of the contract and the buyer refused to pay us the agreed-upon price. We were also supposed to get an extra premium above the market price, but they refused to pay us any of that premium. It was a huge failure. Of the 240 members, only 71 stayed with the co-operative.  The next year, we were much more careful. Our biggest problem was that we couldn’t pay any of the farmers in advance, but the coyotes could, so they were still getting most of the coffee.”

“Bit by bit, we got some loans for technical assistance and we were able to hire some staff.  In 1998, we got 325 pesos from every member and with a small bank loan, we were able to buy a little house in Jaltenango. It was pretty beat up and far from the center of town, but we used it as our office. All the members pitched in to fix it up and we started saving money to build a warehouse as well. Although we got a loan, 40% of the money for the warehouse came right from the members.”

Another member, Benjamin Lopez, told us: “It was really hard in the beginning. Even when we paid the members, they still had to sell some coffee to the coyotes in order to survive.  We didn’t have any trucks to transport our coffee from the farms to Jaltenango.  Without our own transportation, we would just keep losing money. We asked for help from the coyotes but they said no, that if we tried to organize they wouldn’t help us and they would actually stop buying our coffee.”

It was slow-going and then “out of nowhere”, a coffee “giant” from the North offered the co-operative an exclusive contract to purchase all of their organic coffee.  The farmers were jubilant.  Their years of persistence and hard work had finally paid off.

Things were rosy for some time.  “We agreed to sell them our coffee, to deliver only the highest quality, and to protect the biosphere,” Sixto Bonilla told us.  But soon their luck began to change.  “…they began telling us how to run our business, where to store our coffee, and where to process it.”

Morales told us, “We didn’t think that was right; we tried to say to them, ‘you run your company and let us run ours,’ but they were insistent on having us follow their rules. It was a very hard decision, but in the end we decided we had no choice but to stop working with them.”

Maria Leticia Velazco Lopez, community delegate to CESMACH, said: “In 2000, we only had one client, a very important coffee company in the U.S. We had never met them, but we knew they were important and that we were very lucky that they were buying all of our coffee.  They were a  good client; but, in 2003, they made an agreement with AMSA (the largest coffee exporter in Mexico] and Conservation International [a U.S. environmental organization]…. We would have had to sell our coffee to AMSA, and then AMSA would sell it to the US company. That would mean AMSA would be making money off of our coffee.  Also, they were paying all the Fair Trade premiums to this environmental organization instead of giving the premiums directly to the co-operative [as stipulated by the Fair Trade principles].  So we asked them to please work directly with us and to pay the premium directly to us [all part of the Fair Trade principles], but the company refused…We saw that we didn’t have any bargaining power.  It was the last straw and we ended our contract.”

Silvia Roblero Torrez, production coordinator, told us: “The co-op held a General Assembly and the members decided we should call the company and try one more time to ask them not to require us to sell through AMSA. There were four of us who had to make that phone call. We felt that direct relationships and communication with our clients was really important for the success of our co-operative. But none of us had ever spoken directly to anyone at this company before. We had never made an international call before. We were very nervous, but we all sat down around this table with just a telephone in the middle … and we called them. We were really scared.  We didn’t want to lose them as clients, we knew that they were the ‘giants of the coffee industry’ and we were really fortunate to have this contract with them.”

“So, we told them that they had been good clients and we wanted to continue to work with them, but we couldn’t accept working through AMSA. We had worked hard to achieve a level of organization that went beyond coffee and we wanted to work in the way we felt was best for us. But they said no. We couldn’t believe it!  We had explained our ideas… and they just simply said no.  And all of a sudden, that was it, we didn’t have any clients. We were totally dejected and dispirited. But, then we talked it over and decided that there was no other choice; we would just have to go out and find new clients.”

Carlos Romero Velazco, founding member and CESMACH president, said: “In 2005, after we ended our relationship with that coffee company, we sent out a press release to Fair Trade  coffee companies in the US stating that we were looking for new buyers. It was  a huge risk – we didn’t know anything about coffee buyers because this company had been buying our entire production.  But, well, we had nothing to lose.”

“Today, we know all of our clients personally, and we talk to them directly. In the end, we were proven right. Of all the co-ops who used to work with this company, only the four of us who rejected the AMSA proposal are still in existence. Every other co-op has gone out of business.”

From that day forward, our relationship with CESMACH has been steadily growing; we have visited once or twice each year to meet with the farmers and learn more about their organization. Beth Ann Caspersen, Equal Exchange Quality Control Manager, has visited each year to exchange ideas, identify the flavor profiles we’re interested in buying, and select the coffee we buy.  In 2005, when Hurricane Stan devastated southern Mexico and CESMACH lost 25% of its harvest, together with our consumer allies, Equal Exchange raised tens of thousands of dollars to help the farmers renovate their farms and deliver emergency food aid and supplies to their communities.

CESMACH is involved in many environmental protection and social development projects in the area.  As part of their Sustainable Coffee Project, they are planting new coffee trees, as well as citrus and other fruit-bearing trees.  They have a Women’s Project to teach leadership development and co-operative management to the women members and wives of members.  The women are also working with organic gardens and domestic animals to diversify incomes and their families’ nutrition.

Each year, CESMACH is exporting more coffee into the Fair Trade, organic market, and more farmers are asking to join the organization.  Along with three other co-operatives, they used their Fair Trade premiums to buy land and in 2008, they finished construction of a new dry processing plant.   Milling their own coffee has enabled CESMACH to further control for quality and reduce costs.  After years of trials and setbacks, today CESMACH is seen as a leader among Fair Trade co-operatives and is recognized for their innovative environmental, productive, and social projects.  Taking huge risks to maintain their dignity and their self-determination seems to have paid off.  We certainly find inspiration in their example.

Note: Mexican newspapers covered the story of the break between CESMACH and the US company.   A Mexican coffee association bulletin, El Buen Café wrote the following about the situation:  “The strategy… consists in breaking the organizational structures of the small-scale producers, condemning them to be merely ‘suppliers’ of coffee, leaving the whole processing and exporting steps to intermediaries, in this case AMSA, the most powerful exporting company in Mexico.”

Similarly, a Mexican journalist wrote in La Prensa Grafica, “The four co-operatives said these actions form part of a ‘neocolonial’ strategy whose goals are to create dependency on multinational companies and finish off the co-operatives’ organizational and administrative capacities.”

Fair Trade was created in acknowledgment of the fact that small-scale farmers will only be agents of their own development when they control their businesses and are not merely pickers and suppliers in an industry where the vast bulk of the profits go to everyone else in the long chain of intermediaries. Direct relationships were established between buyer and producer to eliminate the need for, and the abuses of, the middlemen. So the sad part of this story is that the farmers had to struggle once again not to be reduced to “mere suppliers.” The triumph is that despite the risk (and the tremendous balance of power against them), the farmers remained true to their convictions, were able to say “no” to a very large and powerful coffee company, and are still thriving today.

[Source: Equal Exchange]

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