Chapter 3
Agribusiness linkages in the selected countries

Argentina

Federation of Agricultural Cooperatives of San Juan

FECOAGRO is a second-degree cooperative made up of 25 first-degree cooperatives with 400 families of small agricultural producers. These families have decided to go ahead with an ambitious project of organization, training and technological incorporation (Table 18). FECOAGRO was founded in 1992, with the aim of increasing incomes through improvements in production, productivity, trade and lines of diversification. Its scope includes improving family living standards.

The Province of San Juan in northeast Argentina is the sphere of influence where FECOAGRO was created. It borders the Andes and is characterized by a mountainous geography and an arid climate. At the production level, its tradition has been viticulture, with 70 percent of the area under cultivation in the province. Next in importance is olive cultivation for the olive-oil industry and preserved olives. In the past, the area included grape-growing and wine-production cooperatives that were unable to implement technical modernization or product diversification. Moreover, the associates had no trust agreements with cooperatives at the commercial level.

In this context, a group of agricultural technicians (extension workers) started to work with a small number of unemployed and landless rural workers in 1983. These technicians belong to the Rural Extension Agency of the INTA. This is a national governmental organization that works in agricultural research and extension and contributes to improving the living conditions of rural producers and their families.

The need arose to promote the integration of producers as a way of improving the situation of smallholders in the province and of diversifying production by alternatives such as medium-large cotton fibre, horticultural seeds, aromatic plants and grapes. Accordingly, an organizational initiative was founded by a group of rural workers, landless farmers and INTA technicians. In 1983, the "Unidad de Planes y Proyectos de Investigación y Extensión para Productores Minifundistas" (Plans and Projects of Research and Extension for Smallholder Producers), a cooperative entity of the INTA, was created. It provides significant support in financing organizational projects such as those of the cooperative.

TABLE 18
FECOAGRO agribusiness linkages

TABLE 19
Agribusiness linkages - FECOAGRO and producer

Substantial importance was first given to training in a wide range of subjects. To this end, support was granted by the Universidad Nacional de San Juan, INTA, Federación Agraria Argentina and Dirección Provincial de Cooperativas.

The main services offered to the producer are: marketing, acquisition of inputs at a low price, machinery, equipment, credit, technical assistance and training services, and education and programmes to improve the living standards of members (Table 19). Three hundred tonnes of horticultural seed are traded annually at national and international level through the efforts of the cooperatives grouped together in FECOAGRO. The cooperatives associated with FECOAGRO represent 45 percent of all the onion and alfalfa seeds produced in the Province of San Juan.

In addition to those established with the partner cooperatives and other supporting cooperatives, the most important agribusiness linkages of FECOAGRO are with government, third parties such as the regional university for education and training, Federación Agraria Argentina, and international cooperation.

In 1993, one of the interesting linkages in the FECOAGRO case was established directly with the IDB to advance a financial and technical cooperation agreement. To achieve this, a system of microenterprise credits was implemented. This was how the entity gave a credit of US$500 000, of which US$300 000 went to creating a revolving fund for financing small productive projects; the remainder went to constructing its own plant for processing seeds.

Currently, the cooperatives export hybrid onion seeds to Japan and the Republic of Korea. They also export hybrid seeds of carrots, beans and flowers, among others. These exports have an external evaluator for production technology, organization and product quality. For the national market, there is great diversity in seed supply, which is increasing.

Chile

COOPEUMO

The COOPEUMO cooperative is a moderately complex case in terms of agribusiness linkages. It is a rural cooperative, located 155 km from Santiago, the capital of Chile. Its purpose is to provide services to producers of avocados and citrus for export. Being close to the centre of consumption and ports of embarkation, and with good-quality natural resources, COOPEUMO is in a privileged position compared with other rural areas of the country. The cooperative was founded in 1969 as part of an agrarian reform process, and was planned as a multiactive service cooperative with productive and consumption aspects. Following the 1973 coup, government support was withdrawn as a result of the government distancing itself from promoting and supporting rural organizations. As a result, the cooperative entered a period of stagnation between 1977 and 1980, reaching a stage of almost complete inactivity.

TABLE 20
Agribusiness linkages of COOPEUMO

In 1981, a revival process was initiated and the cooperative obtained the approval of a project financed by the Inter-American Foundation. The organization began sustained growth from this matrix project, which has provided financing autonomy with a revolving credit fund and financing for operating expenses.

The cooperative's objectives are: raise rural family incomes; improve the quality of life; educate and permanently train its members to successfully take on a role in society; and consolidate the cooperative as an enterprise and service producer. In addition to having 437 active members, it assists 171 families with programmes of technology transfer (with state support).

COOPEUMO has six kinds of agribusiness linkages (Table 20). These various linkages are for supplying technical, managerial and trade support, and funding for infrastructure.

TABLE 21
Agribusiness linkages - COOPEUMO and producer

The associate producers have a wide variety of services as a result of such agribusiness linkage diversity in production, family level and redistributive type (Table 21). Despite such benefits, the cooperative faces active competition from intermediaries.

These intermediaries compromise future purchasing through advances. The cooperative only markets 10 percent of production. Because of the activity of these intermediaries, there is a high degree of informality and poor marketing practices.

The cooperative has the following innovative services:

• Tax accounting service: The cooperative is responsible for providing the necessary technical assistance to comply with the social regulations of the workers, manage monthly and annual tax declarations, and maintain the producers' ongoing relationship with the accounting administrative system and with the cooperative.

• Information service: In cooperation with FAO, the cooperative Centro de Información y de Gestión Empresarial (Information and Business Management Centre) was created. This makes information available to small producers in order to assist them in decision-making. In this way, the economic results and costs of production can be predicted.

The results of COOPEUMO's action are shown in its increased productivity, improved competitive position compared with the large-sized enterprises, and more favourable prices. Anther important consequence is great emphasis on added value to primary production, owing to the direct intervention of the cooperative in domestic and foreign marketing.

COOPEUMO is currently the rural cooperative with the greatest economic development in all of Chile. It has different strengths, such as its own technical team of great capacity, with the ability to design projects, establish external linkages and manage resources. However, the cooperative has had to restructure its management in the last three years owing to a loss of competitiveness by some of its lines, e.g. maize and wheat.

Chacay Cooperative

The Chacay Cooperative is located 375 km south of Santiago. The area is characterized by good-quality natural resources and proximity to important consumption centres. The cooperative was founded in 1968 as part of the agrarian reform process. The cooperative was planned as a multiactive service cooperative that included aspects of production and consumption. Its initial objectives were to promote the economic, social and cultural development of its members. It attracted 2 000 members but, as occurred with COOPEUMO, the 1973 military coup weakened it. In 1990 and 1991, it became almost completely bankrupt. In 1993, 15 members decided to give it fresh impetus.

At present, the cooperative has 90 active members, but also supports technology transfer programmes with government contributions to another 70 families. It has a central head office and an agro-industrial unit for processing fresh and frozen products. The main products and services of the cooperative are: contract farming for horticultural crops and berries; processing services; and technical, managerial and marketing services.

Its main domestic markets are processing enterprises, supermarket chains, retailers, restaurant chains and hotels. In addition, the cooperative has an export market, mainly in Europe and North America.

The life of the cooperative can be viewed at different stages: the first stage between 1964 and 1973; the stagnation stage of 1974-1992; and the reactivation period from 1993, when a new technical team was organized. In 1994, the cooperative succeeded in managing an agro-industrial network with Frisac, an entity with which it initiated a first pilot experiment in agro-industrial bean production.

Under the contract method, the agro-industry alternative enabled significant economic development of the members. Then, international crises caused an overall weakening of agro-industrial linkages and many important producers began to leave. This situation affected the members of Chacay as well as Frisac because the cooperative fell into an institutional crisis that intensified in 1991. It had to reduce personnel, diminish its sowing programmes under the contract method, and halt technological innovation projects. At present, the cooperative is developing a commercial plan with minimum resources and has targeted its strategy towards providing services to businesses.

TABLE 22
Agribusiness linkages of the Chacay Cooperative

TABLE 23
Agribusiness linkages - Chacay Cooperative and producer

The cooperative's emphasis is in contracts or linkages with agro-industries, in addition to linkages with producers (Tables 22 and 23). The economic results with different agro-industries are variable as a result of economic and market conditions. In 2000, with the implementation of the agro-industrial plant of the Chacay Cooperative, a new stage of development of the chain was put forward. In this stage, the cooperative processes a large part of production, with the emphasis on the search for markets for directly processed products.

Among the favourable effects of these agribusiness linkages are:

• For producers, income has been increased, as has their quality of life and that of their families.
• Negotiating power has improved and productive diversity has widened with more intensive land use.
• The cooperative has strengthened organizationally.

• The cooperative has increased its possibilities through agreements with the government and agro-industries.

A better quality of raw material at lower cost is now available to the cooperative.

However, some limitations have been observed. Because of the economic crisis that the cooperative has had to cope with, there is distrust among producers resulting from the reduction in prices compared with previous seasons; the producers had to bear the risks of the crops prior to the cost increase and the market uncertainty. The cooperative has also experienced problems caused by: a lack of working capital to finance production programmes; the international market crisis; arbitrariness in negotiating conditions; and slowness in administrative innovations in the face of rapid supply growth.

Ecuador

Salinas dairies

This case is one of the most representative of successful experiences of Ecuador's rural development projects. In contrast to other cases analysed, the nodal relationship is established between two communities - the Salinas community and the religious community. Many linkages spring from this relationship (see below).

In 1978, the first rural dairy was set up in the parish of Salinas, which was the initial core of Ecuador's rural dairies. At present, there are 70 rural community dairies, in which 1 200 skilled farmers work. The project plants process about 6 million litres of milk per year at the national level, with 1 200 families of beneficiary producers.

The dairies are located in the central region of the Ecuadorian mountain range. The Salinas parish has 11 000 inhabitants, of whom 80 percent are indigenous, with a literacy level of 22 percent.

Traditionally, salt mines have been worked in Salinas. In the region, large noble estates were established where the dominant wealthy family wielded great power through taxes on salt mining. Until 11 years ago, salt was one of the main economic resources. The working families lived under master-servant relationships. Therefore, their need for a cooperative arose in order to free themselves from this dependence.

In order to cope with poverty, the local inhabitants tried to organize themselves to control the salt mines and industrialize them. In 1967, an attempt was made to organize a savings and loan cooperative but this attempt failed.

These failures can be explained partly by the interference of landed vested interests, but also by many internal conflicts at social, ethnic and family level. Finally, with the intervention of Misión Salesiana and religious leaders, community enterprises began to be formed in Salinas.

The social organizations developed around these community enterprises are complex. As part of this group, the Fundación de Organizaciones de Salinas (FUNORSAL), a second-degree organization brings together 28 local organizations. It provides organizational support to the entities that group, advise and train them, and above all, improve negotiation capacity with financial institutions in order to obtain foreign assistance. It currently supports, finances and trains the local organizations according to a production diversification strategy (Table 24).

TABLE 24
Agribusiness linkages of Salinas dairies

In 1972, the savings and loan cooperation, Salinas Ltda, was organized by religious and private initiative. It has about 500 members and has advanced programmes of buying livestock and milk, building houses, reforestation, roadbuilding, community administration and mechanization, among others.

TABLE 25
Agribusiness linkages - Salinas dairies and producer

Misión Salesiana has under- taken community charity work, such as a youth home, education, infrastructure and sanitary works. In 1975, a youth group was formed to promote various productive activities including baking, pork production and sheep-rearing.

Within this great variety of mutually interlinked organizations, agribusiness linkages have been established as shown in organizational support to the producer and the community, support in training, techniques, improved living standards, production diversification, and improved infrastructure, among others (Table 25). The dairies represent one of the most important activities in this interaction. They generate an economic movement of about US$3.2 million annually.

A distribution network has been set up. It includes a store, relations with a supermarket chain, sales through members, and sales in cooperative stores.

Among the interesting particularities of the agribusiness linkages are those for community benefit, such as property and land usufruct, and assets such as livestock, factories and stores, which are generally targeted to improving the living standards of the local population. In addition to dairies, the various community enterprises have developed many products, e.g. meal, mushrooms and other foods. These different products are traded through the Salinas trader, who seeks markets for products produced in different agro-industrial communities.

The problems facing dairies and other agro-industrial businesses relate to competition with large industries of major economic capacity in information, advertising and sales.

Cassava starch processors

Sweet and dry cassava starch is produced by the starch-extraction plants (rallanderias) in the parishes of Calderón and Canuto, most of which have a semi-artisanal processing system.

The main products obtained are sweet starch from dry and wet cassava, and sour cassava starch. Various by-products are obtained from the extraction process, such as: shells that serve as animal feed; "cachaza" (residue from the sugar-cane milling operation or sugarcane liquor), which is sold for balanced food production; and bagasse, which also serves for producing balanced food. This activity generates direct employment for about 1 380 people in the 230 rallanderias in Manabí Province. It is calculated that the rallanderias produced 2 400 tonnes of dry starch in 2001.

The initiative emerged from Ciat, Fundagro and the Instituto Nacional de Investigaciones Agropecuarias between 1985 and 1993, with the support of the Agency for International Development (AID). The backing of these organizations consisted of technical support to processing, management, skills-building and quality activities. The Cassava Producers and Processors Union was formed, which supported the marketing of different products. This union subsequently disappeared because of strategic problems in marketing. Once this entity had disappeared, each producer or unit had to take on responsibility for marketing the products. At present, most operate independently as cassava processors (212 rallanderias). There are also some cassava producers and processors associations grouped in a second-degree association to obtain better prices. The association has 34 members and owns a mechanized rallanderia.

TABLE 26
Agribusiness linkages of cassava processors

The main agribusiness linkages are established between the cassava producers and the processors, and between the processors and the dealers, as well as the local processing enterprises the producers sow cassava in marginal areas; most are small producers cultivating on the mountainside, and that make verbal agreements with the processor (Table 26).

It is estimated that at least 80 percent of the processed cassava goes to the Colombian market. There a few intermediaries between the Colombian market and the Ecuadorian processors, who also intervene in the supply for domestic consumption. In many cases, the intermediary gives an advance payment to the cassava processor, either in cash or in raw material in order to guarantee the fulfilment of the deal.

The impact of agribusiness linkage has mainly been economic. No major progress has been observed at the organizational level, except for a recent initiative of 17 producers to collaborate in order to do business with a Colombian. There have been some advances in activity planning in community activities such as peeling the cassava and modernizing the processing infrastructure. The cassava processors show that no technical assistance is required, as the process is relatively easy.

TABLE 27
Agribusiness linkages - cassava processors and producer

In addition to cash or in-kind advances provided by intermediaries, a producers association loans limited amounts of money for six months and with a guarantee (Table 27).

Colombia

Sumapaz uchuva exporter

About 20 years ago, primary crops were planted in the Sumapaz region in Granada, one hour from Bogotá, the capital of Colombia. In 1985, the family businesses Frutierrez and Ocatí were founded to export tropical fruit. There has been considerable expansion in the growth and export of uchuva in the last seven years. The uchuva has a special market niche in Canada, Germany, Israel and Japan. The Colombian produce stands out for its colour and flavour.

There are currently 250 producers cultivating uchuva in the Sumapaz region. Apart from the exporters, there are also small retail traders and some wholesale intermediaries that buy surpluses for the domestic market. Frutierrez, the associative entity that participates in the agribusiness linkages analysed, has 50 operators in the uchuva region. In addition to uchuva, the exporters handle a group of exotic fruits for export. Average monthly sales are about 400 tonnes, of which 70 percent goes for export and the rest to the domestic market. Domestic consumption of uchuva has developed as a result of export surpluses. The producers also cultivate other commercial crops to sell in Bogotá, such as fruit and horticultural crops.

TABLE 28
Agribusiness linkages for uchuva

The following agents participate in the agribusiness linkages (Table 28): traders in uchuva and other exotic fruits; producers; and private traders.

Exporters initially tried to produce the fruit on their own farms. However, owing to labour-force requirements, and given the knowledge and experience of local farmers, they decided to link to them for trade The trader makes a supply contract with the producer, even without a written contract, whereby all the production is sold to the traders and has to meet set quality requirements. The trader pays in cash or by cheque every 15 days and has to buy the entire production. At present, Frutierrez has 80 suppliers. Occasionally, it gives loans on the crop. It hires an agronomist to provide recommendations on improving quality.

In addition to links maintained with the supplier, the producers have established other linkages with credit entities, input warehouses, and investors with whom companies or businesses are formed. The exporters finance some large-scale farmers and, in turn, the farmers finance small producers, but only in the production stage of the crop. Other investors finance the entire crop from its setup to production.

Producers and traders have an interest in diversifying into other exotic fruits. The most significant impact of this linkage is the greater negotiation ability of producers as well as the trader. The crop has also generated employment in the region as it uses intensive labour, mainly from the family.

Some private traders also act as investors with producers in order to guarantee the supply of fruit, which some sell to international suppliers.

The linkage between the producer and the export entity is not as important as in other cases analysed. The producers have to seek sources of credit, provision of inputs, technical support, etc. The farmers argue that they have created crop technology empirically, and over time, have favoured suitable methods of cultivation and management. Farmers neither receive significant government support nor do they do anything to obtain it.

In general, it is agreed that the crop has improved incomes considerably. As a result, living standards have risen and transport vehicles have been acquired in the last ten years. Thanks to this linkage, progress in schooling has bee noteworthy for producers' children.

Moras del Oriente

The case location is in Antioquia Department, 30 minutes from Medellín, Colombia's second city. Antioquia Department has a rather unusual culture for Colombia. Its population of white immigrants, free from any bonds of servitude, has built a prosperous economy as landowners. This culture has been characterized by its associative trend, and it has founded institutions such as a joint livestock business, with the participation of small and medium-sized producers.

This case began in the mid-1970s, when Jairo Patiño, the leader of the local community, concerned about the limited opportunities in the region for farmers (most were small with limited economic resources), created an alternative economy through fruit agro-industry. The enterprise began as a producer and supplier of various agricultural products. Later, with one of the 40 farmers in the region, the decision was taken to specialize in blackberries.

Through work with producers, Moras del Oriente has achieved a high level of technical modernization and quality that has opened up markets in the supermarket chain, fruit processors and wholesale businesses. Currently, Moras del Oriente processes fruit in pulp form, jam, cans, juice and drinks, as well as fresh trade. Direct beneficiaries number around 500 producers.

A large linkage activity (Table 29) with the producer has emerged from Jairo Patiño's leadership, as follows:

• With producers/suppliers: There are various kinds of agreements. The producer may act as provider, partner or lessee of the crops already established. Producers have a close relationship with Jairo Patiño, their leader. Producers have loaned money to undertake investments in the infrastructure needed for processing. Jairo Patiño has also developed his own resources in blackberry crops, guaranteeing the sales of procedures and profitable practices. Through his business, he provides cropping incentives through technical assistance, financing seeds and fertilizers, and training in technical and social aspects (Table 30).

• With the Junta de Acción Comunal of Guarne District: through the junta, roads and a school have been constructed, public services have been provided, and housing has been improved.

• With the Coagroantioquia cooperative: input credits are provided to blackberry producers, with payment in accordance with conditions of producers and their interests.

• With government entities such as the National Training Service (SENA), Colombian Corporation for Agricultural Research (CORPOICA), PROEXPO (export promotion fund) and Corporation Colombia International (CCI); support in information, technology, training and trade promotion.

• With private regional organizations such as universities: technical support. Private enterprises have also sponsored Moras del Oriente in its modernization programmes.

TABLE 29
Agribusiness linkages - Moras del Oriente

TABLE 30
Agribusiness linkage - Moras del Oriente and producer

In addition to generating employment, Moras del Oriente has improved living standards for the beneficiary families. There is a relationship of trust between the enterprise and producers, which is not mediated by any written contract. About 85 percent of the local producers deliver their production unconditionally. Moras del Oriente has begun to promote production diversification in order to reduce market risk.

New aspects of this agribusiness linkage include the creation of an investment fund using 15 percent of the profits, which were initially used to promote blackberries among new producers without any contractual commitment. Moras del Oriente is planning to set up another similar fund for pensions for producers who are no longer able to actively maintain production links. Jairo Patiño undertakes the management role for the community.

Costa Rica

APILAC

The Asociación de Producción e Industrialización de Lácteos (Association for the Production and Industrialization of Dairy Products - APILAC) is an agribusiness developed in Costa Rica to benefit small and medium-scale producers (Table 31). This organization was founded in 1993, acquiring a dairy-products cooperative that was in an economic crisis. It brings together 136 small and medium-scale producers, of which 79 are members of the enterprise. It also guarantees services to producers such as stockpiling and secure marketing of milk, processing, input supply, channelling loans for production, and technical services such as artificial insemination. The maximum capacity of the plant is 20 000 litres/day, of which 47 percent is currently being used.

TABLE 31
Agribusiness linkages of APILAC

TABLE 32
Agribusiness linkages - APILAC and producer

APILAC has commercial links with distributors that manage most of the production, retail and sales at the plant. It produces about 40 different products for the domestic market, in particular, fluid milk, flavoured milk, custard, three varieties of cheeses, ice creams, and drinks.

The economic results of APILAC are favourable, although its assets are still underutilized. The main impacts of the enterprise have been: employment generation, stable income for families, technical training, and promotion of modernization processes (Table 32).

Guatemala

Cuatro Pinos

Cuatro Pinos Cooperative is located 35 km from Guatemala City, Guatemala. It operates in a smallholding region and the population is indigenous. Only 10 percent of the cultivated area is dedicated to the production of different vegetables, with the remaining 90 percent under maize and beans.

Cuatro Pinos focuses on exporting fresh vegetables (Table 33), mainly to the United States of America and the United Kingdom. The main export products are: china pea, French lima bean, summer squash, artichoke, tomatoes and chilli pimento. There are a total of 580 associate producers, with a sowing area of 350 ha per season.

The cooperative was formed after a national catastrophe, the 1976 earthquake that destroyed many towns. Originally, the cooperative was formed with fresh-vegetable producers that sold on the local market. In 1979, the legal structure of the cooperative was created with 21 members. It began by cultivating vegetables for export with demonstration plots. The target market identified was the United States of America. In the beginning, the cooperative was supported by the Swiss Group. In addition, other foreign organizations were linked, such as ALCOSA, Latin American Agribusiness Development Corporation, AID and private Swiss exporters. The public institutions of Guatemala provided the farm technology and credit for the producers. Cuatro Pinos organizes vegetable production for exportation, provides training at the field level, supplies inputs, and handles the collection, selection and storage of products. Its has made progress through its own exports to European and American markets.

TABLE 33
Agribusiness linkages of the Cuatro Pinos Cooperative

TABLE 34
Agribusiness linkages - Cuatro Pinos cooperative and producer

There have been different periods in the life of the cooperative. Initially, it had lands where it produced its own crops. The crisis of the ALCOSA traders forced them to stop growing. Between 1978 and 1990, the number of members grew. However, in 1995-1996, the cooperative was practically bankrupted by the conduct of its administrators.

Within the cooperative, the Agricultural Department and the Agricultural Committee are responsible for planning of production from contracts. The cooperative has eight collection centres and a central collection centre to manage the post-harvest operations.

The main reasons for success include: the support from the Swiss Group for the creation and organization of the cooperative; trade development in international markets; national and international cooperation; and a good supply of export crops.

Some favourable effects of the cooperative include: improving family incomes; generating work; and improving living standards, which is showing in education, health, nutrition and the linking of women to the cooperative's work (Table 34). The cooperative operates on the technical aspects of production as well as in family well-being.

El Limón

The El Limón cooperative is located 93 km from Guatemala City, in the municipality of Morazán where the climate is hot. Its main product is dehydrated lemon for export. Small producers, who have been improving the technical modernization of cultivation, supply the raw material.

The cooperative was founded on the initiative of Gabriel Peñate, a parish priest, with the support of Misereor, an institution created to combat world hunger and disease. It is an organization of the German Catholic Church. The cooperative was created in 1993 and has 25 members. In addition, there are other indirect beneficiaries, such as the other producers that sell their lemons to the cooperative (Table 35).

The cooperative employs 135 workers. It has a technical assistance department that provides advice to producers and supplies improved vegetative material (Table 36). Dehydrated lemon is obtained through artisanal processes, such as removing the humidity using solar dehydration as a heat source. This process takes four to six months according to the market preference. The main buyer countries are Arab countries, particularly Lebanon, and the United States of America.

TABLE 35
Agribusiness linkages of the El Limón Cooperative

TABLE 36
Agribusiness linkages - El Limón and producer

The main agribusiness linkages are found between the producer and the cooperative. The member has to deliver the lemon crop; benefits arise from trading and profit-sharing. The member also has access to other services, such as technical assistance, training and credit.

The product buyers are large exporters. The cooperative has attempted to enlarge the market through commercial missions and participation at world trade fairs. It has associated with the Guatemala Exporters Association for Non-traditional Products (AGEXPRONT). Through PROFRUTA, the Ministry of Agriculture has tried alternatives to processing lemon in order to diversify the market.

The impacts of the cooperative include: improving the conditions of lemon marketing; stabilizing prices; generating work; and enabling producers to participate in decision-making. It has also raised living standards for families in qualitative terms, such as in improved housing.

El Salvador

Azules

The case of Asociación de Productores de Añil de El Salvador (Producers' Association of Indigo in El Salvador) or Azules is quite recent. However, it was selected because it deals in a natural colorant, and is, therefore, considered a special market niche.

Until the end of the nineteenth century, indigo use was a booming economic activity. Its importance declined owing to substitution by cheaper synthetic products. However, demand has turned against synthetic products in favour of natural products. For this reason, indigo excels as a promising product, because it can bring about an agro-industrial development process.

The project began in 1992, when the cultural recovery of indigo was planned. In 1995, the German Government financed technical support for and marketing of indigo through the German Cooperation Agency (GTZ) with the national counterpart, Agronatura. In 1999, at the request of the Agrisal Group, a systematic support process to the indigo sector began. In 2000, the Inter-American Institute for Cooperation on Agriculture (IICA) coordinated the project to revive the cultivation and processing of indigo. An entrepreneurial network called Azules was subsequently formed.

TABLE 37
Agribusiness linkages of the Azules producers association

TABLE 38
Agribusiness linkages - Azules and producers

This association of indigo traders is a heterogeneous group of independent producers, private enterprises, cooperatives and indigenous groups. It has 20 associates for an area of 129 ha. Eight of the associates have a plant for rustic processing. In addition to processing their own raw material, they make this service available to other producers that lack infrastructure.

Although the export value of indigo powder represents only 10 percent of the product value, US$4 000 in 2001, it is expected a projected increase by a factor of 4.2 in 2002. The project's sphere of influence includes all of El Salvador. The producers are mainly small producers, with a low level of education and income. A minority are professionals and entrepreneurs with a medium or high income and higher education, participating in other agro-industrial activities or having their own businesses.

The marketing office of the indigo traders association plays an important role because it is responsible for buying and selling the product nationally and internationally. International cooperation and support from the Ministry of Agriculture stand out among the agribusiness linkages (Table 37). Organizational, logistic and technical support has been provided from these linkages.

Although the association has been operating for too short a time to evaluate its achievements, it has improved its trade capacity through its trading processes. The improvement in product quality has advanced through a standard quality. The recent administrative developments and management of the organizations have supported all of this, with the support of international cooperation (Table 38).

Sociedad Cooperativa Agroindustrial

Sociedad Cooperativa Agroindustrial (SOCOAGRO) is an agro-industrial enterprise, created in 1998. It main activity is acquiring and processing Tabasco chilli to produce paste, an intermediate product sold as raw material to the McCormick Company of Central America and other food businesses at the national level. It also has resources for producing and canning chilli sauce.

The organization is the outcome of an initiative of four farmers cooperatives located in the San Juan region. At its inception, it was supported by the Instituto Salvadoreño de Educación y Asistencia Cooperativa (ISEAC), the Canadian Hunger Foundation, and the former Office of Canadian Cooperation. It was joined by 12 shareholders, 8 of whom are representatives of 4 cooperatives, and 4 are ex-technicians of the Instituto Salvadoreño de Asesoría Cooperativa

Between 100 and 200 producers of Tabasco chilli benefit directly. They cultivate a maximum of 38 ha per year. According to the previously-agreed on quality, the producers buy 100 percent of the negotiated production. If the producer so requires, a buy-sell contract is signed. The cooperative operates as a processor and trader at the same time. In the lifetime of the cooperative, contacts have been made with international support organizations and the Anglican Church. International organizations have collaborated with resources as capital for investment, work and credit for producers (Table 39).

The producers are small-scale. Most are illiterate with a low income. Most are dedicated to farming and have subsistence crops such as maize, beans, sorghum and horticultural crops. The processing of chilli is industrial and the wholesale trade goes through large companies. Producers have participated in trade fairs and national exhibitions, as well as in international programmes to promote their produce in foreign markets.

The main impact and support provided to producers is technical support to the crop, with the participation of the private sector as input distributors. Some areas have technologically upgraded their irrigation systems, by training producers in equipment management and the efficient use of water. Technicians have been contracted for the agro-industrial process, and support requested from governmental entities for development formulas and personnel training.

The cooperative buys its inputs directly. The economic achievements of the cooperative have not been very significant owing to its very large financial burden from credit transactions with high interest rates. In 1999-2000, it had to face an unfavourable situation caused by falling sales and major financial and administrative responsibilities. The company was not able to place its main product, Tabasco chilli paste, in the market; it manufactured more paste with high administrative costs. According to the evaluation carried out, the enterprise has not become profitable and self-sustainable, but survives on donations.

TABLE 39
Agribusiness linkages of SOCOAGRO

Producers have benefited from training, credit and organizational support (Table 40). It is hoped that the project has contributed to diversification of and improvement in income resources. However, in view of it brief existence, it is not easy to evaluate precisely the impact of the cooperative on producers.

TABLE 40
Agribusiness linkages - SOCOAGRO and farmer