Agros Blog

Today, Saturday, May 14, is World Fair Trade Day. In that spirit, I recently dusted off a college paper I’d written on Fair Trade. Re-reading pages of charts and theories, I was struck by the number of similarities with Agros.

Fair Trade, as we see it today on our supermarket shelves, began with coffee. And not just because so many of us depend on it for our morning routines! Coffee grows best in mountainous regions around the equator—and needs a lot of TLC; the required degree of attention makes coffee best suited for growing by small family-farms, not large multinational corporations. In fact, around 70 percent of the world’s coffee is produced by poor family farmers in the developing world.

That sounds great for the farmers, right? We, in coffee-saturated Seattle, daily cough up $4 for one latte; but family farmers historically have seen almost none of that. Instead, they have sold their beans to intermediary agents. Known as “coyotes,” these agents cunningly colluded together, so that producers in a given region have literally only one buyer for their products; the buyer named whatever price they wanted, then sold to big coffee corporations at exorbitant profits. Year after year, farmers have sold their coffee for less than the cost of production.

So how do people stay “in business” if their products are purchased for less than the price of production? Here in Seattle, you close up shop and go work for someone else! But imagine the mountainous regions of Nicaragua or Guatemala, where coffee has been the principal livelihood for generations; imagine winding mud roads that prohibit access to new markets; imagine low literacy and education that prevent new business ventures. As a result, we see inescapable poverty, loan sharks, migration, human rights abuse, slave labor, indebtedness, hopelessness, landlessness…  And that’s the part of the story where Fair Trade NGOs stepped in to restore hope and opportunity to the world’s poor!

…Wait, that sounds like Agros’ vision statement…

What is Fair Trade’s ultimate goal? Superfluity. That is, to build sustainability and capacity in cooperatives, freeing rural producers from the cycle of poverty so that the NGO is no longer needed! Through fair trade, farmers negotiate directly with contract buyers;  get fair, sustainable prices for their products; and pass on the blessing to other farmers still in poverty.  …sounds a lot like Agros!…

Though the primary focus of Agros’ work has been village development with landless farmers, there are hundreds of families around Agros communities who continue to live below the poverty line, even though they own small plots of land.  With just a marginal increase of services, Agros could provide training, technical assistance and credit opportunities to these families, as well. And, like a symbiotic relationship in nature, the village and surrounding families would nurture each other:

• the village, as a center for community knowledge and training;
• the surrounding families, as leverage for sustainable economic opportunities—securing more profitable contracts (with an increased volume of agricultural production in cooperatives), conserving natural resources and critical watersheds, and collectively advocating with local authorities for more services in the region.

Agros staff first extended training and credit to neighboring, small land-holding families in Nebaj, Guatemala, when Atlas Coffee, a Washington-based coffee export company, offered a contract to the Agros village of Trapichitos—if they could come up with enough volume of coffee.  So, families throughout the entire region were trained to cultivate their land efficiently and sustainably, and to negotiate cooperatively with the exporter. As families and communities have gained more experience and confidence in making decisions and in managing the project, Agros’ involvement has decreased so the project can become self-sustaining.  The entire region has experienced an economic lift, attracting new investors, contracts, and microfinance opportunities, as well as infrastructure improvements by the municipal government.

This regional work both provides new economic opportunities to neighboring poor families and strengthens the sustainability of Agros villages—by addressing environmental degradation and facilitating better commercial contracts for agricultural production with increased volume.  In that particular regional coffee contract, a total of 18 communities are working together.  Coffee purchased directly from Agros farmers by Atlas Coffee is now sold throughout Washington—from Street Bean, a job-training coffee shop for street youth, to an executive suite at the Microsoft headquarters—and exported around the world by local roasters.

Today, Agros facilitates a number of regional cooperative projects in our villages and the surrounding areas, including coffee, chilies, snow peas and other vegetables—with plans to continue cultivating these symbiotic relationships in the future.

So, on World Fair Trade Day, I plan to raise my cup of Fair Trade coffee to celebrating the hard work and accomplishments of the growing Agros family!

Recent months have brought a staggering series of global tragedies. Though complex, these events are inextricably linked by at least one common theme: food. Weather and violence have destroyed crops and disrupted the supply chain for food around the world. With decreased supply, the price of food staples has increased dramatically since June.

Though we are relatively sheltered from the food crisis in the US, there may be one price increase you have noticed if you frequent Seattle coffee shops as much as I do: global coffee crops have been battered by unusually harsh storms, so the decreased supply has increased the price of our lattes. This small change for us hints at a harsh global reality: today, food prices are the highest they have ever been recorded.

In 2008, 870 million people were hungry in developing countries. Today, there are 925 million hungry people.  Since June, 44 million people have dropped under the poverty level in developing countries because of the increase in food prices.

The United Way of King County has named this week “Hunger Action Week”—a timely week of action, advocacy and reflection about local hunger. As we consider how to encourage our friends and family to participate in the week, we want to share how Agros partners take action on hunger every day.

Families working with Agros are protected from the shock of the food crisis through two core strategies: ensuring food security and focusing on economic productive capacity. Though the food price crisis has had a sobering impact in Central America— especially in regions like the Ixil, Guatemala, with a chronic malnutrition rate already over 60 percent—Agros families continue with hope and opportunity.

Food security is prioritized from the beginning of a village. Agros uses a staged entry process, where groups of families move on to new land in phases.  The first arrivals prioritize food production (planting, cultivating and harvesting enough corn and beans to feed the entire village) before work begins in infrastructure, housing, and economic activities. In October, I was blessed to meet the first ten pioneering families of Agros’ newest—and largest ever—village, Tierra Nueva, in Nicaragua.  They had set out on a courageous journey from all that was familiar to move to new land and prepare it for food.  To date, they have planted enough to feed the remaining 140 families for the first year and will be prepared to re-plant after the harvest.  This buffer of food security is possible through the support of Agros donors covering the initial investment in seeds and fertilizer.

Beyond the security of crops, Agros villagers work from the beginning for a steady income supply through diversified economic activities. Staff agronomists assist with crop development techniques that take advantage of local conditions, markets, and necessary inputs, protecting them when prices fluctuate or weather conditions cause harm. Every family Agros works with diversifies their income with at least three income-generating projects, including different cash crops, animal husbandry, and small businesses. 

Reflecting on Hunger Action Week, I echo the words of Christian author, critic and farmer, Wendell Berry: “Eating is an agricultural act.” Both as partners with Agros families and daily consumers of food, we are all intimately linked together in agriculture, hunger, and food.

Agros uses credit as a vital part of our holistic development model. Like many organizations creating a deep impact in impoverished regions, Agros leverages the power of credit—a “hand-up” instead of a “hand-out”—to build self-confidence, financial capacity, and long-term sustainability in our villages.

But not all credit is created equal.

Most of us have heard inspiring stories of entrepreneurs in impoverished corners of the world who, after receiving a small loan, were able to change their families’ story for good. Recent news stories, however, have revealed a puzzling, dark underbelly to the world of microfinance, including everything from suicides in India to non-payment populist movements in Nicaragua to government allegations heaped on Nobel Peace Prize winner Muhammad Yunus, widely acclaimed as the founder of microcredit.

So where does Agros fit in all this?

Unlike microfinance institutions (MFIs), Agros does not rely solely on interest payments to cover its program operating costs. For-profit MFIs can return millions of dollars to their public investors—but in difficult economic times with little market competition, many have resorted to alarmingly high interest rates (soaring over 100 percent in some places).

Agros has always used loans for land as a pivotal part of our work. Since 2001, Agros has also provided enterprise loans for productive activities. Agros ensures manageable interest rates between 5 and 12 percent, depending on the repayment terms and the country—land loans, the largest and with the longest repayment term, maintain an even lower interest rate of 3-5 percent. As families pay back their loans, their payments are deposited in the dedicated Noemí Fund: founded in 2004, a permanently restricted revolving loan fund to provide loans for purchasing land and building homes. Repayments help maintain and build the value of the Fund over time for when new communities are ready to purchase land.

Charging interest serves two purposes: to preserve the value of money over time and to prepare borrowers to successfully access and manage credit for new business ventures when they exit the Agros program. With these guiding principles, Agros can evaluate and provide manageable, fair interest rates—and provide flexible repayment schedules that are adjusted in unexpected circumstances like natural disasters.

Perhaps the biggest factor for success is education. The people most in need of economic support—the poorest of the poor—have no prior experience with credit, much less business development. When high-interest loans are given without training to support new clients, the system can harm the poor more than help them. MFIs, by definition, focus on financial services; within this capacity, some organizations are providing financial literacy training to their clients. For Agros, credit is a means towards the end of financial self-sustainability; thus, we go beyond basic financial trainings in budgets, loans, and interest to coach borrowers in business plan development, profit projections, marketing, and contract negotiation. This increases the financial impact of loans and ensures the success of the borrower.

On top of everything else, most people in remote, rural regions—like where Agros works—do not even qualify for microcredit from MFIs. Generally, MFIs are set up to fund micro-businesses in high-density urban areas with a quick profit turnaround. The cost of operating in rural areas is simply too high—and profits can be much slower, such as investments in livestock. Through Agros’ long-term development model, relationships are established that reduce the risk of default and provide the support needed for success. In fact, Agros has seen entire regions experience an economic lift, attracting new investors, contracts, and microfinance opportunities—as well as infrastructure improvements by the municipal government—as communities develop.

One of the signs of success for Agros is seeing microcredit projects turn into self-sustaining enterprises. In Guatemala, 18 communities around the town of Nebaj are cooperating in a coffee exporting contract. Agros has worked in the area for more than a decade with families in Agros villages and through this project, neighboring land-holding families were invited to join Agros villages in credit and training opportunities. Atlas Coffee, a Washington-based coffee export company, offered a contract to the Agros village of Trapichitos, contingent on being able to produce enough coffee for the project to be financially viable. Families throughout the region were offered microcredit loans to purchase agricultural inputs like fertilizer and seeds, trained to cultivate their land efficiently and sustainably, and given technical assistance in negotiating with the exporter. As families and communities gain more experience and confidence managing the project, Agros’ involvement has decreased and the project is becoming self-sustaining.

In the US, this coffee imported from Nebaj by Atlas Coffee is now exported around the world by Washington roasters and sold locally in cafes as diverse as a Seattle job-training coffee shop for street youth to an executive suite at the Microsoft campus. The project has been a great success all around.

Credit at Agros—in the context of holistic support—really is making the world a better place.