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Angelica Hicks

Unconventional Bananas in Peru: an Interview with Julio Oscar Gallegos Herrera-Rambla

The U.S. market tends to treat bananas as commodities, as in unspecialized products that are virtually interchangeable, regardless of origin. Following a century of well-documented exploitative practices by U.S. banana companies, the fruit remains a top seller at U.S. grocery stores. Thanks to the conventional system, bananas are everywhere, cheap as can be, and divorced entirely from the circumstances of their production in the minds of consumers. One banana is like any other.

Equal Exchange aims to dismantle that paradigm, working with a movement of independent businesses – farmer co-ops, distributors, stores – to create a banana supply chain that is unconventional at every step. In a sensitive industry, we look to the farmer organizations revolutionizing the banana trade to envision a future in which the industry represents and benefits all stakeholders.

The Valle del Chira has a special micro-climate that is hot and dry, allowing organic bananas to grow with less threat of plant diseases that spread easily in wetter climates.

EE has partnered with CEPIBO, an association of small organic banana producers in Piura, Peru, for 8 years. This week, I had the chance to chat with CEPIBO’s  Administrative Manager, Julio Oscar Gallegos Herrera-Rambla, about the unique small farmer sector in which he works, and the future he sees for smallholder banana production.

CEPIBO’s members grow bananas in the Valle del Chira (Chira Valley) in Northern Peru. The valley is part of a micro-climate that is hot and dry and consequently ideal for organic banana farming, since plant diseases are less likely to spread or prosper than they are in the humid tropics.

Unlike other Latin American countries, Peru did not enter the banana export industry until relatively recently. According to Julio, small farmers in Northern Peru began growing organic bananas for export around 20 years ago, having observed the successful industry just across the border in Ecuador. At the outset, these farmers were selling fruit by themselves, typically to the largest exporters. This presented a disadvantage: since small farms in the region are on on average just 3 hectares (7.5 acres), a single farmer didn’t have many levers to pull in negotiations with multinational shippers, who could thus dictate prices and volumes at their convenience.

Over time, farmers began to organize into associations and cooperatives. In 2003, CEPIBO was founded by small producers who recognized that they could build collective power if they formed a block and aggregated supply. Says Julio, “CEPIBO has always been about small producers working for small producers.”

Photo courtesy of Julio Oscar Gallegos Herrera (pictured), Administrative Manager at CEPIBO  

Julio, himself, is not a farmer; he studied Business Administration at the University of Piura, and began his career in the private sector. He gained experience in logistics and exportations, working with large conventional export companies. In 2013, after years of working for private companies, he decided to break off and start his own consultancy for export businesses. CEPIBO was his first client, at a time when its business and organic banana production were thriving.

But agriculture, and international trade, can be tremendously volatile. Over the years, CEPIBO has had its share of difficulties in a brutal and unforgiving banana market, where small farmers are competing with lower-priced plantation-grown bananas from other countries and facing the unique challenge of implementing standardized agricultural practices across hundreds of smallholder farms. In 2017, Julio was invited to work with CEPIBO again at a critical moment for the association: “CEPIBO was facing a strong economic crisis, and that is why they requested my support to analyze the situation and improve management practices.” A year later, Julio signed on as a full-time employee of CEPIBO.

Julio’s prior experience with private sector greatly informs his perspective as a committed staff member at CEPIBO. “When you start to look at the gap between the private sector and the associative (cooperative) sector, you see two realities that are very distinct. The less privileged sector has less access to resources and education, and that is due to poverty.”

For Julio, an ideal banana industry – a goal for all of us in the supply chain to work towards – would be one “that doesn’t work against the planet, an ecologically sound industry that allows producers and community members the tools and the knowledge necessary to become business people who own their own land; that makes it possible for their children to access higher education of good quality.”

Equal Exchange Sourcing Manager Ravdeep with CEPIBO staff in 2017. Left to right:  Walter Garrido, Certifications Manager;  Leticia Gutierrez, Logistics Coordinator; Ravdeep Jaidka;  Jorge Socola, Former President; Julio, Administrative Manager

It may sound like a grandiose vision, but through business development and marketing of organic, fair trade fruit, CEPIBO is moving in a positive direction. The association has around 365 farmer-members and employs 14 administrative staff members, as well as around 100 staff who work in the field, harvesting and packing bananas. Julio plans to continue working in this fast-paced and challenging environment: “I am here, honestly, because this is a commitment I have made. It’s not just about a good salary. This is about overcoming, that is the inspiration – you realize that there are some things that are worth saving.”

CEPIBO is looking toward a long future of building opportunities for its small-farmer members, and Equal Exchange and its partners across the supply chain are part of that. Through collective work, “we are yielding results, and that motivates you to keep going forward. CEPIBO is more stable now, and we are thinking about making plans that we would never have imagined possible before.”

Want to learn more about the unconventional EE banana supply chain? Check out our latest video here.


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Cooperative Bananas, In Dollars and Cents

When you purchase a conventional banana at a grocery store, there are certain costs that your everyday low price covers: the fruit itself; the international shipping costs; the trucking from the warehouse to the grocery stores. These costs are internalized, meaning they’re accounted for in the final price you pay.

But there are hidden costs to banana production that you won’t pay a cent for at the cash register. The medical treatment for illnesses contracted by farm workers exposed to heavy pesticides. The lost wages of plantation workers who miss work due to harassment. The loss of income for small farmers selling fruit to brokers below minimum price.

Some of the burdens are apparent immediately, like the detrimental effects of insufficient income on a family’s food security, while others will take time to fully manifest, like the consequences of climate change exacerbated by agricultural carbon emissions. Though the associated costs are linked directly to banana production, they are borne in large part by the communities surrounding farms, rather than the players downstream in the supply chain who ultimately consume the bananas.

The costs that are pushed onto farmer communities are known as externalized costs or externalities. At Equal Exchange, we discuss the externalized costs of banana production often, as they are a motivating factor in the development of our alternative, fair trade cooperative model of banana business. We know that externalities in bananas are nothing new – the historical socioeconomic ramifications of the U.S. banana industry are difficult to fathom – but even today, there has been little research dedicated to teasing apart these costs and studying how to reduce them most effectively.

That may be changing. Fair Trade International has recently released a study by the research firms TruCost/True Price to measure, for the first time, the externalized costs of the banana industry in concrete monetary terms, per 40-pound box of bananas, which is around 80 bananas. In the banana sector as a whole, the estimated figure is a tremendous $6.70 of external costs per box of bananas  ($6,432 per shipping container!), 60% of which corresponds to social costs, like insufficient income, and 40% environmental costs, like water depletion. That means that for each 40 lb box of bananas produced, an additional $6.70 of external costs – not paid for by customers – are generated for producer societies to bear. However, for fair trade certified banana production (including plantations, small farmers, organic and conventional), the figure drops to $3.65 per box, mostly due to lower social costs. In other words,the fair trade groups studied generated 45% lower external costs than the sector on average.

Even within this fair trade subcategory, Equal Exchange bananas are unconventional: they’re also organic and small-farmer grown. To be specific, Equal purchases bananas from democratic cooperatives. These organizations are independent and autonomous, managed by small farmers with collective jurisdiction over the allocation of fair trade premiums and elective power over the board of directors. Equal Exchange bananas are also more expensive than conventional bananas. So, the question bears asking: what costs are included in the price of an Equal Exchange banana?

Why pay more for bananas?

A man witch a sack stands inside a trellis.
Farmer-member Hugo Rocafuerte Vega on his family farm in La Libertad, Ecuador.

 

This past June, I traveled with colleagues to the southern coast of Ecuador to learn about the operations of  one of our farmer co-op partners, la Asociación de Pequeños Productores el Guabo, or AsoGuabo. As a cooperative, AsoGuabo works for the benefit of its 130 farmer-members, exporting around 30 shipping containers of fresh bananas around the world each week. This is extremely ambitious work, which requires a full-time 25-person staff. AsoGuabo is considered a highly successful co-op – “la pionera” or pioneer in Fair Trade and organizational development, per co-op President Edwin Melo –  within a region responsible for approximately 30% of the world’s banana trade.

When I arrived in the provience of el Oro for the first time, I was astounded by the sheer visible magnitude of the industry: miles and miles of banana plantations, as far as the eye can see, destined for supermarkets around the world, at mostly rock-bottom prices. Following a full day of farm visits, I sat at the desk of Lianne Zoeteweij, General Manager of AsoGuabo, as she worked into the evening. She explained that although large plantation owners can export containers by themselves,  “a small producer can never do that. They need the association. And an association brings also more costs with it, because of course you need bookkeepers, you need logistical people, technical peoples, and so on. So, it becomes a little bit more expensive than a huge plantation.” That’s one reason it’s important for small farmers to have access to the fair-trade market.

When we visited farms on banana-packing day, while bunches were cut, cleaned, stickered, and packed into boxes to be whisked away to the warehouse, it was apparent how critical a role the long-term, skilled cooperative staff members play in AsoGuabo’s commercial success. At one small farm, we met with Marcelo Rebolledo, the Logistics and Quality Control manager for AsoGuabo. Marcelo has decades under his belt working with banana logistics, both for big companies and for AsoGuabo.

A man talks with two other people in a field
QC whiz Marcello Rebolledo Torres talks co-op logistics with the Equal Exchange banana team.

 

According to Marcelo, in addition to managing logistics with many farmers to pack a single container, fulfilling orders for multiple smaller independent brands – such as Equal Exchange – requires unique logistical finesse from the banana co-op team, and is also uniquely satisfying.

“[A typical big banana business] will only pack three or four brands. We are packing many different brands, with very small volumes …  for example, an order of only 8 pallets to send to England; or 3 containers for the U.S., things like that. Always so many brands, a little here and little there – it’s a much more complicated job for us. But we like it! Because the result that is achieved is something really lovely for small farmers. That’s the truth.”

The result of the co-op’s monetary investment in enthusiastic professional talents like Marcelo and Lianne – internalized costs that are factored into the banana price — is that small farmer-members can earn a viable and steady income, maintain their own land, receive membership benefits, and retain democratic control over their own export businesses. Additionally, under Fair Trade standards, banana co-ops earn an additional $1 premium per box on top of fruit price, which is allocated democratically by farmer members to business, social, and environmental projects of their choosing, another vehicle for small farmers to add value to their communities and engage in mitigation of externalized costs directly.

Room to improve

Still, for all the success, it’s important to emphasize that even in this unique model, there is room to improve. Recall that FTI’s study found an average of $3.65 in external costs/box for fair trade producers. One important area for improvement identified by FTI’s study, particularly for small farmers, is in optimizing productivity to augment farmer income and reduce resource usage. In this arena, for example,  AsoGuabo is consistently investing in solutions. Recently, the co-op broke ground on a biofábrica to sustainably produce organic fertilizers on-site, a project funded through the democratically allocated Fair Trade premium. Additionally, AsoGuabo is running experiments to improve soil health and water retention, and hires an entire technical team to assist farmers in productivity and quality improvements. Thanks to the co-op structure, farmers can collectively decide to retain earnings and allocate premiums to invest in projects like these that will pay off for producer communities in the long-run.

Ultimately, all of this hard work on the part of producers to build robust, sustainable businesses will succeed if those of us living in banana-importing countries acknowledge that paying a bit more upfront for EE bananas saves great costs to farmer communities later. It is not just conjecture or anecdotal evidence; there is data to back up the model we support. As Lianne of AsoGuabo put it,

“We are showing, with facts, that small farming is possible. There is a lot of competition, of course, here with plantations. We are showing it is possible to compete, not only on quality, but to keep prices reasonable – not exactly as low as large-scale farming, but it’s still possible to maintain smallholders in business and give a fair and honest price to consumers as well.”

When you purchase an Equal Exchange banana – whether you’re a distributor, a grocery store produce manager, or an individual filling your shopping cart – you are paying for a product whose real costs are more transparent. You are paying for the sustainable operation of a democratically organized, farmer-led co-op which guides responsible business decisions. You are contributing for trained, local staff to manage complicated logistics with many smallholder farmers; for a fair and steady price to the farmers themselves; for social premiums to support co-op development, additional member benefits and community projects.

You are paying a fair and honest price for delicious and healthy food. Doesn’t that sound like an equal exchange?