Global Policy Forum

By Ben Gregory and David McKnight

The tree stands in the middle of the Orchid Reserve tended by the UCA Miraflor, a fair trade coffee co-operative near Esteli. At first glance it looks like a normal tree. Go closer, and you can see a huge gash at the bottom of its trunk. Closer still, and you can actually enter, look up, and see a hundred foot ‘chimney' towering above you. You are inside a parasite, a plant which slowly strangled its host, taking on its shape, but reducing the original tree to dust.

For many, Nicaragua's economy is in a similar deadly embrace. It is slowly being strangled by the dictates of the World Bank and the International Monetary Fund. Many countries have given in to the inducements of the international financial institutions, either willingly or under protest. But the results have been the same, companies and countries in the rich North living off the South, as their people fade away.

Coffee is the latest commodity to face a crisis. The IMF and World Bank encouraged new countries to produce coffee. Vietnam went, in under a decade, from producing very little coffee, to number two in the world, with the help of cash from the World Bank. With the market flooded, prices have crashed for coffee, 70 per cent of which is produced by small farmers. Coffee prices hit a 30 year low, whilst coffee companies reaped the benefits. Ten years ago the world coffee economy was worth $30 billion, of which producers received $12 billion. By 2001 it was worth $55 billion, but the producers share had shrunk to only $7 billion.

Five giants – Kraft, Nestlé, Proctor & Gamble, Sara Lee and Tchibo – buy half the beans on the world market. They have grown richer as the 25 million coffee farmers have grown poorer. In Nicaragua coffee is fetching 60 cents a lb, whilst production costs are 80 cents. At the same time Nestlé makes a 27 per cent profit margin on its instant coffee, and Sara Lee 17 per cent, a huge amount compared with other food and drink products.

The squeeze is not only coming from companies, nor on just coffee. At the moment Nicaragua is locked into negotiations to create a Central America Free Trade Area by the end of 2003, and a Free Trade Area of the Americas by 2005. In each the agenda is being set by the United States. Already cheap imports of rice and maize from the United States are undermining small farmer's food security and livelihoods in Nicaragua, affecting millions of Nicaragua's poor.

Sinforiano Cáceres, of the National Federation of Cooperatives (FENACOOP), expressed many of the concerns about the new free trade negotiations. "The differences between the USA and Nicaragua are so enormous, it would be best for both to agree to respect the other's position, especially regarding agriculture.

Nicaragua is not looking for access to North American markets, but rather to obtain agreements that will permit small and medium farmers to function. We should agree to leave our most sensitive products out of the agreement."

He highlighted the damage free trade is doing to Nicaraguan coffee producers. "Our coffee is generally of a very high quality. As a result, some manufacturers blend a small amount of it with a bulk of Vietnamese, low-grade, coffee. And still call the mixture 'Central American.' This can do nothing but damage to our commerce."

The effects of these pressures have an all too human cost. In the summer of 2002 twenty one people – fourteen of them children, died in camps near Matagalpa, in Central Nicaragua, set up to house starving coffee workers in the region. A credit squeeze, partly the result of IMF policies, is forcing farmers to sell up, and driving them off the land.

There are, however, alternatives to this madness. There is a long established system of fair trade. Its origins lie in the solidarity movement, which in the case of Nicaragua promoted coffee in the 1980s as a way of supporting the Sandinista revolution. Since then it has developed in countries around the world, now accounting for around 200 co-operatives with 675,000 farmers, 70 traders and 350 coffee companies.

This has made a real difference to some Nicaraguan small coffee farmers, which make up 95 per cent of growers in the Republic. In March 2003 Blanca Rosa Molina, a Matagalpan coffee farmer and President of Cecocafen, one of the five Nicaraguan fair trade co-operatives, gave her personal example of the benefits. "The fair trade price has enabled me to raise my children, send my daughter to university and build my house bit by bit – it's a very humble house and I'm still building."

At around the same time members of the seventh Welsh delegation were talking to Corina Picada, a member of the UCA Miraflor Co-operative. Her struggle for her own patch of land goes pack to the time of the revolution. Originally, her farm and all the surrounding land was owned by Rene Molina, an associate of Somoza the dictator. On the revolution he fled, and the land was parcelled out as part of the agrarian reform.

Corina still remembers the time she had to defend her farm during the war in the 1980s. As she spoke to the delegation, she pointed to the hill above her farm. "The Contra [the counter-revolutionaries] were here. We dug trenches, on the ridge just above the farm. I was there with a Spanish priest when the Contra came. We had one gun between us, and I gave it to him, because he was a better shot."

The hill is now covered with banana trees, which provide shade for her coffee plants, which sit snugly beneath them. She is still defending her community, but this time with the help of fair trade. Unlike other farmers, the fair trade price has enabled Corina and fellow co-op members to survive the current catastrophic drop in price. She produces 2,500 lbs of coffee a year, fed by 2,000 lbs of organic compost, which she makes in large worm bins on her farm.

Part of the profit from her crop is pooled with others, to fund community projects in health and education. They are also trying to diversify the local economy, to provide a future for the community's young people. "There's a problem with them leaving the land. They go looking for a better life, but they don't find it. What is a young campesino going to do in the city? They slip into gangs. One of the roles of eco-tourism is to combat the desertion. They are stimulating artisan production of handicrafts."

None of this would be possible without fair trade. But fair trade is more than this. It is seeking to lay the blueprint for a fairer global trading system. Porfirio Zepeda, a manager with UCA Miraflor, visited Wales in March 2002. He was in no doubt that this lies at its heart. "Fair trade is not just a chance to get higher incomes, but also to have contact with consumers…We can change the relationship between consumers and producers, and the relationship between prices, so that it is a relation that allows us to live."

Here in Britain, the government rhetoric calls for fairer trade rules and stresses the need to ‘make globalisation work for the poor'. Unfortunately its championing of trade ‘liberalisation' and unstinting support for harsh economic policies is hurting the very people it is supposed to be helping. At the World Trade Organisation Britain has led the way in pushing for a widening of the global ‘liberalisation' agenda, forcing developing countries like Nicaragua to ‘open up their markets' to British businesses.

Britain's pursuit of opening up protected markets in developing countries flies in the face of any notion of ‘fair trade' and poses a deadly threat to small producers such as Nicaragua's coffee growers.

In its recent report (Mugged – Poverty in your coffee cup), Oxfam put forward a rescue plan to bring to an end the current crisis. However, it still does not go far enough. In a world where power lies with governments, unaccountable institutions and big companies in the North, or with a small land owning elite in the South, the poor, small farmers are always going to get squeezed. If Fair Trade has any message, then it is that a fair price will only be achieved when a trading system is set up which pays a fair price internationally, production is managed co-operatively at a local level, and the giant companies are reigned in, or taken out of the equation altogether. As Porfirio Zepeda says, the relations between consumers and producers needs to be built on fairness, and not on profit.

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