Global Policy Forum

By Celia W. Dugger

CARE, one of the world's biggest charities, is walking away from about $45 million a year in federal funding, saying American food aid is not only plagued with inefficiencies, but may hurt some of the very poor people it aims to help. Its decision, which has deeply divided the world of food aid, is focused on the practice of selling tons of American farm products in African countries that in some cases compete with the crops of struggling local farmers. "If someone wants to help you, they shouldn't do it by destroying the very thing that they're trying to promote," said George Odo, a CARE official who grew disillusioned with the practice while supervising the sale of American wheat and vegetable oil in Nairobi.

Under the system, the U.S. government buys the goods from American agribusiness, ships them overseas on mostly American-flagged carriers and then donates the goods to the aid groups. The groups sell the products in poor countries and use the money to fund their anti-poverty programs there. As Congress considers a new farm bill, neither the Bush administration nor representatives are looking to undo the practice, known as "monetization." In fact, some of the nonprofit groups say it has worked well and are pressing for sharp increases in the tonnage of American food shipped for sale and distribution to support development programs.

The Christian charity World Vision and 14 other groups say that CARE is mistaken, that the system works because it keeps hard currency in poor countries, can help prevent food price spikes in them and does not hurt their farmers. But criticism of the practice is growing. Former President Jimmy Carter, whose Atlanta-based Carter Center uses private money to help African farmers be more productive, says a flawed food aid system has survived partly because the charities that get money from it defend it. Agribusiness and shipping interest groups have tremendous political clout, but charitable groups are influential, too, Carter said, because "they speak from the standpoint of angels." "The farm bloc is powerful, but when you add these benevolent organizations, the totality of that has blocked change in the system," said Carter, who is also a Georgia farmer.

Some charities that champion monetization bristle at such suggestions. And their allies in Congress say that maritime and agribusiness interests are essential allies for programs to aid the hungry. "Sure it's self-interest if staying in business to help the hungry is self-interested," said Avram Guroff, a senior vice president at ACDI/VOCA, which ranked sixth in monetization sales last year. "We're not lining our pockets."

But Peter Matlon, an agricultural economist based in Nairobi and a managing director of the Rockefeller Foundation, said converting American commodities into cash for development was a case of "the tail wagging the dog," with domestic farm policies in the United States shaping hunger-fighting methods abroad. "The NGOs have been ignoring this evidence for years that there's a negative impact on the prices farmers receive," said Matlon, who is involved in a $150 million effort financed by the Rockefeller and Bill and Melinda Gates foundations to increase the productivity of African farmers. The Government Accountability Office, the non-partisan, investigative arm of Congress, also concluded this year that the system was "inherently inefficient." CARE and Catholic Relief - who rank first and second in money raised through monetization - say they recover only 70 to 80 percent of what the United States paid for the commodities and shipping. But while Catholic Relief Services and Save the Children, which ranked fifth last year in such sales, agree with CARE that the system is inefficient, they also say they will not stop converting American food into money unless Congress replaces the lost revenues with cash. They help a lot of poor people with the money, they say.

The experiences of Walter Otieno, a grizzled Kenyan farmer in mud-stained pants, illustrate the paradoxes of paying for rural development through sales of American farm goods. Over the years, he had watched four of his 12 children die of measles, which is more often fatal for the malnourished. He has had difficulty growing enough to feed his family. "My children were skinny and their skin was dull," he said. Then last year he began growing a small patch of sunflowers on a hill sloping down to Lake Victoria with help from a program that CARE finances through the sale of American farm goods here. A CARE extension worker, Rosemary Ogala, has taught him and dozens of farmers in his group where to buy sunflower seed, when to plant it, how to space the rows and when to harvest.

CARE has also connected them to a ready market: the Kenyan company Bidco Oil Refineries, whose managers say they could more than quintuple the amount of sunflower seed they buy from Kenyan farmers to process into vegetable oil. The profit Otieno earned from the crop rescued his family from dire poverty. Now, with his new earnings, he plays with his sons and daughters, plump on eggs and milk, at the family's general store, a tiny shack stocked with goods financed by the sunflower sales. "Our lives have changed," he said. The question is whether small-scale sunflower farmers like Otieno would have done better if nonprofit groups had not sold tons of American crude soybean oil, a competing product, to the same Kenyan company that purchased Otieno's meager crop. CARE and some other experts say the answer is a clear yes.

In 2003, Bidco bought almost 9,000 metric tons of crude soybean oil sold to the United States by Bunge, the agribusiness giant. Altogether that year, Bunge sold the United States 15,180 metric tons of oil for resale by the nonprofits in Kenya. American law requires aid groups to establish that such sales will not discourage production by local farmers, but some critics say it is a conflict of interest to ask nonprofit groups to select experts to make this determination.

In this case, the nonprofit organizations hired a consultant who advised them in 2003 that they could safely sell up to 38,000 metric tons of vegetable oil in Kenya, which mostly depends on imports. That amount, about 10 percent of the country's consumption, was "negligible," he said. But Odo of CARE disagreed, saying in a memo that "the truth is that the subsidized importation from the U.S. reduces the growth in the local market." Ultimately, CARE's decision to phase out such sales evolved from a senior manager's change of heart. Daniel Maxwell, a professor of nutrition at Tufts University, was a food security adviser for CARE in Nairobi who saw sales of American food as an imperfect, but useful way to raise money.

He knew firsthand, however, how risky it was to manage projects financed in fluctuating commodities markets. When prices sank, CARE had too little money and was sometimes forced to lay off workers. Maxwell also strongly suspected that buyers offered too little for the farm goods, knowing they were dealing with aid workers who were novices in commodities trading. As he and Christopher Barrett, an agricultural economist at Cornell University, researched a book, "Food Aid After Fifty Years," his doubts deepened. "Not only was it a pain the neck," he said, "but there were potentially serious knock on effects that would be damaging to farmers and trade."

In 2004, Maxwell and Barrett made the case against the practice at CARE headquarters in Atlanta. They recalled that the senior vice president, Patrick Carey, who has since died, cautioned them that leaving the system would be like "an act of partial suicide" for the nonprofits. Nonetheless, by 2009 CARE will end almost all of its participation in such projects across the developing world. It will try to raise money to replace the lost revenues from philanthropies and other donors, and by making its own aid programs profitable. One of those programs could be seen in action one recent afternoon in the Kenyan village of Poche. CARE has helped local women bypass local middlemen to sell pineapples at better prices in big supermarkets in Nairobi, 10 hours away by road.

One woman, Doreen Amimo, a 52-year-old grandmother, has seen her weekly earnings rise to $18 from $11. She can now afford to feed and clothe an orphaned niece and nephew. "And I never lack sugar in the house," she said, "and we can have tea and milk every morning!" These farmers are selling their fruit to a small company, Vegcare, that CARE and a Kenyan company started with an investment of $170,000 in 2005. Vegcare advises farmers on how to grow pineapples that meet supermarket standards, buys them and trucks them to a wholesaler in Nairobi that supplies Nakumatt, a Kenyan supermarket chain.

CARE's idea is that a profitable business is more likely than a charitable venture to survive when foreign aid runs out. CARE managers here say they hope its renunciation of most of the money from commodity sales will free it to candidly address the flaws in the American strategy to combat world hunger. "What's happened to humanitarian organizations over the years is that a lot of us have become contractors on behalf of the government," said Odo of CARE. "That's sad but true. It compromised our ability to speak up when things went wrong."