PRODUCING ORGANIZATION: FUNDALACHUÁPRODUCT: COCOA

INTERVENTION PROPOSAL FOR THE STRENGTHENING OF FERMENTED ORGANIC AND/OR CONVENTIONAL COCOA COMMERCIAL TRADE, BY

“FUNDACIÓN LAGUNA LACHUÁ”

LOCATION: Cobán, Alta Verapaz

PRESENTINGFOR

FUNDASISTEMASTO

ROTARY

Guatemala, September the 7th, 2012

TABLE OF CONTENTS

I. EXECUTIVE SUMMARY 3

II. SOCIAL ASPECTS 4

1. Description of the Organization 4

2. Organizational Chart - FUNDALACHUA 5

3. Organization’s Location 6

III. MARKET STUDY 7

1. Product Description: Cocoa in Guatemala 7

2. International Market 7

3. National and Regional Market 8

4. Customers 8

5. Quality 9

6. Suppliers 9

IV. TECHNICAL STUDY 9

1. Productive Process: 9

2. Project Objectives 10

Specific Objectives: 10

Component 1: Management Development and Competitiveness 10

Component 2: Quality Assurance and Control 11

Component 3: Negotiation and Commercialization 11

Component 4: Financial Processes for Cocoa Processing Operations 12

V. BUDGET 14

APPENDIX A. Cocoa purchase intention letter 15

APPENDIX B. Physical and Organoleptic (sensory) Analysis 17

APPENDIX C. CFC and/or CFO Specifications 18

APPENDIX D. Intervention Request Letter 20

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I. EXECUTIVE SUMMARY

Within the department of Alta Verapaz, the cultivation of cocoa lies in the hands of small Q’eqchi’ Mayan producers who live and work in remote areas with deficient means of communication, and many times, in the surroundings of protected areas of national and international interest.

Through an appropriate business strategy focus, cocoa offers Guatemala an important opportunity to fight poverty, promote rural development, and protect our environment.

FundaLachuá, along with national technical and financial support, establishes the first cocoa plant production nursery in the years 2006 and 2007. Nowadays, the organization has 230ha of hybrid cocoa in agroforestry systems without the usage of agrochemicals. Their associates produce approximately 34.5 mT of ordinary conventional cocoa (without fermenting) per year, and they sell it at the local market, or to intermediaries who visit the farms. FundaLachuá and its associates have a processing plant comprised by fermenting boxes, drying patios, Samoa-like timber dryers, and storage warehouses, which were built with the financial support of MINECO’s (Ministry of Economy) Rural Economic Development Program (PDER for its Spanish initials), through FUNDASISTEMAS, as a partner for PDER’s entrepreneurial development. This productive infrastructure, added to the technical assistance for the correct pre/post harvest management of cocoa’s grain (fermenting and drying, mainly) will help the organization to achieve the quality requirements that national and international markets demand, reach competitive advantage and better prices. Moreover, the organization must improve its business performance through results planning, demand targeting, and agreeing on a shared long term vision between directors and their associates. Cocoa world production is projected to increase from 3.7 million mT in 2007/2008 to about 4.5 million mT in 2012/2013, at an estimated growth rate of 3.7% a year. Cocoa’s world milling season (consumption) is estimated to grow from at least 3.7 million mT in 2007/2008 to 4.3 million mT in 2012/2013, at an estimated growth rate of 2.8% a year. Various chocolate factories at a national level such as “Fábrica La Granada”, “La Grecia”, and “Pakaya”; as well as at an international level as “ICAM” from Italy, and “Ritter Sport” from Germany (see purchase intention letters) have shown interest to purchase Guatemalan conventionally fermented, and/or organic cocoa.

The Project’s general objective is that FundaLachuá and its associates improve their capability to implement technological innovations, policies, and develop plans to increase their competitiveness in differentiated cocoa markets. This will help them to accomplish the strategy that they determined: to create a Trading Company of Agricultural Products from the Lachua Eco Region in the municipality of Cobán, Alta Verapaz jointly with, in this case, cocoa producer community based organizations, and by doing so, to be effective in the products commercial field.

To support this initiative proposed by the people of the communities to FUNDASISTEMAS through an accompaniment and technical & financial viability management request letter, (see appendix D) an intervention is considered necessary. This intervention could take one to two years in duration, and require an investment value of $32,500.00 comprised by a $

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2,500.00 of beneficiary partner contribution, and a solidarity ROTARY contribution of $30,000.00. The equivalent amounts in Guatemalan currency for the previous data are Q. 19,500.00 and Q.234,500.00 correspondently, (see budgets in Quetzales and US Dollars in page 16).

II. SOCIAL ASPECTS

1. Description of the Organization

In March of 1997, the Project “Laguna Lachuá National Park Conservation and the Sustainable Development within its Influence Area” initiated its operations. Phase I consisted on a strategy to stop the advancement of the agricultural border and decrease the pressure upon the natural resources. Along with the execution of Phase II (2001-2004), the importance of social participation was reinforced as one of the cornerstones for the conservation and sustainable usage of the natural resource base, within the Park as well as within its influence area. During Phase III of Lachua’s project: “At the service of its people” they worked on negotiation, decision making, and population self-management spaces, as well as governmental management; thus, improving the capabilities to define and execute territory division policies, linking the conservation and protection of natural ecosystems with sustainable productive options promotion and development within the Eco region. At three fourths of the execution of Phase IV of the project, the eco regional view has had diverse changes, the most remarkable are: a) consolidated second tier organizations, jointly working with government entities; b) 85% of the territory is legalized and titled, c) The reforestation rate increases at a rate of 400 ha per year, and a balance is managed between the resource development and the people’s welfare; d) Productive chains begin to have an impact on society increasing its income and consolidating financial sustainability processes, and most important, e) The leaders of the Region understand the importance of becoming part of the association so they can have one voice, which might pursues a wholesome development based on a participative context.

The “Fundación Laguna Lachuá” is a civil association, created through a strategic alliance of local organizations, integrated by 2 second tier COCODES and 5 first tier Productive Associations (Acodeseresa, Asococoseresa, Atz’amha’, Asoselnor and K’atb’alpom). It is a participative governance space of the Lachuá Eco-region for landscape and natural resources sustainable management. It emerged from organizational processes and community based group assistance provided by the Project “Laguna Lachuá”, financed by the Dutch Cooperation, INAB and the UICN. This project of sustainable development, created an innovative experience for rural development.

Its main objective is to contribute to the sustainable development and governance of the Lachuá Eco-Region, encouraging local population to participate in the conservation of protected natural resources and administration management within the zone, and in generating opportunities for the goods and services of the Eco Region.

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General Assembly

Board of Directors

Temporary Workers Work Commissions

Technical Assesment

GENERAL INFORMATION OF THE ORGANIZATION

Name of the group: Fundación Laguna Lachuá Department: Alta Verapaz

Type of Legal Personality: Association Municipality: Cobán

Name of the Representative:

Cesar Osberto Prado Chub

Village / Hamlet / Canton: Salacuim

Phone Number(s): 40907297 E-mail: fundalachua@gmail.com

Number of Active Associated Producers

140% of indigenous associated producers:

100%

Indigenous Ethnicity: Q´eqchi´ Number of indirect

beneficiary people 1,500

Number of permanent job positions:

50Number of temporary job positions (daily wage)

2,000

2. Organizational Chart - FUNDALACHUA

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3. Organization’s Location

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III. MARKET STUDY

1. Product Description: Cocoa in Guatemala

Chocolate and Mayan civilization go hand in hand. More than 2,500 years ago, the Mayans from the low lands prepared chocolate beverage from cocoa seeds (Theobroma cacao L., “the food of the gods”). Amongst Mayan and Aztecs, chocolate was a prestigious beverage, of elite, reserved for royalty, the nobles and the high ranked warriors. Cocoa also had a currency role in Ancient Mesoamerica. It is also known that for Mayans and Aztecs at the time of the Spaniard Conquest, cocoa seeds served as an exchange means in market transactions, so it was a time when “money grew on trees”1, literally. History indicates that before the conquest, cocoa cultivations were limited to the area between the south of Mexico and the current border between Costa Rica and Panama.

Nowadays, cocoa is grown in 9,172 plantations in Guatemala, covering 2,713 ha, distributed in 18 departments located in the Northern zone (40.29%) and Southwestern zone (48.43%) mainly. This productive activity is performed by more than 10,000 small2 and midsize producers under agroforestry systems, oriented to organic management. 92.77% of plantation farms have an area inferior to 22.54 ha, and out of these, 74.34% are producers with an area equal or inferior to 7.04 ha3, producing approximately 1,000 mT of dry cocoa annually, providing a 0.02% of world production. The average net income of families that grow cocoa and are associated to cocoa producer organizations in Central America is of approximately US$108 per month4.

As a whole, the national cocoa sector generates an average of 216,757 annual day’s wages, equivalent to 803 full employments, of which 46.04% corresponds to agricultural activities, and 53.96% to industrial activities and craftwork. The income generated, by employment alone, is about 9.34 million quetzals annually, out of which about 4.24 million quetzals (45.36%) are distributed in the rural area, through agricultural activity. The contribution of this sector in the creation of the Gross Domestic Product – GDP -, is of approximately 8.6 million quetzals. This implies a national GDP participation of 0.14%, and 0.99%5 in the Agricultural GDP.

2. International Market

In the last years, cocoa industry has started to differentiate amongst two types of cocoa: “common” cocoa, and “fine” cocoa. Common cocoa grains come from a type of tree called “Forastero” (cocoa with less than 30% of brown grains), and the fine cocoa grains come from “Creole” and “Trinitarian” type of trees. Guatemala possesses Creole and Trinitarian cocoa both with good demand expectations and quality differentiated6.

1Popol Vuh Museum –UFM- (Universidad Francisco Marroquín) 2006. Kakaw: Chocolate in Guatemalan Culture. Guatemala 25 p.2It is understood for small producers to those that do not structurally depend of permanent contracted work, managing their lands mainly with their own labor and their families.3INE (National Statistics Institute) 2004. Number of censed plantation fields, cultivated surface and production obtained from permanent and semi-permanent crops. Fourth Farming and Agricultural National Census. Guatemala 3:18-274CATIE (Research and Teaching Tropical Agricultural Center) 2007. Project Document: Competitiveness and Environment within the Cocoa Territories in Central America. Costa Rica 175 p.5PRONACOM (Competitiveness National Program) 2008. Cocoa Sub-sector Diagnosis in Guatemala. Guatemala 115 p. 6PRONACOM (Competitiveness National Program) 2008. Cocoa Sub-sector Diagnosis in Guatemala. Guatemala 115 p.

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Cocoa world production is projected to increase from 3.7 million mT in 2007/2008 to about 4.5 million mT in 2012/2013, at an estimated growth rate of 3.7% a year. Cocoa’s world milling season (consumption) is estimated to grow from at least 3.7 million mT in 2007/2008 to 4.3 million mT in 2012/2013, at an estimated growth rate of 2.8% a year7. There is a good expectation regarding prices, currently fluctuating between US$ 3,200 per mT8 – CFC – to US$ 3,800 per mT – CFO –. The goal of being part of a chain is to improve the services that FundaLachuá provides to its associates and customers, and to compete in differentiated cocoa markets, and to trade at least 12.5 mT of CFC and/or CFO in the national or international market.

3. National and Regional Market

85% of the national cocoa grain production is consumed by the chocolate industry located in Guatemala City, as well as more than 200 handcrafted factories in the municipality of Mixco within the department of Guatemala, and in the departments of Suchitepéquez, San Marcos, and Quetzaltenango. The rest of the cocoa is destined to regional and/or international markets, mainly to El Salvador, and to a lesser extent, to the United States of America9. It is not a common practice to establish contracts between producers and buyers in Guatemala, where specific quantity, quality, prices, times of delivery, and payment agreement10 aspects are regulated.

The cocoa Processing Plant in Honduras, which belonged to the Honduras Cocoa Producer Association –Aprocacaho-, has been in financial bankruptcy since October of 2008; the Plant processed cocoa for Honduras and Nicaragua’s Common Coca –CC-. Such processing plant (cocoa and organic cocoa butter export) has a milling capacity of 5 thousand mT. Honduras produces approximately one thousand mT, forcing them to import cocoa grain from the Dominican Republic and Nicaragua, and it’s very probable that they are also importing from Guatemala as well.

4. Customers

There has been some interest shown to buy Guatemalan cocoa by many chocolate producers at a national level such as “Fábrica La Granada”, “La Grecia” and “Pakaya”, and at an international level with ICAM from Italy and Ritter Sport from Germany (FundaSistemas and FundaLachuá counts with cocoa purchase intention letters) (Appendix A). Such market demands Conventional Fermented Cocoa11 –CFC – and/or Organic – CFO – and its price differential varies according to the target market.

7ICCO (International Cocoa Organization) 2008. Annual projection for production, consumption and estimated production levels to reach equilibrium in cocoa world market. Consulted on March 8th 2010, Available at http://www.icco.org8ICCO (International Cocoa Organization) 2010. ICCO Database (on line). Consulted on February 1st, 2010, Available at http://www.icco.org9CATIE (Research and Teaching Tropical Agricultural Center) 2007. Cocoa productive chain features report and actors cooperation diagnosis. Guatemala 47 p.10MAGA (Agricultural, Livestock and Foods Ministry) 2007. “Action plan of cocoa agro-productive chain in Guatemala”. Guatemala 23 p.11Minimum of 80% Brown grain (fermented), 10% purple grain (initial state of fermentation), 10% slaty grains (over fermented), 3% maximum internal mold and 7% internal grain humidity.

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5. Quality

FundaSistemas prepared (according to Ritter Sport’s technical chart, Appendix C), and sent to Ritter Sport Chocolate Factory in Germany CFC samples using the cocoa processing plants that exist in the Lanquín and Cahabón municipalities in Alta Verapaz for a physical and organoleptic (sensory) analysis. The results of the Analysis showed that high quality cocoa can be produced in Guatemala if technologies and methodologies developed by FundaSistemas are used (Appendix B).

6. Suppliers

FundaLachuá and its associate members cultivate around 150ha of Trintarian type hybrid cocoa that has good demand expectations quality-differentiated (flavor and aroma) without the usage of synthesis agrochemicals.

IV. TECHNICAL STUDY

The Project in its current situation stresses that one of the critical points in cocoa supply chain production is grain fermentation to process quality cocoa. In this sense FUNDALACHUA association has the minimum tools and productive infrastructure to ferment cocoa to produce and trade quality dry cocoa.

1. Productive Process:

Production: Cocoa plantations are grown in multi-layer agroforestry systems without agrochemical application, mostly 4x4m (625trees/ha). They were produced with hybrid seeds, which are characterized by 60% of plantation producing few, and remaining 40% of the trees providing most part of the harvest.

Post-harvest Handling. Cocoa quality is low due to poor fermentation and drying practices and because selected genetic material has not been used for its grain quality characteristics, chemical composition and sensory profile.

Productivity/ Diseases. Cocoa grows in proximity and interaction with other plants, especially trees (timber, fruit, forest remnants and nature regeneration), and a long list of annual crops9. Farmers retain or plant trees or other useful plants in the cacao plantation, mainly for shadow regulation, growth optimization and cocoa production, timber production, fruit or other income for family use or sale.

Cocoa requires, to effectively combat diseases, adequate and periodic bleak regulation. From phytopathological point of view, this practice seeks to promote air circulation within plantations and eliminate moisture excess, creating environmental conditions that disadvantage pathogens and benefits the plant.In the case of thrush, several authors have emphasized the use of agricultural practices, standing out the shade regulation and cocoa pruning, essential to effectively combating the disease.

12Somarriba, E., 2006.Agroforestry with cocoa. In: Proceedings 15 International cocoa research conference, Nigeria, Africa, pp. 261-264.13Porras, V.H., Cruz, C.A., Galindo, J.J., 1990. Integrated Management of black maize and cocoa moniliasis in the lower humid tropic of Costa Rica. Turrialba (40), 238-245.

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2. Project Objectives

The General Objective is that FUNDALACHUA and its association members might improve their capacity to implement technological innovations, policies, and develop plans to increase their competitiveness in differentiated cocoa markets.

Specific Objectives: The organization improves its entrepreneurial, administrative, and strategic capacity,

and contributes to the welfare of the association’s members families. The quality of at least 25 mT has increased through a correct pre & post harvest

management (fermentation and drying, mainly). The organization trades at least 25 mT of CFC and/or CFO in the national and/or

international market. The Organization constitutes a fund, with contributions from the beneficiaries, for the

continuity of the Credit Community Fund for the improvement of cocoa production, transformation, and trade.

Component 1: Management Development and Competitiveness

The specific objective of this component is to increase working management and strategy of the organization to elevate the quality of services offered to its associates and costumers.

Updated membership of the cocoa producer associates. Conduct an assessment of the organizational, productive, and business needs. As a

first step, the organization should prioritize the needs for the social, economic, and environmental development of the organization and its associates, while considering how commercializing CFC and/or CFO will benefit the organization and its associates.

Elaborate a Business Plan and a Strategic Plan to access differentiated cocoa markets.

Improve the capabilities of the directors and associates regarding business development and competitiveness through the following subjects (though it’s not limited by this): 1) Micro and Small Business Administrative Process, 2) Internal Accounting and Financial Controls, 3) Production and Investment, 4) Calculating and optimizing costs, and 5) Marketing and commercialization.

Present reports regarding the advance of the project. They will be presented to FUNDALACHUÁ and to the financial organism each month, with a consolidation every 6 months and a final report at the end of the year.

14Krauss, U., Hoopen, M., Hidalgo, E., Martínez, A., Arroyo, C., García, J., Portuguez, A., Sánchez, V., 2003. Integrated Manangement of cocoa (Theobroma cocoa) moniliasis (Moniliopthoraroreri) in Talamenca, Costa Rica. Agroforestry in the Americas (10) No. 37-38

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Component 2: Quality Assurance and Control

There will be innovative technology in pre & post harvest management to improve cocoa grain quality at the disposal of FundaLachuá.

This component has as a specific objective, to improve cocoa grain quality through a proper pre & post harvest management.

To achieve it, this network component proposes:

To take technical advantage of one cocoa post harvest management processing plant, with a storage warehouse, drying patio, static dryer and a solar dryer each. FundaSistemas will provide Technical Assistance service with the cooperation funds requested to ROTARY, for the processing plant management and dry fermented and/or conventional cocoa quality assurance.

Train on Quality Control and assurance of cocoa pre & post harvest management manual, which we already have, as a result of current accompaniment. FundaLachuá and its associates must assure cocoa grain quality according to the specifications of their clients through the implementation of a quality assurance protocol, as well as to know the tools for its control. This manual will be applied during the whole pre/post harvest process to minimize product rejection probability, and to increase clients trust in the organization.

Improve the knowledge of directors and associates in regard to quality control and assurance by highlighting the following topics: 1) Quality assurance in pre/post harvest management, and 2) CFC and/or CFO Quality Control Tools.

Component 3: Negotiation and Commercialization

This component has as a specific objective to negotiate and commercialize CFC and/or CFO with different processors that grant better prices, conditions of sale, and sustainability.

To achieve this, this network component proposes:

The creation of a company linked to FUNDALACHUA, of a social-economic and commercial nature, legally constituted as a Public Limited Company, with the purpose of managing everything that concerns cocoa and other agricultural products that prevail in the eco region, and commercialization of products as requested by the beneficiaries in the attached note in appendix D.

Accompaniment on behalf of FUNDASISTEMAS for a year under ROTARY support, and under possible new resources, for two years to finish consolidating the implementation and efficient commercial operation of the LACHUA ECO REGION AGRICULTURAL PRODUCTS TRADING COMPANY.

1.Prepare and send cocoa samples to national and international buyers.2. Obtain contracts and/or letters of intention to buy CFC and/or CFO.3.Trade at least 25 mT of CFC and/or CFO in the national and/or international market.4.Increase directors and/or associates skills in CFC and/or CFO international trade.

Component 4: Financial Processes for Cocoa Processing Operations

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Description of Seed Capital:

Through this project, FUNDALACHUA expects to guarantee the proper process of drying slime cocoa, and assure the delivery of slime cocoa from the associates as a benefit for FUNDALACHUA and be able to process larger volumes for commercialization of dry cocoa.

To achieve this objective, it is necessary to provide financial assistance and better the Trading Company’s financial capacity for making purchases at a just price in accordance with costs of production and sale prices.

Currently associates of FUNDALACHUA, sell their cocoa to intermediaries. The money obtained through sales of their product is used to buy fertilizers for maize, cardamom, coffee, and pepper. The necessity to reinvest their profits does not allow them to offer a high quality cocoa to the market, forces them to accelerate the processing, and causes them to constantly require more capital to maintain their other crops.

For the future of the Rural Fund, it’s necessary to have capital seed for the agricultural production for the members of the producer organizations formed as a network of producers. FUNDASISTEMAS acquires shares in the organization, on behalf of the producers that are active participants in the production process and delivery of the product, for the processing and marketing, for a period of two years. At the end of that period combined, the organization decides to whom they will give the shares, with the commitment to keep them within the company that manages the fund.

The capital of ROTARIOS that FUNDASISTEMAS places in the form of shares, should be leveraged for the associates in a ratio of 4 to 1; in other words, for each Quetzal of shares acquired by associates, FUNDASISTEMAS will purchase 4 Quetzales of shares, in such a way that at the end of 2 years there will be capital in shares available inside the credit fund. There will also be trainings to make group financial decisions, resources to finance their productive activities, and reduce the need to approach lenders. Through this union of forces the association will develop a better participation in the market, achieve a better price, and improve economies of scale and loyalty to their organization.

The contribution of the beneficiaries will be placed in the books as shares or contributions made by the association. These incomes will be registered in a specific account that will not be utilized while this project is still valid. Afterward they will serve as working capital in the buying and selling of cacao and as an equity fund that will serve as leverage with the support of seed capital from ROTARIOS, for the sustainability of the entrepreneurship of Fundalachuá.

Within one year, FUNDASISTEMAS will execute a Business Strengthening plan for the benefiting organization, through the application of a shared learning methodology, with the learning strategy involving the participation of more than 50% of the associates who are properly affiliated and active within the association.

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Execution Time ChartProject for the Strengthening of Fermented Organic and/or Conventional Cocoa Commercial Trade

Item Result Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 121 Previous conditions Agreement Sign and Management Intervention Plan First Outlay Hiring of executing team

2 Business and Strategic Operation of Beneficiary Org. Effective

Updated membership Productive and business need diagnosis Reinforcement to the business plan Business Skills improvement

Creation of accounting and managerial controls and records

3 Quality and Productivity of COCOA according to the market

Productive capacity improvement Production increase Post-harvest management improvement 4 Market share increase Sending product samples Creation of contract negotiation skills

5 Financial capacity has been strengthened for trading process

Creation of a seed capital fund Financial tools design and training Creation of a local trading company

Joint administration with Fundasistemas, ROTARY, and Beneficiary Organization from seed capital

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V. BUDGET

Based on a $30,000.00 contribution on behalf of ROTARY, as a donation, and a $2,564.00 contribution as a balancing entry on behalf of the beneficiary organization (for the organization patrimonial fund), adds up to a total of $32,564.00 equivalent to Q. 254,000.00.

No. Budgetary Area Total Q’s

RotaryContributionQ’s

Benefiting Organization Contribution Q’s

Method of support from the organization.

1 Fund for seed capital. 120,000.00 100,000.00 20,000.00 Cash.2 Productive and

administrative Training and Technical Assistance

95,613.00 95,613.00

3 Training materials and technical assistance.

27,130.00 27,130.00

4 Monitoring of FUNDASISTEMAS

11,257.00 11,257.00

TOTAL 254,000.00 234,000.00 20,000.00

No. Budgetary Area Total$ USA

RotarySupport$ USA

Benefiting Organization Support. $USA

Method of support from the organization.

1 Fund for seed capital. 15,385.00 12,821.00 2,564.00 Cash

2 Productive and administrative Training and Technical Assistance

12,258.00 12,258.00

3 Training materials and technical assistance.

3,478.00 3,478.00

4 Monitoring of FUNDASISTEMAS

1,443.00 1,443.00

TOTAL 32,564.00 30,000.00 2,564.00

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APPENDIX A. Cocoa purchase intention letter from ICAM to FundaSistemas

Dear Sr/Madam at Presidential Commission for Local DevelopmentGuatemala City.Guatemala.

Attention to: Dr. Rodolfo Paiz Andrade.Presidential Commissioner for Local Development

In my visit to Guatemala City I was personally received by Dr. Rodolfo Paiz Andrade. In such occasion I communicated our intention to buy Cocoa grain from the projects directed by Doctor Paiz Andrade.

Our chocolate factory demands first quality Cocoa Grains, therefore, the shipments must be supervised by our agent, Engineer Erich Eger, if offered Cocoa gathers all the conditions demanded by us, we are willing to purchase all the production that you might offer.

We are aware that you are requesting FIS (Social Investment Funding) financial support, for Cocoa projects, which we hope are soon obtained for the Cocoa Programs success.

We wish to initiate operations as soon as possible.

With a special greeting to Doctor Rodolfo Paiz Andrade,

Sincerely,

Doctor Angelo AgostoniICAM.

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(Original Spanish Scan Copy)

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APPENDIX B. Physical and Organoleptic (sensory) Analysis of prepared cocoa sample sent by FundaSistemas to Ritter Sport

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APPENDIX C. CFC and/or CFO Specifications from Ritter Sport

SPECIFICATIONSDRYED FERMENTED COCOA

2.Humidity 6%

3.Fermentation 80% max. 4% partly purple

2% purple 1% loose structure, brown 0% slaty

4.Non fermented grains 0%

5.Mold 1% moldy ≤8% external mold

6.White spot 0%

7.Infestation 0%

7. Technical organoleptic quality 0% twins 0% without germination root 0% germinated Max. 0.5% wrinkled

Lightly bitterLightly acid

Typical cocoa flavorWithout strange flavor

Without mold smellWithout kept smell

Without smoke smell

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The specifications apply to certified organic cocoa, cocoa in organic certification transition, and conventional cocoa.

(Original Spanish Scan Copy)

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APPENDIX D. Intervention Request Letter from FUNDASISTEMAS for the creation of the Agricultural Products Trading Company.

Salacuim Village, Cobán, Alta Verapaz, August the 22nd, 2012

MrLic. Otoniel Gamboa JavierOperations DirectorFundaSistemas

Dear Otoniel Gamboa, I address you with a cordial greeting, wishing you success in the development of your activities in benefit of Guatemalan population.

The motive of this letter is to request assessment in the creation of FUNDALACHUÁ business, commercial and trading figure that would allow commercial sales of agroforestry products from the Lachuá Eco Region, produced by its associate organizations.

The current legal figure is a non-profit, and cannot trade products like cocoa, honey, handcrafts, inferior diameter woods, and xate.

We hope to count with the support of your assessment, due to the importance of the subject, to continue strengthening our common vision within the Lachuá Eco Region.

Without any other comment, sincerely,

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(Original Spanish Scan Copy)

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