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Comité editorial nacional

Dr a . Ma yr én Pol a nc o Gay t án / Universidad de Colima,Facultad de Economía Mt r o . A l f r edo Romero Cas t i l l a / UNAM , Facultad de CienciasPolíticas y Sociales Dr . Ju an González Ga r cía / Universidad de Colima, CUEICP

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27P ortes , revistA mexicAnA de estudios sobre lA cuencA del pAcífico

t ercerA épocA / volumen 6 / número 11 / enero • Junio 2012 / P.P. 27-49

Fair trade for coffee producing

small-scale farmers in Mexico 1

Namkwon Mun 2

Jihyun Seo 3

Abstract

The agriculture played an important role in the industrialization

process of Mexico. However, the agricultural policy of Statehas isolated small scale farmers, giving priority just to largeagricultural exporters. This study analyzes the implications thatcan have fair trade for the Mexican small scale farmers. The fairtrade tries to cover the production cost and basic necessities forthe small scale farmers, making direct ties between producersand consumers. This type of linkage guarantees the minimumprice and the extra social payment to the small scale farmers,grouped in cooperatives o associations.

Coffee is one of the most known fair trade product, andMexico is one of the most important coffer exporters of theworld. The fair trade of coffee production where many smallfarmers work is carried out by cooperative like uciri (Unión deComunidades Indígenas de la Región Istmo). The case studyshows that fair trade cannot provide complete answers to theall problems that have small farmers. But, since fair trade triesto promote small farmers well-being and many small farmers

1 This work was supported by Hankuk University of Foreign Studies Research Fundof 2011.

2 Hankuk University of Foreign Studies.3 University of Liverpool.



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P ortes , revistA mexicAnA de estudios sobre lA cuencA del pAcífico

could get rid of extreme poverty thanks to fair trade, it might bepossible to say that fair trade can be one valuable option for the

sustainable development of small farmers.

Key words: Mexico, Fair Trade, Coffee, Small Scale Farmers,Agriculture.

Resumen

La agricultura ha jugado un rol importante en el proceso de laindustrialización de México. Sin embargo, las políticas agrícolasdel Estado han marginado a los pequeños campesinos, favore-ciendo a los agroexportadores. En este estudio se analizan lasimplicaciones que puede tener el comercio justo para los peque-ños campesinos. El comercio justo intenta cubrir los costos deproducción y sus necesidades básicas a los pequeños producto-res, creando vínculos directos entre productores y consumido-res. Este modo de vínculo les garantiza el precio mínimo y unpago social adicional a los pequeños productores, agrupados encooperativa o asociación.

El café es uno de los productos más conocidos del comer-cio justo, y México es uno de los exportadores más importan-tes del café de comercio justo. El comercio justo de la produc-ción cafetalera en que trabajan muchos pequeños campesinos,se hace en torno a la cooperativa Unión de Comunidades Indíge-nas de la Región Istmo (uciri). El estudio de caso muestra que elcomercio justo no puede dar respuestas completas para solucio-nar todos los problemas de los pequeños campesinos. Sin em-bargo, al considerar que el comercio justo trata de promover elbienestar de los pequeños campesinos, y que éstos podían salirde la pobreza extrema, por lo menos participando en el merca-do de comercio justo, se podría decir que el comercio justo me-rece ser una opción valiosa para el desarrollo sustentable de lospequeños agricultores.

Palabras clave : México, comercio justo, café, pequeños agri-cultores, agricultura.

Introduction

In Mexico, agriculture has played an important role underthe Import Substitution Industrialization (isi) model. The



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fAir trAde for coffee producing smAll -scAle fArmers in mexico

agricultural sector has played as a provider of basic foods tourban labor forces at a low price and as an earner of foreign

currency which was designed to import material inputs forthe industrialization. In this process, the State’s role wasfundamental, and the government’s agricultural policies werefavorable to large-scale export-led farming at the expense ofsmall-scale farmers, mostly living in the southern part of thecountry (Cardoso, 1992; Edwards 1993; Reyes, 2011). Thisexclusion of small-scale farmers has been intensied as theyhave become more exposed to market forces with structuralchanges in the agricultural sector: the opening of the agricultural

market and smaller interventions of the State in the agriculturalsector. The access of small-scale farmers to the State’s supportssuch as governmental agricultural subsidies and technologicalassistances has been reduced, and the agricultural markethas become more and more open to other- domestic andforeign- competitors (Gwynne and Kay, 2004: 47). With theagricultural market more liberalized and unregulated, theimport of agricultural products subsidized by the governmentsin developed countries has increased, and most Mexican small-

scale farmers became less competitive with their structuralbarriers, undergoing the deepening poverty and having littlechoice but to immigrate towards cities or even outside thecountry.

In Mexico, agricultural producers can be roughlycategorized into two with nearly opposite economic and socialconditions: large-scale commercial producers and small-scale farmers. Small-scale farmers mostly have less than vehectares of land, lack access to the land of high quality, and

have little or no access to technology, credit, storage facilities,and marketing channels. Mexican government expected thatthe trade liberalization in the agricultural sector would promote‘uncompetitive’ farmers to convert their production to otherprotable crops, and thus resources would be allocated moreefciently. However, small-scale farmers were not preparedenough to take advantage of greater market opportunities withstructural barriers, and thus exposed more to market forces. Inaddition to lack of access to credit, high transaction costs that

small-scale farmers face, government policies have become morefavorable to export-led commercial farmers. Moreover, small-scalefarmers have faced more competitions from agricultural imports



30


that have been subsidized from the governments in developedcountries, and inuenced by transnational agribusinesses with

nearly monopolistic power. These market pressures put small-scale farmers more vulnerable since the State’s role has beenreduced drastically. The livelihoods of small-scale farmersnot only have been hard hit, and the emphasis on export-ledcommercial farming had produced environmental costs as well(Seo, 2010: 49-50).

Although trade liberalization has produced economicprots for some of ‘competitive’ farmers, living conditions havebeen deteriorated for the majority of small-scale farmers. Despite

the importance of economic prots, the marginalized peopleand their quality of life cannot be ignored as they are importantaspects of development.

Fair trade concerns the livelihoods of small-scaleproducers by making direct trading relations between producersand consumers. It aims to provide producers with the minimumfair trade price which covers the production costs, and with socialpremium that can be invested in various economic and socialprojects for small-scale farmers who participate in fair trade

market through producers’ cooperatives. In addition, fair tradepromotes environmentally sustainable production methods andlong-term trading contracts between producers and consumers.As a whole, the focus of fair trade is different from conventional“free” trade which put economic prots at the core.

This study aims to examine if fair trade can be a probablechoice for small-scale farmers in Mexico by overcoming theirstructural barriers caused by strong operations of neoliberaleconomic model since the early of 1990s in particular. In reality,

the marginalization of small-scale farmers in Mexico seems to beintensied with structural changes in the Mexico’s agriculturalsector. As said, it can be necessary to take small-scale farmersinto consideration since the development of a country would notbe sustainable without giving attention to the social costs- poorliving conditions of the marginalized people- of the economicgrowth. In this sense, fair trade is likely to be worth consideringbecause it puts the livelihoods of small-scale producers at thecenter of the attention, and thus promotes the sustainability of

the development.



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The Evolution of Fair Trade Movement and the

Participation of the Mexican Small-Scale Farmers

in the Movement

Fair trade does not seem to have clearly-set denition yet.Although various fair trade-related organizations or initiativeshave their own denition of fair trade, there seem to be somecommon grounds: Fair trade is based on the direct relationshipand the long-term contracts between producers and consumers;It promotes the sustainable development with concerns about thelivelihoods of small-scale producers, who otherwise could have

been excluded from trade talks, and about the environmentallysustainable production patterns.

The structural changes made in the Mexican agricultureby opening of the market and reducing the State’s role, havebrought both positive and negative results. While some‘competitive’ producers and agribusinesses beneted from thelower barriers of the agricultural market, other ‘uncompetitiveand inefcient’ farmers have been severely affected, andtheir living conditions have been even deteriorated. These

‘uncompetitive and inefcient’ farmers are mostly small-scaleproducers, to whom fair trade gives attention.

Fair trade has its origin in the 1940s and 1950s with theorientation of relief rather than trade, and since then it has beenevolved to become what it is now. In the beginning, religiousgroups and other politically-oriented ngos- Ten ThousandVillages (formerly known as selfhelp) and serrv International-tried to “provide more than charity to victims of war, famine, andother devastating events”, by buying handicrafts from victims

(Mace, 1998: 26). Ten Thousand Village traded directly withproducers of needlework from Puerto Rico, joined soon after byserrv International (also based in the usA), which began tradingwith producers in the South” (Hutchens, 2009: 63). In Europe,while the goods of Chinese refugees were sold to consumersthrough Oxfam uk shop outlets, groups in the Netherlands setup importing organizations for producers’ goods under the nameof Fair Trade Organisatie (1967) (ibid: 63).

As a form of trade, not charity or relief, the start of fair

trade can be traced back to the 1960s (Seo, 2010: 54). Theconcept of fair trade is based on the rst unctAd in 1964, whenthe developing countries came up with the slogan of “Trade, not



32


Aid” in order to demand fairer and freer trade relationship withthe developed countries (Arditi, 2006: 4). Developing countries

expressed their demand for just and fair trade again in theSecond unctAd in 1968, but there was not much reaction tothis demand as in 1964. In 1965, there was the creation of rstAlternative Trading Organization (A to), which represents theswitch of emphasis from relief to trade of products (Seo, 2010:55). A tos sought to provide economic assistance by creating amarket in the First World for products made by Third Worldartisans and farmer producers could receive a better price fortheir products (Mace, 1998: 26).

In 1969, the rst World shop was opened in the city ofBrenkelen, the Netherlands, which aimed to “bring the principlesof fair trade to the retail sector by selling almost exclusively goodsproduced under fair trade terms in underdeveloped regions.”“With the initial positive results, the number of Worldshopsincreased up to nearly 120 within two years across Europeancountries like Germany, France, Switzerland, Austria, Sweden,Belgium, and the United Kingdom, and the fair trade have gainedmore recognition (Seo, 2010: 55; Medina et al., 2008: 2).

Despite growing awareness in consumer markets abouttrade injustice through A to’ s campaigning efforts, the productrange they offered was limited primarily to handcrafts, andthe consumer market remained small… prots dropped andsome A tos faced bankruptcy, many A tos began to look towardsconsumer needs and to balance these with those of producers”(Hutchens, 2009: 64). Since the late 1980s, there have beengrowing fair trade labeling initiatives in an attempt to expand thedistribution of fair trade products, more than handicrafts, so as

to increase the market share of the fair trade products. In 1988,“the rst fair trade certication initiative, Max Havelaar, wascreated in the Netherlands under the initiative of Nico Roozen,Frans Van der Hoff, and Dutch development ngo Solidaridad”(See Wikipedia- Fair Trade). The rst fair trade coffee from Mexicowas purchased in Dutch supermarkets. Thereafter, nationalfair trade labeling initiatives like Max Havelaar have increasedacross countries in Europe and North America. In 1997, flo wasestablished in Bonn, Germany, to unite the labeling initiatives

under one umbrella and harmonize worldwide fair tradestandards and certication.



33


Since the late 1980s when the rst fair trade label- MaxHavelaar- was created, consumers can get relatively easier

access to fair trade products as fair trade products need not besold only at Alternative Trading shops as in the previous years. Aproduct with fair trade label would be able to be traded in a widerrange of shops to which consumers can have easier access (Seo,2010: 66; Hutchens, 2009: 65). Since then, the characteristicof fair trade has become more like fair trade labeling initiativesthan like fair trade movement.

In 1997,flo, an umbrella body, was created with combinedefforts of national labeling initiatives. flo is responsible for

setting international fair trade standards, for organizing supportfor producers around the world, for developing global fair tradestrategy, and for promoting trade justice internationally.

The rst fair trade label, Max Havelaar, has its origin ina Mexico’s coffee producing cooperative called uciri, and Mexicois one of the largest fair trade coffee exporters. With uciri’ s some successes, there have been other attempts of producer’scooperative to sell their products through fair trade in Mexico. The number of producer’s organizations involved in fair trade is

high in Mexico (See Table 1).



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T a b l e

1

N u m b e r o f F a i r t r a d

e C e r t i e d P r o d u c e r O r g a n i z a t i o n s i n L a t i n A m e r i c a ( 2 0 0 7 )

A r g e

n t i n a

B o l i v i a

B r a z i l

C h i l e

C o l o m b i a

C o s t a R i c a

E c u a d

o r

1

0

2 6

1 8

6

4 8

1 3

2 2

G u a t

e m a l a

H o n d u r a s

M e x i c o

N i c a r a

g u a

E l S a l v a d o r

P a r a g u a y

P e r u

2

3

2 0

5 0

2 0

6

6

4 4

S o u r c e : w w w . f a

i r t r a d e . n e t



35


certimex (Certicadora Mexicana de Productos y ProcesosEcológicos) is a non-prot organization and is created in 1997.

The organization is founded with the purpose to collaborate in thedevelopment of ecological production through quality inspectionand certication of agriculture products and processes, farming,agriculture - industry and forestry. certimex started only tocertify organic or ecological products, but in 2000 it elaborated,together with Comercio Justo México A.C., the criteria andprocedures for the certication of the fair trade. It started towork with flo in July 2002, exercising inspections according tothe standards of the fair trade organization. With this evolution,

certimex became an organization which is capable of providinginspection and certication services for organic coffee, and fairtrade coffee.

Comercio Justo México (c Jm) is the Mexico’s fair tradesystem and is created in 1999. c Jm is a Mexican civil associationthat promotes the commercialization of fair trade products andthe provision of services for small-scale producers, at the sametime it encourages the social, economic, and environmentallysustainable development. The principal mission of c Jm is

to increase the distribution of products produced by smallproducers in Mexico and to encourage fair relations between theorganizations of small producers and consumers; promoting amarket based on justice; solidarity and sustainability (See morec Jm website.).

c Jm is intended to promote fair trade in Mexico, to raiseconsumer´s awareness about it. In addition, it is designed toset the norms and system of regional fair trade, and to makealliances with other fair trade organizations or groups in and out

of the country. Principal members of c Jm are Anec (AsociaciónNacional de Empresas Comercializadoras de Productores delCampo, Ac), cepco (Coordinadora Estatal de Productores deCafé de Oaxaca, Ac), invertir (para desarrollo sustentable Ac),mAJomut (Unión de Ejidos y Comunidades de Cafeticultores delBenecio Majomut), pAuAl (Pequeños Apicultores Unidos deAmérica Latina, Ac), sipro (Servicios Informativos Procesados,Ac), and uciri. And honorary members include Alianza Cívica,AmAcup (Asociación Mexicana de Arte y Cultura Popular Ac),

cee (Centro de Estudios Ecuménicos, Ac), cnoc (CoordinadoraNacional de Organizaciones Cafetaleras, Ac), ideAr (Impulsora deAlternativos Regionales sc), Red Todos los Derechos para Todos,



36


Ac, rmAl (Red Mexicana de Acción frente al Libre Comercio, Ac),and vAmos (Fundación para el Desarrollo Sustentable, Ac).

Agromercados, a Mexican fair trade rm, was foundedin 2000, with an initial capital of about us$ 24,000 fromproducer´s organizations. It belongs to dozens of organizationsof small producers involved in the production of coffee, honey,cocoa, cereals, milk, orange juice, among others in 17 of 32states of across Mexico (Johnson, 2002: 67). “The prots fromAgromercados are designed to be reinvested or to be utilized infavor of farmers or indigenous organizations, and the rm isto receive a fair price in order to guarantee a stable market for

small producers. Agromercados’ main product is organic coffee,and of 65,000 producers participating in Agromercados, nearly35,000 are producers in the state of Oaxaca, Chiapas, Puebla,San Luis Potosí and Querétaro” (Seo, 2010: 80; Johnson, 2002:67).

Coffee is the best known fair trade product amongconsumers in Europe, North America and Japan because Fairtrade coffee was not only the rst fairly traded food productbut also the rst to carry the fair trade label. Although Mexico

has not been historically important coffee-producing countrieslike Brazil, the coffee production in the country has emergedas one of the important economic activities (according to fAo,coffee is the 12th important exporting agricultural product inthe country) and has importance on the livelihoods of small-scale producers. As the rst fair trade label, Max Havelaar, hasits origin in a Mexico’s producers’ cooperative- uciri-, Mexico isone of the major fair trade coffee producing countries: Mexicoaccounted for 21 per cent of the trade of the flo certied green

coffee, followed by Peru, 16 per cent, and Guatemala, 15 percent, respectively” (flo 2003).

In Mexico, the land distribution to farmers after theRevolution has put another characteristic on the country’scultivation. Coffee, an agricultural product of plantations,originally cultivated in Mexico by large landowners, has beenconverted into a peasant product, planted by indigenoussmallholders. Coffee in Mexico is largely produced by small-scale farmers in the aftermath of the land distribution, and thus

coffee production became closely associated with the livelihoodsof coffee-producing small-scale farmers.



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In 1973, as part of President Echeverrias’ plan tomodernize small-scale coffee production and increase Mexico’s

presence in foreign markets, the Mexican Coffee Institute(Instituto Mexicano del Café or inmecAfe) developed to supportcoffee producers (Mace, 1998: 18). However, the demise of thestate agency in 1989 in the process of reducing the state’srole in the economy has put the state-dependent small-scalefarmers more vulnerable to the market pressure. Moreoverthis end of inmecAfe coincided with the demise of InternationalCoffee Agreement (icA) in that same year, putting more pressureon those small-scale coffee producers. In addition to negative

impacts of unregulated market on small-scale coffee producerswith the demise of international agreement and of the stateagency, small-scale farmers have become more exposed to thepower of a few transnational coffee roasting companies. Whilecoffee production involves millions of small-scale farmers,only ve large transnational roasting corporations dominatedthe industry. At the end of 2002, the ve largest roasters wereresponsible for purchasing nearly half of the world’s supply ofgreen coffee beans, with Kraft General Foods buying just over 13

per cent of the total, followed by Nestlé (13 per cent), Sara Lee(10 per cent), Procter & Gamble (4 per cent), and Tchibo (4 percent), which sells mainly in Germany” (Fridell, 2007: 117).

There are many small-scale farmers’ cooperativesinvolved in Fair trade these days in Mexico. As is the situationat the international level, these kinds of cooperatives have beenmostly developed in the coffee sector in Mexico. According to fairtrade Certied, there are many fair trade coffee cooperatives inMexico: cepco, ismAm, Unión Majomut, and uciri, among others.

The rst fair trade label, Max Havelaar, initiated throughselling coffee from uciri in Mexico to the Dutch market. uciri is“small-scale coffee producer’s cooperative from 54 communitiesin 20 municipalities located in the Isthmus of Tehuantepec,Oaxaca… currently over 2,500 active member families in uciri,representing over 25,000 people… dominant ethnic groups inuciri included the Zapotec, Mixe, and Chontales, and to a lesserextent Mixtecos and Chatinos (Fridell, 2007: 183). The uciri has developed in the early 1980s and has become one of the

most active small-scale producers’ cooperatives in and out ofthe country.



38


What is Gained and Lost for the Small-Scale

Farmers in Mexico

It is possible that small-scale farmers benet from fairtrade in various ways. Fair trade guarantees the fair trademinimum prices and social premium. The minimum price canensure small-scale farmers fairly stable economic incomes incomparison to participating in the conventional free trademarket. In addition, small-scale producers are required totake part in democratically-run producer’s organizations orcooperatives in order to get involved in fair trade market. Those

producer’s organizations or cooperatives are designed to investin infrastructure and other basic services of their communitieswith social premium. Moreover, small-scale-producers canimprove their access to credit through pre-nancing, and beprovided with technical supports from their long-term tradingpartners. Small-scale farmers can get involved in the decision-making process, by attending in the democratic and transparentproducer’s organizations or cooperatives as well (Seo, 2010: 81-82).

However, there seem to be still limitations and challengesof fair trade from only economic perspective. Since Fair marketaccounts for very limited portion of world trade, and theconsumption of products are largely consumed in the developedcountries, despite growing efforts to make and increase thedomestic fair trade markets like in Mexico. Moreover, as fairtrade has become emphasizing on market increase, the corevalues of fair trade- the livelihoods of small-scale farmers- seemto be blurred. This issue has been drawing a lot of controversies

with a growing involvement of conventional agribusiness in fairtrade market, in particular. Since fair trade can be highly spokenof its consideration into various aspects- social, economic,and environmental- of development. Moreover, the fact thatsmall-scale producers are given particular attention has beenconsidered as one of the most important points of fair trade.

In the case of uciri, from 1993 to 2002, the quantityof export-quality green beans processed and sold by uciri oninternational markets remained fairly consistent and ranged

between around 500,000 kg to 700,000 kg… uciri also soldbetween 180,000 kg to 290,000 kg annually of non-export-quality coffee on domestic markets…Almost all of its international



39


export-quality coffee was sold as certied organic, and nearly allof it was sold through fair trade (Fridell, 2007: 188). According

to Gavin Fridell, the majority of fair trade coffee cooperatives canusually export between 10 and 30 per cent of their beans to fairtrade partners (ibid: 188). This good performance of uciri in thefair trade market can be attributed to its long experiences andits attempts to make relations with diverse fair trade importers(See Table 2) (Seo, 2010: 100).

In order to increase sales of their fair trade coffee, uciri attempts to sell their coffee in the domestic market. uciri wasan important element in the process of promoting Mexican fair

trade market and certication system such as c Jm, certimex,and Agromercados , and now is one of major participant andbeneciary of those systems. In addition, uciri have tried to makenegotiations with large conventional corporations in recent years.“The obvious example of uciri efforts was a ten-year deal4 thatit signed with Carrefour, the world’s second largest food chain,in February 2002, for an unspecied quantity of coffee (Fridell,2007: 190). There have been a lot of controversies over this dealsince although the involvement of conventional corporations in

fair trade can increase the market share of fair trade productson the one hand, at the same time their participation can blurthe core subject of fair trade itself: Fair trade can produce theeconomic prot as well as social and environmental benets,taking small-scale producers into principal consideration (Seo,

2010: 101).

4

“The coffee will be roasted by Malongo, a conventional roaster in southern France,and then sold insupermarkets owned by Carrefour. Although Carrefour will payfair trade prices and adhere to fair trade rules, the coffee will not be independentlycertied by Flo. Instead, the coffee will be independently certied as organic andwill be stamped with Carrefour’s own quality seal” (Fridell, 2007: 190).



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Table 2Major Importers of the uciri’s Fair Trade Coffee, 2002

Unit: 132-1nb bag

Comercio TerzoMondo (Italy)

Sacheus(Sweden)

Equal Exchange(The u.s.)

gepA (Germany)

5,000 bags 1,500 1,300 1,000

Urtekram

(Denmark)

Café Campesino

(The U.S.)

ezA (Austria) Just us!

(Canada)Over 500 500 500 350

Source: Fridell (2007).

Taking the case of uciri, it can be said that fair tradestill have several limitations, but simultaneously it producesome benets for small-scale farmers (Seo, 2010: 102). uciri distributes the revenue gained from the minimum guaranteed

price (minus operating costs) to member households on the basisof the quantity of beans each brings to be processed and soldby the cooperative, and the revenue from the social premium isused to help pay for uciri’s various social and economic projects(Fridell, 2007: 191). Sustainable and stable livelihoods can bebuilt upon sustainable and stable incomes, and thus income isthe basis with which small-scale producers may ultimately gainthe capacity to acquire savings and make additional incomegenerating investments (Potts, 2007: 13). By participating in

uciri which sell their coffee in the fair trade market, small-scale farmers could get relatively stable income covering theirproduction costs, and could benet from various economicand social projects in which uciri invests and manages withsocial premium of fair trade. This is quite different picture sincefarmers have been suffered by exploitations and intimidation ofmiddlemen before they organized themselves and participatedin fair trade.

However, the fair trade minimum prices does not tend to

include real social and environmental costs of production since“fair trade prices must remain close enough to conventionalprices so as to not discourage ethical consumers in the North,and thus fair trade prices, while higher than conventional ones,



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are ultimately limited by market imperatives, not an objectiveassessment of the real costs of production” (Fridell, 2007: 192).

Therefore, small-scale farmers do not get high incomes enoughto overcome their economic poverty completely even thoughtheir living conditions have gotten better than before by gettinginvolved in fair trade market. In the meantime, in order toovercome the limited income sources, the union attempted topromote their members to diversify their production, and theunion launched a fruit marmalade production project as aneffort to diversify its income sources.

Fridell (2007: 195) argues that “over time, although uciri

has turned toward private and government sources of nancing,the fair trade network still plays an important role in thecooperative’s nancial situation. He also explains the nancialbenets from participating in fair trade:

“First, uciri’s participation in the fairtrade network has enhanced its credibility amonggovernment agencies, development organizations,and private banks who view uciri as a stableorganization with a degree of market security,leading to the union’s easier access to fundingand other types of improvements. Second,knowing that pre-nancing from fair tradepartners is available if needed is an importantsource of stability for the organization. It allowsuciri some room to maneuver and maintain someindependence from domestic lenders and thesemi-clientelist relations that inevitably emergewith such connections” (ibid: 196).

Social premiums gained from fair trade can produce

more than economic prots for small-scale farmers: producer’scooperative can invest in the long-term social and economicdevelopment with that premium. With this extra premium,cooperatives can invest in infrastructure, and other communityprojects like education and health programs. uciri couldconstruct two processing plants, one in Lachiviza and otherin the regional center of Ixtepec, and the cooperative’s beansare transported by its own two large long-haul trucks and vesmaller pickup trucks. The improved infrastructure for uciri

include a hardware store, which gives access to appropriatelow-cost equipment; a warehouse for storage and preparation ofcoffee for export, where they are also preparing to begin roasting



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coffee to get higher prots and eventually to export according toEuropean taste; a Center for Peasant Education (cec) founded in

1986, to provide training for organic production skills through13 months courses (Almanza-Alcalde, 2005). In addition, apublic transportation system like the Union of Zapotec and Mixe Towns of the Isthmus (upzmi, Unión de Pueblos Zapotecas delIstmo) was introduced, and basic health services were providedwith the construction of the health care clinic in Lachiviza in1994. uciri members can get education and training throughthe fair trade network as well. uciri members have been ableto acquire a better understanding of how the coffee market

operates, including information about permits, paperwork…organic certication; the determination of prices…; knowledgeof organic production methods and new technological advancesthrough mutual relationship with fair trade and organic licenses,roasters, and afliated ngos (Fridell, 2007: 200).

uciri is a producer’s cooperative organized of Mexico’ssmall-scale coffee producers in state of Oaxaca, and got involvedin the rst fair trade labeling initiative- Max Havelaar. As a fairtrade pioneer, uciri has played a signicant role in fair trade

networks in and out of the country. Through participating in thefair trade market, small-scale farmers could get various benets.uciri members could improve their living conditions with theminimum fair trade price and social premium. Although theminimum prices were not high enough to overcome their povertycompletely, small-scale farmers could get out of the previousexploitation from middlemen by making direct relationshipwith fair trade partners. Along with relatively stable economicincome, if not high enough, the union could invest in economic

and social development projects: investment in infrastructure,public transport system, and basic services like health clinicand education center. Members could get relatively easier accessto credit through pre-nancing and ofcial credit channels,and be encouraged to promote organic production. In addition,the union could be granted technical supports from their fairtrade partners. Moreover, farmers were able to participatein the decision-making process through democratically-runorganizational structure of the cooperative.

The rapid growth of fair trade markets in recent yearscan be largely attributed to the fair trade certication systemas a wider product range is available and consumer awareness



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is rising through social marketing initiatives (Hutchens, 2009:69). However, there is a growing concern about large-scale

brand companies’ moving into the fair trade markets recently,and there are arguments that “conventional brand companieshave engaged in ‘tokenism’- stocking minimal amounts of fairtrade products under new niche brands (Hutchens: 71). Atthe heart of fair trade lies a fundamental paradox… to achievesocial justice and alter the unjust terms of trade that hurt smallfarmers worldwide, fair trade utilizes the mechanisms of the verymarkets that have generated those injustices… it is a hybrid-simultaneously a social movement and an alternative market

structure (Jaffee, 2007: 1).Managed well, trade can lift millions of poor people out

of poverty; managed badly it will leave whole economies evenmore marginalized… when international and national marketsdo work properly, poor people also need help to overcomeobstacles that prevent them from participating on a fair footing”(Hellin and Higman, 2003: 1-2). Fair trade has the intentionto provide decent living conditions for long marginalized small-scale producers, mostly living in the developing countries, by

guaranteeing better trading terms and by raising consumers’consciousness of their consuming actions, rather than pursuingthe maximization of economic prots. Fair trade guarantees abetter deal for producers in the developing world through: “a fairand stable price for their product; long-term trading relationsand advance payments; investment in local communitydevelopment; support in gaining knowledge and skills neededto operate in the global economy; environmentally sustainablefarming methods.

A central goal of fair trade is to create more direct, socially just, and environmentally responsible trade relations- mainlydisadvantaged farmers in the global South and concernedconsumers in the North (Jaffee, 2007: 1). According to flo, “fairtrade has several criteria to be followed: guaranteed minimumprices to producers and social development premium; advancecredit or payment to producers; democratically-run producercooperatives or workplaces; long-term contracts and tradingrelationships; environmentally sustainable production practices;

nancial and technical assistance to producers...” Here, fairtrade minimum price is based on the costs of productionand the producers’ basic living costs. According to Hutchens



44


(2009: 60-61)., a social premium is the premium which isadded to the minimum price in order to enable producers to

build business capacities and to diversify to alternative and/or additional sources of business income; and at a communitylevel to nance the construction of clean and proximate waterfacilities for domestic use and production, health facilities andaccess to medicines, community micro-credit schemes andcommunity banks, housing and infrastructure such as roads,electricity, storage warehouses as well as schools and resourcesfor educating children.

By guaranteeing fair trade minimum price and social

premium, producers can get fair incomes for their products.Also, they can invest in infrastructure, technical training, andbasic services like education and health with social premiumas producers themselves participate in the decision-makingprocess. Producers can deal with their previous problemsof inaccessibility to credit with pre-nancing. Moreover, theproduction of fair trade is promoted to be environmentallyfriendly” (Seo, 2010: 64). Osterhaus (2006: 134-35) demonstratessome of the benets of fair trade for small-scale farmers like.

“It is extremely difcult to dene with precision thenancial benets of fair trade for small-scale farmers, mainlybecause cooperatives themselves decide on how to distribute theamounts received among their members… the high and stableprice they receive for their produce and the additional premiumenables cooperatives to build up a small working capital andto invest in quality improvements, differentiation and technicalsupport…The combination of the guaranteed minimum price,the social premium, pre-nancing and increased access to credit

has contributed to greater economic and social stability of small-scale producers… training and technical assistance enablefarmers to improve the quality of their produce, while access toinformation helps cooperatives to take adequate decisions abouthow to produce, market and sell crop…..”

Conclusion

In Mexico, since the late 1980s and the early 1990s, big

transformation has been made on the country’s structure ofagricultural production and on rural livelihoods. In the early1990s, most trade barriers were reduced and most agriculturalcommodities got under tariff regime. Trade in some agricultural



45


commodities was liberalized in 1994 while several sensitivecrops were under a process of year-to-year liberalization, so that

market for barley in 2003 and for bean, corn, and powderedmilk in 2008 were expected to be liberalized.

While the liberalization and deregulation of agriculturalmarket made favorable conditions to export-led large-scalefarmers mostly located in the northern states of the country,small-scale farmers who have less access to credit andinfrastructure became more susceptible under more liberalizedand competitive economic environment. Most of small-scalefarmers have nearly no or limited access to nancial resources

and infrastructure so as not to be competitive enough tocapitalize on greater market opportunities. Government not onlyreduced or eliminated supports or subsidies, but also its policieshave become friendlier to export-led commercial farmers. Theopening of the agricultural market has put more pressure onsmall-scale farmers with intensifying inuences of transnationalagribusiness, and pushed them under erce competition fromsubsidized agricultural imports. As a result, incomes madeby small-scale farmers could not even cover the cost of their

production, and sometime, farmers have become compelledto leave their land and get involved in non-farm activities forsurvival, or to immigrate to nearby cities or abroad, particularlythe U.S.

Fair trade has evolved from the orientation of relief ratherthan trade at its outset, and in mid-1960s, there was the creationof rst A to, which represents the switch of emphasis from reliefto trade of products, seeking to provide economic supports bycreating a market in the First World for products made by Third

World artisans and farmers. Since the 1980s, there have beenincreasing fair trade labeling initiatives in order to increase themarket share of more diversied fair trade products, rather thanselling handicrafts from the Third World countries only at shopslike World shops, or by religious groups. The creation of rstfair trade label, Max Havelaar, was a turning point of this trend.Since then, other fair trade labeling initiatives began to springup, leading to the foundation of one of important internationalfair trade organizations, flo, in 1997. The organization was

the result of efforts made by many national fair trade labelinginitiatives, and was designed to set international fair tradestandards, and to promote supports for small-scale producers.



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Small-scale farmers can be guaranteed with the fairtrade minimum prices and social premium, by participating

in fair trade market. With fair trade minimum price, small-scale farmers can obtain fairly stable incomes, comparing toparticipating in the conventional free trade market. Also, small-scale producers are required to take part in democratically-run producer’s cooperatives in order to join fair trade market. These cooperatives can make investments in infrastructure andother basic services of their communities with social premium.Moreover, the access to credit for small-scale farmers can beincreased through pre-nancing. Fair trade trading partners

can provide them with technical supports and other advices.Small-scale farmers can also get involved in the decision-making process, by attending the democratically-run producer’sorganizations.

Coffee is one of the most prominent fair trade products,and Mexico is one of the most signicant fair trade coffeeexporters. It is necessary for small-scale producers to getorganized into a producers’ cooperative when they intend topartake in fair trade market. In Mexico, there are almost 50

fair trade certied producer organizations, and uciri is one ofthem. uciri got involved in the creation of rst fair trade label-Max Havelaar, and since then, the union has become a pioneercooperative, participating in the domestic and international fairtrade market. uciri members could improve their quality of lifewith the minimum fair trade price and social premium. Althoughthe minimum prices were not high enough to overcome theirpoverty entirely, small-scale farmers were not suffered fromexploitation from middlemen any more. In addition to relatively

better economic conditions, the union could make investmentsin infrastructure, public transport system, and basic serviceslike health clinic and education center. At the education center,farmers were able to get knowledge of organic coffee production.Relatively easier access to credit through pre-nancing andofcial credit channels is another benet for uciri members, alongwith technical supports from their fair trade partners. Moreover,farmers were able to participate in the decision-making processthrough democratically-run organizational structure of uciri.

Despite all these benets of fair trade for small-scaleproducers, it cannot be said that fair trade is a panacea for allthe problems that small-scale farmers face. Fair trade market



47


still accounts for very small portion of total trade although themarket share has been gradually on the rise. However, these

labeling initiatives seem to undermine the very core value of fairtrade: the livelihoods of small-scale producers. Moreover, thegradual involvement of conventional corporations in fair trademarket is controversial in recent years. While the involvementof corporations can increase sales of fair trade products madeby small-scale producers, corporations sometimes capitalize ontheir involvement as public relations. Namely, corporations tendto improve their image while purchasing only small amounts offair trade products, and do not often commit themselves to the

fair trade values.Since these involvements are quite recent trend, there

is still lacking guidelines for corporations participating infair trade market. Another challenge is that the majority ofconsumers are located in the developed countries. There hasbeen growing efforts to create and increase domestic fair trademarket in Mexico, along with the domestic certication system.With the creation of domestic Fair Trade market, domesticconsumers are likely to get more information about fair trade

and its products, and the reliance on consumers in developedcountries could be alleviated. Although fair trade guaranteesproducers the minimum price and social premium, the fair tradeprice cannot be high enough if fair trade products are to attractconsumers. So it is necessary to diversify the products of small-scale producers. Producers’ organizations which get involved infair trade market tend to depend on the production of one cropor product. Although there are efforts to diversify the productsas is the uciri case, the dependence on one product can make

small-scale producers more susceptible to price uctuations.Fair trade is not cure-for-all. However, small-scale

farmers who have been long marginalized seem to be able toget out of extreme poverty, with minimum income guaranteedto cover at least the production costs, and to nd ways todeal with structural barriers such as access to credit byparticipating in fair trade market. Fair trade concerns the livingconditions of these small-scale farmers, rather than pursuingonly the maximization of economic prots. In addition, the

social premium is to be invested in long-term economic andsocial development projects, and the production patterns areencouraged to be environmentally sustainable. In economic



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terms, fair trade seems like to make up for the market failure –the asymmetrical distribution of wealth- caused by subsidies

in developed countries and monopolistic power of transnationalagribusiness in the market. Some critics of fair trade argued thatfair trade can play like agricultural subsidies by distorting themarket. However, the fair trade minimum price is not xed andvaries according to the market price. Moreover, the fair tradedoes not tend to give prots only to a few agribusinesses as havedone agricultural subsidies in developed countries. Rather, itcan function like social safety net for small-scale farmers byguaranteeing them the price at least to cover the production

costs and the opportunity to continue their production.In addition, fair trade products can be explained as a

differentiation of products. Fair trade products tend to promoteethical consumption with the consideration of the quality ofsmall-scale producers’ life. This type of consumption itself hasbecome the brand value of fair trade products. As a whole, fairtrade does not seem to substitute for the present trade system. The Mexican Coffee production case shows the limits andpossibilities of fair trade in improving the living conditions of

small-scale farmers. However, considering that fair trade seemsto provide an opportunity for small-scale farmers to get out ofthe plight of their living conditions and to make investmentsin longer-term economic and social programs, it is worth beinggiven attention.

Bibliography

Arditi, Benjamín. Del comercio libre al comercio justo: Las iniciativas

de los nuevos defensores de la equidad en las relaciones norte-

sur. Revista “Sistema” No. 195, Madrid, España, Noviembre2006.

Fridell, Gavin. Fair Trade Coffee: The Prospects and Pitfalls of

Market-driven Social Justice. University of Toronto Press Inc.,2007.

Gwynne, Robert N. and Kay, Cristobal ed. Latin America Transformed:

Globalization and Modernity. 2nd ed., Hodder Arnold, 2004.Hellin, Jon and Higman, Sophie. Feeding the Market: South American

Farmers, Trade and Globalization. Kumarian Press, Inc., 2003.

Hutchens, Anna. Changing Big Business: The Globalization of theFair Trade Movement. Edward Elgar Publishing Ltd., 2009.




Jaffee, Daniel. Brewing Justice: Fair Trade Coffee, Sustainability

and Survival. University of California Press, 2007.

Johnson, Pierre William. El comercio justo en México: sellos degarantía y estrategia. Iniciativa de tipo. II Cumbre Mundial delDesarrollo Sustentable. Johannesburgo 2002.

Mace, Bill. Global Commodity Chains, Alternative Trade and Small-

Scale Coffee Production in Oaxaca, Mexico. (M.A. Thesis, MiamiUniversity, Oxford Ohio, 1998).

Medina, et al . Comercio justo: una alternativa de desarrollo para los

pequeños productores. “Punto de Vista”. Facultad de Contaduría y Administración, Universidad Autónoma de Chihuahua.

Osterhaus, Anja. ed.Business Unusual: Successes and Challengesof Fair Trade. Fair Trade Advocacy Ofce, Brussels, 2006.

Potts, Jason. Alternative trade initiatives and income predictability:

Theory and evidence from the coffee sector. InternationalInstitute for Sustainable Development, July 2007.

Seo, Ji-hyun. Implications of Fair Trade for Small-Scale Farmer in

Mexico: The Case of Coffee Production. (M.A. Thesis, HankukUniversity of Foreign Studies, Seoul, Korea, 2010).

Websites

Agromercados: http://www.agromercados.netcertimex: http://www.certimexsc.comComercio Justo México: http://www.comerciojusto.com.mxFair Trade Organization Overview: http://www.enactbsc.org/site/

wp-content/uploads/2009/07/ftwh_organizational_chart.pdf Wikipedia (Fair Trade): http://en.wikipedia.org/wiki/Fair_tradeflo: http://www.fairtrade.netfAostAt : http://faostat.fao.org

uciri: http://www.uciri.org

Fecha de recepción: 18 de junio de 2012Fecha de aprobación: 14 de agosto de 2012

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