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Inter Press Service

Recession Challenges Fair Trade

Diego Cevallos

Organic Coffee Beans

MEXICO CITY  - The world economic recession is threatening the progress Latin America has made in fair trade. The leaders of this alternative form of exchange are making emergency contacts in order to assess the situation and come up with strategies to confront it.

Most of the representatives of fair trade organizations interviewed for this report believe the recession's impact is inevitable, but there are some who see the crisis with optimism, such as networks in Argentina and Brazil who go so far as to predict improvements in this sector.

Ruben Ravera, spokesperson for the Argentine Fair Trade Network, is among those who see a gloomy outlook. It is very likely that because of economic contractions "the consumer's commitment to fair trade will decline," he said.

Eduardo Rojo, director of the citizen's group Comercio Justo (Fair Trade) in Mexico, notes that "there is a sense of desperation and emergency in all parts" of the networks dedicated to this sort of exchange.

Rojo warned that although "the impact of the product prices isn't being felt yet, the negotiations for putting the products on the market are increasingly difficult."

Fair trade is based on alternative market channels created in the 1980s between consumers - mostly in the industrialized North - and small farmers and artisans in the nations of the developing South, eliminating the big corporations from the middle and establishing new rules for production and labor.

An estimated 1.4 million people are dedicated to producing goods and commodities for fair trade.

The buyers pay higher prices, which remunerate an activity certified through a variety of mechanisms, ensuring respect for the environment, higher wages, more equitable social organizations and the production of higher quality goods - mostly organic when it the product is food.

Global fair trade sales in 2007 reached 2.9 billion dollars, twice the total for 2005, according to data from Fair Trade Labeling Organizations International (FLO), based in Germany.

Although there are not consolidated data available for 2008, Gabriela Frers, Latin America regional director for the World Fair Trade Organization, said that some groups that sell in Europe, Canada and the United States have reported a five-percent decline for last year.

"The financial crisis that started in the United States is generating a recession in the other countries of the North, the principal consumers of fair trade, which means it will surely have repercussions in sales," Frers said from her offices in Paraguay. Sugar, cacao, coffee, bananas, flowers, fruit, honey and tea are some of the main products moved through fair trade.

According to Frers, 64 percent of Latin American sales are to other countries, mainly the United States, Canada, Spain, France, Italy and Britain.

As a result of the crisis, dialogue has begun among organizations that are active in the alternative markets. They have set their sights on defining strategies to deal with the new situation, said Mexican expert Rojo.

There are no precise estimates of how many Latin American producers participate in fair trade, but in Mexico alone (one of the leading countries in the sector), some 50,000 rural families are engaged in the alternative markets. Eighty to 90 percent of Mexican sales, especially organic coffee, go to markets in the wealthy countries of the industrialized North.

But not all countries' fair trade endeavors rely on exports. In Brazil and Argentina, for example, domestic sales have sustained fair trade production.

In Brazil, "the solidarity economy, similar to fair trade, represents 3.0 billion reais (about 1.3 billion dollars), or 1.5 percent of gross domestic product, and has 22,000 entrepreneurial projects," said Rosemary Gomes, president of Faces do Brasil, a network of groups that work in that sector.

"The solidarity economy and its commercial network in the internal market have not yet suffered from the crisis, but the exports have," she said.

As a strategy, South-South fair trade has already been promoted, especially for food products, complying with food sovereignty principles, for example, among Latin American countries, Gomes said.

FLO is promoting diversification of trade in South America and Mexico, as well as domestic markets in competing with the major supermarkets, a strategy that the crisis should intensify.

Even producers who export feel more protected under fair trade regimes, because of the "advantages of prices and the payments established before production." In addition, they benefit from public policies, such as supports for family farming, which is why the crisis is not pressing them to abandon the system, according to Gomes.

In past crises, of the organic coffee producers, "only those who were involved in fair trade survived, because the prices were kept stable," she said.

Overall, the hardest hit will be "social rights" due to the precariousness of employment and the living conditions of the farmers, said Gomes.

Edson Marinho, business manager at Ética: Comercio Solidario, a Brazilian fair trade group made up of non-governmental organizations and social movements, reported that sales to Europe of dried fruits, especially mango, suffered a decline in 2008, although that can be attributed in part to excess supply.

One person who does not see problems on the horizon is Marcelo Paranhos, director of the Mango Association of Brazil, which has 80 farmer members who grow 500 hectares.

In 2008, their mango harvest reached 3,500 tons; 40 percent was exported, and a third of that was through fair trade arrangements.

"This year we have a good projection for results... we hope to double the fair trade exports," said Paranhos.

The recession is an opportunity, he says, to add value, seek new markets at home and abroad, sell packaged products and lower costs. All of this "is possible is only possible because we are involved in fair trade."

A similar approach is on the mind of María Minuet, president of the Argentina Association of Women Microentrepreneurs, which produces natural fibers and cosmetic creams based on native plants.

"We don't see a risk. We have competitive products, contacts outside the country, and we aren't proposing sales of large-scale production," she said.

Sebastián Homts, of the group Art and Hope of Argentina, described fair trade in his country as something new and little known. His group does not export but has three shops in Buenos Aires where it sells products made by some 500 indigenous families from eight different ethnic groups.

Homts said that with a company that is able to disseminate the benefits of fair trade the sector will remain relatively healthy in the middle of the storm.

But those optimistic voices are not quieting the warnings.

"The consequences of the global crisis have the same negative effects on our networks. The reduction of exports from Latin America is already a fact, and that includes the fair trade products," said Frers, whose group sold 44 million dollars' worth of products in 2007.

To confront the economic storm clouds, Frers and Rojo are working to boost local markets and build closer ties among fair trade organizations.

With reporting by Mario Osava (Rio de Janeiro) and Marcela Valente (Buenos Aires). This story is part of a series of features on sustainable development by IPS - Inter Press Service and IFEJ - International Federation of Environmental Journalists, for the Alliance of Communicators for Sustainable Development.

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