Making Markets Work for Rural Entrepreneurs in Guatemala
Traditional aid programs tend to ask “What problems do the poor have and how can we solve them?”. We approached the problem differently, asking, “Why isn’t the market providing solutions for small farmers and how can we change that?” In Guatemala, small farming families struggle to deal with competition from freer trade and a loss of traditional local outlets for their produce as more Guatemalans begin to shop in modern grocery stores and supermarkets. Guatemalan consumers are gaining more choice and often higher quality. But most Guatemalan small farmers are not benefiting from these trends in terms of increased incomes or employment opportunities- despite the fact that most Guatemalans live in rural, agricultural areas. We set out to change that.
About You
About You
First Name
Graham
Last Name
Craft
Facebook Profile
About Your Organization
Organization Name
Mercy Corps
Organization Website
Organization Country
United States, OR, Multnomah County
Country where this project is creating social impact
Guatemala, AV
Is your organization a
Non‐profit/NGO/citizen sector organization
How long has your organization been operating?
More than 5 years
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Innovation
Entry Form title
Making Markets Work for Rural Entrepreneurs in Guatemala
What change do you want to bring to the world?
Traditional aid programs tend to ask “What problems do the poor have and how can we solve them?”. We approached the problem differently, asking, “Why isn’t the market providing solutions for small farmers and how can we change that?” In Guatemala, small farming families struggle to deal with competition from freer trade and a loss of traditional local outlets for their produce as more Guatemalans begin to shop in modern grocery stores and supermarkets. Guatemalan consumers are gaining more choice and often higher quality. But most Guatemalan small farmers are not benefiting from these trends in terms of increased incomes or employment opportunities- despite the fact that most Guatemalans live in rural, agricultural areas. We set out to change that.
What are the primary activities of your project?
We help small farming families learn to meet national and international quality, hygiene and packing standards for their produce; give them the knowledge and skills to run their farms like a business; link them to higher value retail markets and help them learn to negotiate effectively to maximize their share of the profit. As a result, they're producing and selling more, earning a higher profit and creating new jobs in areas with near universal unemployment.
What is innovative about your initiative? How is it a new contribution to the field?
In Guatemala, most supermarkets and other large retailers (like hotels and restaurants) purchase their food from large, commercial farms located near the capital. Small farmers, especially those in more remote areas, traditionally lack access to these markets for a variety of reasons, starting with knowledge. Many are unaware of the market opportunities in the capital. They don't know which crops are in highest demand or at what price. They lack experience sorting and grading their produce, so they sell it all at the same price rather than separating out the best stuff for a higher price. Because they tend to have small harvests and are located far away from the main markets, they can't compete with the high volume and low transport costs of the big commercial farms.
Our project is different in a number of ways. First, similar projects often focus on niches such as organic or fair trade products, mainly for export. Ours focuses on helping Guatemalan farmers take advantage of market opportunities inside Guatemala, including supermarkets and restaurants. Second, we are not an intermediary between the farmers and the private sector. Instead, we work directly with the private sector as full partners in the design and implementation of the project. Our project would never be sustainable if we were the ones providing the benefits to the small farmers. Instead, we provide important information, training and introductions to new markets. And it's the market itself that provides the lasting benefit to the farmers, in the form of higher incomes and job creation.
What stage is your project in?
Operating for 1‐5 years
Tell us about the community that you engage? eg. economic conditions, political structures, norms and values, demographic trends, history, and experience with engagement efforts.
Just over half of Guatemala's population lives in rural areas, yet rural people account for 71% of the country's poor. The disparities in incomes, social services and infrastructure between rural and urban areas is extreme. Guatemala has the second most unequal distribution of farm land in Latin America, with 2% of farms controlling 57% of all farmland and 87% of farms occupying just 16% of the available land.
More than half of the population is below the national poverty line and 15% lives in extreme poverty. Poverty among indigenous groups, which make up 38% of the population, averages 76% and extreme poverty rises to 28%. 43% of children under five are chronically malnourished, one of the highest malnutrition rates in the world.
When Mercy Corps came to Guatemala in 2002, we decided to base our operations in Alta Verapaz, a poor rural area 4-6 hours' drive north of the capital. We hired a Guatemalan to lead our operations and since that time fewer than 10% of our staff at any one time have been non-Guatemalans. Many are of Mayan or mixed ancestry and almost all are natives of the communities where they work. This was a marked contrast to the prevailing trend among international non-profits working in the country, almost all of them based in the capital and generally headed by an international staff director and senior managers. By grounding ourselves in the communities we were trying to serve, Mercy Corps was able to overcome the mistrust and misunderstandings that often complicate relations between rural communities (where most Guatemalans live) and the social, political and economic elites in the capital.
Share the story of the founder and what inspired the founder to start this project
This project has many authors. But it would never have happened without the active leadership of Amy English. Amy began working in 2004 with 20 small holder families in a remote rural area of Alta Verapaz who had recently gained legal title to their land for the first time in their lives. They had varying levels of experience with subsistence agriculture but no experience of growing for the market nor did they see themselves as micro-entrepreneurs. They were struggling to find a way to earn enough income to be able to stay on their newly acquired land. Amy worked with them to see which crops were best suited for their locations and, equally important, to calculate which of those crops would offer the highest returns. The group settled on a variety of traditional food crops for their own tables and local markets. But they decided to add several acres of pineapple as well to boost their incomes. Over the next two years, they gained experience marketing those pineapples to canning and fruit juice companies. By combining traditional crops with pineapples and approaching their land use like the small entrepreneurs they really were, all 20 families were able to significantly increase their incomes and pay down household debts. Mercy Corps realized this model held great potential for hundreds of similar small holder families in Alta Verapaz and ultimately across Guatemala. Amy and the farmers continued to scan the market possibilities and settled on the growing supermarket sector as a promising outlet for their produce.
Social Impact
This Entry is about (Issues)
Please describe how your project has been successful and how that success is measured
Over three years, our project has created 2,434 jobs, mostly farm labor and washing, grading, handling and packaging. Of these, 75% were filled by men and the remaining 25% by women. This is especially encouraging as formal employment for women in most of our communities is almost non-existent.
At the same time, participating farming families saw their profit per hectare of land increase by an average of 25%.
How many people have been impacted by your project?
1,001- 10,000
How many people could be impacted by your project in the next three years?
1,001-10,000
How will your project evolve over the next three years?
The project is moving into new areas in Guatemala, expecting to reach 1,000 more families, creating 4,000 more jobs. We're attracting additional retail buyers (including restaurant chains) so participating farmers have the broadest possible choice and can negotiate the best deal for their families and employees. We are looking at new countries in Latin America, Asia and Africa. We're not replicating a model so much as a philosophy. Each market will be different and so will the needs, resources and aspirations of the communities we work with. But what's worked in this project and what we'll continue to apply elsewhere is the close, direct relationship with private sector partners, basing everything we do in real market demand. This project shows that markets can work for the poor.
Sustainability
What barriers might hinder the success of your project and how do you plan to overcome them?
Agricultural markets are notoriously volatile. We help ensure against this by working with small farms and associations of small farmers to diversify their crops and their market options. Basically we help them make sure they're not putting all their eggs in one basket, so to speak, and can better survive a change in one specific market.
Tell us about your partnerships
USAID - provides 50% of the project's current funding.
Wal-Mart Inc. - Wal-Mart, which owns the majority of the supermarkets in Guatemala, is the second largest funder of the project. More importantly, their wholesale buyers have been an integral part of the design and delivery of the project. They provide information about the projected demand for various crops and current prices and they help farmers understand the quality standards required to sell in supermarket. By the third year of the project, over 59% of participating farmers' produce was sold to Wal-Mart, providing them with a reliable retail market for their fruits and vegetables.
Finally, the farming families themselves. Mercy Corps provides project oversight and advice. Wal-Mart provides demand information and a potential market. But it's the farmers themselves that do the work, take the risks and make the hard decisions about what to grow and where to sell it.
Current annual budget of project, in US dollars
$500,001‐1 million
Explain your selections
Over the last three years, we've received our primary funding from USAID and Wal-Mart Inc as well as important contributions from US-based foundations and individuals.
How do you plan to strengthen your project in the next three years?
By expanding the donor base and the range of participating retail market buyers, including some export markets but primarily focused on Guatemalan produce for the national market.
Also, we're constantly looking for ways to refine our approach, so that our role is kept to minimum, the project remains as efficient as possible while maintaining its impact and success.
Challenges
Which barriers to employment does your innovation address?
Please select up to three in order of relevancy to your project.
PRIMARY
Lack of access to information and networks
SECONDARY
Restricted access to new markets
TERTIARY
Lack of skills/training
Please describe how your innovation specifically tackles the barriers listed above.
The rural areas where we work have extremely high rates of unemployment. They are fairly remote, with poor transport and communications infrastructure and few formal job opportunities. Education and literacy levels are low, especially for women. Compounding all of this is the fact that most of our small farmers are from various Mayan communities, adding a layer of cultural, ethnic and linguistic obstacles to their integration into the mainstream Guatemalan economy.
We help small farms flourish and grow by connecting them to buyers-based in the capital and the market information they need to make sound choices about which crops to plant and how to negotiate the best possible price. As these farmers succeed as entrepreneurs, they expand production and increase their demand for labor.
Are you trying to scale your organization or initiative?
If yes, please check up to three potential pathways in order of relevancy to you.
PRIMARY
Grown geographic reach: Within host country
SECONDARY
Grown geographic reach: Multi-country
TERTIARY
Grown geographic reach: Within host country
Please describe which of your growth activities are current or planned for the immediate future.
The project, now in its fourth year, is already expanding to new areas inside Guatemala (targeting areas of high poverty, hunger and unemployment), while we continue to adapt the model for use in rural communities in other countries from Afghanistan to Indonesia and Nepal.
Do you collaborate with any of the following: (Check all that apply)
Government, NGOs/Nonprofits.
If yes, how have these collaborations helped your innovation to succeed?
Wal-Mart Guatemala has been key to making this project a success. They provide our small farmers real market information and insight. Where past projects tended to focus on supply and production, the inclusion of Wal-Mart as advisors and potential customers keeps our project focused clearly on meeting market demand. Once our participating farmers rise to this challenge, they are in a much better position to sustain their success by themselves, without additional support from us. Currently about 59% of the produce of participating farms and farmer associations is sold to Wal-Mart while the remaining 41% goes to local markets, traditional wholesale buyers, or other Guatemalan retail companies. Small farmers who once sold only to middlemen now have a range of options.
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Comments
What a great project. For the first time, farmers can support themselves and live on their own land.
This is the best example of how small producers can sell high quality produce and make a better living for themselves and their families
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