Integrated Economic Development: Lessons from Peru

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Author Victor Ganoza

Chief of Party
TechnoServe Peru
Photo by TechnoServe Peru

Peru’s cocoa production has tripled since 2008, with exports reaching $200 million in 2016—the most dramatic increase among the world’s top cocoa producers. What accounts for this transformation? Having witnessed it first-hand, I believe that the recent success of Peru’s cocoa sector is the result of two factors: a shared commitment among key actors to improve the well-being of farmers, as well as a clear strategy to engage the entire cocoa value chain, from farm to market.

The rise of Peru’s cocoa sector has to be understood as part of the country’s alternative development strategy for areas that had previously produced coca, the leading ingredient in cocaine. This three-pronged approach focused on the substitution of illicit crops, improved government services, and investments in infrastructure. Its objective was to show farmers that they could improve their well-being by giving up their coca plants.

Investments made by the Peruvian government and partner governments, such as the United States and the European Union, have made it possible to establish a vibrant, licit, and agriculture-led economy in these areas, with the cocoa, oil palm, and coffee value chains spearheading the change. But the impact of projects aimed at replacing illicit crops would have been limited without the alignment of the project objectives and activities with those of national and local public institutions providing services and infrastructure in the area.

Unlike many traditional agricultural projects, efforts to boost Peru’s cocoa sector have focused not only on farms, but in the development of strong linkages between producers and their markets.  To achieve this, investments by government and donors have concentrated on improving planting and productivity at the farm level, aggregating production through cooperatives or commercial blocks, and promoting Peruvian cocoa in local and international markets.

On the agricultural front, simple techniques to improve productivity, such as TAPS (the Spanish acronym for Synchronized Fertilization and Pruning) have helped to increase average productivity in alternative development areas to close to 1,000 kg per hectare of dry beans. Cooperatives are exporting directly to customers overseas, and smaller co-ops are forming commercial blocks in order to increase volumes and reach better customers. Finally, improvements in post-harvest infrastructure and fermentation techniques have helped access markets demanding higher quality.

On the marketing level, Peruvian cocoa has benefited from the development of a solid, growing artisan chocolate sector and promotion events in Peru that attract numerous foreign artisan chocolate manufacturers and buyers. This, coupled with participation at international venues, and recognition won by Peruvian-made chocolates, has increased buyers’ interest in Peru’s cocoa.

One example of this “whole value chain approach” is the Economic Development Alliance project in the region of San Martin, funded by USAID and others—including the World Cocoa Foundation—and implemented by TechnoServe. In collaboration with local, regional, and national government institutions, the project worked with over 20,000 cocoa producers between 2011 and 2017. Farmers in the program increased their productivity and household incomes by 30 percent, and participant producer associations achieved annual export sales of $12 million. The project  promoted over 50 artisan chocolate ventures led by women in the region and worked to consolidate a support platform made up of the various private and public stakeholders to promote Peruvian cocoa at the local and international level.

As a result of this and other similar projects, over 60,000 ha of cocoa have been planted, mostly in alternative development areas of Peru. Exports will continue to grow as new areas come into production over the next five years. Through continued cooperation and carefully designed support, Peru’s cocoa sector can continue to flourish.