Posted by A Peruvian example of what we do at 20/20DC and how to apply the principles of knowing the market to change the standards of living for rural Peruvian farmers.
Covid-19 clearly illustrates how a problem in one country can develop into a global crisis. This is as true with diseases like Covid-19 as it is with economics, politics, ideas, and movements. In today’s interconnected world the butterfly effect finds a way of reaching everyone. Therefore, when someone is in poverty it impacts us all and when people move out of poverty, have stable jobs and the resulting stable communities it impacts everyone. It is to the benefit of all people of the world to eliminate poverty.
20/20DC helps do that through helping to create jobs, not for the same of jobs but to produce products that the world demands. We work to do so in such a way that the efforts are sustainable, have a neutral or positive impact on the environment, are gender-neutral, and truly improve people’s lives.
Most of our focus on business development is through developing win/win international trade relationships. In our efforts to build export markets we go beyond finding a market for a product. We start at the foundation from which trade is developed by addressing product safety, quality worker skills, and economic inclusion. We know that when companies and individuals learn the importance of tasks as simple as washing their hands and keeping the product in proper cold storage and handling conditions, when they learn an elevator pitch to market their company or when they learn the interconnectivity of their economy with that of the global economy, and that they can use the proceeds of their hard work not just to be able to not only eat the next day but to be able to educate their family to new levels and how to succeed in today’s world we have succeeded.
The work of 20/20DC has changed lives for the better in many countries. We have helped to build a brighter future for the families, communities, countries, and our world.
20/20DC has been in business for 23 years and a good example of our work and the impact it has had on families, entire countries and industries is through a study of our work in Peru. We have worked on many products in Peru including quinoa, Sacha Inchi, potatoes, and wood products.
Through applying the principles of CHARM DANCE our efforts helped raise communities from subsistence farming where they struggle for daily survival to improved standards of living where they can plan their future with confidence. We have done this by providing them with a market for their products. Our efforts, and those of others working toward the same objective, has provided rural farmers in Peru with a market for the product of their labor far beyond their dreams and visions prior to our engagement.
The Altiplano of Peru and Bolivia, around lake Titicaca, is a tough environment to survive in little lone thrive. The high altitude makes it difficult for physical exertion including farming and infrastructure building (the Altiplano has an average elevation of 12,000 feet above sea level, although it can reach well over 13,000 feet in many places and the highest village above 16,000 feet!). All physical exertion there is a challenge for those not accustomed to the high altitudes. Studies have shown that the environment pushes the local’s physical strengths by compensating with a larger heart to push more blood, and oxygen through the veins than those at sea level.
When traveling on the Altiplano, I have found the benefits of drinking coca tea(a key ingredient for cocaine), eating local chocolate (Sublime), and drinking high caffeine beverages. These therapies help compensate for the low oxygen resulting from the high altitude. Despite these efforts walking a short distance is a struggle for a sea-level natives like myself!
Prior to the Conquistador Francisco Pizarro and his 180 men conquered the Inca’s the Incan Empire was able to flourish in an agriculturally harsh environment because of intensive agriculture production of three indigenous crops – the potato, tomatoes, and quinoa. Sadly, many people do not know that the potato and tomato are both from Peru, they wrongly assume Ireland and Italy because of their wide use in these countries. With what is known as the Columbian Exchange these products found their way into the diet of consumers around the world with the production of potatoes in 159 countries and tomatoes in 170 countries.
Despite the amazing health benefits of quinoa prior to our involvement it was produced in only a handful of countries due to the agronomical requirements to be produced at high altitudes and close to the equator. This combination of environmental conditions provided the quinoa plants requirements for hot days, cool nights, and plenty of sunlight, coupled with sufficient water from the nearby Andes mountains. These characteristics help concentrate the protein and amino acids in the quinoa seed that is not achieved at lower altitudes away from the equator.
In recent years, with an increase in popularity of quinoa, many countries including the USA, produce quinoa in an attempt to catch the rising tide of quinoa demand. They often work with new varieties selected and bred (genetically modified naturally) to grow in low altitudes and with less intensive sun and range of daytime and nighttime temperatures. While these new varieties are technically quinoa, most of them lack the superior amino acid and protein benefits of quinoa produced under the conditions of the Altiplano.
I “discovered” red quinoa while in Peru working on a USAID project (Poverty Reduction and Alleviation (PRA)). This project was focused onreducing poverty through trade. This was an early version of the USAID strategy for demand-driven economic development.
While in the fields doing research, I was shown samples of various quinoa seed that an indigenous sustainable farmer had collected on her farm. When she showed me a mahogany-colored seed, I got excited about the market potential of this unusual variety. They informed me that other “consultants” had seen this variety and dismissed it as having no market potential. Understanding the market (the M in CHARM DANCE) I understood that American chefs and family cooks would love a naturally colored, protein-rich, gluten-free, amino acid balanced product on their plate to replace the starch of potatoes, rice, or couscous.
In this case, as with many others, the absence of a market is not proof of the absence of a market and may reflect an opportunity that others have missed. The market potential can exist when no market is evident or statistically proven. This is where the entrepreneurial eye comes to interpret market factors and potential and identify opportunities for change.
After being presented with the mahogany (red) quinoa I returning to the USA. I identified a buyer that expressed his interest in learning more about the product. However, he was not willing to invest his company funds in going to Peru to see this unique variety. Being confident of the opportunity, I personally paid for the buyer’ strip to Peru (USAID would not pay for it because they did not want to support one business over another). Understanding the risk and reward (the R of CHARM DANCE) I agreed to pay for the buyer’s visit to Peru because without my action and commitment the opportunity would not have been explored further.
With around 1 kilo of seed available for planting a lot of work had to be done to bring this rare variety of seed to sufficient levels for commercialization. The USAID Peru PRA team put together a Peruvian team which included the NGO CARE, the US Peace Corps, and the Catholic Church to provide stability, transparency, and provide sufficient support for the buyer to have confidence in the Peruvian opportunity and reliability of supply.
Farmers on the Altiplano are typically subsistence farmers eating much of what they produce and selling the surplus. In the early 2000’s quinoa had a limited market outside of Peru, focused on people with celiac disease or looking for a gluten-free protein.
Without a large export market for quinoa of any kind at the time, the farmers sold or bartered any surplus that they produced in the local market. At these markets, some traders existed to purchase their product for sale in Lima and other local markets or export. The farmers would then use the proceeds of the sale of surplus quinoa (beyond what their family would consume) to purchase other food and non-food products and services. In many cases, the production of quinoa was the only source of cash income for a family or perhaps coupled with the raising of sheep and llamas.
When we talked with the growers about producing a new crop for us, they had no interest. Because quinoa production was critical to their survival and a surplus added to their limited income they did not want to try a “new” crop and risk not having the harvest sufficient enough to feed their family or a reliable market to sell their product.
Therefore, we structured a deal where the Peruvian development partners acting as an honesty broker and stimulus so that both sides would be willing to accept the risk of trying something new. For the Peruvian farmers, a failed crop or no market could be found it could cost them their survival or hard-earned cash and they would have to rely upon the social safety net which was very thin on the Altiplano of Peru at the time.. For the US buyer the risk of failure of the product to produce sufficient export quality and quantity and their business risk was significant.
To facilitate the development of the industry we negotiated with the buyer who agreed to pre-pay for half of his original commitment of containers. This payment was made to an NGO, owned by the Catholic church. This provided the buyer with confidence that his money would not disappear. At the same time, the advance payment provided the producers with confidence that they had a market for their product and the buyer was not going to disappear with the next flight out of Cusco. Many development consultants, projects, and agencies promise to make a change, but the locals understand that many of them do not live up to the rhetoric. They cannot afford to gamble with their food source on a consultant or development project’s vision and best intentions. They cannot eat intentions.
It took many production seasons to go from 1 kg of seed to a commercially viable crop, in fact, the USAID final report this effort was written up as follows:
Consultancies have had less success in identifying new markets. For example, a PRA consultant (me) arranged for the president of Quinoa Corporation to visit Peru in 2001; after visiting the Puno economic corridor, he decided to test the red Pasankalla variety of quinoa in the U.S. foodservice industry and ordered 72 metric tons. Because that variety was close to extinction, it took several years for the local processor, El Altiplano SAC, to fill the order, and demand has been sporadic since that time.
Well, this effort that USAID and the PRA project considered as having “less success” turned out, as I had forecast, to be a paradigm-shifting event for the Altiplano and the world market for quinoa. In 2017 it is estimated that red quinoa, from this 1 kg mutant/near-extinct variety of quinoa generated international sales around $150 million USD. I venture to say that sales value and positive impact on farmers and communities on the Altiplano far exceeds all the other “more successful” efforts touted in the closing PRA project.
The variety was “near-extinct” because there was no market demand, there was no market demand because nobody had identified the opportunity – this requires the Entrepreneurial Eye, which I believe is genetic rather than trained, but that is a blog for another day.
Through these efforts, and others, the world has seen quinoa demand grow exponentially. Which helped the producers on the Altiplano of Peru and Bolivia achieve greater economic success and sustainability. Additionally, today quinoa is produced in roughly 70 countries with prices tripling between 2006 and 2013. The cost of production on the Altiplano has changed little but the income has tripled. A paradigm shift for the local producers.
What we accomplished in Peru through using many of the CHARM DANCE principles was to:
- Supporting the development of an industry
- From an indigenous crop
- Using a near-extinct mutant variety
- Providing the local farmers with cash income
- In fact, the deal we set up with Quinoa Corp. was the first time any farmer on the Altiplano of Peru and Bolivia got pre-paid for the crop that they had traditionally produced under subsistence farming strategies
The increase in the value of the quinoa crop produced on the Altiplano provided a more stable economy and communities that can now afford social services and infrastructure. An improved economy in the region helped to raise all boats (all farmers) and the multiplier effect on income and spending provided a sound economy for those not engaged in quinoa production but engaged in serving the communities and market demand for other goods and services.
Despite the success of this effort, it is sometimes judged as interference and harmful to the local producers. In this case the Wall Street Journal published an article in 2014, quoted by many others, wherein they state that Quinoa: “The so-called superfood is now too expensive for poor locals to eat.” However, that article was written by journalists, not economists or local farmers. It did a great job of sensationalizing the issue and stimulating reader interest. Upon further economic study, this stand was discredited by agri-economists who looked beyond the window dressing of emotions and sensationalism.
Bottom line is that we helped farmers in rural Peru move from subsistence farmers with limited crop options to farmers that produce a traditional crop under contract (guaranteed sales prices). This allows them to sell their surplus for cash, rather than bartering or trading it at the market or consuming it in their home. By producing a cash crop, they now use the cash to pay for healthcare, clothing, and other sources of protein and fiber.
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