The future of fairtrade in South America

When Argentine-born Alex Pryor first pulled out his maté at university in California, his fellow students mistook it for a water pipe. He laughs at the memory. Over time, fewer heads turned at the sight of his tea-like beverage, which is popular across the south of Latin America. By the time he graduated, he'd even passed on his maté-drinking habit to some of his college peers.

"From sharing my maté with American friends at university, I just became aware that there was a need for an alternative to coffee", he says.

Spotting a money-making idea, he grouped together with four friends and started importing the herbal tea from Argentina and neighbouring Paraguay. Pryor wasn't motivated by making a quick buck for himself, however. The son of two professional conservationists, he saw the enterprise as an opportunity to support low-income farmers, while also protecting the biodiversity of his homeland.

The idea stuck and 15 years later his company, Guayaki, is working with 250 small farmers in northern Argentina, southern Brazil and Paraguay. All receive a minimum of 50% above the market price. Many take home double that. Certified under the benchmark organic standard IMO, Guayaki is also supporting community-led reforestation projects and bird conservation programmes in the Atlantic forest, close to where its maté producers live.

Making it in America

Guayaki recently became recognised by Sistema B, the South American version of the US-based triple bottom line certifier B Corps. With the ethical credentials of the product set, the business challenge for the fairtrade maté exporter centres on raising consumer awareness of its product.

Guayaki runs tastings in campus cafeterias and other popular hangouts for students, with its salespeople typically arriving on an electric tricycle. "Sharing the gourde", Pryor calls the product demonstrations, a reference to the rounded vessel from which maté is drunk. "When we started sixteen years ago, it was only tea and coffee … now, we've basically create a yerba maté [maté leaf] category. So now it's tea, coffee and maté."

Guayaki's initial marketing began with Pryor and his pals hawking his exotic product up and down the US west coast in a motorhome painted with a rainforest design. Independent organic stores predominated among their early clients. Many of these now belong to the retail chain Wholefoods, which has kept these pre-existing relationships alive and continues to stock Guayaki's certified maté.

"It's a grassroots approach. It might be slow for the common marketing theories, but it works", says Pryor. "There are so many people looking for meaningful products that are healthy and who are voting with their dollars."

Another fairtrade company certified by Sistema B that is finding success in the North American market is Interrupción. The Argentina-based fresh fruit exporter has seen its foreign sales double year on year since 2007, with annual revenues now reaching around $28m.

Unlike Guayaki, Interrupción's product portfolio, which includes mangos, blueberries and apples, are familiar to US and Canadian shoppers. The key to success abroad is the ethical and quality credentials of its products. Interrupción, which sources from 12,000 small producers in Chile, Argentina, Peru and Ecuador, has a range of certifications covering food safety, fairtrade and organic. To help farmers invest in improvements to their production processes, it awards preferential loans ranging from $2,000 (£1,313) to as much as $600,000 (£394,000). All these messages are front and centre of its on-pack communications.

Interrupción's co-founder, Diego Gonzalez Carvajal, admits that local inflation in supply markets such as Argentina pushes up production costs, but these are more than offset by the premiums available in foreign markets. "Our consumer remains those in the developed world because they can obviously afford to pay a little more," he says.

South American future for fairtrade

Carvajal sees a future for fairtrade in South America itself. Ideally, Interrupción would have up to a fifth of its sales in domestic markets in a decade's time. Clearly, there are environmental benefits from the consequent reduction in transportation. Yet median incomes in the region remain low and consumer consciousness is still "in its very early days", he says.

The most notable exception is Brazil. One Sistema B firm that is thriving in South America's largest economy is Ouro Verde. The manufacturer of derivative products based on Amazon-sourced Brazil nuts, Ouro Verde sells exclusively in its home market.

Despite strong demand in Brazil, challenges remain. For one, the fairtrade premium of around 15% "could be higher", Ouro Verde's company director, Luis Fernando Laranja Da Fonseca, admits. Another issue is the huge margins – sometimes 300% or more – that the supermarkets demand. "This generates a pressure against those trying to implement fairtrade like us", he states.

Unlike Guayaki and Interrupción, Ouro Verde's founders lacked personal contacts in foreign markets. That makes breaking into the export market extra tough. Laranja Da Fonseca estimates that to put together a marketing campaign in the US for his Brazil nut butter would cost around $500,000 – a prohibitively high figure. In addition, the US dollar has lost more than a fifth of its value against the Brazilian real over the past five years, making exports less attractive.

Brazil might dominate South America's home market for ethical consumption, but the idea is catching on elsewhere. Comparatively affluent Chile offers a prime example. Fairtrade advocate Gerardo Wijnant has seen a "growing spirit of concern" for the environment and product provenance since he helped set up the ethical handicrafts business Comparte over 25 years ago.

"It's like a journey without a return. When you start to realise that what McDonalds or KFC offers isn't very healthy and you look for alternatives, then gradually your thinking begins to change", Wijnant says. "Consumers, especially young people, are more alert to issues of the environment and sustainable development today."

Comparte's big breakthrough came 18 months ago when Home Centre Sodimac, a large Chilean home improvement chain, agreed to stock its products. The decision forms part of the larger retailer's corporate responsibility strategy to increase local procurement.

As part of the deal, Sodimac puts a lower profit margin on its sales to generate consumer uptake. It also pays within seven days and provides daily information to Comparte about sales figures, allowing them to adjust their production accordingly. Mall Plaza, a brand of shopping centres, is now offering the fairtrade provider free retail space too.

"It's extremely gratifying to see how much consumers' awareness has grown," Wijnant says. "The existence of a market for fairtrade here in our own country would have been impossible to think about 15 or 20 years ago."

Oliver Balch is author of India Rising: Tales from a Changing Nation, published by Faber

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