Patrick Struebi’s experience with the world’s leading international commerce companies has led him to change the face of fair-trade exportation. Patrick is seizing the opportunity to broaden global markets while paying small producers a fairer price for their goods. He has developed a hybrid certification program, through his organization, Fair-trade South America (Fairtrasa), which links sustainable agriculture with community empowerment. By creating alliances with organizations and farmers he is encouraging growers to invest price premiums in community development.
The New Idea
Fairtrasa is the hybrid innovation of Patrick, a young businessman from Switzerland who is changing the face of international fair-trade. After five years of working with small producer organizations in Mexico and Argentina, he has discovered the weaknesses of the existing fair-trade system and is using his vast experience in international commerce to transform an imbalanced marketplace. Most small producers are unable to participate in competitive international markets because they cannot obtain the complicated and expensive fair-trade certification. The outcome is the continuation of subsistence level incomes and farmers forced to migrate to seek a better life. Patrick is modernizing a system which has traditionally worked well for high volume crops and well prepared farmers, but the huge growth of fair trade has also exposed weaknesses in the system. Through Fairtrasa, Patrick is creating a new more agile and more inclusive certification which is fairer, more flexible, and includes those growers who specialize in low demand fruits and vegetables.
The potential for impact spreads widely beyond local farms because the Fairtrasa program encourages community development and demands sustainable agriculture. Fertile fields and better agricultural practices generate higher income that can be reinvested into the community for social and economic progress. Patrick has introduced a unique variant to the current fair-trade pricing mechanism. The current system offers a guaranteed minimum price for their goods, as well as a predefined premium which goes directly to the farmer. Patrick offers a higher “fair price” for the goods which is based on local and export market rates plus an additional premium. The price premium goes to the farmers and the communities, to be invested as they collectively see fit, and can be used for an irrigation system, a better road to take goods to market, or a new school for the community.
As world commodity prices increase, small-scale producers are left behind because they are not certified to export. By creating a new, globally accepted certification process, excluded farmers are able to join the international marketplace. Building alliances with organizations are transforming small farmers into export-quality producers focused on sustainable agriculture and community development. Patrick is taking advantage of various different markets including fruits and vegetables in western Mexico, wine in central Argentina, and potential off-shoots in Peru, Brazil and India. Fairtrasa has been growing quickly to take advantage of this favorable opportunity to offer new commodities to the global market while providing small producers with the best prices available for their products.
The current fair trading system has been, to all appearances, a huge success. From its modest beginnings more than thirty years ago, it has grown into a system which has benefited more than 5 million growers with US$3.6B in revenue and 30 percent growth rates over the past few years. As more people learn about the system they look to support farmers instead of big business middlemen and buy fair-trade certified products. But the success of the current system has been based on the strategy of a single organization, Fairtrade Labeling Organization (FLO). They are picking the proverbial low hanging fruit; for fair-trade that means working with well organized producers who already produce and trade high quality high volume products such as coffee. Unfortunately, its very success has exposed glaring weaknesses which have not been addressed by FLO.
The present system of fair-trade certification is monopolized by the German company FLO-CERT, presently the only certifying company in the world. FLO sets minimum purchasing prices while giving back a small premium to the grower communities. Unfortunately, FLO operates a slow and expensive bureaucratic process which excludes low-volume products and therefore does not justify the expenditure for small producers. For example, grapefruit growers in the western state of Michoacan have spent two years in the fair-trade certification process with FLO and have yet to make any significant strides in verifying their product for international sales. This has resulted in a nearly 50 percent reduction in possible revenue since they continue to be restricted to local markets.
Export companies have been able to grow rapidly by working with producers who already produce export quality products. Although small producers often don’t or can’t utilize modern production techniques which produce export quality yields. In addition, by trading only high volume products, this excludes lower volume exotic goods and byproducts like avocado oil from entering the market. This leaves many importers frustrated at the lack of variety available to offer U.S. and European consumers.
Narrowing the market for export goods excludes most small producers in rural communities from participating in competitive international markets. It is typically the poorest communities who are the excluded farmers and who have become wedged into a precarious space between low prices and low productivity. Subsistence farming and immigration are the detrimental consequences of not participating in major markets. There is no money to redevelop farms after years of unsustainable agricultural practices resulting in massive immigration to the U.S. to earn money. Many people who have come back to their homeland attempt to build houses, which are rarely finished, and the land remains unused and unfertile. Growers who are able to produce a reasonable quantity of good quality foods are restricted to local farmer’s markets and grocery stores. Community development is halted and the cycle of poverty continues to be aggravated.
Conditions are ideal for the development of an alternative more efficient system that targets small sustainable farmers because world commodity prices are the highest in recent memory. Worldwide demand for fair-trade products and increased requests for greater variety of socially and environmentally friendly products have created a feasible situation for low demand food growers to enter into the international market. Using the dated system of a fixed minimum price including an additional premium for the community allows farmers to live better but does not sustain progress and growth. A more fair method for excluded producers to tap into competitive international markets is necessary for rural community growth and to put an end to the cycle of unsustainable agriculture and its resulting poverty.
Patrick is creating a new global sustainable trade institution that establishes new working relationships between whole sellers who export products, like Fairtrasa, and small farmers. These new roles for existing actors will double production capabilities, make communities responsible for economic progress, and bring new products and brands into the international marketplace. The core of Fairtrasa’s strategy is moving from a one-branded one-agency system into a multi-branded and multi-certification industry that links fair-trade with sustainability and community empowerment. This new design builds on traditional production practices for an environmentally sustainable product which can be branded by major importers. Focusing on fruit growers in western Mexico, Patrick is using this same methodology to expand Fairtrasa’s range of exportation within Mexico and in several countries in South America and Asia.
Moving away from a remote pricing model, Fairtrasa is creating a system of interconnected and transparent export businesses in Latin America that include the traditionally excluded. By substituting the minimum price set in Germany with a fair price based on local as well as export market conditions, Fairtrasa allows higher world commodity prices to be passed on to the small local producer. Growers will still be receiving an additional price premium and Patrick foresees that being spent on producer empowerment and community development by bringing in allied institutions and organizations that provide seminars educating farmers on sustainable farming techniques. While focusing his efforts at the headquarters office in Michoacan, Mexico, Fairtrasa has allied with worldwide certification organizations that certify small farmers quickly and inexpensively.
As growers continue to improve their production towards meeting international quality standards, Fairtrasa offers another option for making local wholesale deals with major food outlets such as Walmart Mexico. Farmers are earning better prices than they can receive from traditional middlemen. Building on traditional export markets is also an important aspect of the Fairtrasa strategy. Already the leading fair and sustainable trade exporter to the European Union and USA, with sales of US$20M, Patrick is building a network consisting of US$500M within the next five years. He is working with Walmart and Whole Foods in the U.S. to sell sustainable products under their respective fair-trade brands and is enthusiastically looking into larger European, Canadian, and Japanese markets.
A major aspect of the Fairtrasa policy is making alliances with exporters who operate with a social consciousness. This includes groups who are already working with small uncertified producers and who may or may not be integrated into the larger global marketplace. Fairtrasa is reaching out to organizations in addition to exporters who have had no prior access or the financial resources to participate at such a large scale. Patrick is working with global financers to offer funding for appropriate groups, and he estimates that each exporter can achieve a total of US$20M in annual revenue. Fairtrasa sees this investment as a social development project rather than an economic project and intends to work side-by-side with exporters as more small farmers are introduced into the marketplace.
This new “Sustainable Trading System” is not competing with FLO but is instead filling a void not being addressed in the current system. It will target excluded products and excluded producers who need help to develop their capabilities to produce export quality goods. Instead of a single fair trade monopoly like FLO, Patrick is working with a model much like what currently exists for organic products; where various entities and many certification agencies work with local growers.
Environmental sustainability is another defining characteristic that differentiates Fairtrasa from FLO and is the key to bringing in a larger importer and consumer market. In its business practices Fairtrasa is also environmentally sensitive and has taken precautions to keep its environmental footprint small; for example, it ships goods on cargo ships as opposed to by air. Fair-trade products can only ensure the consumer that a fair price has been paid to the producer however, unlike organic, it does not ensure that environmental protection methods have been used. Likewise, organic products are not traditionally labeled as fair-trade and do not mean that producers are receiving a just price for their goods. Sustainable-trade on the other hand is a hybrid of the two systems which guarantees the buyer that sustainable agricultural practices are monitored and controlled, thereby making many products organic by nature. For those products in transition to become organic certified, Fairtrasa would make exportation for these products easier and more efficient by labeling their products sustainable.
Once farming communities begin to see a steady stream of export income, which will support agricultural development and decrease migration, Patrick envisions communities taking on a new role in collective responsibility. The price premium received on export quality goods goes into a communal fund which is then distributed as the framing collectives see necessary. Fairtrasa has established a nonprofit foundation, which receives a percentage of each box of fruit or vegetables sold. The foundation continually reinvests into the community and encourages other enterprises and organizations to join them by donating technical assistance through educational workshops. The goal is that once the entire farming community participates, which can be up to 500 farmers, they will be able to make sound and responsible decisions about profit investments. For example, Fairtrasa set up a compost production site which not only greatly increases soil fertility but also reduces CO2 emissions. This compost substitutes toxic fertilizers and encourages intercommunity commerce with companies that specialize in regional soils. Another mutual investment is the rebuilding of irrigation and drainage canals which can affect two to three farms in the same area. Modernizing equipment and avoiding the use of chemicals is a vital part of keeping the land healthy. The communal funds can go towards buying and implementing the appropriate technology and towards sustaining the future of local agriculture.
Patrick was born and raised in Switzerland were he was cultured by his parents on the importance of fairness, morality, and tolerance. Patrick studied business administration and public accounting and later worked for seven years as an auditor for the international consulting and auditing group Deloitte. In 1998, the company asked Patrick to take on a project as one of their top managers at a huge coal mining operation in Colombia, although he did not speak the language. In addition to other business trips, Patrick was exposed to different cultures while witnessing that harsh reality that envelops the gap between rich and poor. After a short while in Colombia he left the company to dedicate himself full-time to learning Spanish and the culture of Latin America.
One of Patrick’s principal clients while at Deloitte had been Glencore, a Swiss mining group with more than US$150B in worldwide sales. On leaving the firm, Glencore invited him to set-up a new department at their head office for acquisitions and integrations of new group companies. He sat on the board of various group companies and was deeply involved in some of their major acquisitions, new trading, and hedging techniques.
Patrick’s experience with Glencore permitted him to truly see the implications of big business on local communities. While he spent long hours trying to save relatively small amounts of money for the central offices he witnessed detrimental repercussions at the community level. At one juncture, he sat on the board of a mining plant in Peru who decided to “restructure” operations. Patrick knew that restructuring means the loss of jobs and in a poor country that means zero income for many people. A moral obligation to avoid participating in the practices of making the rich richer and the poor poorer overwhelmed Patrick. He decided to leave Glencore and a secure and prosperous lifestyle, to sell all of his belongings and travel the continent.
In the spring of 2003, Patrick ended up in Mexico and after three months of backpacking around the country, he was inspired to start an international commerce company on the basis of fair-trade to support underprivileged small farmers. He settled in the western state of Michoacán where he pioneered a fair-trade project with small avocado growers. Establishing himself in Uruapan, the heart of the avocado orchards, Patrick has collaborated with two associates local to the area who share his passion for creating a world of sustainable fair-trade.
While remaining small-scale is at the heart of his ventures, Patrick does not plan to stay that way. He already successfully started the first fair-trade wine project in Argentina and opened another affiliate office in India. Patrick is poised to develop socially conscious exportation throughout the Americas and the rest of the world. By creating a new, global fair-trading system that doesn’t compete with FLO, he targets the excluded producers and products not included in the current network.