Eva Oakes describes Choco4Peace’s experience building a network based on blockchain technology in the cocoa sector in Colombia. The main aim is to get smallholders out of both cocaine production and poverty through access to finance.
Blockchain technology, increasingly known as the dark horse bringing sustainable solutions to shortages and inequalities in the agrifood industry, largely holds the tools needed to stop world hunger while addressing development issues on an international level. By aggregating investors and producers within integrated economic networks, blockchain technology has bridged an often hard-to-cross gap, bringing together suppliers attempting to meet a rising product demand and producers in developing countries who lack the means to both find buyers and export their product.
The potential of Colombian cocoa
Recognising the need of using blockchain technology, Choco4Peace, a start-up company based out of Montreal, Canada and Bogotá, Colombia, has begun creating such a network in Colombia’s cocoa sector. Colombia is currently the fifth producer of cocoa worldwide, and third in Latin America. The cocoa is grown by approximately 38,000 families, with 90% of production being carried out by smallholders rather than large commercial agriculture companies.
Despite the high propensity for cocoa growth, with Colombia’s Cocoa Development Ten Year Plan 2012-2021 reporting around 660,000 hectares of terrain available for growing cacao, Colombia’s export potential is currently marginal, comprised of only a handful of producers capable of fulfilling certification requirements. Many of Colombia’s potential cocoa crop lies in largely rural, hard-to-access post-conflict regions formerly occupied by guerrilla groups operating before the peace agreement in 2016. Occupancy commonly forced farmers in these regions to farm coca for the production of cocaine, and focusing on the production of cocoa was economically and logistically unfeasible.
Also contributing to Colombia’s modest export potential are unsustainable agricultural practices. According to the International Cocoa Organization, up to 40% of cocoa crops are lost annually due to incorrect conservation and upkeep. Not only is it, under current circumstances, impossible to translate the potential of cocoa production into the global market, but unsuitable practices hinder the amount of cocoa available for export.
In Colombia, the potential for cocoa is not only unique in terms of quantity but also quality. The Colombian cocoa sector is known for the production of cocoa ‘fino aroma’, a specialty cocoa which is rising in demand from international buyers distinguished s in the qualifications they take into account when buying cocoa.
‘Fino aroma’ cocoa is typically used in the production of gourmet and high-quality chocolates, products for which demand has undergone explosive growth with no signs of decrease. Buyers of this type of cocoa emphasise the quality of the chocolate, while taking into consideration sustainability and ethics. As consumer preferences are shifting towards demand for better quality, origin, specific flavours, higher sustainability and traceability, a niche market has been established in which buyers interact directly with producers to maintain long-term relationships.
Using the blockchain in the cocoa sector
Choco4Peace is using hyperledger blockchain technology to allow the production of cocoa in Colombia to proliferate, while addressing a deficit of cocoa in the international market and bringing smallholders out of both cocaine production and poverty through access to finance. Blockchain technology is implemented through a combination of decentralised phone applications supporting an inclusive economic network, which aggregates smaller-scale cocoa producers with chocolate makers, socially oriented investors and stakeholders such as sustainable development service providers.
Cocoa producers in these post-conflict regions previously had little access to financial resources due to obstacles in the form of communication, transportation, product quality, corruption and more. Rural areas are particularly prone to these kinds of challenges, especially in the case of Colombia, where weak institutional power allowed guerrilla groups to overtake these areas and encourage the production of cocaine, while diminishing the livelihoods of the residing communities.
Where weak institutional power prevents the government’s attempts to alleviate poverty and boost development efforts, Choco4Peace’s use of blockchain technology steps in. The Colombian government has recognised the issue of the prevalence of coca growth and has pledged money to volunteer smallholders willing to transition from the cultivation of coca to that of cocoa. However, due to the government’s lack of capacity, the amount of funds they are offering farmers are not sufficient for smallholders to be secure in this shift. Recognising this issue, Choco4Peace’s blockchain platform uses blended finance, combining funds and tools offered with those of the Colombian government, enabling the private and public sector to collectively finance cacao entrepreneurs’ ventures.
After identifying willing and capable producers, Choco4Peace’s programme provides smallholders with capacity building tools such as insurance, training, technology and certification services in order to transform them from high-risk investments to low-risk investments. These steps not only serve as preparation for access to investors and financial resources, but additionally, they promote principles of sustainability. These tools instruct smallholders to use sustainable cultivation practices with the goal of yielding higher crop productivity, improving quality,preventing the misuse of land and denigration of soil and maximising crop cultivation while natural resources are conserved.
Through the blockchain, the socioeconomic and environmental impacts of cocoa producers’ sustainable farming practices are made visible through an accumulation of data, recorded on a transparent hyper-ledger platform. In collaboration with the IXO Foundation, an organisation using blockchain to provide a trusted global information network to encourage impact investors, Choco4Peace seeks to measure and generate a proof of impact through the accumulation of data based on interactions within the economic network. Blockchain technology’s ability to store and provide extensive data is used as a means to build trust, incentivising investment in areas of need around the world as investors can see directly the impact their contribution makes.
Integrating smallholders into the economic platform
Choco4Peace’s project targets rural smallholders in post-conflict areas, but more specifically within this criteria, Choco4Peace focuses on the empowerment of those most in need; women, youth and indigenous people, all of whom have suffered the impacts of Colombia’s long war, and are willing to transition from cocaine production to cocoa cultivation . These producers, once identified and provided with the tools and training necessary, are entered into the economic platform, where they are aggregated with chocolate makers, investors and stakeholders.
The blockchain’s ability to record all transactions allows both buyers and consumers to trace the cocoa’s origin, ensuring trust, traceability and transparency, qualities often absent in relationships between investors and smallholders in rural and often unstable areas. The use of this technological platform additionally reduces time and cost and increases cooperation by removing the necessity of communication through ‘middle man’ third parties, as increased transparency within interactions decreases the number of necessary actors.
Blockchain technology makes the possibility of smallholder integration within larger economic networks possible, impacting deficits not only in the international market but also at a micro level. By providing smallholders with access to finance, farmers and their families previously suffering from impoverishment, malnutrition and a general lack of resources due to both location and weak state infrastructure, are empowered by entrepreneurship through the growth of cocoa.
Through Choco4Peace’s use of blockchain technology, chocolate, a widely-appreciated commodity throughout the world, is quite literally being used for the construction of peace, as blockchain technology provides a way for producers to build lives with dignity, transitioning from the production of cocaine to that of cocoa. Access to markets, fair prices and transparent and traceable trade, made possible by blockchain technology, make this positive transition feasible, bringing chocolate to the world while diminishing the harmful impacts of the cocaine industry and empowering those living in Colombia’s post-conflict regions.
How sweet is chocolate for peace…