CENTRAL AMERICA: Does Fair Trade Coffee Eliminate Poverty?

By Anders Riel Müller 

Nov 8, 2010

Latin America Bureau

The most frequently used argument for Fair Trade is that it provides small scale producers with the additional income needed to avoid lives mired in poverty. But poverty in coffee growing communities is a multi-faceted problem that cannot be reduced to a simple question of price mechanisms and improved trade relationships. Despite the rapid growth of Fair Trade and the tangible benefits it provides in terms of higher prices, poverty remains a persistent problem in many coffee communities, even those who sell all their coffee under Fair Trade terms.


The majority of coffee produced and sold under Fair trade Certification comes from small-scale producer cooperatives in Latin America, Africa and Asia. The size of farms vary widely, but in general, a small scale coffee farmer tends to have between one and ten hectares of coffee.  For most of these small scale farmers, coffee is the primary source of income, so they are highly vulnerable to fluctuations in global coffee prices. Small changes in coffee prices during harvest season can be decisive for whether their families will be able to feed themselves throughout the year, send the children to school, and in the worst cases whether they can remain on their land. They are at the mercy of a global trading system in which prices and conditions of trade are set in commodity exchanges in the US and Europe far beyond their reach and control.

Fair Trade challenges the unfairness of the conventional trade system, by ensuring small-scale producer cooperatives are paid higher prices. Also, by  eliminating  many  of  the  middle-men  between  the  producer  and  the roaster,  growers receive a  larger  share  of  the  total  value  generated  through  the coffee chain. Fair Trade also emphasizes the need for access to pre-finance and long terms trading relationships that allow farmers and cooperatives to reinvest in their coffee business and plan for the longer term.

In most research and articles these very tangible benefits are highlighted as making a difference in the lives of small scale coffee farmers. And there is no doubt that Fair Trade does have a positive impact, especially for the producer cooperatives. The additional resources allow the cooperatives to reinvest in better processing facilities, provide credit to farmers, improve the quality of coffee, marketing, etc. However, cooperatives also have an explicit function as a social organization whose mission is to improve the lives of their members, and this is where I think it is important to be critical of the claim that Fair Trade eliminates poverty.

Claiming that higher prices eliminate poverty is based on a very simplified and incomplete notion of poverty. It represents a failure on our part to fundamentally understand what it means to be poor. To eliminate poverty we need to understand the fundamental reasons for poverty and the many faces of poverty. A market based approach to poverty alleviation may see increased trade as contributing essential financial resources to marginalized producers, but it is important to realize that fairer pricing is only one of many means needed. If we truly want to help coffee farmers improve their livelihoods, we need to better understand their life situations, their hopes, and their aspirations. If we take this point of departure in our understanding of poverty, we will see a much more complex picture and also a more multifaceted understanding of what it takes to address poverty among coffee farmers and their families.

Symptoms and Causes of Poverty

This assessment is based on my own research conducted in three coffee communities in the states of Oaxaca and Vera Cruz in Mexico as well as in person interviews conducted by the International Center for Tropical Agriculture in Nicaragua, Mexico and Guatemala on behalf of Green Mountain Coffee Roasters, one of the largest buyers of Fair Trade Coffee in the US. What these surveys have in common is that they all took place in communities that have a relatively high share of their annual production sold through Fair Trade channels and thus in many ways are economically privileged compared to communities that have to sell their coffee on regular market terms.

The results from both surveys show that despite the high share of coffee sold through Fair Trade channels, symptoms of poverty are still widespread throughout the communities. Food security, in particular, is a major problem in all communities and many farmers also reported that they were still forced to find work outside of their communities for parts of the year in order to secure the financial means to sustain their families. In the survey conducted for Green Mountain Coffee Roasters, 84% of the respondents indicated that food security was an issue for at least one month a year, but the majority faced food security issues for 3-8 months of the year.

Food insecurity has a significant impact on the lives of coffee farmers and their families. In my own research, I found that malnutrition was a significant issue for many children affecting their physical and mental development. Food insecurity also forced many families to be split apart for several months of the year because either one parent or both had to leave the community in order to find work. In some cases, parents would leave their children to themselves and in other cases they would bring the children with them, which meant that they could not attend school for several weeks or months. Food insecurity thus impacts many other aspects of the daily life in coffee communities including health, education, migration, and economic activity.

Understanding the causes of food insecurity requires an understanding of the role of coffee in the local economy. As mentioned earlier, most small scale farmers own 2-5 hectares of land with most or all of it dedicated to coffee production. Coffee is a long term investment for most growers as it takes 3-5 years for a coffee tree to bear fruit and they remain productive for 30-100 years depending on the variety and local soil and climatic conditions. Coffee is also a very labor intensive crop that requires pruning and maintenance throughout year, and during the harvest season, that can last for several months, most family members are required to help out. Some families would have a few fruit trees growing on their land as well for their own consumption or for sale, but most were trapped in a mono-crop situation where scarcity of land and lack of knowledge and resources to diversify left them extremely vulnerable to coffee price fluctuations on the global market. The lack of land for food crops also meant that almost all food was purchased in the food markets, leaving families in a situation of double vulnerability as they are subject to fluctuations in both coffee prices and food prices.

Trapped in Coffee and Poverty

In my interviews with farmers, most expressed sincere pride in their profession as coffee growers. Coffee cultivation and processing not only requires hard manual labor, but also intimate knowledge of pruning and caring for the coffee trees. Coffee cultivation is not just a job, it is a way of life and a craft that takes years to learn and perfect. But the reliance on coffee as the primary source of income also leaves most farmers at the mercy of a global commodity chain that they have absolutely no influence on. Some farmers and cooperatives were aware that the dependency on coffee was a threat to the long term viability of their communities. Some had started initiatives to seek to establish greater autonomy from the global coffee market by helping families grow food crops and diversify in to other products for which there was a local or regional market, but it is was difficult balancing act, because it was also necessary to reinvest in coffee activities. Rarely was there enough resources to feed the household, reinvest in coffee cultivation, and diversify economic activities.

It is important here to note that Fair Trade premiums are paid to the cooperative and not to the farmers directly. In most cases the cooperatives will reinvest part of the Fair Trade premiums in improving coffee related activities such as processing equipment, coffee tree nurseries, quality control and marketing. What money remains is usually distributed to the individual households. In some cases the cooperatives will also divert some of the Fair Trade premiums towards economic diversification projects and social services, but this was secondary to reinvestment in the coffee business, the core economic activity of the cooperatives.

The results of these surveys show that while Fair Trade does benefit coffee communities, we must also be clear on the limitations of Fair Trade. To claim that Fair Trade lifts coffee growers out of poverty is an overstatement that does disservice to Fair Trade and the growers alike. To address poverty in coffee communities we need to understand that the heavy dependence on coffee as the primary source of income is what keeps communities caught in the poverty cycle. To address poverty, there needs to be a more comprehensive approach that establishes more independence from coffee through greater self-reliance and by shifting some parts of the land under cultivation to food and products for local and regional markets in which farmers have greater influence and control. In short, in order to break free of the poverty trap, farmers need to break free from the coffee trap.

Addressing Food Security and Economic Dependence

Addressing food security is one of the most pressing concerns as it impacts everything else in the lives of coffee farmers. If there is not enough money for food, there is no money to reinvest in the coffee business, diversify economic activities, secure their children’s education, and so on. In my own research, this seemed to be a well acknowledged fact by most cooperatives I visited, but the resources were often not available to do much about it. However, one cooperative had shown significant progress in assisting households by providing training workshops on vegetable gardening and nutrition. The same cooperative had also opened their own food store to ensure that families could have access to affordable food staples such as maize and rice throughout the year. Finally, the cooperative was actively engaged in producing other commodities for local markets such as honey and sugar. The results were very tangible in our interviews with local families. In general, families in that specific cooperative expressed that their lives had improved significantly. This response was in contrast to the two other cooperatives visited where the cooperatives themselves were struggling to stay afloat even with the Fair Trade premiums they received.

Green Mountain Coffee Roasters has gone to great lengths to understand the relationship between Fair Trade and poverty. The company’s involvement with coffee communities has gone beyond buying Fair Trade certified coffee in recent years. Since the initial surveys were conducted in 2006, the company has invested several millions of dollars in addressing food security, economic diversification, health, and education. On food security alone, Green Mountain Coffee Roasters now funds 20 food security projects in 12 countries touching more than 25000 families or more than 120,000 individuals. It is encouraging to see that some companies in the industry are beginning to acknowledge that Fair Trade is not the end all solution to alleviating poverty in coffee growing communities.

As consumers, we also need to better understand the actual impact of Fair Trade, to acknowledge the benefits that Fair Trade does provide, but also be aware of the limitations of the system. Supporting Fair Trade is a good first step, but there is much more that needs to be done if we want to lift small scale farmers out of poverty, and in the end isn’t that why we choose to buy Fair Trade coffee in the first place?