PeruvianPeruvian Brazil Nuts: An Brazil Nuts: An Exploration of Value Chains Exploration of Value Chains
and Opportunities for MSMEsand Opportunities for MSMEs
Emily ArdellEmily Ardell
Alejandra KempffAlejandra Kempff
Marco SaladiniMarco Saladini
Micro- and Small-Enterprise growthMicro- and Small-Enterprise growth course course
taught by Prof. Jeanne Downing taught by Prof. Jeanne Downing
Jonh’s Hopkins University - School of Advanced International StudiesJonh’s Hopkins University - School of Advanced International Studies
Washington, DC – USA Washington, DC – USA
Spring Semester 2005Spring Semester 2005
Presentation given on March 22, 2005Presentation given on March 22, 2005
Peruvian Brazil Nut IndustryPeruvian Brazil Nut Industry Peruvian economic reforms: improved efficiency in international trade of Peruvian economic reforms: improved efficiency in international trade of
goods, and internal economic structuregoods, and internal economic structure
Peru’s primary exports: gold, copper, fishmeal and zinc, with nut production Peru’s primary exports: gold, copper, fishmeal and zinc, with nut production playing a tiny role in Peruvian economy; however, this production is primary playing a tiny role in Peruvian economy; however, this production is primary income-generating activity in its specific regionincome-generating activity in its specific region
Completely localized industry as nuts harvested exclusively in the Amazon Completely localized industry as nuts harvested exclusively in the Amazon Rainforest. Major competitors are Bolivia and Brazil (primarily Bolivia). Rainforest. Major competitors are Bolivia and Brazil (primarily Bolivia).
International belief that Peru’s Brazil nuts are lower quality than those of its International belief that Peru’s Brazil nuts are lower quality than those of its South American neighbors.South American neighbors.
Despite fierce international competition, the Brazil nut industry in Peru has Despite fierce international competition, the Brazil nut industry in Peru has been growing each year.been growing each year.
Major market is US, with EU states following but far behind.Major market is US, with EU states following but far behind.
Where are “our” nuts from?Where are “our” nuts from?
Why this value chain, you ask?Why this value chain, you ask? Value chain chosen because Peruvian Brazil nuts have great potential to Value chain chosen because Peruvian Brazil nuts have great potential to
compete on the world market by utilizing correct toolscompete on the world market by utilizing correct tools
The Brazil nut industry in Peru has been growing substantially, reflecting The Brazil nut industry in Peru has been growing substantially, reflecting positive trends in production and potential for future growthpositive trends in production and potential for future growth
This industry employs 38% of the local population in Madre de Dios, and is This industry employs 38% of the local population in Madre de Dios, and is the principal factor that prevents the poorer members of the population from the principal factor that prevents the poorer members of the population from falling deeper into povertyfalling deeper into poverty
Brazil nuts contribute to the continued preservation of the Amazon Brazil nuts contribute to the continued preservation of the Amazon Rainforest, a factor which affects both regional and international Rainforest, a factor which affects both regional and international populations and landscapespopulations and landscapes
Nut consumption is increasingly supported by international health experts, Nut consumption is increasingly supported by international health experts, especially for women’s preventive health, and this is a chance to capitalizeespecially for women’s preventive health, and this is a chance to capitalize
Value chain mapValue chain mapPeru USA
Gathering ProcessingIntermediation Exporting ImportingProcessing & packaging
Retailing
Functions in the value chain
Actors in the value chain
Castañeros
Processing companies
Traders or acopiadores
Exporting companies (La Selva, El Bosque, Rovalex)
Importing companies (Bedemco)
Supermarkets (Giant, Whole foods)
Integrated processing and exporting company (Candela Peru)
Fair trade & organic stores (Global Organic, Yes Natural store)
Processing & packaging companies (Sanfilippo)
Consumers
Manufacturing companies (cakes and confectionery products)
Fair trade importer (Fair Trade Organisatie)
Brazil USA
Gathering ProcessingIntermediation Exporting ImportingProcessing & packaging
Retailing
Functions in the value chain
Allocation of valueAllocation of value
Allocation of value (percentage of final
price per pound of nuts)
Gathering
0.9
Processing
13.7
Intermediation
5.7
International shipping fees, taxes
and duties
8.6
Exporting
5.7
Importing
22.9
Processing, packaging and retailing
42.9
Gathering ProcessingIntermediation Exporting
Functions in the value chain (Peru side)
Outsourcing of servicesOutsourcing of services
Mapping and concession Government
Transport to Madre De Dios Hauliers, Candela Peru
Shelling Processing companies, Candela Peru
Finance Habilitadores,processing and exporting cos. Candela Peru
Quality certification Government facilities, exporting and processing companies, Candela Peru
Transport to Lima Processing companies
Transport to the USA Shipping companies
Training Candela Peru
Who Buys?Who Buys? International buyers are varied and include: Bedemco, SanFilippo & International buyers are varied and include: Bedemco, SanFilippo &
Sons, Amber wood, Fair Trade UKSons, Amber wood, Fair Trade UK
In-country buyers of Peruvian Brazil nuts include: Candela Peru In-country buyers of Peruvian Brazil nuts include: Candela Peru (alternative trade organization), La Selva, El Bosque and Rovalex(alternative trade organization), La Selva, El Bosque and Rovalex
Buyers of Brazil nuts need and want:Buyers of Brazil nuts need and want: Nuts of good/excellent qualityNuts of good/excellent quality Safe nuts for distribution to retailers (compliance with Safe nuts for distribution to retailers (compliance with
standards, especially in terms of aflatoxins levels)standards, especially in terms of aflatoxins levels) Consistent and reliable service in the provision of nutsConsistent and reliable service in the provision of nuts
MSMEs in the Brazil nuts value chain in Peru have basic resources, MSMEs in the Brazil nuts value chain in Peru have basic resources, and can meet most of buyers’ demands, but not alland can meet most of buyers’ demands, but not all
Historical wholesale pricesHistorical wholesale prices
0,50
1,00
1,50
2,00
2,50
3,00
US
dol
lars
per
pou
nd
Recent trends in wholesale pricesRecent trends in wholesale prices
Prices decreased between 1999 and 2001 because of Prices decreased between 1999 and 2001 because of greater supply and of stricter regulations being introduced greater supply and of stricter regulations being introduced in the European Union, as a debate on health concerns in the European Union, as a debate on health concerns unraveledunraveled
After the new regulations have settled in, European After the new regulations have settled in, European demand has gone up, by 20% in 2004demand has gone up, by 20% in 2004
Demand of mixed nuts, pushed by news reports about their Demand of mixed nuts, pushed by news reports about their health benefits, has gone up by 14% in the UShealth benefits, has gone up by 14% in the US
World supply, possibly as a consequence of scarce demand, World supply, possibly as a consequence of scarce demand, has decreased by 10% in the same yearhas decreased by 10% in the same year
The scarcity of Brazil nuts on the market has caused The scarcity of Brazil nuts on the market has caused defaults, delays and renegotiations and has resulted in defaults, delays and renegotiations and has resulted in severe tensions on pricessevere tensions on prices
The outlook on 2005 seems less extreme, with demand The outlook on 2005 seems less extreme, with demand stabilizing at lower levels and production catching upstabilizing at lower levels and production catching up
CandelaCandela
Candela is a trade organization whose activities within Candela is a trade organization whose activities within the Brazil nut industry are based on Fair Trade principlesthe Brazil nut industry are based on Fair Trade principles
Candela buys the nuts from harvesters for national and Candela buys the nuts from harvesters for national and international distributioninternational distribution
Its product lines focus on Brazil nut oil, handmade Its product lines focus on Brazil nut oil, handmade candles and Pecan Nutscandles and Pecan Nuts
Candela has worked on creating alliances and trust-Candela has worked on creating alliances and trust-based relationships with the castañerosbased relationships with the castañeros
It provides services to the castañeros, including credit, It provides services to the castañeros, including credit, training and advanced processing servicestraining and advanced processing services
TahuamanuTahuamanu
First stage of value chain- First stage of value chain- logistics engineering & logistics engineering & alliance with communityalliance with community
Advanced Industrial Advanced Industrial ProcessesProcesses
MarketingMarketing
Tahuamanu’s main strengths:Tahuamanu’s main strengths:
Value chain governanceValue chain governance The governance in this chain is in between balanced and The governance in this chain is in between balanced and
market-based. Candela Peru’s segment is directed.market-based. Candela Peru’s segment is directed. The distribution of benefits and the chain’s efficiency are The distribution of benefits and the chain’s efficiency are
heavily influenced by the extreme fragmentation of heavily influenced by the extreme fragmentation of functionsfunctions
The “links” which seem to have more power are: The “links” which seem to have more power are: - Traders in Peru, who carry out a whole range of functions - Traders in Peru, who carry out a whole range of functions from helping with concessions and credit to finding the right from helping with concessions and credit to finding the right combination of services and dealing with buyerscombination of services and dealing with buyers- Processing firms in the destination markets can decide - Processing firms in the destination markets can decide whether to use Brazil nuts in mixes and how to interprete whether to use Brazil nuts in mixes and how to interprete demand’s trends. demand’s trends.
Castañeros and most of the “links” in the destination Castañeros and most of the “links” in the destination market are confronted by exogenously determined prices market are confronted by exogenously determined prices and supply or demand, therefore they seem to have less and supply or demand, therefore they seem to have less market powermarket power
ConstraintsConstraints
Toxins (systemic)Toxins (systemic) Marketing (systemic/specific)Marketing (systemic/specific) Mapping/Timing (specific)Mapping/Timing (specific) Tenure and Concessions (specific)Tenure and Concessions (specific) Credit/Microfinance (specific)Credit/Microfinance (specific) Lack of Management skills Lack of Management skills
(specific)(specific)
Peru’s AdvantagesPeru’s Advantages
New forest laws provide New forest laws provide incentives to longer tenure incentives to longer tenure and reforestationand reforestation
Improving economic Improving economic environmentenvironment
Access to seaportsAccess to seaports Peru is one of the few world’s producers of Peru is one of the few world’s producers of
this cropthis crop Brazilian production is decliningBrazilian production is declining
Possible strategies for intervention
Improve castañeros’ cohesion
Value chain focusStrengthening of horizontal linkagesUpgrading
Supporting marketsFinance
Transform the value chain into a completely directed one
Value chain focus Vertical linkages
Supporting marketsInputsFinanceProvide services to
individual castañeros and/or firms
Value chain focusVertical linkageUpgrading
Supporting marketsBusiness servicesFinance
A. B.
C.
Action planAction plan Aim at increasing quality and productivity while minimizing Aim at increasing quality and productivity while minimizing
environmental impactenvironmental impact Facilitate the creation of a cooperative among castañerosFacilitate the creation of a cooperative among castañeros Stimulate alliances and/or acquisitions between castañeros and Stimulate alliances and/or acquisitions between castañeros and
other economic agents downstream in the chainother economic agents downstream in the chain Work on key constraints through Work on key constraints through
financial aid and technical assistancefinancial aid and technical assistance Encourage the new economic entities to Encourage the new economic entities to
deal directly with buyers in-country and deal directly with buyers in-country and abroad and to collectively source inputsabroad and to collectively source inputs
Diversify the local economy (eco-Diversify the local economy (eco-tourism, crafts)tourism, crafts)
Involve women in microfinance and Involve women in microfinance and productive activitiesproductive activities
Solutions to ConstraintsSolutions to Constraints Finance Finance
Options for dealing with the financial constraints:Options for dealing with the financial constraints:
– Customize existing microfinance networks (as CREDISMAD) to Customize existing microfinance networks (as CREDISMAD) to better conform to the real needs of the MSME’sbetter conform to the real needs of the MSME’s
– Assist in the formation of new credit unions in the local areaAssist in the formation of new credit unions in the local area
– Incorporate micro-small business training (accounting, financial Incorporate micro-small business training (accounting, financial management, etc.) into microfinance services, in addition to management, etc.) into microfinance services, in addition to just credit provision.just credit provision.
– Further incorporate women (wives of harvesters) into local Further incorporate women (wives of harvesters) into local economic structure via micro-credit opportunities and small economic structure via micro-credit opportunities and small business trainingbusiness training
Solutions to ConstraintsSolutions to ConstraintsToxinsToxins
Storage- Storage- Appropriate storing Appropriate storing facilities protect the nuts from facilities protect the nuts from extreme temperatures typical of extreme temperatures typical of the amazon.the amazon.
Drying- Drying- Proper drying Proper drying techniques are necessary in order techniques are necessary in order to preserve the quality of the nuts.to preserve the quality of the nuts.
Transportation-Transportation- Timely transportation methods are critical in orderTimely transportation methods are critical in order
to avoid toxin formation.to avoid toxin formation.
Solutions to ConstraintsSolutions to ConstraintsManagementManagement
•
Management skills are key for growth. Castañeros and other entrepreneurs Management skills are key for growth. Castañeros and other entrepreneurs in the area lack themin the area lack them
Main areas to work on include financial management, logistics, marketing for Main areas to work on include financial management, logistics, marketing for export, cost reduction, handling of natural resources and customized export, cost reduction, handling of natural resources and customized technical trainingtechnical training
Castañeros, small entrepreneurs and women Castañeros, small entrepreneurs and women are the target groupsare the target groups
The association of castañeros (FEDECAMD) The association of castañeros (FEDECAMD) and the local authorities can be involved as and the local authorities can be involved as organizers and/or providersorganizers and/or providers
Some of the courses would be bundled with Some of the courses would be bundled with micro-finance products, others taken for a fee, micro-finance products, others taken for a fee, gradually increasing over timegradually increasing over time
Sources of informationSources of information Interviews:Interviews:
Edward Millard, Conservation International USAEdward Millard, Conservation International USA Edgardo Maravi, World Bank Group (Agricultural and Rural Development)Edgardo Maravi, World Bank Group (Agricultural and Rural Development) Damian Osorovich, Bedemco Inc. USADamian Osorovich, Bedemco Inc. USA Michael Valentine, John B. Sanfilippo and Sons USAMichael Valentine, John B. Sanfilippo and Sons USA Sergio Pereira, IFC World Bank Group BoliviaSergio Pereira, IFC World Bank Group Bolivia Narda Maria de la Barra Aguirre, World Wildlife Fund PeruNarda Maria de la Barra Aguirre, World Wildlife Fund Peru
Papers and articlesPapers and articles ““Case Study: Economic Viability of Brazil Nut Trading in Peru” by: Chris Collinson, Duncan Case Study: Economic Viability of Brazil Nut Trading in Peru” by: Chris Collinson, Duncan
Burnett and Victor AgredaBurnett and Victor Agreda ““Documento Preliminar: Sistemizacion de Informacion Sobre Castana (Bertholletia Excelsa) Documento Preliminar: Sistemizacion de Informacion Sobre Castana (Bertholletia Excelsa)
y Su Situacion Actual en la Region Madre de Dios” by: Natalia Quinteros Casaverde, y Su Situacion Actual en la Region Madre de Dios” by: Natalia Quinteros Casaverde, Bastianne Louman, Narda Maria de la Barra Aguirre (WWF Peru)Bastianne Louman, Narda Maria de la Barra Aguirre (WWF Peru)
““Business and Biodiversity – Rainforest Marketing and Beyond” by: Jason W. ClayBusiness and Biodiversity – Rainforest Marketing and Beyond” by: Jason W. Clay ““The Brazil Nut Industry – Past, Present and Future” by: Scott A. MoriThe Brazil Nut Industry – Past, Present and Future” by: Scott A. Mori ““Castana y Derivados, Perfil y Sectoral” by: Ceprobol, BoliviaCastana y Derivados, Perfil y Sectoral” by: Ceprobol, Bolivia
WebsitesWebsites Proyecto conservando castañales Proyecto conservando castañales Conservation InternationalConservation International World Wildlife Fund World Wildlife Fund Chris Kirby’s Personal Website (regional expert)Chris Kirby’s Personal Website (regional expert) Smithsonian MagazneSmithsonian Magazne BBC NewsBBC News