Collective action for market chain innovation in the Andes

Abstract

The Papa Andina network employs collective action in two novel approaches for fostering market chain innovation. The participatory market chain approach (PMCA) and stakeholder platforms engage small potato producers together with market agents and agricultural service providers in group activities to identify common interests, share market knowledge and develop new business opportunities. These forms of collective action have generated commercial, technological and institutional innovations, and created new market niches for Andean native potatoes grown by poor farmers in remote highland areas. These innovations have benefited small farmers as well as other market chain actors. This paper describes Papa Andina’s experiences with collective action for market chain innovation. It then discusses the implications of these experiences for the understanding of collective action and the policy implications for research and development organizations.

Introduction

The Andean region of South America is characterized by extreme social and economic inequalities. It is estimated that more than 60% of Ecuador’s rural population and nearly 80% of Bolivia’s and Peru’s are poor (CEPAL, 2004). Poverty is especially prevalent in highland areas, where the potato is the main staple food and an important source of cash income. In areas over 3500 m above sea level, subject to frequent frost and drought, potatoes are among the few crops that can be grown. Over centuries, Andean farmers have developed more than 4000 native varieties of potato. In Peru and Bolivia, most native potatoes are cultivated by semi-commercial farmers for home consumption, barter and sale in local markets. At lower altitudes, more commercially oriented farmers grow modern varieties employing pesticides, herbicides, and chemical fertilizers. In Ecuador, where growing conditions are generally milder, native varieties have almost entirely been replaced by new varieties introduced by national breeding and seed programs.

Agricultural development is taking place in the context of rapid urbanization and increasing market integration. Farmers are confronted with many new market challenges as well as opportunities. Urbanization and increasing participation of women in the labour force are leading to a dietary transition towards convenience foods, animal protein, fresh dairy products, and higher consumption of fresh fruits and vegetables. Packaged food sales and supermarket retail outlets are now found in most developing countries. Demand is also increasing for higher quality foods that meet ever-increasing standards of safety. Supermarkets are becoming major players in vertically integrated food marketing systems. Consequently, the production practices and livelihoods of small Andean farmers are increasingly influenced by the demands of urban consumers, market intermediaries and food industries (Reardon and Berdegué, 2002, Wilkinson and Rocha, 2006).

In contemporary agricultural markets, small farmers are often at a disadvantage in relation to larger commercial farmers who can supply larger volumes of quality-assured products, possess superior bargaining power, and have better access to information, services, technology and capital. Small farmers’ limited access to physical and financial resources restricts their ability to expand and invest in technologies that increase efficiency and add value to primary production. Small farmers also frequently have limited technical skills and poor access to information and training for improving their production practices. The limited market surplus of individual small farmers inflates marketing costs, increasing transaction costs and the per-unit costs of assembly, handling and transportation. Small farmers also lack basic knowledge of the marketing system, current information on prices and market conditions, and bargaining power (Kruijssen et al., 2007, Kruijssen et al., in press; Berdegué, 2001).

Various approaches have been proposed to improve the prospects of small farmers in agricultural markets, including collective action via farmer organizations and cooperatives (Shepherd, 2007). In the present paper, we discuss two novel uses of collective action that involve not only small farmers but also market agents and agricultural service providers. The participatory market chain approach (PMCA) and stakeholder platforms foster market chain innovation in ways that benefit small farmers as well as other market chain actors. The main intended outcomes of these types of collective action are commercial, technological and institutional innovations. This differs from most cases of collective action described in the literature, which report on farmer organization for achieving economies of scale, enhancing small farmers’ bargaining power or improving the management of common pool resources. The new forms of collective action reported on here, involving diverse market chain actors, researchers and other agricultural service providers, have been developed by the regional research and development (R&D) network, Papa Andina, which operates in Bolivia, Ecuador and Peru.