Meet the chocolate company that is reforming ex-cocaine producers through blockchain

Business Leader recently sat down with Matt Whiteman, the Partnership and Growth Manager at Choco4Peace – a company that is looking to change the lives of ex-cocaine producers through blockchain.

He was brought on to build and manage strategic relationships with key ecosystem players operating at the intersection between the worlds of chocolate, blockchain, international development, agricultural finance, and peacebuilding.

Can you give our readers an overview of Choco4Peace?

Choco4Peace (C4P) is a multi-institutional movement that supports constructing and sustaining peace by generating positive socio-economic and environmental outcomes in post-conflict regions through the empowerment of women, youth, indigenous and other at-risk people in the cacao sector by providing access to markets, financial models and disruptive technologies.

Starting in Colombia, C4P works with ex-cocaine producers and war victims who have made the transition to growing cacao, the base ingredient in chocolate.

How are you using blockchain to help Colombian farmers?

The majority of small cacao farmers in Colombia live below the poverty line. This is largely due to lack of access to markets and fair prices, finance, capacity building, technology, insurance, and good governance and policy frameworks.

We use blockchain to trace not only the origin of the cacao as it moves through the value chain to become transformed into chocolate. We also trace the socio-economic and environmental impacts of production, consumption, and investment in cacao. This means that as a consumer, you can know that you are paying the farmer a living wage that will allow them to walk away from the production of illegal crops.

As an investor, you will be able to mitigate your investment risk because you can see that it is shared with other stakeholders in the ecosystem. These impacts we measure are aligned with the UN Sustainable Development Goals – global objectives agreed upon by 193 signatories to the United Nations for eliminating poverty, saving the planet, and creating prosperity for all.

What was the inspiration behind setting up the company?

Our Executive Director Sergio Figueredo is originally from Colombia, so there is an obvious personal connection at the centre of this story. When I asked him why he was doing this, he told me his dad said: “If you don’t like the way something is done, do it yourself”. So I guess he took that advice to heart.

When Sergio asked me to join him, I saw this as an opportunity to build a world worth living in, and to beat back the endless deluge of weariness and grief experienced by anybody paying attention to the news.

He and I worked together previously in agricultural finance, providing access to finance solutions for small and medium enterprises in sustainable agriculture and forestry in emerging economies. One of the hard problems in this field is how to get financing down to the bottom of the pyramid to those who need it most. Finance is an essential ingredient for anybody who wants to grow their business. But the people we’re talking about are perhaps the riskiest investment one could imagine – small farmers usually living in rural and remote areas, often with low levels of literacy, often farming without land titles to use as collateral against a loan, often subject to natural disasters—and on top of that, they used to produce cocaine.

As a result, these people are largely invisible to the mainstream financial sector. Altogether there are around 450 million small farmers around the world who need access to finance, worth around half a trillion dollars, and cannot get it. Remember, these are the people who grow our food. This problem is called the agricultural financing gap, and to which we are applying the use of blockchain to de-risk investments and liberate some of that capital.

How successful has the company been in helping ex-cocaine producers and war victims change their lives?

The transition from the production of illegal crops to legal ones is very complex, and the Colombian government is the major actor in this process. Choco4Peace supports those who have decided to make that transition in accessing markets and finance. Our role to date has been around building a consortium of actors to enable this to happen and generating support for the model. Much of the support that has gone to these farmers to date from the development community has focused on technical assistance to improve quality and yield. But this is meaningless if these farmers cannot get a fair price that will give them a good reason to continue cultivating legal crops. This is where we come in.

At the moment we have agreements with seven cacao cooperatives representing around 1000 farmers in four regions of the country. We have also been speaking with chocolate makers and we are seeking partnerships with any bean-to-bar chocolatier that understands that the current commodity system keeps farmers in a cycle of violence and poverty, and wants to change this.

The pilot we are mounting is to provide access to markets and finance for 50 families of ex-cocaine producers in Tumaco, in the Nariño district. Remember also that Colombia is not the only cacao-producing country that hosts an armed conflict. The opportunity here to use blockchain to support peacebuilding processes and create other positive social and environmental goods is massive.

What are the main challenges the company faces when trying to turn people away from the cocaine industry?

The biggest challenge is around consumer awareness. We are so used to paying a price for a chocolate bar that does not reflect the true cost to the people who produced it, or to the environment. The conversation is changing slowly – there was a great piece recently in the Washington Post drawing the link between cacao production and child labour, but while most consumers would say they would want a system that would provide better conditions for farmers, few say they are willing to pay a higher price for it.

Our priority is on working with farmers who have already made the transition to cacao production. There are around 38,000 existing cacao producers in Colombia who need access to markets and finance today. The bigger challenge will be the roughly 77,000 families who have volunteered for the crop substitution program – a government-sponsored initiative that offers economic incentives to transition to legal crops.

The challenge here is that the incentives offered don’t cover the full cost of implementing the sustainable cultivation techniques a farmer would need in order to maximize the quality and yield of their crops, or to gain skills in financial literacy that would allow them to level up as entrepreneurs. At the moment we are focusing on acceleration rather than incubation, although that is part of our longer-term strategy.

How has the 2016 peace agreement helped farmers in the country?

In 2016, the Colombian government signed a peace accord with the FARC, the largest of several illegal armed groups responsible for a civil war that lasted over 50 years, killed 220,000 people, and displaced millions. Now, because those farmers cannot access international markets which would pay them a fair price for their crops, they face the awful dilemma of either continuing to produce legal crops like cacao in poverty, or returning to the production of cocaine in order to survive.

Many farmers living far from the capital would likely say that the peace agreement has had little positive effect on their daily lives. In fact, there have been unintended negative consequences. The FARC controlled vast swathes of rainforest, which they left largely untouched. Their demobilization created a power vacuum that was filled by other armed groups that were not signatories to the agreement, and now that land is being opened up to commercialisation in the form of illegal logging and mining, such that the rate of deforestation increased by 44% in the year of the peace accords.

What is the ultimate goal and future for the company?

Our immediate goal is first and foremost peace in Colombia – but here we have a model that can be replicated and scaled in other regions of the world where there is an imperative to move away from conflict.

Blockchain technology could potentially be used in any geography and with any commodity – we merely chose chocolate first. The value of blockchain in creating greater transparency, traceability and trust within supply chains has already been demonstrated; the future is in the creation of a digital impact economy whereby we can value and trace the non-monetary benefits and harms of our consumption and investment decisions. This will not happen unless we can create new economic incentives to attract the private sector to engage in the creation of public goods – something which has historically been the responsibility of governments and NGOs.