A quest for sustainable economic and social development
Dendê, the oil of the African oil palm in Brazilian Portuguese, is extracted from the fruit of a tree known as the dendezeiro. The economic importance of dendê palm oil extends beyond its use as a cooking ingredient, which is what it is best known for in Brazil. It is employed as a biofuel, as protection for tin plate and steel plate, and in the production of soap, candles, grease, lubricants, vulcanized articles, vegetable fats and margarine. Brought from Africa by slaves, the dendezeiro was first planted in the Northeast of Brazil. The country is now the third largest producer in Latin America and the state of Pará, in the Amazon region, accounts for 85% of domestic dendê oil production. In 2001, the Agropalma Group, considered Latin America’s most important palm oil producer, began the “Dendê Family Agriculture Project” in the municipalities where it operates in Pará. The project became an attractive labor option for small family farmers in this poorly developed region. By transforming family farmers into fruit suppliers for the palm oil production chain, the company managed to get them to play an active role in the local economy, whereas previously they had focused only on subsistence farming. By becoming oil palm farmers, these families became the agents of a sustainable socio-environmental development process characterized by the growth of income generation and ecosystem conservation.
IN A STATE OF IMBALANCE
The Brazilian state of Pará is part of the so-called “Legal Amazonia,” an administrative region of more than 1,235,000,000 acres that covers 60% of the national territory. Although the “Legal Amazonia” region has experienced economic growth since the 60s, living conditions in the area still reflect poor human development standards. For instance, in the town of Vitória do Jarí, in the state of Amapá, only 3.74% of the inhabitants live in homes with a bathroom and running water. This is also the case of Almeirim, in Pará, where 31.81% of the children are illiterate (compared to the overall Brazilian rate of 6%). If social policies to correct these distortions are not implemented, the region’s development may be permanently impaired. Social dynamics indicate there are many conflicts at play: native family farmers oppose migrants; farmers demand land ownership; indigenous peoples witness the expropriation of their means of production and their culture; companies exploit natural resources with predatory management practices; and many families live in utter poverty. Furthermore, it is difficult to gain access to the available natural resources and the technical and financial resources that city councils, states and the federal government can grant.
Pará occupies one third of the Brazilian Amazon region, 1,248,042 square kilometers(481,872 square miles) or 16.7% of the country’s territory. The state, whose key feature is vast emptiness, has 7 million inhabitants spread out over its area – on average, 5 per square kilometer. Its economy is based on mineral extraction, vegetable extraction and, to a lesser extent, on agriculture, livestock farming and industry. Pará accounts for 1.9% of Brazil’s GDP or roughly US$ 16 billion and is an area of major social, economic and environmental imbalance.
CONTROLLING THE PRODUCTION CYCLE
The Agropalma Group has the largest and most modern palm cultivation and processing agro-industrial complex in Brazil. Accounting for 80% of the domestic production of this oil, it generates 2,800 direct jobs, has annual sales of US$19.2 million and controls the entire production cycle – from cultivating the seeds to producing refined oil, vegetable fats and margarine. The Group entered the agro-industrial segment in 1982, when it set up a company for cultivating dendezeiros and extracting their oil (obtained from the fruit’s pulp through cooking, shelling and pressing) and palm kernel oil (obtained through pressing, once the shells have been broken and separated from the core). This first company was set up in an 27,170 acre area in the municipality of Tailândia, about a hundred miles south of Belém, the capital of Pará. Follow the key data on Acará, Moju and Tailândia, the Pará municipalities in which the Group has operations.
The Group believes that its social responsibility activities strengthen the company and its stakeholders. However, Marcello Brito, its commercial director, points out that “as a privately-held company, the Group’s main focus is not philanthropy, but making business profitable.”
DENDÊ AND FAMILY AGRICULTURE
Agropalma feels investment in social welfare activities must be aligned with its mission of achieving the sustainable development of its business and of the region as well. Thus, its social actions take place mainly through participation in socioeconomic development projects involving the region’s small producers. The Dendê Family Agriculture Project stands as an example, aimed at creating productive activities, reducing environmental damage and curbing rural migration by means of a production model based on family agriculture. Through this, Agropalma aims at implementing dendezeiro farming in small rural properties and thus encouraging income growth; recovering areas degraded by subsistence crop farming; providing farmers with a production alternative based on a perennial crop cycle; and reducing clearance of land by raze fires and deforestation driven by itinerant agriculture. This action chain assures a supply of raw material for the industry, at the same time trying to foster the region’s sustainable development and to generate positive economic and financial results for the farming families involved and for the company itself.
The Dendê Family Agriculture Project began in the municipality of Moju, state of Pará, fifty miles away from Belém. In just four years it attained its initial targets of:
- Planting 3,705 acres of palm;
- Generating employment for 150 families, with roughly 750 direct jobs;
- Increasing the income of the families involved in the project by 80%.
The project grew out of a joint initiative of the Moju municipal council and Agropalma and focuses on stimulating the harvest of palm fruit bunches. To achieve their objectives, both sought funding from the Amazônia Bank (BASA – Banco da Amazônia) for the Family Agriculture Strengthening Program (PRONAF – Programa de Fortalecimento da Agricultura Familiar), in order to get families to subscribe to the company’s proposal. The partnership aimed at helping 150 families in Moju, a municipality with 60,000 inhabitants at the time. The alliance was crucial for the project’s viability, as the palms take roughly three years to start yielding fruit and BASA granted a monthly stipend of one minimum wage (some US$130) for the support of each family and the purchase of palm farming material. The loan was payable with interest of 4% a year, with a seven-year grace period. In other words, the terms were far better than the annual interest rate of 64.4% charged for loans to individuals in 2005. “Part of the earnings of each family is retained by BASA and will be used to pay off the financing, ensuring the investment’s productivity cycle”, explains Brito.
Besides the BASA loan, each family was given a 25 acre plot with legalized ownership rights, thanks to a negotiation between the company and the Pará Land Institute (Iterpa – Instituto de Terras do Pará). The families also received agricultural machinery and equipment, palm seedlings and technical assistance from Agropalma directly. Furthermore, the company pledged to purchase the small farmers’ entire production and to keep on hand an agricultural operations team, vehicles for transporting fertilizer, raw materials, tools and personal safety equipment. The municipal council, in turn, promised to select and settle the families, besides providing infrastructure support, such as choosing the area and the topography and providing demarcation. By 2006, the company had invested US$ 1.2 million in the project.
THE RELEVANT RESULTS OF AN INNOVATIVE PROJECT
The Dendê Family Agriculture Project led the Moju farmers to establish the Arauaí Community Development Association. In its headquarters, they hold monthly meetings attended by the association members, Agropalma technicians and representatives of the parties involved with the project. Difficulties, improvements and partnerships in aid of the community are discussed at these meetings, giving rise to action plans that have already led to road building, the establishment of a school and the institution of public transport. The appearance of this association is considered one of the project’s main results, because it strengthens the community’s social capital and its capacity to interact with the government, as it exercises its citizenship. Promoting environmental education among family farmers is another one of the project’s main outcomes, since previously they were used to living off the non-sustainable extraction of timber, as well as other native resources and subsistence crops such as manioc, corn and beans. In the words of Edmilson Ferreira de Barros, president of the Arauaí Community Development Association, “we didn’t have development before – we deforested a lot and reaped little. Now we don’t cut down the forest.”
In 2005, fifty Moju families harvested their first crop and began earning an average monthly income of US$320, with a possibility of doubling this in 2006. After the seventh year (2008), the expected annual income should reach some US$8,500 per family. Before taking part in this project, the families’ average monthly income did not exceed US$26/month from the sale of flour, fruit and coal, while, according to 2005 data, the average monthly income in Brazil equaled US$231.14 and the equivalent for the rural population amounted to US$108.30. In addition, their activities degraded the forest. Families have a source of permanent work due to the crop’s perennial nature, in which production at the same site is maintained. Moreover, the palms do not require daily care and the planted area can be shared with other crops.
The project is innovative because it includes small local farmers in a production chain with positive economic prospects, provides them with viable access to the technology for planting and harvesting palms, and orients family agriculture toward a type of farming previously considered viable only for intensive crops. Thus, an example of perennial crop production that generates ongoing monthly income has come true in the Amazon region, reducing rural migration and strengthening the community. Furthermore, it enables Agropalma to demonstrate socially responsible conduct to its stakeholders, in addition to providing it with direct benefits such as lower investment expenses, less tied-up capital, higher production volumes and the assurance of obtaining high quality raw material. More specifically, these projects allow the company to expand the production area without tying up capital in land or raising direct employee headcount, which noticeably cuts personnel costs and labor charges. Another one of the project’s favorable aspects is the conservation of land and natural resources by the population itself, mainly the local farmers’ families.
In Brito’s opinion, “the project opened the authorities’ eyes to the need for partnerships that ensure the investment’s useful life, with products that have a strong, open market and that, above all, pay the producer adequately.” He adds, “It’s a mistake to say that family agriculture and corporations don’t mix. To the contrary, it can be combined with any firm, large, medium or small.”
One of the chief challenges of the project is difficulty in changing the cultural patterns of small family farmers. Used to living off extraction and subsistence crops, they are now obliged to adopt the more sophisticated planting techniques that perennial crops require. This change has been taking place gradually, through constant dialogue and information, as illustrated by the learning process Agropalma experienced to build a relationship of trust with the farmers. Some were disinterested and suspicious of the company’s intentions at first, causing initial resistance to the project. However, people from Agropalma and from the other institutions involved met with the farmers to clarify objectives and discuss the project’s activities and results, overcoming the initial resistance.
Concerning this evolution, Ivan da Silva Cristo, one of the family farmers, declares: “At first, I had my doubts about joining the project or not. But my colleagues showed me that it would have benefits. Today, my income covers 100% of my household expenses.” Brito adds that “as it is the international market that sets the pricing, the company is unable to define prices capable of particularly benefiting any party. This lends transparency to the process.”
The involvement of the public sphere in the network and the value chain built, however, poses challenges of a different nature. Whereas some relationships flourish, such as the partnership with the Moju Municipal Council, others stall. The state government’s non-fulfillment of agreements to invest in the region’s infrastructure is just one example of government lack of commitment to the project. Further examples include the restrictions imposed upon the registration of land ownership in the settlements, or the lack of support of the municipal councils of neighboring towns, which obstruct or hinder project expansion to other sites. In these cases, to avoid jeopardizing results and keep the project from being discontinued, the company bears the burden of a portion of the investment that was meant to be shouldered by other partners in the undertaking.
Alternating forward strides and setbacks, this experience illustrates the road of persistence and resilience faced by those who pioneer a new way of producing economic results with social value and environmental conservation. It also shows that it is possible to transform the reality of families through initiatives that involve the participation of several social actors and to encourage their inclusion in the production chain of goods, helping not only to improve their quality of life but also the sustainable development of a region.
Table 1: Municipalities Involved
|Municipality||Estimated Population 2005||Area (Sq.km)||Area (Sq.miles)||Population Density (Inh./sq.km)||Urban Population||Rural Population|
General Data on the municipalities involved in the Dendê Family Agriculture Project
Rosa Maria Fischer is the SEKN leader in Brazil. Director of Centro de Empreendedorismo Social e Administração em Terceiro Setor (Center of Social Entrepreneurship and Management on Third Sector) and Professor at the Faculdade de Economia, Administração e Contabilidade da Universidade de São Paulo (FEA/USP).
Monica Bose is a senior researcher at CEATS and holds a Master in Business Administration from the Faculdade de Economia, Administração e Contabilidade da Universidade de São Paulo (FEA/USP).
Paulo da Rocha Borba is a senior researcher at CEATS and holds a Master in Business Administration from the Faculdade de Economia, Administração e Contabilidade da Universidade de São Paulo (FEA/USP).