How blockchain has transformed the lives of Ecuadorean cocoa farmers

Francisco Numan Tenesharing shares cocoa from his farm.

For generations, families have farmed cocoa in the mountains in the Ecuadorean Amazon. The region is widely agreed to produce the best chocolate in the world.

But the industry is teetering on the verge of collapse. The work is extremely demanding, incomes are low, and to compensate for declining returns struggling farmers are cutting down ever more forest to make way for cocoa plants.

“A farmer’s work is really, really hard and difficult,” says Carlo Ruiz Head of UNDP’s Inclusive Economic Development Unit. “As a result, a lot of young people are not staying in the area.”

Mr Ruiz was thinking about this one day while listening to a podcast on one of his favourite subjects — coffee. “I’m a coffee geek, and I was also starting to get into innovation,” he says.

Ana María Villegas on her cocoa farm.

Like many others, he was at first skeptical about whether innovation was just a content-free buzzword, or something that could bring real change. Could it really help improve the lives of farmers and help young people stay on the land?

“We wanted to see how to make this more productive and a better way of earning an income,” he says.

He first considered traceability — a popular trend which enables consumers to know who grew and produced their chocolate bar — but decided it alone couldn’t deliver the results he was looking for.

“And that’s when we started to think about how we can use technology as a tool for something bigger,” he says.

He turned to the Istanbul-based AltFin Lab and Amsterdam’s FairChain Foundation to investigate the potential of blockchain — an emerging technology which creates an independent virtual ledger of records that cannot be manipulated and is fully traceable. His ultimate goal was to see whether the technology could deliver fair results for farmers and help them protect their environment.

Jorge Castillo is one of the founders and the former president of APEOSAE. He runs a cocoa nursery, which was contracted by UNDP and APEOSAE to provide 6,000 plants to the other farmers supported by the chocolate bar tokens.

“I was kind of scared, you know, blockchain sounds good, but how is it going to work? We were in the beginning kind of lost, because it was something we were not familiar with.”

Fairchain stepped in with the technical knowledge to guide the development process and the partnership has delivered The Other Bar — the world’s first blockchain shared value chocolate bar, which went on sale in the UK late last year.

The initiative was entirely funded by UNDP’s country investment facility and funds from FairChain foundation.

After buying the bar customers have the choice of scanning a blockchain-powered token which can be used to buy a tree, or to receive a discount on their next purchase. Either way, Ecuadorean farmers receive significantly more money than through any other method.

Zumbi is a small town, three kilometres away from the Association, where about 30 of the APEOSAE farmers live.

“With our blockchain technology, and we’re using The Other Bar for it, we’re giving the consumers more than a voice. We act, we give them part of our money and they can decide where to invest it,” says Guido van Staveren, Founder, FairChain Foundation.

UNDP selected APEOSAE as its local partners, they represent more than 165 organic cacao farmers in the Amazon, who were keen to develop a traceability platform.

“They were engaged from the beginning because they are already growing and exporting other products,” Mr Ruiz says.

The proceeds from The Other Bar means farmers can hire people to help during the vital harvest period, and the tree planting component of the project enables more carbon dioxide storage, helping to combat climate change. High wages are translating to more jobs, training, skills, and opportunities for young people.

“Consumers will know that this bar delivering on a promise. We’re doing things right, we’re supporting farmers,” Mr Ruiz says.

Alex Johan Jimenez Tillaguano turns cocoa in the Marquesina, at the collection center of APEOSAE, located in Panguitza, Zamora Chinchipe. Cocoa has two important post-harvest processes: fermentation and drying. Drying is done by turning it in sunlight, and can take three to four days, depending on the weather.

With a strong and fair economic model in place in Ecuador, Mr Ruiz is turning his thoughts to bigger places. The chocolate industry is worth more than US$105 billion and big brands are starting to invest in so-called ‘impact’ products, which deliver more than just profits to shareholders.

“Success will look like global brands are engaged with this mechanism,” he says.

As UNDP, along with the wider UN family, enters the Decade of Action — a concerted push to achieve the Sustainable Development Goals (SDGs) by 2030 — Mr Ruiz believes that radical new business models have a crucial part to play.

He knows that approaching problems with an open mind is one of the best tools we have.

“We were never scared of learning, we were never scared of finding something we didn’t know. You need different ways to tackle problems, otherwise you’re going to become irrelevant.”

The proceeds from The Other Bar means farmers can hire people to help during the vital harvest period, and the tree planting component of the project enables more carbon dioxide storage, helping to combat climate change.

Photos by UNDP Ecuador/Diego Malakias