Thursday, September 30, 2010

A Blog round-up, on Cuba and coffee

Two good blog posts from this morning caught our attention, so we will combine them into one post. One describes improvement in Cuba, and another describes improvement for small farmers in Ethiopia.

First up is Cuba, who has quietly made great strides in meeting the Millennium Development Goals. Impartial observers say that Cuba is one of the best performing countries in meeting the MDGs. Most of the country's residents have equal access to health care and education, so this helps to remove some of the barriers to finding good work.

From the Guardian's Poverty Matters blog, contributor Jonathan Glennie asks an economist friend why Cuba is doing great.

According to a new MDG Report Card by the Overseas Development Institute, Cuba is among the 20 best performing countries in the world. The key question for development experts who want to learn from this success is this: How is progress being made when the economy appears to be in such turmoil? I posed this question to a young Cuban economist friend of mine and his answer is worth reflecting on (I will let the fact that he doesn't want his name to appear, despite saying positive things about the government, speak for itself regarding freedom of expression):

Hello Jonathan. How is it possible to sustain spending despite economic difficulties? Good question!

The Cuban economy is planned and we redistribute income from the most dynamic sectors, which generate most foreign exchange, towards those that are less dynamic but necessary for the country. That's how we maintain a budget to keep health and education high quality and free of charge to the user.

Although many see this as "social spending", some economists, of which I am one, see it as a long-term (if costly) investment. It is part of the country's economic strategy in the long run to have human capital which can easily adapt to new economic conditions, including the development of trade in services. So costly investments are made, and wages in these sectors are kept relatively high. Since 2004 Cuba has indeed increased exports of services in precisely these sectors (health and education), mainly to Latin countries.

Small coffee farmers in Ethiopia are making strides to improve their product to sell to internationally. Small farmers often lack the technology skill or time to quality control their beans. But if the farmers co-operate, they can pool their resources to make their product more appealing to the big international buyers.

From Duncan Green's Poverty to Power blog, he visits some coffee growers in Ethiopia who have made strides to improve their product and get more money from it.

Here are some of the ways the farmers are facing up to the challenge:

1. Organization and scale: They set up the Limmu Innara Union of cooperatives in 2006, which now comprises 41 coops, with 30,000 households. Strengthening the management capacity and market linkages of the union will be crucial to getting the coffee to market.

2. Quality control: success will depend on improving the quality of the beans. That means making sure that every family member or day labourer picks the red beans, and not the green ones, and that every stage of transport and processing minimises impurities. One of the key ways to achieve this is actually through a fascinating ‘functional adult literacy’ programme and a focus on women’s rights – more on that tomorrow.

3. Access to working capital: the union needs to pay the farmers up front for their coffee, otherwise their desperate need for cash will force them to sell to private traders even though they pay less. It takes time to build up that capital, and access to credit is hard until they have assets they can put down as collateral, so Oxfam has part-funded the building of a new warehouse that can both clean up the coffee chain, and simultaneously act as collateral for bank loans.

4. Learning to navigate the value chain: the coffee value chain is complex (see diagram), and requires different skills as you move from selling to local traders at the farmgate to doing international deals. Oxfam is working with a team from Accenture to find organizations that can work with the union to set up those links.

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