Marcello, over the last 35 years CODESPA has been working to develop rural markets and support small-scale entrepreneurs. Based on your experience, what are the underlying challenges hindering farmers’ success and the prosperity of their communities?

We at CODESPA are on a mission to contribute to rising 10 million more people from poverty to prosperity in the most underserved regions of Latin America, Africa, and Asia through our community-led, scalable approach to rural market development. We aim at empowering entrepreneurs by providing them access to knowledge, markets, and financial services. Today, producers from any remote area have the potential to sell their products - rice, coffee, seaweed to name just a few – to international companies, so that consumers anywhere in the world can buy and enjoy them. This is the beauty and promise that global markets offer. However, despite the enormous potential in their hands, local communities are still vulnerable and face challenges to their profitable participation in these markets.

The first challenge is a paradox: many communities are located in protected areas, rich in natural resources, which most of the time represent their greatest asset. For Hinatuan seaweed farmers in Southeast Philippines, for example, living in a remote area of the Pacific Ocean with access to very clean and unpolluted sea water, represents a great added value. But the area is secluded and far from the key market players. A lack of connection with the core market and the multiplication of actors in the value chain is the first inefficiency. Because farmers are so isolated, they depend on intermediaries who normally pay the lowest possible price. As a result, they lose power on the market.

The second challenge relates to private companies. Efficiency is key for any big market player: companies do not want to buy raw material from thousands of small players, but ideally from fewer bigger providers. Intermediaries deal with local producers and set the price: very low for the farmers, much higher for the private companies. Small farmers neither know how companies work, nor their standards and requirements. They also do not know their own value on the market. CODESPA provides them with training and connections with private companies. We help them set up their own companies, shape their value proposition and progressively become independent and successful.

The third challenge is finance. The entrepreneurs we work with lack capital for the investments they need – for example machinery or infrastructure. They also lack working capital. They have no savings, therefore they need to sell fast to fulfil the immediate needs of their families. If they had the capital to wait and sell when the price is higher, or when they collectively negotiate better, their income could be so much higher. CODESPA provides them with capital to invest in technology as well as capital that allows them to negotiate and operate strategically.

Inefficiencies in the value chain are a key factor extenuating today’s global issue of wealth inequality. How does this materialise in the seaweed industry in the Philippines?

High-quality seaweed is in high demand on global markets. They are processed as carrageenan, which is used in the food and beverage industry. Seaweed is also used in the pharma and cosmetics industry for its gelling, thickening and stabilising properties. Buyers are in desperate search of high volumes of this specific seaweed, which is grown almost exclusively on the remote South Pacific coasts.

The quality of the seaweed depends on a proper drying process, lasting a certain number of days and achieving the right moisture level. As farmers are constantly in need, they sell too fast to the intermediaries, compromising on quality and therefore income. The intermediaries buy from hundreds of farmers at the lowest price, finalise the drying process in line with the quality standards and sell it at a very high price to the manufacturers. The result is an imbalanced supply chain, where all gain is concentrated in the hands of a few intermediaries, while thousands of farmers lose value and stay stuck in unsecure conditions with no prospects.

In this context, we saw an opportunity to directly link international companies and farmers. We supported the Hinatuan farmers community through training, helped them unite in the Hinatuan Seaweed Producers Association (HSWPA) and connected them with CEAMSA, a Spanish seaweed processor based in Manila.

What was hindering the direct connection between farmers and private companies before CODESPA’s intervention? What made the interaction possible?

Lack of trust. Other previous initiatives in the Philippines, led by international non-governmental organisations, failed when two problems arose: some of the companies did not respect the price agreement, letting the farmers down and making them lose faith in the potential of the market. On the other side, the companies invested time in sharing valuable information with the farmers and, as soon as the quality increased, some of them sold all their production to other buyers, breaching the agreement for a few additional cents.

Ensuring collaboration among players at the top and bottom of the wealth pyramid is the key goal of the Julius Baer Foundation, which supports us in the Philippines. Driven by this objective, we connected with CEAMSA Asia and started facilitating the relationship with HSWPA, working to balance the mutual expectations and helping to build trust. Initially, CODESPA focused on ensuring that CEAMSA would pay the agreed price and that the farmers would commit to selling exclusively to CEAMSA for one full year after the start of the collaboration. That worked.

In the second year, HSWPA could have sold to other buyers but decided instead to continue the relationship with CEAMSA. At this point, the human connection among the players became the real turning point in this story. The CEAMSA General Manager, also a Filipino from Cebu, made this project part of his personal and professional vision. He and his team visited the community multiple times, providing training and advice, and securing remote consultation and support whenever needed. Then a delegation of famers travelled to CEAMSA’s plant in Manila – many of them leaving Hinatuan for the first time in their lives – to learn about the transformation process and the company’s needs. Trust was built and the project flourished.  

Today the business case is strong: the project yields a significant return in terms of higher quality and lower transactional and processing costs for the manufacturer. Thanks to the knowledge transfer provided by CEAMSA, today HSWPA’s seaweed quality is among the best in the region. Once delivered at the plant, it can skip the sorting and cleaning steps and go straight into production, increasing efficiency and lowering costs for CEAMSA. By skipping the middlemen, CEAMSA also reduced transaction costs: lower costs for them, much higher income for the farmers.  

Such transformation does not happen overnight and requires commitment and flexibility. CEAMSA invested their colleagues’ time and skills to train the community and adapted their payment schemes to match the farmers’ needs. The trust factor is becoming our standard. After working with CEAMSA, we are transferring this model and connecting private companies with vulnerable market players in other industries such as cocoa, coffee, tourism. 

How did the life of farmers and community change through the programme?

The project boosted the income of local households by 80%, clearly improving prospects for the whole community. Another key achievement is visibility. Often, vulnerable communities represent a problem for local authorities, dealing with low employment, social security and the need for services. In Hinatuan, the farmers’ community started formalising their business and paying taxes, eventually becoming visible, prominent citizens. This success prompted the municipality to invest in the community, supporting HSWPA with financial credit. Another investment was in infrastructure for a new warehouse and facility. This is exceptional and shows how the farmers’ community went from being a problem for Hinatuan to becoming an asset: from invisible to successful.

Self-esteem is the third change: imagine what happens when farmers, who have been living in their village for their entire lives, start travelling to Manila, negotiate the value of their production, go back, organise, ship and then receive the first payment? This is when the magic happens, because it shows that their dream is possible and that there’s a future for their community.

Finally, the farmers’ community really cares about the ecosystem. They are aware that natural capital is their most important asset and moved from using dynamite for more productive fishing to sustainable planting. 

Which future initiatives are you working on to help Hinatuan farmers boost their prosperity?

We are now looking to innovate at various levels. At the local level, we are focusing on two main pillars: The first is to further ‘green’ the value chain to grow even cleaner seaweeds and provide customers with a stronger competitive advantage. We are also working to reuse all the waste seaweed that is not sold to produce other added-value products in a circular economy approach. As the volume of seaweed produced is growing fast, there will also be an increase in waste and related methane emissions. The production of bio fertilisers will help reduce emissions and turn waste into a profitable by-product.

At the global level, carrageenan from seaweeds is used in products ranging from processed meats to drinks, toothpaste, cosmetics, etc. Their use is extensive. What if buyers all over the world required traders to certify that their seaweeds are produced following this sustainable standard? This business case is currently being studied by IESE Business School in Madrid. If we manage to elevate our approach as the global standard for a sustainable seaweed market across the world, then together, we will be able to drive systemic change in the industry with immense value gain for all players in the seaweed supply chain.