Brazilian Palm Oil
Family Agriculture Project
A quest for sustainable economic and social development
By Rosa Maria Fischer, Monica Bose and Paulo da Rocha Borba
Dende, the oil of the african oil palm in brazilianPortuguese, is extracted from the fruit of a tree known asthe dendezeiro. The economic importance of dendê palm oilextends beyond its use as a cooking ingredient, which is whatit is best known for in Brazil. It is employed as a biofuel, as protectionfor tin plate and steel plate, and in the production of soap,candles, grease, lubricants, vulcanized articles, vegetable fats andmargarine. Brought from Africa by slaves, the dendezeiro was firstplanted in the Northeast of Brazil. The country is now the thirdlargest producer in Latin America and the state of Pará, in the Amazonregion, accounts for 85% of domestic dendê oil production.
In 2001, the Agropalma Group, considered Latin America’s mostimportant palm oil producer, began the “Dendê Family AgricultureProject” in the municipalities where it operatesin Pará. The project became an attractivelabor option for small family farmers inthis poorly developed region. By transformingfamily farmers into fruit suppliers forthe palm oil production chain, the companymanaged to get them to play an active role inthe local economy, whereas previously theyhad focused only on subsistence farming. Bybecoming oil palm farmers, these families became the agents of asustainable socio-environmental development process characterizedby 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 covers60% of the national territory. Although the “Legal Amazonia”region has experienced economic growth since the 60s, living conditionsin 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 andrunning water. This is also the case of Almeirim, in Pará, where31.81% of the children are illiterate (compared to the overall Brazilianrate of 6%). If social policies to correct these distortions arenot implemented, the region’s development may be permanentlyimpaired. 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 ofproduction and their culture; companies exploit natural resourceswith predatory management practices; and many families live inutter poverty. Furthermore, it is difficult to gain access to the availablenatural resources and the technical and financial resources thatcity 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% ofthe 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, livestockfarming and industry. Pará accounts for 1.9% of Brazil’s GDP orroughly US$16 billion and is an area of major social, economicand environmental imbalance.
Controlling the production cycle
The Agropalma Group has the largest and most modern palm cultivationand processing agro-industrial complex in Brazil. Accountingfor 80% of the domestic production of this oil, it generates 2,800direct jobs, has annual sales of US$19.2 million and controls theentire production cycle—from cultivating the seeds to producingrefined oil, vegetable fats and margarine. The Group entered theagro-industrial segment in 1982, when it set up a company forcultivating dendezeiros and extracting their oil (obtained from thefruit’s pulp through cooking, shelling and pressing) and palm kerneloil (obtained through pressing, once the shells have been brokenand separated from the core). This first company was set up in an27,170 acre area in the municipality of Tailândia, about a hundredmiles south of Belém, the capital of Pará. Follow the key data onAcará, Moju and Tailândia, the Pará municipalities in which theGroup has operations (see Table 1).
The Group believes that its social responsibility activitiesstrengthen the company and its stakeholders. However, MarcelloBrito, its commercial director, points out that “as a privately-heldcompany, the Group’s main focus is not philanthropy, but makingbusiness profitable.”
Dendê and Family Agriculture
Agropalma feels investment in social welfare activities must bealigned with its mission of achieving the sustainable developmentof its business and of the region as well. Thus, its social actionstake place mainly through participation in socioeconomic developmentprojects involving the region’s small producers. The DendêFamily Agriculture Project stands as an example, aimed at creatingproductive activities, reducing environmental damage and curbingrural migration by means of a production model based on familyagriculture. Through this, Agropalma aims at implementingdendezeiro farming in small rural properties and thus encouragingincome growth; recovering areas degraded by subsistence cropfarming; providing farmers with a production alternative based ona perennial crop cycle; and reducing clearance of land by raze firesand deforestation driven by itinerant agriculture. This action chainassures a supply of raw material for the industry, at the same timetrying to foster the region’s sustainable development and to generatepositive economic and financial results for the farming familiesinvolved and for the company itself.
The Dendê Family Agriculture Project began in the municipalityof Moju, state of Pará, 50 miles away from Belém. In just fouryears it attained its initial targets of:
- Planting 3,705 acres of palm
- Generating employment for 150 families, with roughly 750direct jobs
- Increasing the income of the families involved in the projectby 80%
The project grew out of a joint initiative of the Moju municipalcouncil and Agropalma and focuses on stimulating the harvest ofpalm fruit bunches. To achieve their objectives, both sought fundingfrom the Amazônia Bank (BASA – Banco da Amazônia) forthe Family Agriculture Strengthening Program(PRONAF – Programa de Fortalecimento daAgricultura Familiar), in order to get families tosubscribe to the company’s proposal. The partnershipaimed at helping 150 families in Moju,a municipality with 60,000 inhabitants at thetime. The alliance was crucial for the project’sviability, as the palms take roughly three years tostart yielding fruit and BASA granted a monthlystipend of one minimum wage (some US$130)for the support of each family and the purchaseof palm farming material. The loan was payablewith interest of 4% a year, with a seven-yeargrace period. In other words, the terms werefar better than the annual interest rate of 64.4%charged for loans to individuals in 2005. “Partof the earnings of each family is retained byBASA and will be used to pay off the financing,ensuring the investment’s productivity cycle,”explains Brito.
Besides the BASA loan, each family wasgiven a 25 acre plot with legalized ownershiprights, thanks to a negotiation between thecompany and the Pará Land Institute (Iterpa– Instituto de Terras do Pará). The families alsoreceived agricultural machinery and equipment,palm seedlings and technical assistancefrom Agropalma directly. Furthermore, the company pledged topurchase the small farmers’ entire production and to keep on handan agricultural operations team, vehicles for transporting fertilizer,raw materials, tools and personal safety equipment. The municipalcouncil, in turn, promised to select and settle the families, besidesproviding infrastructure support, such as choosing the area and thetopography and providing demarcation. By 2006, the company hadinvested US$1.2 million in the project (see Table 2 below).
The project’s second phase began in 2005, now in the municipalityof Tailândia, also in Pará, with 34 of the 50 families intendedjoining palm bunch production.
The relevant results of an innovative project
The Dendê Family Agriculture Project led the Moju farmers toestablish the Arauaí Community Development Association. In itsheadquarters, they hold monthly meetings attended by the associationmembers, Agropalma technicians and representatives ofthe parties involved with the project. Difficulties, improvementsand partnerships in aid of the community are discussed at thesemeetings, giving rise to action plans that have already led to roadbuilding, the establishment of a school and the institution of publictransport. The appearance of this association is considered one ofthe project’s main results, because it strengthens the community’ssocial capital and its capacity to interact with the government, as itexercises its citizenship. Promoting environmental education amongfamily farmers is another one of the project’s main outcomes, sincepreviously they were used to living off the non-sustainable extractionof timber, as well as other native resources and subsistence cropssuch as manioc, corn and beans. In the words of Edmilson Ferreirade Barros, president of the Arauaí Community Development Association,“we didn’t have development before – we deforested a lotand reaped little. Now we don’t cut down the forest.”
In 2005, 50 Moju families harvested their first crop and beganearning an average monthly income of US$320, with a possibilityof doubling this amount in 2006. After the seventh year (2008), theexpected annual income should reach some US$8,500 per family.Before taking part in this project, the families’ average monthlyincome did not exceed US$26 monthly from the sale of flour,fruit and coal, while, according to 2005 data, the average monthlyincome in Brazil equaled US$231.14 and the equivalent for therural population amounted to US$108.30. In addition, their activitiesdegraded the forest. Families have a source of permanent workdue to the crop’s perennial nature, in which production at the samesite is maintained. Moreover, the palms do not require daily careand the planted area can be shared with other crops.
The project is innovative because it includes small local farmers ina production chain with positive economic prospects, provides themwith viable access to the technology for planting and harvesting palms,and orients family agriculture toward a type of farming previously consideredviable only for intensive crops. Thus, an example of perennialcrop production that generates ongoing monthly income has cometrue in the Amazon region, reducing rural migration and strengtheningthe community. Furthermore, it enables Agropalma to demonstratesocially responsible conduct to its stakeholders, in addition toproviding it with direct benefits such as lower investment expenses,less tied-up capital, higher production volumes and the assurance ofobtaining high quality raw material. More specifically, these projectsallow the company to expand the production area without tying upcapital in land or raising direct employee headcount, which noticeablycuts personnel costs and labor charges. Another one of the project’sfavorable aspects is the conservation of land and natural resources bythe population itself, mainly the local farmers’ families.
In Brito’s opinion, “the project opened the authorities’ eyes tothe 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 thatfamily agriculture and corporations don’t mix. To the contrary, itcan be combined with any firm, large, medium or small.”
One of the chief challenges of the project is difficulty in changingthe cultural patterns of small family farmers. Used to living offextraction and subsistence crops, they are now obliged to adoptthe more sophisticated planting techniques that perennial cropsrequire. This change has been taking place gradually, through constantdialogue and information, as illustrated by the learning processAgropalma experienced to build a relationship of trust with thefarmers. Some were disinterested and suspicious of the company’sintentions at first, causing initial resistance to the project. However,people from Agropalma and from the other institutions involvedmet with the farmers to clarify objectives and discuss the project’sactivities and results, overcoming the initial resistance.
Concerning this evolution, Ivan da Silva Cristo, one of the familyfarmers, declares: “At first, I had my doubts about joining the projector not. But my colleagues showed me that it would have benefits.Today, my income covers 100% of my householdexpenses.” Brito adds that “as it is theinternational market that sets the pricing, thecompany is unable to define prices capable ofparticularly benefiting any party. This lendstransparency to the process.”
The involvement of the public sphere inthe network and the value chain built, however, poses challengesof a different nature. Whereas some relationships flourish, suchas the partnership with the Moju Municipal Council, others stall.The state government’s non-fulfillment of agreements to investin the region’s infrastructure is just one example of governmentlack of commitment to the project. Further examples include therestrictions imposed upon the registration of land ownership inthe settlements, or the lack of support from municipal councils ofneighboring towns, which obstruct or hinder project expansion toother sites. In these cases, to avoid jeopardizing results and keepthe project from being discontinued, the company bears the burdenof a portion of the investment that was meant to be shouldered byother partners in the undertaking.
Alternating between forward strides and setbacks, this experienceillustrates the road of persistence and resilience faced by pioneersof a new way of producing economic results with social valueand environmental conservation. It also shows that it is possible totransform the reality of families through initiatives that involve theparticipation of several social actors and to encourage their inclusionin the production chain of goods, helping not only to improve theirquality of life but also the sustainable development of a region.
Rosa Maria Fischer is the SEKN leader in Brazil. She is Directorof CEATS – Centro de Empreendedorismo Social e Administraçãoem Terceiro Setor (Center of Social Entrepreneurship andManagement on Third Sector) and Professor at the Faculdade deEconomia, Administração e Contabilidade da Universidade de SãoPaulo (FEA/USP). Monica Bose is a senior researcher at CEATSand holds a Master in Business Administration from the Faculdadede Economia, Administração e Contabilidade da Universidadede São Paulo (FEA/USP). Paulo da Rocha Borba is a seniorresearcher at CEATS and holds a Master in Business Administrationfrom the Faculdade de Economia, Administração e Contabilidadeda Universidade de São Paulo (FEA/USP).