Building Markets

Back to all blogs
2

Côte d’Ivoire’s Cocoa Ban Backfires

There was good news out of the world’s biggest cocoa exporter, Côte d’Ivoire, this week. On Tuesday, a ship filled with cocoa beans harvested in the West African country left for Antwerp. It was the first ship to carry cocoa out of the country since the three and a half month ban on cocoa exports was lifted. While that is good news, that there was a ban at all is a point of concern. It has choked Côte d’Ivoire’s marketplace.

Since November, when the former president Laurent Gbagbo refused to cede the presidency, Côte d’Ivoire has teetered on the brink of civil war and humanitarian crisis. The international community’s response to the impasse lagged behind the country’s growing troubles. The African Union discussed what to do without taking action. The EU and US applied sanctions. Banks cut Gbagbo and his cronies off and froze their assets. And president-elect Alassane Ouattara called for a cocoa ban to starve Gbagbo of revenue.

Predictably, the country’s cocoa trade, the nation’s greatest source of revenue, was hit the hardest. In 2009, cocoa generated $2.53 billion in exports. No surprise that the cocoa ban was damaging.

Ouattara knew there would be “catastrophic” effects from his ban, including high inflation. The price for cocoa rose 34 percent, the highest since 1979. Higher international prices mean plunging domestic prices. This is particularly problematic in Côte d’Ivoire where small-scale farmers not only grow most of the cocoa crop but also depend entirely upon it. For Ivorian farmers, lower profits mean they won’t be able to replace an ageing cocoa tree or buy fertilizer for the next season.

Experts are worried about the harvests after 2012. The average cocoa tree in the country is 30 years old, well past a tree’s most productive years. Being unable to buy new trees, which take at least three years to mature, will result in significantly reduced harvests. Add to it next year’s dry La Niña weather pattern, and the true impact of the ban begins to take shape.

Farmers aren’t the only ones hurt by it. Ivorian exporters have been sitting by their warehouses bursting with cocoa beans—worth $1.8 billion or a third of the country’s yearly crop—and pray they will be able to get the beans to market, a scenario that agri-commodity specialists say is uncertain. Some exporters resorted to smuggling the beans east across the border to Ghana.

In a March article, the Economist argued that the cocoa embargo, along with international sanctions and asset-freezes, was tightening the noose around Gbagbo’s neck. That may have been true, but what certainly occurred was a blow to the country’s cocoa sector. The country is expected to lose its reign as number one producer to Ghana. Additionally, hundreds of middle-class exporters and rural farmers lost their only source of income.

There’s a reason anti-sanction arguments in developing countries abound (think Iraq under Saddam Hussein, Burma and Iran). The main one being that sanctions, like embargoes, drive innocent civilians even further into poverty. This will be true of Côte d’Ivoire too.

Peace in a developing country depends upon economic, just as much as political, stability. Ouattara has taken office and the country is slowly beginning to return to a stable political state. Yet, the country’s economy will take a longer time to heal. Poor farmers will struggle to feed their families, while risking future harvests. Middle class exporters, who won’t have revenue to pay back loans, will lose their ability to participate in the economy in the future. Where is the sense in hurting the small engines of economic growth that move a developing country forward?

Tags , , , , , ,

2 Comments

  1. […] article originally appeared on PDT’s Building Markets blog on May 12, […]

  2. Karina says:

    How can an organisation with the word ‘Peace’ in its name, and a woman author to boot (though a man should ‘get it’ equally as well), keep a straight face while writing an article on the cocoa ban being a ‘bad thing’ without a single mention of the use of child slavery in the Cote D’Ivoire industry? Bad for the markets? How about totally destructive of children’s lives? How about thinking about how much humanity you’ve got left inside of before you speak so blithely of market interests without showing any regard for the suffering of actual, vulnerable, children? Disgusting. Minimally be informed before you write about something with ‘authority’. Try http://www.antislavery.org/english/campaigns/cocoa_traders/chocolate_and_slavery_qa.aspx


Rss Feed Tweeter button Facebook button Youtube button