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Wal-Mart plants seeds of alliance with Latin farmers

March 08, 2008|Marla Dickerson | Times Staff Writer

SAN PEDRO SACATEPEQUEZ, GUATEMALA — Perched on less than an acre of land off an unpaved road in a hardscrabble rural area, farmer Gumercindo Ajanel would hardly seem like a Wal-Mart regular. But in fact, he's working for the American retail giant.

On a recent morning, he proudly displayed fresh-picked cilantro and parsley he ships to the chain's local stores. A company agronomist taught him to grow greens that are hygienic and visually appealing. Best of all, he said, Wal-Mart buys frequently and pays promptly. "That helps a lot," said Ajanel, who employs 30 farmhands in this area about 35 miles northeast of the capital, Guatemala City.

Ajanel, 35, is a rare success story in a nation where nearly three-quarters of the population is rural and largely poor, yet being squeezed by modern economic forces. Supermarkets are rapidly displacing informal channels through which peasants traditionally sold their harvests. Growers used to hawking dusty potatoes out of the back of a truck are finding shoppers defecting to chains whose produce is clean, uniform in size and often lower in price.

Consumers are thrilled at the savings and convenience. But the trend worries some agricultural economists and development experts. Now simply growing a good crop is not enough to ensure the survival of many small-scale farms; they must get their products onto supermarket shelves.

"As the food retail and manufacturing sector becomes more and more concentrated, market access becomes the binding constraint for small producers," said Dave Weatherspoon, an associate professor of agribusiness at Michigan State University.

In Guatemala, Wal-Mart this week unveiled a program aimed at linking more mom-and-pop growers to its supply chain. In partnership with the U.S. Agency for International Development and two nonprofit groups, the company plans to train 600 farmers over the next three years to supply produce for its local stores.

It's good public relations for Wal-Mart, but company officials say it also helps the bottom line. Most of the fruits and vegetables the retailer sells in its 457 Central American stores are produced locally. But supply glitches have resulted in temporary shortages of products such as lettuce.

Wal-Mart wants to diversify its supplier base to keep its shelves stocked as it expands. It's also looking to give small farmers a crack at producing niche items such as herbs that big growers can't be bothered with and that are too expensive to import.

"It helps us ensure a supply of specialties," said Ignacio Perez Lizaur, chief executive of Wal-Mart Centroamerica. "It does, ultimately, make business sense."

The success or failure of this and similar efforts may determine whether thousands of farm families can remain on the land or join the millions who have migrated to urban slums or to rich nations such as the United States.

"What's at stake for small farmers is that they may soon find they have no place to go with their produce," said agronomist Julio Berdegue, president of the Chile-based Latin American Center for Rural Development. "The change is happening so fast that a lot of them aren't going to be able to keep up."

In the 1990s alone, Berdegue estimates, grocery stores in Latin America more than doubled their share of retail food sales to about 60% of the market, a figure that could be closer to 70% today. Such a transition took half a century in the United States.

Several factors are driving the trend. Free-market policies adopted by many nations have attracted investment from foreign market chains, which have found profits in a region with fewer competitors than in industrialized countries.

Arkansas-based Wal-Mart Stores Inc. opened its first store outside the U.S., in Mexico, in 1991. In Latin America, it has since expanded to Argentina, Brazil, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. In Guatemala, Wal-Mart owns a 51% share in a chain of 145 stores that operate under the names Despensa Familiar, Supertiendas Paiz, ClubCo, Hiper Paiz and Maxi Bodega.

Latin America is urbanizing rapidly and more women are working, increasing demand for one-stop shopping.

A pregnant Paula Obiedo, 27, stopped by a Despensa Familiar this week in Guatemala City to buy beef in between housework and her job selling watches. She said she didn't trust the unrefrigerated meat at a traditional market a few blocks away. With a job, a husband, two small children and another on the way, she doesn't have time to hop from stall to stall. "Hygiene, price . . . and convenience," said Obiedo, explaining why she has become a supermarket regular.

To meet those high expectations, retailers such as Wal-Mart are requiring suppliers worldwide to meet stringent quality standards that dictate details such as the type of seed and post-harvest handling. It's no easy feat for large producers, much less peasant farmers with little capital or formal education.

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