The Cocoa Industrys Effects on Ivory Coasts Economy

2128 words (9 pages) Essay in Economics

5/12/16 Economics Reference this

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Chocolate is a sweet delicacy that is associated with joy, comfort and delight. However most consumers do not consider the origins of chocolate and the process it has gone through before it is purchased and eaten. Chocolate is a highly consumed treat in Canada and the United-States, and it is one of my personal favorite sweets, yet there are many worrisome issues that happen throughout chocolate’s production. The cocoa bean, chocolate’s main ingredient, must be grown in tropical climates and it is therefore grown in several countries in Africa, Asia and Latin America. West Africa is the largest exporting region of cocoa beans, with the Ivory Coast as its principle provider, supplying 40% of the world’s cocoa reserves and it comprising one-third of the countries economic revenue (Isern, 2006). The Ivory Coast’s economy is therefore extremely dependant on cocoa bean buyers who in turn rely on the consumption of chocolate in North America and Europe. This has not only led to numerous economic problems, including an unbalanced economy and high debts, but also several social problems, such as child labour. It is imperative to understand the conditions that have led to this social injustice, because Sub-Saharan Africa has the leading rate of child labour worldwide, and the Ivory Coast is a key contributor to this problem. (Kielland and Nkamleu, 2005). For my research, I will examine how the Ivory Coast has become dependent on cocoa exportations and the role transnational corporations have played throughout this process, resulting in them having increasing amounts of power in the cocoa industry. I will also examine the effects of these changes on the Ivory Coast’s economy and on the labour force. My working thesis is as follows: Due to the liberalization of trade policies, the Ivory Coast’s economy has become reliant on cocoa exportations. As a result, transnational cocoa buyers have obtained power over social conditions within the country, leading to the unethical practice of child labour. To fully expand on this thesis, I will firstly explain the conditions that led to the implementation of structural adjustment programs (SAPs) by the International Monetary Fund (IMF) and the World Bank in the Ivory Coast. I will secondly examine the consequences of the SAPs on their economy and the increasing centralized power that transnational buyers have obtained. Thirdly, I will examine the effects this has had on child labour and finally the initiatives the Ivory Coast’s government and the global community have taken to eradicate child labour.

The Historical Context of Liberalization

Ever since the Ivory Coast has become independent from France, its economy has been seriously dependant on primary commodities, particularly cocoa (Ahoua 1993). The cocoa industry was regulated by a public organization established by the Ivorian government called the “Caisse de Stabilization (Caistab)”, that offered subsidies, controlled exports in order to protect the Ivorian cocoa market (Losch 2001). However, regardless of the Caistab, the Ivory Coast did not have the economic capacity or stability to deal with the effects of the oil crisis in the 1970s, which resulted in a global drop in cocoa prices. (ibid). The fluctuations of cocoa prices already impacted the countries inner stability and prosperity, causing the beginning of several long-lasting economic issues. Along with the Caistab, the Ivorian government was equally providing funding for infrastructures, such as transportation and energy, and the development of a nationally owned cocoa transforming industry, called SIFCA (Ahoua 1993). All this led to increased lending from banks, amounting to the formation of enormous debts. From 1987 to 1989, the Ivory Coast actively attempted to exert power on the globally dropping cocoa prices by withdrawing from the markets and stopping all exportations. (Losch 2001) However, the Ivory Coast’s government was incapable of sustaining such a protest due to their economy’s dependence on cocoa profits, forcing them to recommence exportations after two months (ibid). This had little effect prices, since corporations had enough stored cocoa to sustain the protest, however it had disastrous effects on the Ivorian economy, pushing their already indebted economy into a crisis (ibid). All these issues created the conditions leading to the liberalization of the Ivory Coast’s economy.

To amend their problems, the Ivory Coast needed to receive loan from the International Monetary Fund (IMF) and World Bank (WB). To receive these loans, countries needed to implement Structural Adjustment Programs, fulfilling the stipulations dictated to them by these international organizations. Some conditions included the dismantling of the Caistab, a further drop in the prices of Ivorian cocoa, a cutback in government subsidies given to cocoa farmers, a reduction of tariffs on imports and lesser taxation on industries (Ahoua, 1993). These reforms were suppose to allow the country receive funding from transnational corporations, allowing them to repay their debt. Pardoning the country’s debt was not a considered option by the IMF or WB (ibid). Moreover, social reforms were promised, to ameliorate education and health care, however this was to be effectuated without receiving additional funding and by promoting privatization, which rendered no real improvements (ibid).

The Increasing Power of Transnational Corporations

All these adjustments were meant to decrease government spending in the cocoa industry and encourage privatization resulting in the development of the country. However, the profits coming from these initiatives were used to further develop the cocoa industry, and not other sectors of the country, increasing the countries cocoa dependency (Isern 2006). Initially, cocoa farmers had control over the markets since there were several buyers competing for their beans, however the centralization of cocoa producer and manufacturers rapidly turned the industry into a “buyer-driven” market (Folds 2001). Three main cocoa bean buyers have subsequently emerged out of this process: Barry Callebaut, Cargill and Archer Daniels Midland (ADM) (Folds 2002). This oligopoly forces farmer’s compliance with the conditions demanded by the transnational buyers, otherwise famers are incapable of selling their cocoa beans. The Ivory Coast’s cocoa bean processor SIFCA was also bought by Cargill, rendering their governments attempts to influence the processing industry ineffective (Losch 2001). To make matters worse, the global demand for cocoa is far inferior to the supply provided by the Ivory Coast and competing countries, such as Ghana and Indonesia (ibid). This is detrimental because the Ivory Coast is obligate to produce the best quality cocoa for the lowest price possible to attract the investment from the limited number of corporations, resulting in a further drop of the global cocoa (Losch, 2001). Due to this, farmers are often forced to resort to child labour to overcome these constraints.

Another dimension that limits the power farmers have in the market is the two-tiered nature of the cocoa industry. Folds (2002) distinguishes them into “grinders”, who transform cocoa beans into butter, powder or liquor, and “branders”, who then transform the cocoa into finished products. This division can create confusion when trying to designate whose responsibility it is to ensure the use of ethical labour practices (Isern, 2006). For example, in 2005, Nestlé, ADM and Cargill were sued by the International Labour Rights Fund (ILRF) for buying chocolate from farmers using child labour. Nestlé denied its involvement by stating that “it has no direct cocoa procurement in Ivory Coast”, since the company directly buys transformed beans from ADM or Cargill (Orr, 2006). Additionally, ADM and Cargill buy their beans from middlemen, and not immediately from the cocoa farmers, giving them the opportunity to once again pass off the blame (Parenti, 2008). As a result, consumers are increasingly disconnected from the process and conditions laborers are subjected to in chocolate’s production.

However, certain initiatives have derived from trade liberalization that have helped empower farmers and strive for better labour conditions. There is a growing consumer demand for products created under ethical conditions, creating special markets that can have positive effects in countries (FLO 2005). For example, the Fair Trade movement has aimed to eliminate child labour in the cocoa industry and allows consumer to demonstrate their support for this cause by buying products under these labels. (ICCO 2006). Specifically, the Fairtrade Labeling Organization (FLO) has set standards to determine what is considered Fair Trade cocoa, and has certified compliant companies and countries, giving consumers the information needed to make responsible purchases (FLO 2005). The Max Havelaar Foundation has also contributed to this cause by providing fair wages to small-scale farmers, and supporting fair trade cocoa. (ICCO 2006). Nevertheless, Fair Trade cocoa has remained unpopular, representing 0.1 % of the market (ICCO 2006). Furthermore, Fair Trade cocoa is not commonly produced in the Ivory Coast, rendering zero sales in 2004 (FLO 2005). Although these organizations have been created through consumer demand for them, they have been unsuccessful in producing sustainable change in the Ivory Coast. This demonstrates the need for different initiatives coming from within the countries, as well as global initiatives to reduce child labour.

The Consequences on Child Labour

Several initiatives have been established to eradicate child labour in the Ivory Coast and the cocoa industry. In fact, the Ivorian government has officially prohibited children under the age of 18 from working, and has signed the Harkin-Engel protocol to fully abolish child labour from cocoa farms (Parenti, 2008). The International Labour Organization and transnational corporations, such as Nestle and ADM, also voluntarily signed this protocol to abolish the “worst form of child labour” (Isern, 2006). Prohibited activities include wielding a machete, spraying pesticides and heavy lifting, since they are deemed as harmful forms of labour (Parenti, 2008). However, even with these attempts, little improvements have been made and issues of blame and responsibility have been created. Does the Ivorian governments failed initiatives warrant an increase in activities by international organizations and transnational corporations within their country? Or is this an infringement upon the Ivory Coast’s sovereignty? The global community answer to this is that transnational corporations should be held responsible. For example, in the newspaper article Slave Chocolate, protestors in San Francisco expressed their disproval of Nestlé’s labour practices, determining that it is undoubtedly Nestlé’s responsibility (Orr, 2006).

A solution to ensure the responsibility of transnational corporations, originally proposed by The Harkin-Engel protocol, was to implement a child labour label on chocolate products, in order to easily inform consumers about the labour conditions involved throughout their production. (Parenti, 2008) Although this seemed like a good initiative to reduce child labour, it could instead have harmful effect on the poorest farmers and likewise the Ivorian economy. Consumers would discriminate against chocolate produced with child labour, further punishing the poorest farmers who necessitate its use (Isern 2006). This would ultimately worsen the problem and increase the rates of child labour. This demonstrates that policies will essentially need to target trade laws and try to establish a more just free market.

On the other hand, it can also be argued that child labour in the Ivory Coast is not entirely a product of the economic dependency on cocoa exportations. In Kielland’s (2006) study, she remarks that most forms of child labour were in fact seen as a “socialization method”; giving families the opportunity to teach their children the proper methods of farming cocoa. She also remarks that community involvement is a more prevalent value in the Ivorian culture, and therefore child labour is often seen as the child’s contribution to society. However, there are also many dangers with child labour such as trafficking, abuse and harmful labour practices. Additionally, children who worked on cocoa farms were less likely to attend school than those who did not farm cocoa (Kielland 2006). She suggested that more a more effective implementation of governmental policies would be necessary to prevent child labour by, for example, providing social services and ensuring that adult wages were sufficiently high, thus making child labour unnecessary (ibid). A stricter implementation of government policies surrounding school attendance could also help eradicate child labour.


To conclude, transnational corporations have obtained increasing amounts of power in the cocoa industry and the Ivory Coast because of trade liberalization and the centralization of the cocoa processing industry. This has had several consequences, such as an increased economic dependence on cocoa exports and higher rates of child labour within the country. Although the Ivory Coast’s government and international organizations have attempted several initiatives to reduce child labour, none have been successful in creating sustainable change. Therefore, it becomes important to try new initiatives that confront the issues of the free market, because there is a direct correlation between child labour and the liberalization of cocoa trade. Furthermore, it is important to understand the surrounding complexities involving child labour, for example the different power relationships that come into play, in trying to effectively abolish it. More research is necessary to find a solution that will allow the Ivory Coast’s economy to develop without negatively impacting human rights.

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