Fresh supply chains for sustainable destinations: case study in La Fortuna

 
Sustainable Communities Review

   Fresh supply chains for
                                                         1. Introduction
sustainable destinations: case
                                                             Sustainable supply chain management
     study in La Fortuna                                 in agriculture is particularly important since
                                                         sustainable agricultural products mean better
            Mercedes Montero1                            standards of living for rural communities
                                                         (United Nations 2015) and healthier products
                                                         for an increasingly conscious tourism
         La Fortuna, Costa Rica, has                     population (European Commission 2013,
     high potential for becoming a                       Giovannucci et al. 2012).
                                                              Agri‐food supply chains are complex and
     sustainable destination
                                                         further research can improve competitiveness
     according to international GSTC
                                                         of host regions, especially when these can be
     standards; however, it lacks local                  sustainable destinations. Sustainability can
     sourcing of fresh agricultural                      also be encouraged by a tourist‐driven
     goods, even tough, some of them                     perspective. In this regard, the Global
     there are locally grown. This                       Sustainable Tourism Council (GSTC) in 2013
     research describes the agri‐food                    introduced a new certification especially
     produce supply chain of four                        designed for sustainable destinations (GSTC
     selected products in the region                     2014) since there is growing consumer
                                                         demand for sustainable tourism.
     and addresses governance
                                                              Matarrita‐Cascante et al. (2010) addressed
     mechanisms, price gaps and
                                                         sustainability in La Fortuna and suggested
     overall limitations for an                          several criteria by which this tourist region
     effective supply chain.                             may be considered sustainable. Local
         Results provide an insight on                   sourcing and local prosperity are
     the supply chain mechanism and                      fundamental aspects for sustainable tourism.
     main limitations of actors to                       However, Canedo‐Rivas (2012) analyzed how
     create win‐win partnerships                         agricultural farmers are not included in the
     resulting in large price gaps                       local supply chain and local restaurants do
                                                         not source from local farmers.
     among supply chain links and
                                                              Regional competitiveness is a key aspect
     procurement inefficiencies.
                                                         of competitive supply chains especially if the
                                                         agri‐food supply chain can provide wider
                                                         benefits to producers and consumers at the
                                                         same time. Since sustainability in supply
                                                         chains is improved by enhanced
1
 Escuela de Economía Agrícola y Agronegocios,            relationships among partners (Seuring and
Universidad de Costa Rica; mercedes.montero@ucr.ac.cr
                                                         Müller 2008), this research focused on the

                                                                                                      60
Sustainable Communities Review

characterization of the food supply chain in     the highest proportion corresponding to fresh
this region and the analysis of governance       agricultural products (Zevallos 2013).
mechanisms toward the creation of a                   La Fortuna is located in the region of San
sustainable destination in La Fortuna.           Carlos (Figure 10), which is the largest canton
     Integration of supply chains, as well as    in Costa Rica with 3347,62 km2 and 6.5% of
the adoption of sustainable practices, has       the national territory. San Carlos includes
proven to increase performance goals in the      these districts: Ciudad Quesada Florencia,
manufacturing industry (Zhu and Sarkis           Buena Vista, Aguas Zarcas, Venecia, Pital,
2004) and in the food industry (Vasileiou and    Fortuna, La Tigra, Palmera, Venado Cutris,
Morris 2006 Schiefer 2002, Berno 2006).          Monterry and Pocosol (Local Goverment of
Nonetheless, management faces problems           San Carlos 2016). La Fortuna is the only one
when integrating the first links of the chain    of these districts considered to be a tourist
(Stoian and Gotret 2011) in an upstream flow,    destination—all other are more agriculture‐
which in this case are agricultural ones.        centered.
     According to Seuring and Müller’s           2. Literature Review
theoretical framework (2008), the supply         Supply Chain Management
chain is organized by the focal company and          Stoian and Gotret (2011) have
supply chain decisions are based on              characterized the differences between a poor
governance structures. This research             performance in a supply chain and what is
addressed these aspects in a descriptive         considered determinant for high
study of selected products grown in the          performance. These are usually called value
region by small and medium farmers. The          chains or sustainable supply chains. These
main goal of this research was to gain in‐       differences are presented in Table 1.
depth understanding of agricultural supply           According to Pagell and Wu (2009), a
chains and their dynamics within a               sustainable supply chain has good standards
potentially sustainable destination.             on traditional measures as well as in the
     Costa Rica has emphasized its tourism       other dimensions included in the definition
attractions in terms of natural amenities,       of sustainable development: social and
including La Fortuna, whose economy has          environmental aspects. Seuring and Müller
increasingly shifted towards tourism in the      (2008) define sustainable supply chain
past 30 years and whose economy and              management as the material, information and
population have shown rapid growth (Acuña        capital flows as well as cooperation among
and Ruiz 2000). La Fortuna’s most important      companies while achieving goals in the
sectors in terms of economic shares are          economic, social and environmental
agriculture, tourism and trading/services. As    dimensions of sustainable development,
for agricultural production in the Huetar        considering that these come from client and
Norte region of Costa Rica; 15% is               stakeholder requirements.
transported to the rest of the country and
21% is targeted for the export market—with

                                                                                              61
Sustainable Communities Review

    Table 1. Characterization of poor and high performance of a supply chain
                                Poor       performance/supply High           performance/sustainable
       Criteria
                                chains                             supply chains, value chains
                                                                   System competitiveness and long‐
       Purpose                  Competitiveness of actors
                                                                   term vision
       Orientation              Guided by the supply               Guided by the demand
                                Maximize earnings and
                                                                   Add value through productivity,
                                minimize costs without
       Objective                                                   quality, traceability and
                                considering aspects other than
                                                                   differentiation
                                the economic ones
                                                                   Commercial relationships and
                                Commercial relationships and
                                                                   supply of products in medium or
       Vision                   supply of products in short or
                                                                   long term, with win‐win
                                medium term
                                                                   strategies
       Organizational
                                Independent actors                 Interdependent actors
       structure
                                                                   Medium to high level of
       Type of                  Low level of cooperation and
                                                                   cooperation and trust; clear and
       relationships            trust among actors
                                                                   transparent definition of norms
                                                                   Relevant and timely for effective
                                Low and limited to
       Information flows                                           development of actor
                                commercial transactions
                                                                   relationships
    Source: Bourgeois and Herrera (1999), Stoian and Gotret (2011)
                                                         smallholder agriculture in the new forms of
     From these definitions, two predominant             agri‐food governance can be a challenge.
issues can be highlighted. The term                          Peculiarities of smallholders sustain that
sustainability includes managerial decisions             no single model for strengthening their
on economic, environmental and social                    supply chains can apply universally (IFC
criteria and sustainable supply chains                   2013). The characteristics of actors, products
demand collaboration among actors of the                 and governance mechanisms (Gereffi et al.
supply chain.                                            2005) partially define the dynamics,
                                                         possibilities and strategies for successfully
Supply chains and governance mechanisms                  coordinating with actors along the supply
    Traditionally, smallholders are                      chain.
recognized as having partial integration in                  Alternative coordination mechanisms
the market as well as limitations for                    need to be created so that small farmers are
operating under market principles                        included; however, these always creates
(Friedmann 1980). The new form of agri‐food              costs—transaction costs. Therefore, the
governance is buyer‐driven and has                       objective of new institutional economics,
developed sophisticated participation rules              founded by Coase (1937) and followed by
(Vorley 2001); therefore, the implications for           Williamson (1985), is to study conditions

                                                                                                       62
Sustainable Communities Review

   under which firms (or supply chains) are              Gereffi et al. (2005) then also classified
   more transaction‐cost efficient than markets.      hybrid structures as follows:
        Supply chain partner selection is based       1. Modular value chains: The ability of
   on transaction costs between both parties             codifying product specification is less
   (Hitt 2012). The process of getting to an             complex than the products themselves.
   agreement among actors generates frictions            Product specifications are codified
   and higher transaction costs that are the             through a common understanding
   result of asymmetries in access to                    between buyers and suppliers, so that
   information, bounded rationality and                  they only have to work though codified
   opportunistic behavior among actors                   products instead of analyzing the
   (Wiliamson 1979). Transaction costs define            product each time the transaction occurs,
   the relationships created among supply                reducing transaction costs.
   chains.                                            2. Relational value chains: These take place
        Gereffi et al. (2005) suggest a governance       when specifications of a product cannot
   typology in global value chains, bounded to           be codified, transactions are complicated
   the structural transaction‐costs theory               and the capacities of suppliers are high.
   proposed by Williamson (1991), which                  In these cases, information flows and
   divides supply chains into                            constant communication among partners
1. Market structures: This is the lowest level of        is needed and therefore, changes in
   cooperation between actors in which the               partners can create high costs.
   buying‐selling rules are clear and of common       3. Captive value chains. These occur when
   understanding. Transactions are simple and            the ability to codify and product
   there is no need for a structure to make any          complexity specifications are high but the
   kind of transfer: the transactions are made in        capacities from suppliers are low. These
   markets. There are low transaction costs so           face changing prices and the buyer,
   actors do not tend to deal with any kind of           rather than the seller, is the most
   institutional arrangements.                           significant actor in the decision‐making
2. Hierarchy: Product and transaction                    process.
   requirements are very specific and because of
   that, enterprises and supply chains tend to        3. Methods
   integrate vertically. Generally, there are             In‐depth interviews were carried out
   larger controls over production and                with important institutions in the region,
   commercialization due to asset specificity.        including La Fortuna’s Development
3. Hybrid structures: These are structures that       Association (ADIFORT), the regional
   are not located in any of the extremes             Ministry of Agriculture (MAG), the National
   presented above. Due to differences in asset       Bank of Costa Rica, the Costa Rican National
   specificity, products characteristics and          Chamber for Ecotourism and Sustainable
   transaction complexity, these structures are       Tourism (CANAECO) and the Costa Rican
   defined as hybrid (Williamson 1991).               Chamber of Restaurants (CACORE). These

                                                                                                 63
Sustainable Communities Review

interviews were intended to address the              national scale. Taro was also included in the
region’s plan for development as well as             analysis because it is produced in La Fortuna
sustainability’s triple bottom line and              and it represents an opportunity for
development perspectives.                            promoting local food in restaurants targeted
                                                     to tourists. This is one of the objectives of the
Methods for data collection: farmers                 National Plan for Healthy and Sustainable
     The district of La Fortuna was                  Food promoted by the Costa Rican Chamber
established as the site for analysis because of      of Restaurants (CACORE 2015).
its sustainable destination framework.                    To get an approximate number of
Although the borders of the wider supply             farmers in the region, geographical
chain spread to the international market, the        information on people dedicated to
focus for analysis and the farmers’ sample           agriculture was obtained from INEC, as well
was estimated according to the geographic            as desegregated demographic, social and
limits of the district, since one of the             economic data. All other information was
objectives of sustainability is to source locally    obtained from field research.
and the goal of the research is to address this           In an exploratory phase, pilot interviews
specific topic.                                      were carried out in training sessions
     In 2014, INEC conducted the agricultural        organized by MAG‐La Fortuna. Three visits
census, but there is no accurate information         were planned in order to identify the main
about this study’s population target since           regions and to validate the information
farmers dedicated to agricultural products           provided by INEC and the selected products
were not identified on a regional scale              before interviewing farmers and restaurants.
(district) but on a wider canton scale.                   A stratified sample was estimated
Information about the exact number of                according to the proportion of people
farmers dedicated to the selected products           dedicated to the agricultural sector of the
was not available.                                   economy in the district. Six communities
     Meetings with La Fortuna regional MAG           within La Fortuna were considered for the
were the basis for product selection. Products       sample selection: Agua Azul, Sonafluca, Tres
suggested by the regional director were              esquinas, La Perla, Los Ángeles, El Tanque
papaya (Carica papaya), yuca/cassava (Manihot        and San Jorge. Sample size for farmers was
esculenta) and plantain (Musa balbisiana, Musa       estimated on a 90 percent confidence interval
acuminata or a mix of these) (Hernández              and 108 farmers were interviewed in these
2015). However, pineapple (Ananas comosus)           communities.
and taro (Colocasia esculenta) production were            Direct questionnaires were applied from
also included in the questionnaire. Pineapple        September to December 2015 in several visits
was included because it can be produced in           to the region. All routes were designed
this region; in fact, 47 percent of Costa Rica’s     according to INEC’s map, previous visits and
pineapple production is located in the               information about important farmers in the
northern region of the country (CANAPEP              region and others farmers had previously
2015) and because it is widely consumed on a         mentioned. All houses in the selected regions

                                                                                                    64
Sustainable Communities Review

were visited, and those identified as small         Input sources
and medium farmers were interviewed.                    There are two main agricultural input
                                                    suppliers in La Fortuna: El Colono and
Methods for data collection: hotels and             Almacen Agroveterinario Dos Pinos, which
restaurants                                         are private institutions. Farmers often get
     For selection of the hotels and                their inputs from these as well as either from
restaurants, a list of hotel and restaurant         governmental institutions (especially papaya
licenses was requested from the San Carlos          seeds) or from their buyers, who often
local government. From this list, a total of 325    provide some inputs if their sellers are
licenses were active; however, several              committed to a longer‐term agreement.
belonged to the same management. For                    Institutions such as MAG are often
example, if a hotel had three restaurants,          committed to supporting farmers to getting
there would be four different licenses, one for     their inputs at lower prices; however, 10
the hotel and three for the restaurants             farmers mentioned how input prices are high
although procurement and managerial                 and they believed the government should
decisions were taken by the same person.            support them in lowering at least the main
There were several hotels on the list that did      agrochemical inputs. There were no farmer
not include restaurants and therefore these         organizations in this region to strive for
were not interviewed. In addition, some             policy reforms that could eventually lead to
small restaurants and hotels had closed by          structural policy changes that could lead to
the time the research was conducted;                lowering input prices.
therefore, the population was reduced to 53.
     All restaurants were contacted; however,       Farmers
the response rate was 50 percent of the                 The population in La Fortuna is 73%
population. Interviews were carried out from        rural and 27% urban (INEC 2015) and most
September 2015 to January 2016 in previously        farmers live in rural regions, close to their
requested meetings with the procurement             farms. Socioeconomic development (SD) is
managers; 30 complete questionnaires were           divided into the five categories, shown in
filled out by restaurants in La Fortuna.            Table 2.
                                                        Most of the population (82%) has a low,
4. Results                                          medium‐low or medium SD; however, the
                                                    largest percentage (68.4%) is considered as
Supply chain analysis                               medium while only 1 GMU is considered as
     This section characterizes the main actors     high and 9 as low. In farmers’ households,
of the fresh produce supply chain and               there were an average of 3.91 people per
addresses their dynamics and governance             household (SD = 1.60), the mean, median and
structures.                                         mode were all rounded to four people per
                                                    household, following a normal distribution.
                                                    The national average of persons per

                                                                                                65
Sustainable Communities Review

household for 2014 was 3.30. National averages per quintile go from 3.57 members (fifth) to 3.10
members (first). In La Fortuna, 35.6% of households had more than four members, which is
slightly higher than the fifth quintile in national terms
.
Table 2. Socioeconomic levels of La Fortuna’s population, 2015
                   Socioeconomic level Frequency      Percentage    Cumulative
                                                      (%)           percentage (%)
                   Low                  9             5.9           5.9
                   Medium‐low           12            7.9           13.8
                   Medium               104           68.4          82.2
                   Medium‐high          26            17.1          99.3
                   High                 1             .7            100.0
                   Total                152           100.0
                 Source. INEC, 2015; N = 152 (GMU: geographical minimum units: INEC’s
                    measurement of minimum geographic measurements for analysis)

     Most of the population (82%) has a low,          with a minimum of two years and a
medium‐low or medium SD; however, the                 maximum of 62, therefore there is high
largest percentage (68.4%) is considered as           variation (SD = 13.943). While some have
medium while only 1 GMU is considered as              worked as farmers their entire lives, some
high and 9 as low. In farmers’ households,            others changed recently shifted to
there were an average of 3.91 people per              agriculture, since the construction sector
household (SD = 1.60), the mean, median and           deteriorated in the region a few years ago.
mode were all rounded to four people per              Both, agriculture and construction jobs are
household, following a normal distribution.           considered non‐skilled labor and workers can
The national average of persons per                   switch easily from one activity to the other.
household for 2014 was 3.30. National                 Some farmers (eight) that have recently
averages per quintile go from 3.57 members            moved to agriculture, mentioned how they
(fifth) to 3.10 members (first). In La Fortuna,       were forced to shift from other tourism‐
35.6% of households had more than four                infrastructure related jobs to agriculture as a
members, which is slightly higher than the            consequence of the recent economic crisis of
fifth quintile in national terms.                     2008–2009.
     The number of household members was                  In terms of agricultural dependency for
usually negatively correlated with per capita         economic performance, 63% of farmer
income. Therefore, lower national per capita          households depend only on agricultural
incomes can be expected in La Fortuna;                production, while 37% do not. As for their
however, income and agricultural incomes              proportional income distribution, 73%
are not the focus of this research.                   mentioned all of their income comes from
     Farmers have a mean of 25.26 years of            agriculture and farming.
experience working in the agricultural sector,

                                                                                                   66
Sustainable Communities Review

Table 3. Income from agriculture and education level of farmers, La Fortuna, 2015
                                   Income from agriculture
              Education level
                                   100%     75%      50%      25%       NA       Total
                                   17       1        3        2         1        24
              Less than 6 years
                                   70.8%    4.2%     12.5% 8.3%         4.2%     100.0%
                                   45       4        4        5         0        58
              6 years
                                   77.6%    6.9%     6.9%     8.6%      0.0%     100.0%
                                   12       0        1        0         0        13
              Less than 11 years
                                   92.3%    0.0%     7.7%     0.0%      0.0%     100.0%
                                   4        4        1        1         0        10
              11 years
                                   40.0%    40.0% 10.0% 10.0% 0.0%               100.0%
                                   2        1        0        0         0        3
              Higher education
                                   66.7%    33.3% 0.0%        0.0%      0.0%     100.0%
              Total                80       10       9        8         1        108
                                   74.1%    9.3%     8.3%     7.4%      0.9%     100.0%
                                                       achieved some kind of higher education.
    Most farmers received almost all their             However, even when education increased,
income from agriculture‐related activities             farmers still received most of their income
whether these were solely crop production or           from agriculture (          .
farming; some farmers also combined it with                Around half of farmers in this region
other jobs such as drivers, agriculture                usually grew more than just one product
machinery rentals, apartment rentals or                (44.4%), while 55.6% stuck to one product.
security guards. These were the jobs                   Most popular crops were cassava (55%),
mentioned most and their working relatives             papaya (38%), plantain (35%) and plantain
work mostly in beauty salons or as                     (30%). Farmers do not rely only on one
elementary schoolteachers.                             product—they mentioned prices fluctuate
    Most of the jobs farmers mentioned are             significantly during the year and having
non‐skilled labor or low‐skilled labor. This           more than one product allowed them to
situation corresponds with farmers’ low                increase their financial stability. Some
academic profile; since 75.9% only have                farmers grew a mixture of these products or
elementary school education, including                 mixed them with less popular products such
22.2%, which who did not complete it. Only             as ginger and sweet potato (Figure 1).
three people from the sample (2.8%) had

                                                                                                 67
Sustainable Communities Review

             Figure 1. Frequency distribution of selected products for La Fortuna, 2015

Although there is much research on the             which farmers understand as buyers who
importance of written contracts to enable          offer better prices.
farmers to increase their development goals,            In terms of association and
especially for economic stability, in La           organizational skills, only 39 farmers (36%)
Fortuna, most farmers worked with their            mentioned they belong to some type of
supply chain partners without a contract           farmers’ organization; however, these are no
(69.4%), while 23.1% used a verbal contract        local cooperatives or farmers’ associations
and only 7.4% had a written one. According         but rather larger countrywide associations.
to their responses, this situation occurs               Most farmers sold their produce to
because they preferred to choose from the          intermediaries and packing companies (Table
market if there were any buyers who would          4), although they often mentioned they were
pay a higher price than the last                   uncomfortable when asked about why they
person/company that bought their product.          chose to work with them; however, these
     Creating trust among supply chain             actors were the only ones who would buy
partners is fundamental to sustainable             their entire production and collect it at the
supply chain performance; however, there           farm gate. Restaurants bought mostly from
were no risk‐sharing mechanisms for farmers        intermediaries (Table 5), reasons being they
to rely on their buyers, and therefore they        already know their suppliers or because of
were constantly searching for better options;      ease of the transaction.

                                                                                              68
Sustainable Communities Review

Table 4. Frequency of supply chain partner selection for farmers, La Fortuna, 2015
                       Type of buyer              Frequency            Percentage (%)
                       Intermediary               53                   49
                       Factory                    39                   36
                       Farmers’ market            10                   9
                       Supermarket                5                    5
                       Restaurant                 1                    1
                       n=                         108                  100

Table 5. Frequency of supply chain partner selection for restaurants, La Fortuna. 2015
                        Type of seller          Frequency             Percentage (%)
                        Intermediary            19                    63
                        Both                    7                     23
                        Farmers                 4                     13
                         n=                     30                    100
                                                        Rican National Chamber for Ecotourism and
Local buyers                                            Sustainable Tourism, supports business
     Restaurant decision makers had a mean              linkages, for example as well as sustainable
of 9.84 years of experience, with some                  initiatives and training courses; however,
mentioning less than a year of experience and           there are only five hotels affiliated with this
the maximum respondent mentioned 30                     institution in La Fortuna (Carballo 2015).
years of experience (SD = 7.761).                            In spite of sustainability promotion and
     Educational level of restaurant managers           the national certification for hotels,
or procurement managers was higher than                 restaurants and tour operators, only seven
farmers, which was expected; 43.33% of them             restaurants claimed they are part of the Costa
had gone on to higher education (college)               Rican Sustainable Tourism Certification
and 46.66% had between six and 11 years of              (CST), three other respondents claimed they
high school education. These are significantly          have strived for it in the past but did not
higher than the educational level of farmers,           continue to pursue it since it has very high
although farmers have more experience.                  standards and they were not sure if it is
Also, 60% had received training courses                 worth it.
while working in the tourism or sourcing                     In terms of contract mechanism, 50%
sectors.                                                worked with their fresh produce suppliers
     Farmers’ lack of organization replicated           without a contract, 40% with a verbal
in the restaurant sector: 73.3% did not belong          contract and 10% with a written contract.
to any type of organization either in the               This situation had a similar pattern in the
tourist sector or in the sourcing sector.               previous stage of the supply chain since most
Tourism organization is a common topic in               farmers did not work with a written contract;
the country, especially when dealing with               however, most restaurants worked directly
sustainability issues. CANAECO, the Costa               with intermediaries rather than farmers.

                                                                                                     69
Sustainable Communities Review

Exports and the Costa Rican market                 and so this is a new market. From these
     In farmers’ interviews, seven mentioned       selected products, cassava is the most
they own their means of transportation and         important product in the foreign market. The
therefore they sold directly to the local          main market for cassava is the United States
farmers’ market, in street sales and in three      since it has been about 70% of total exports
cases they transported directly to the             for the past 10‐year span.
National Center for Food Supply and
Distribution (CENADA), located 125 km              Supporting actors
away. In cases in which farmers sold to                 The University of Costa Rica (UCR),
intermediaries, once these products left their     Costa Rica’s Technical Institute (TEC) and
farms, most farmers did not know where or          CATIE (Tropical Agricultural Research and
to whom products were sold; only five              Higher Education Center) are universities
farmers who sold to intermediaries knew            that farmers recognize because they have
where their products were finally consumed.        received previous support from them in the
     Production from farmers who sold              form of research and improving their
directly to factories was turned into either       production capacity. The National Institute of
frozen products or chips (especially in the        Learning (INA) is a teaching center widely
case of plantain and cassava). Papaya was          recognized by small and medium farmers
also exported either fresh or frozen. There are    and hotels and restaurants because they have
four factories in La Fortuna, which can            received training courses from this
absorb the local supply and usually buy all of     institution, such as. Food‐handling courses
the farmers’ harvest, which is a valuable asset    and agricultural technical courses.
from the farmer’s perspective; two of these             ADIFORT, La Fortuna’s development
factories sold their produce exclusively to        association has a major influence on a local
foreign markets and the other two sold             scale because of its economic capacity and
mainly to the local market, at least as first      good organizations skills; it works from two
tiers.                                             main pillars—social projects and economic
     According to FAOSTAT (2015), Costa            projects (Román 2015). ADIFORT is involved
Rica exports fresh plantains to North              in the organized farmers’ market, which is
America and the European Union (EU);               held every Friday.
however, exports significantly reduced from             The main source of income and social
2006 to 2009 and have remained low since           mobility for families in La Fortuna is tourism
then. Dry plantains were first exported in         or tourism‐related activities; but the second
2006 and exports have increased                    most important sector is agriculture (Román
significantly, especially from 2010 on. Fresh      2015, Hernández 2015). As for financing,
papaya is mainly exported to Canada, since         most loans were related to tourism; however,
papaya from Costa Rican is banned from             in recent years, these have decreased and
entering the United States. Taro is exported       people in the region have searched for
to North America and to the EU in small            financing for other types of businesses,
quantities however’, exports began in 2012,

                                                                                               70
Sustainable Communities Review

including agriculture and farming projects           (Carballo 2015). There is not enough
(Rodriguez 2015).                                    information to ascertain why hotels and
     From the perspectives of tourism and            restaurants do not participate as members of
restaurants, the Costa Rica Tourism Institute        these institutions; however, there are low
(ICT) plays an important role in promoting           organization skills and a lack of willingness
the country as a sustainable, green and              to associate among both sectors in the region.
authentic destination; however, restaurants               Procomer, which is the national
and hotels in the region are more acquainted         institution in charge of promoting
with ICT because of the CST certification            exportation of goods and services, assesses
program, which is the national certification         all companies interested in exporting;
for sustainable tourism.                             including those who export agricultural
     CATUZON is the Northern Region                  goods. It provides guidance to new exporters
Tourism Chamber, which is a community                and those who already export; Procomer also
organization that promotes tourism,                  provides international market information;
especially linked to the northern part of the        however, this institution works on a national
country; 43 businesses are affiliated with this      scale.
chamber (ICT 2016), including hotels,                     The graphic representation of the supply
restaurants, tour operators and                      chain can be observed in figure 2, were
transportation agencies. In terms of tourism         supporting actors are located outside the
promotion and support, only five institutions        supply chain structure.
are currently affiliated with CANAECO, the
main advocate of sustainability and tourism
     Figure 2. Supply chain of selected fresh agricultural produce, La Fortuna, 2015

                                                                                                 71
Sustainable Communities Review

Price analysis                                          ranges according to type of buyer are
    Farmers sell their produce to different             significantly different for papaya and
types of consumers, classified in five                  cassava, but not for plantain or taro.
different types of buyers, and the mean price
paid per buyer is shown in Table 6. Price

Table 6. Prices received by farmers per type of buyer of fresh products, La Fortuna, 2015*
                 Type of buyer
      Products                                                      Farmers’ market      Sig (0.95%)
                 Restaurant Small markets Factory Intermediary
                                                                    /street sales
      Papaya                143             155      155            325                  0.009
      Cassava               161             156      160            304                  0.000
      Plantain 120          108             121      123            118                  0.923
      Taro       217        282.61          262.56   229.97         543.47               0.564

    *Prices in Costa Rican colons (price equivalent 544 colons = $USD 1, 30 May 2016).
     Papaya, cassava and taro: prices per kg; plantain price per unit.

   Restaurants were also asked about the                differences in this case; means prices are the
mean price of these products, results are               same, regardless of the supplier.
shown in Table 7. There are no significant

    Table 7. Prices paid by restaurants per type of seller of fresh produce, La Fortuna, 2015*
                                 Type of seller
                 Products                                                         Sig (0.95%)
                                 SM farmer       Intermediary         Both
                 Papaya          613.75          671.25               650.83      0.982
                 Cassava         445             449.58               427.78      0.959
                 Plantain        165.25          173.73               144.29      0.426
   *Prices in Costa Rican colons (price equivalent 544 colons = USD 1, 30 May 2016.
            Papaya, cassava and taro: prices per kg; plantain price per unit.

    Price sold by farmers to intermediaries
and price at which restaurants buy from                 5. Discussion
intermediaries were as follows: papaya                       Gereffi (1994) defines governance as
333.065%, cassava 180.988% and plantain                 “authority and power relationships that
41.243%. Taro was not considered for this               determine how financial, material and
analysis since the proportion of restaurants            human resources are allocated and flow
who regularly bought taro was too small.                within a chain.” Governance is based on the
                                                        complexity of the information between actors
                                                        in the chain, how the information for

                                                                                                       72
Sustainable Communities Review

production can be codified and the level of       consumed. Bullwhip effects would certainly
supplier competence (Gereffi et al. 2005).        affect negatively on farmers’ incomes since
    According to Gereffi’s hybrid structure       there is no market‐risk information. This is a
classification, the fresh agri‐food supply        problem in the sense that farmers would not
chain of La Fortuna classifies as a captive       adapt to changing trends fast enough because
governance structure since suppliers              of their lack of awareness of market trends.
(farmers) depend on a small numbers of                 According to Seuring and Muller (2008),
buyers who “wield a great deal of power” (G.      first tiers of the upstream sustainable supply
Gereffi 1994), while small‐ and medium‐scale      chains would adapt to changing consumer
farmers (SMFs) are dependent on the               demands either through certification systems
conditions established by their buyers.           or by focal companies. In this case, focal
    SMFs do not have any type of farmers’         companies are the only source of market
organization; all of them negotiate sale of       information for most farmers and therefore
their produce on their own. This system           would base their farming decisions on these.
limits their bargaining power since they are      Certification systems, however, are not
SMFs and cannot exert any type of market          popular in the region; none of those
power through price and volume control. All       interviewed had enrolled in any type of
farmers have a positive perception of a           certification system.
potential SMF organization; however, no one            Those who make sourcing decisions in
has launched any initiative yet, perhaps          restaurants are aware of the importance of
because of lack of organization skills.           sustainability and local sourcing—they often
    Most farmers sold their produce either to     explained their good relationships with
intermediaries or to factories, which             SMFs. They know their target market and are
determined prices. Usually, quality of            informed of changing trends in clients’ needs.
agricultural products is encoded, but quality     Since tourism is gravitating toward
standards for agricultural products in this       sustainability and corporate social
region are not stable; according to               responsibility, hotels and restaurants
interviewed farmers, price and quality are        expressed willingness to follow these
relative terms. When agricultural supply is       patterns.
high, quality standards are very strict;               On the other side of the supply chain,
however, when supply is low, buyers do not        farmers were willing to sell their produce to
take into account their quality standards,        buyers other than intermediaries and
often buying produce they would not               factories because most of them felt prices
normally buy. Nonetheless, farmers are price      paid for their products were not fair.
takers.                                           However, the first problem in linking these
    There is a lack of backward information       two is quantity: if all restaurants in La
along this supply chain. When farmers were        Fortuna bought all of their products locally,
asked if they knew where their produce was        they would purchase only 14.2% of plantains,
sold, most did not. In only five cases farmers    0.4% of cassava and 2.5% of papaya grown
knew exactly where their produce was              by SMFs.

                                                                                              73
Sustainable Communities Review

    Finally, restaurants need at least a            innovation in business models of these
weekly supply of fresh produce, while               supply chains.
farmers harvest in a six‐month period for                Although it is a popular characteristic in
cassava and taro and do not stagger their           agricultural supply chains for farmers to
harvest in order to offer their produce             depend on buyers, this is still a challenge,
consistently to local restaurants. Prior            since SMFs would sell their produce
coordination is necessary so farmers plan           whatever the price, having no control over
their harvest according to their potential          any decision‐making procedures aside from
buyers’ needs.                                      their harvest; there are no bargaining
                                                    mechanisms, and conditions are set only by
6. Conclusion and recommendations                   buyers.
     The fresh product supply chain is very              Collaboration among SMFs and local
complex and since there is no farmers’              restaurants would help the tourism sector not
organization, their decision‐making process         only to comply with sustainable certification
in selecting partners is scattered among            standards but also to provide an enhanced
different buyers. In some cases, farmers even       experience for tourists by offering local food,
sell to intermediaries who transport products       which has proven to increase tourist
all the way to the country’s urban area. On         satisfaction in other locations (R. Sims 2009).
the other hand, farmers buy from                    Governance mechanisms from the tourism
intermediaries who travel from this urban           sector that push this type of initiative are
area to La Fortuna.                                 essential since the agricultural sector of the
     Since restaurant owners and managers           supply chain lacks organization skills.
are aware of the importance of buying               CACORE’s national plan for local food in a
locally, especially in the agriculture sector,      possibility for supply chain enhancement;
there is a possibility for these to collaborate.    however, incentives for restaurants to
Also, farmers would find prices paid by             participate should be promoted in order to
restaurants significantly higher than those         obtain higher policy implications and better
they currently receive from their buyers,           standards of living for the rural areas.
therefore there is an incentive for both sides.          Promotion of this type of initiative can
Nonetheless, this potential trading                 promote development in rural areas, creating
mechanism would only include a small                opportunities for people to prosper and
proportion relative to the number of fresh          reducing socioeconomic problems that occur
products harvested in the region.                   with rural to urban migration. Generating
     The education level and socioeconomic          possibilities for development in rural areas is
conditions of farmers are still a challenge in      key to sustainable development in a region in
this region; investment in these aspects could      which most of the population is located in
exponentially increase their possibilities for      rural areas, often with lower standards of
engaging in high‐value global chains—to             living.
engage in value‐added products or promote                This research provides a characterization
                                                    of the fresh product supply chain and

                                                                                                 74
Sustainable Communities Review

    emphasizes the main issues of farmers’ lack        Bourgeois, R., & Herrera, D. (1999). Enfoque
    of bargaining power and market knowledge.              Participativo para el Desarrollo de la
    The asymmetry of information among these               Competitividad de los Sistemas
    two groups of actors was expected because of           Agroalimentarios. San José, Costa Rica:
    other empirical results; however, this                 IICA.
    research provides a full characterization of       CANAPEP. (2015, December 8). Cámara
    the supply chain and of its governance                 Nacional de Productores y Exportadores de
    mechanism. Further research on how to                  Piña. Retrieved from
    improve bargaining power of SMFs with low              http://canapep.com/estadisticas/
    individual quantities as well as improvement       Carballo, N. (19, October, 2015). Executive
    in association and organization skills are             Director CANAECO. (M. Montero,
    needed to extend benefits from supply chains           Entrevistador)
    and promote rural and local development.           European Commission. (2013). Extracts of the
                                                           Specific programme for Horizon 2020 societal
    Acknowledgements                                       challenge 2. Retrieved from establishing
    This research was possible thanks to the               the specific programme implementing
    financial support of MICITT (Ministerio de             Horizon 2020 ‐ the Framework
    Ciencia, Tecnología y Comunicaciones) and              Programme for:
    CONICIT (Consejo Nacional para                         http://ec.europa.eu/agriculture/research‐
    Investigaciones Científicas y Tecnológicas) of         innovation/events/2014‐06‐‐
    Costa Rica, through a partial scholarship              brussels/h2020‐specific‐programe‐
    provided by the Fund of Incentives FI‐0087‐            extracts‐sc2‐agri_en.pdf
    2013. I am also grateful to the small‐ and         Friedmann, H. (1980). Household production
    medium‐scale farmers, restaurant managers              and the national economy: Concepts for
    and stakeholders of La Fortuna for allowing            the analysis of Agrarian formations. The
    me into their farms and their businesses.              Journal of Peasant Studies, 7 (2), 158‐184.
                                                       Gereffi, G. (1994). The Organisation of Buyer‐
    References                                             driven Global Commodity Chains: How
                                                           U.S. Retailers Shape Overseas Production
Acuña, M., & Ruiz, K. (2000). Contribución del             Networks. In G. Gereffi, & M.
    Desarrollo Turístico sobre el Empleo Rural no          Korzeniewicz, Commodity Chains and
    Agrícola en Costa Rica. Centro Internacional de        Global Capitalism (pp. 95‐122). Westport,
    Política Económica para el Desarrollo,                 CT: Praeger.
    Universidad Nacional, (14), 85‐107.                Giovannucci, D., Scherr, S., Nierenberg, D.,
Berno, T. (2006). Bridging Sustainable Agriculture         Hebebrand, C., Shapiro, J., Milder, J., &
    ans Sustainable Tourism to Enhance                     Wheeler, K. (2012). Food and Agriculture:
    Sustainability. Sustainable Development Policy         the future of sustainability strategic input to
    and Administration. Florida, USA: Taylor &             the Sustainable Development in the 21st
    Francis Group .                                        Century (SD21). New York: United
                                                           Nations Department of Economic and

                                                                                                        75
Sustainable Communities Review

         Social Affairs, Division for Sustainable      Sims, R. (2009). Food, place and authenticity:
         Development.                                      local food and the sustainable tourism
GSTC. (2014, 01 22). Welcome To Sustainable                experience. Journal of Sustainable Tourism,
    Tourism. Retrieved from                                17 (3): 321‐366.
    http://www.gstcouncil.org/                         Stoian, D., & Gotret, M. V. (2011). Ejes
Hernández, O. (2015, September 11). MAG´s                  Temáticos para el Fortalecimiento de
    representative La Fortuna. (M. Montero,                Cadenas (CATIE). Cadenas Productivas y
    Interviewer)                                           Desarrollo Económico Rural en
Hitt, M. (2012). Relevance of Strategic                    Latinoamérica, 125‐149.
    Management Theory and Research for                 United Nations. (2015). Decisions by Topic:
    Supply Chain Management. Texas A&M.                    Rural Development. Retrieved from
    Research Paper. , 9‐13.                                A/RES/70/1 ‐ Transforming our world:
ICT. (30 June, 2016). Cámara de Turismo de la Zona         the 2030 Agenda for Sustainable
    Norte. Obtenido de                                     Development:
    http://www.ict.go.cr/es/enlaces/camaras‐y‐             https://sustainabledevelopment.un.org/to
    asociaciones‐de‐turismo/article/33‐camara‐             pics/ruraldevelopment/decisions
    de‐turismo‐zona‐norte‐catuzon.html                 Vasileiou, K., & Morris, J. (2006). The
IFC. (2013). Working with Smallholders: a Handbook         sustainability of the supply chain for
    for Firms Building Sustainable Supply Chains.          fresh potatoes in Britain. Supply Chain
    International Finance Corporation. World               Management: An International Journal, 11
    Bank Group.                                            (4), 317–327.
INEC. (2015, October). Encuesta Nacional de            Vorley, B. (2001). The Chains of Agriculture:
    Hogares Julio 2014. Retrieved from Resultados          Sustainability and the Restructuring of Agri‐
    Generales:                                             food Markets. Opinion. World Summit on
    http://www.inec.go.cr/wwwisis/documentos/              Sustainable Development. International
    INEC/ENAHO/ENAHO_2015/ENAHO_2015.                      Institute for Environment and
    pdf                                                    Development.
INEC. (2015, October 20). Statistical Data, INEC.      Wiliamson, O. (1979). Transaction‐Cost
    San José, Costa Rica.                                  Economics: The Governance of
Rodriguez, M. (10 de September de 2015).                   Contractual Relations. Journal of Law and
    Representative National Bank of Costa Rica.            Economics, 22 (2), 233‐261.
    (M. Montero, Entrevistador)                        Williamson, O. (1991). Comparative
Román, C. (9 September, 2015). General                     Economic Organization: The Analysis of
    Secretary ADIFORT. (M. Montero,                        Discrete Structural Alternatives.
    Entrevistador)                                         Administrative Science Quarterly, 36 (2),
Schiefer, G. (2002). Environmental control for             269‐296.
    process improvement and process efficiency         Zevallos, E. (2013). Agenda de Competitividad
    in supply chain management –the case of the            para la Región Huetar Norte: Caracterización
    meat chain. International Journal of Production        Socioeconómica de la Región Huetar Norte .
    Economics, (78) 197–206.                               San José, Costa Rica: Agenda de

                                                                                                      76
Sustainable Communities Review

        Competitividad para la Región Huetar    Chinese manufacturing enterprises. Journal of
        Norte.                                  Operations Management, (22) 265–289.
Zhu, Q., & Sarkis, J. (2004). Relationships
   between operational practices and
   performance among early adopters of green
   supply chain management practices in

                                                                                           77
You can also read
Next slide ... Cancel