Choco4Peace

Choco4Peace works to enable vulnerable Colombian farmers to improve their lives by finding markets for their chocolate-producing cocoa, enabling them to escape poverty and conflict. Our social enterprise supports constructing and sustaining peace by generating positive socioeconomic and environmental outcomes in post-conflict regions of Colombia through the empowerment of women, youth, indigenous and other at-risk people in the cocoa sectors by providing access to markets, financial models and disruptive technologies. 

We use blockchain technology to develop a decentralized inclusive economic network (DIEN) which aggregates cocoa farmers, chocolate makers, socially-oriented investors, private sector actors, governments, and NGOs.

This proven business model and technology, shows that poverty reduction, saving the planet and creating prosperity are measurable impacts with economic value, and can not only be scaled nationally, but also can be replicated with any commodity in any geography.

There are approximately 450 million smallholder farmers around the world, the agricultural sector consists mostly of small farmers living in remote areas who lack access to programs and technology that would facilitate economic assistance in a timely manner. Many families are going hungry, falling into extreme poverty, and looking for alternative, undesirable sources of income as a result.

In Colombia, there are approximately 65,000 cacao farmers, 90% of whom are smallholders and 73% live below the poverty line, on $2 per day or less. This is mainly due to a lack of access to markets and fair prices, education, finance, insurance, technology and inputs challenges, enhanced by the lack of a robust governance and policy framework. Colombian cacao producers have to choose between farming legal crops like cacao in poverty, or returning to coca and cocaine production as a means of survival, which have led to a vicious cycle of violence and poverty.

In Tumaco, in the district of Nariño, where our pilot program is located, 80% of farmers live below the poverty line and 74% of people who live there are unemployed.

C4P has conducted fieldwork and signed agreements with 7 cacao cooperatives in 5 regions of the country representing over 1,000 farmers. We have selected 100 farming families in Tumaco, Colombia, who are war victims and ex-coca producers as test users, providing market access to prevent armed conflicts and cocaine production. Additionally, we secure a chocolate factory led by women. 

We also have partnerships with capacity-building NGOs that have long relationships with these cooperatives, in order to better understand their needs and deliver services effectively. In collaboration with our partners, we have conducted a baseline impact assessment of the pilot group against which to measure progress. C4P has spent two years raising awareness of the proven business model and technology, demonstrating that poverty reduction, saving the planet and creating prosperity are measurable impacts with economic value.

There are many efforts from NGOs and the international community to support Colombian cacao producers to escape poverty and illegal activities. Their efforts are mostly focused on the quality and quantity of the cacao, this results in producers that remain untechnified and without access to the finance they need to change, our solution aims to change that.

Farmers in Colombia face the dilemma of producing legal crops in poverty or reverting to illegal activity to survive. By helping farmers access services they need, they distance from illegal activity, restore natural resources on which they depend, build peace, resilience, and lives with dignity. 

Digitalisation and technology have the potential to be the tipping point for success. Enabling farmers to access a digital platform with vital services is an effective way to reduce poverty, improve collaborations, and make supply chains more transparent and efficient. This ecosystem provides last mile rural communities with essential services, improving cost & time efficiency.

The Decentralized Inclusive Economic Network (DIEN) is a digital ecosystem that integrates all the socioeconomic services a small farmer need to succeed in one place – think of it like a smartphone full of apps. A farmer needs to connect with those to want to buy their product. They need a way to get paid. They need technical support, insurance, and financing. These digital applications lay the foundation for three vital improvements:

First, it enables producers to access indispensable services in an effective and friendly-user way, with an interface tailored for their digital abilities.

Second, the digital applications within the platform allow the establishment of third-party application such as a blockchain-based supply chain app, in which transactions are hashed, buyers can have access to precise information about the quality of the cacao, payments are facilitated by e-wallets and/or a banking application, or they can see whether they are part of the Colombian government’s crop substitution program. Transparency from bean to bar, from producer to buyer.

Third, the unprecedented level of security, transparency and traceability brings a crucial improvement to mitigate investment risk.

When an investor is able to know that a farmer has received training, insurance, and that they have benefitted from government programs & incentives, the investor will have their risks mitigated and, therefore, be more inclined to mobilize capital down to the bottom of the pyramid. We call this “Blended Risk”, which ensures that all stakeholders within the ecosystem share the risk of supporting the cacao entrepreneurs.

Choco4Peace has developed and brought chocolate products to market using cacao produced by ex-cocaine producers and war victims from Tumaco.

AgUnity, our implementation partner, is a last mile technology provider that gives farmers practical, accessible tools to connect with each other and establish effective lines of communication and an ethical, accountable means of trade. AgUnity has rolled out their technology in several remote areas already, working with the WFP and FairTrade for coffee in four countries, where it has been well-received. One of the cocoa farmers in their pilot in Sierra Leone was awarded in 2017 and 2019 as one of the best 50 cocoas in the world by the Cocoa Excellence Awards.

We’re aligning to adapt their technology for use in the cocoa sector in Colombia. Our pilot project focuses on 100 farming families in the community of Tumaco  with a specific focus on women, youth and indigenous producers. https://www.agunity.com/post/how-agunity-is-changing-the-developing-world-with-technology-in-the-hands-of-farmers

Problem:

Out of 65,000 cacao farmers in Colombia, 73% live below the poverty line. These producers face the dilemma of farming legal crops like cacao in poverty or returning to cocaine production as a means of survival.

Barriers: 

Farmers lack access to the markets, technology, finance, insurance, capacity building, and governance and policy frameworks they need in order for cacao farming to be a viable economic pursuit.

Control of illegal groups who undermine the authority of the government and bring a cycle of violence and poverty.

Interventions: 

Choco4Peace operates an integrated vertical value chain that brings together cacao growers with international cacao/chocolate buyers. We have developed a Decentralized Inclusive Economic Network (DIEN): blockchain-based digital ecosystem that integrates and delivers all the socioeconomic services a small farmer would need to succeed in one place. The platform also mitigates investment risk for impact investors looking for bankable companies and wanting to pass on measurable impacts to their shareholders, facilitating the deployment of capital down to the bottom of the pyramid.

Outputs: 

Farmers obtain a basic smartphone with an e-wallet and are issued a digital cryptographic identity containing socioeconomic data such as family structure and business profile. A blockchain supply chain application connects producers and buyers, and allows us to trace in a transparent way the origin of the cacao and the socio-economic impact on producers’ households. Their e-wallet facilitates the deployment of financial mechanisms that allows them to receive payments, finance, and government economic assistance.

Outcomes:

• Farmer level: 

Increase knowledge of the market

Stabilize and increase level of income

Access to capacity building, finance, technology

Lower risk of violence

• Investor level: 

Decreased investment risk

Access to bankable projects with traceable socioeconomic and environmental impacts

• Ecosystem level:

Long term scalability in other areas and countries

Empowerment of minority communities (women, youth, indigenous producers)

Use Colombian government crop substitution subsidies to crowd in private investment and fill the agricultural financing gap.

Impact:

By providing access to market, fair prices, technology and finance, farmers will be able to lift themselves out of poverty, build peace in their communities, and build lives with dignity.

One of the objectives is to digitalize the cacao industry. In order to do that, we will enable cacao producers with a smartphone and an integrated strategic platform that collaborates with key socioeconomic service providers.

1. Provide cacao producers with a self-sovereign, digital cryptographic identity

2. Implement a supply chain with distributed ledger technology that records and traces how cacao moves through the value chain until it becomes chocolate

3. Facilitate the deployment of financial mechanisms that allow cacao producers to receive payments, obtain finance, and government economic assistance.

The pilot previously mentioned consisting of 100 farming families was the starting point of this implementation. As a result of this pilot, the Ministry of Agriculture and the Presidential Adviser for Digital Transformation in Colombia are interested in scaling it nationally.

The technology developed by our partner, AgUnity has been especially tailored for farmers needs and resources. The phases of development of the technology have been carefully implemented in order to understand the reality of farmers. Indeed, in developing countries farmers face different issues than developed countries, such as connectivity, transaction transparency, communication, and infrastructure. 

As for the adaptation of the technology in Colombia for farmers and communities in post-conflict areas, we spent two years understanding their conditions, their available resources and their needs. Building trust with the community we’re working with is an equally important part of the adoption of the technology by the users. Indeed, the challenge in partnering with remote communities in high-risks areas of Colombia is that there is still control from illegal groups, and these communities have also been promised a lot by different organisations who never delivered on their promises. With that being said, learning from them and connecting with them allows us to then introduce the solution more easily.

The solution and the technology behind it was especially designed for farmers and their challenges. It was developed with them, for them and with tools adapted for their level of literacy and numeracy. For example, there are pictograms depicting the different services available, making it easier to understand and choose from. It was important, when developing the technology, that the solution matched the existing skill gap of the farmers and communities.

When it comes to adapting to low connectivity environments, the solution allows farmers to operate off the blockchain offline and anytime they have access to an online network it synchronizes.

Our pilot project focuses on 100 farming families in the community of Tumaco in Colombia, with a specific focus on women and indigenous producers. We have signed expressions of interest from 1000 farmers from 7 cacao growing cooperatives in 5 regions of Colombia. Our objective is to scale to 1000 farmers within our second year, and to 60,000 farmers by year five. Beyond that, we are also exploring replicating our model in other cacao-producing Latin American countries experiencing armed conflicts (e.g. El Salvador, Honduras, Venezuela, Mexico).

To foster better social, economic, and environmental conditions for cacao producers who are ex-cocaine producers and war victims in Tumaco by increasing their access to international fair markets, technology, and other socioeconomic services. Specifically:

1. Identification and registration of at-risk cocoa producing families

2. Articulate a public-private partnership for the cocoa value chain in Tumaco, with purchasing contract mechanisms to favour national and international commercial penetration.  

3. Implement a traceability mechanism for the “fino de aroma” cocoa supply chain using blockchain technology

4. Establish a data-driven socioeconomic impact measure to inform decision making (Based on 6 of the SDGs)

Another goal is to position Colombia’s cacao producers to succeed in a post-COVID-19 world. In order to achieve this, we must:

1. Build an international consortium with public, private and NGOs that are supporting cacao producers with technical or financial assistance.

2. Digitalize the cacao industry: Enable cacao producers with a smartphone and an integrated strategic platform that collaborates with key socioeconomic service providers. 

3. Design and implement a financial vehicle to complement the efforts of the Colombian government, private organizations and NGOs as well as to mobilize capital to cacao producers’ investment needs.

In 2016, the government of Colombia negotiated a peace deal with the Revolutionary Armed Forces of Colombia (FARC), ending over 50 years of civil war.

But peace is fragile, and some FARC members took up arms again in August 2019, and this process only accelerated during the Covid-19 pandemic.

In the intervening period, the vacuum left by the FARC had been filled by a myriad of other armed groups. Those factions have pressured coca farmers to steer clear of the peace process’s crop substitution program, often at the barrel of a gun, and targeted regional activists who campaign in favour of the peace process’s provisions. Beyond the additional logistical and governance challenges, the peace process will require the blending of public and private capital in order to succeed.

Additionally, deployment of capital through the government’s crop substitution program has been slow and marred by corruption, further decreasing the trust of farmers. 

Lastly, COVID-19 has of course affected globally. For instance, cacao producers lack of technology has further isolated them, unable to sell their products and neither receive economic humanitarian assistance. The investment arena is cautious and capital flows are decreased, which is reflected in impact investments and start-up funding. 

We have been building relationships with networks of impact investors around the world and there is growing interest in a peacebuilding fund that would leverage public capital from the Colombian government as a way of crowding in private capital to support the transition from coca production to the production of legal crops such as cacao.

Facing the challenges of Covid for the cacao industry, we are assembling a national consortium with the Colombian Presidential Adviser on Digital Transformation, the ministries of the environment, agriculture and commerce as well as key actors in the public and private sector that represent the interest of cacao producers. Finally, we’ve been involved in the design of a Corporate Bond in order to channel funds in Colombia and prevent a food crisis.

We have our executive team consisting of the founder and three co-founders. 

We work with over thirty employees, volunteers, and consultants across eleven countries. 

Sergio’s unique profile, a combination of negotiation, project management and impact investments, is perfectly suited. His strategic analysis and international relations experience with various stakeholders, in emerging markets like Africa and Latin America, bring significant insight and depth of cultural knowledge to C4P.

As a Colombian living abroad, he witnessed from an early age the consequences of social injustice, poverty and war. Growing up, he believed in creating socioeconomic change and decided that a strong academic background was the key to fulfilling his dream.

As an international economist and political scientist, most of his background and skills have been in understanding the financial context of investors and organizations looking for investments. Trying to close the financial gap in the agricultural industry has strengthened his ability to develop relationships as well as to improve negotiation skills with public and private organisations and governments.

Members of his team include the co-founders : 

• Matt Whiteman, partnership and growth director, manages relationships and projects with international partners. Background in International Development, Human Geography, and Ethics. 

• Santiago Diaz, supply chain and logistics director, in charge of cacao and chocolate quality control procedures in Colombia. Background in International Negotiation and Management, and Market Strategy. 

• Juliana Diaz, communications and marketing director, in charge of advertising, sales promotion, website and social media tactics. Background in Industrial Design and Corporate Communications Management.

We’re finalizing our Advisory Board, with members specialized in cacao, blockchain, cryptocurrency, agricultural finance, international development, supply chain logistics and communications.

There are many different partners involved in the project who have different roles to play in order to concretize it, here are some of the key ones:

• Supplier: Asprocat/D'Origenn is a cocoa farmer cooperative/trading association that provides cacao of consistent quality 

• Chocolate Factory led by women: Origen Cacao

• Main investor: Ark2030. The Ark2030 Foundation has the objective to unite private capital, global citizens/builders both corporate and individual to fund, at scale and pace, regeneration projects across 5 key ecosystems that in turn restore 500 million hectares globally through auditable and blockchain traceable UN certified projects.

• Blockchain companies: AgUnity to build the blockchain platform and infrastructure needed by C4P, the DIEN.

• Assistance from the government of Colombia regarding the framework for cacao producers and the digital adoption and technical assistance. 

• Colombia Cacao Federation: FEDECACAO

• Various NGOs providing technical assistance and training

We have a research partnership with the University of Indiana Kelley School of Business to provide market intelligence and consultation on our business strategy.

We have built relationships with networks of impact investors around the world and there is growing interest in a peacebuilding fund that would leverage public capital from the Colombian government as a way of crowding in private capital to support the transition from coca production to the production of legal crops such as cacao.

Our business model is centered around the commercialization of cacao as an economic incentive for farmers to walk away from illegal activity. Our second objective is around mobilizing access to finance to allow farmers to improve their quality and yield. We do this by providing farmers with access to an integrated set of socioeconomic services, using smart-contract blockchain technology to create an inclusive and decentralized economic ecosystem. This ecosystem aggregates cacao growers, investors and stakeholders, where cacao producers are provided with capacity building, finance, insurance, technology and certification services necessary to sustainably produce cacao and mitigate investment risk.

The revenue model will be based on three types of revenues in the short, medium, and long term, with Choco4Peace being the center of this platform.

1. Sustainable Supply Chain: Choco4Peace will charge a fee (%) for each kg of cacao or chocolate sold through the platform. 

2. Education: Cacao entrepreneurs will be provided with financial and technical training in order to enable them to achieve their objectives. Choco4Peace will charge a fee per training facilitated.

3. Platform: Every transaction made between the cacao entrepreneur and the investors will include a membership fee (%) that Choco4Peace will charge for the use of the platform.

The Choco4Peace revenue model also diverts a percentage of net revenues to a community fund to support education for children and community strategic development. Allocation of funds is based on consultation with our partner communities.

C4P is focused on three main streams of operating revenue:

1. Stream 1 will come from 2 sources

   1. C4P purchase of cacao from producers and delivery to chocolate producers with a markup of up to 50-75% above the New York Stock Exchange rate, the standard rate at which bulk cacao is traded.

   2. C4P produces chocolate in Colombia and sold to institutions such as boutique chocolate makers, universities, hotels, airlines and retails stores with up to 80% mark up. To this date, C4P has received purchase intentions from Air Canada, NASDAQ Stockholm and the University of Montreal.  

2. Stream 2 will come from 2 sources:

   1. a traceable transaction fee for use of C4P’s Blockchain platform. This will be done through the Decentralized Inclusive Economic Network (DIEN), a private consortium that operates as a marketplace with a 2-3% transaction fee that is paid by its members (e.g. chocolate makers, socioeconomic service providers and governments). 

   2. Chocolate makers will pay a 2-3% transaction fee on the final cost of cocoa.

3. Stream 3 will be fed by cocoa producers who participate in C4P sustainable trade and who are looking for access to tailored financial products based on their business profile and C4P’s operational costs. The interest rate for these products will vary from 8% to 10%, which is below market rates for most financial products available in Colombia.

We received an entrepreneurship grant from the government of Quebec worth approximately $13,000 USD.

We began generating revenue from chocolate sales to private companies and NGOs (<$5,000) before the COVID-19 lockdown disrupted global supply chains.

The company is currently in the seed round, we are aiming to gather approximately $1,000,000. with a blend of grants and equity by the end of the year. The amount will serve as such:

• Commercialization of cacao and chocolate: USD $750, 000

• Technology: smartphone with blockchain integrated: $250, 000

For the first year of activity, the total expenses are estimated at $556,918, this includes total sales and general expenses, and salaries.
As per the costs and expenses directly related to the production of chocolate bars, it is estimated at $332,818 for the first year.

There are two broad categories of farmers we look to support. The first are those who are already producing cacao, who now need access to markets and finance in order to improve their income. This is the “accelerator” component of our model. The second group is those farmers who have volunteered to remove their coca crops and transition to legal crops like cacao. This is the “incubator” component of our model.

Partnering with MIT and The Mission Billion Challenge Global Prize will enable Choco4Peace to begin the process of delivering the solution by providing cocoa farmers with the necessary amount of smartphones that include the blockchain system. This will allow them to access the socio-economic services they need in order to improve their income.

The next stage of our evolution will include establishing a foundation to manage key activities such as investments in farming communities. We require legal support to establish a holding company, as well as the foundation.

We are also looking to broaden our network of impact investors and philanthropists with an interest in peacebuilding.