Bolivia: Project boosts milk production in rural communities

June 12, 2012—The sun is about to rise in Cochabamba, a Bolivian city located over 8,000 feet above sea level. On a pasture field in a small community of dairy farmers, Hector Ferrel, a 75 year-old Bolivian producer, begins a new day at work with confident steps.

“I’ve been milking cows as far as my memory reaches back.  Surely, I want to continue doing that until the day I die," said Mr. Ferrel with the serenity of one who has gone through much more difficult days.

Back in 2007, Mr. Ferrel and his 29 fellow farmers of the Punata Dairy Farming Association (Asociación de Lecheros Agropecuario Punata) led a very different life than they do today. Their malnourished cows barely produced 1200 liters of milk a day and their combined daily income only reached US$ 380.

Things began to change when farmers learned about the World Bank Rural Alliances Project (PAR in Spanish). PAR creates a sustainable economic partnership between associated producers and marketers. It works like this:

• Both parties come together and set a business plan.
• Buyers determine a product specification and agree on purchasing conditions. Buyers may also provide technical assistance to producers. 
• Associated producers then request financing from the PAR.  If approved, they must contribute 30% of the total investment cost.
• Each producer group that becomes a member of the alliance receives tailored funding to achieve the product specification required by the buyer, as well as institutional support to improve its managerial capacity.

Put another way, the project’s aim is to open the market to poor rural producers, and help them add value to their products, improve their income, foster fair trade and develop the economy of their community along the way.

 “I expect this investment in social capital to have wide and positive repercussions well beyond its recorded impact on the well-being of farming households”, added Tuchschneider.

Everything was running smoothly until the Punata’s farmers hit a setback.  Commercial banks were not keen to lend nearly US$ 20,000 to a small farmer’s association, the majority of whose members were in their late 60s.  According to traditional financial institutions, they were not eligible for a credit loan for their contribution to the PAR investment.

The breakthrough came when a member of the community lent the money and the farmers were finally able to receive the rest of the financing. With the alliance’s support, they bought agriculture machinery, grain mixers and a storage tank, and hired technical assistance. 

Soon they were producing their own animal feed and even selling the surplus to other farmers, creating a second revenue-generating business. These improvements led the herd of 152 cows to produce better quality milk in larger quantities, that can be sold at a much higher price than before.

“Now we deliver more than 2,000 liters of milk daily to local processing companies and they say that our product has a better fat content than others”, said a proud Gustavo Quinteros, a veterinarian who works with the association.

"Milk production has increased by 6 or 7%, and farmers' combined daily income has jumped to more than US$ 900," said Ousmane Dione, a World Bank sustainable development expert. "In fact, the initiative not only restored the farmer's confidence but also the traditional milk production in the region".

This move illustrates how a long-term, dedicated partnership can lead to effective solutions. Its original design draws on lessons learned from many rural, local and indigenous development operations in Bolivia and other Andean countries.

Since 2005, PAR has supported and financed over 780 rural alliances between small rural producers and domestic and external buyers in Bolivia, in sectors ranging from fruit and vegetable cultivation to honey and handicraft production.

“This alliance between the Punata’s farmers and buyers makes the business sustainable and assures its bright future by creating a market,” said Susan Goldmark, World Bank Country Director for Bolivia.

Empowered with new managerial skills, the Punata’s farmers are planning to expand the stable to give more comfort to animals, and extend their business to produce cheese and yogurt.  Being able to make this kind of decisions brings a smile to Mr. Ferrel’s face.

“In life, there are a number of obstacles that can be overcome with a little bit of support, patience and optimism” he said.