A view from Peru

Peru’s labour laws require growers to register employees and pay social welfare benefits to protect workers, but not every company complies as doing so increases the cost of production significantly. Diego Del Solar, co-founder of Peruvian avocado and ginger company La Grama and supplier to Riverford, speaks to Wicked Leeks:

Where are your farms based in Peru, for avocados and for ginger?

Diego Del Solar (DDS): Avocado farms are located north of Lima, the capital city, in the valleys that exist between the coastal deserts of Peru. The closest valley is 200km north of Lima, and the furthest about 700km. Our ginger packing house is located approximately 350km east of Lima, crossing the Andes mountains, in the transition area between mountain and rainforest, so it takes about 12 hours to get there by driving. The farms are spread out around the packing house, the furthest one is about five hours driving distance from it.

What is the biggest challenge for organic avocado production in Peru?

DDS: As with every organic agricultural operation, nitrogen is the biggest limitation compared to conventional agriculture. As explained, organic avocado in Peru is produced in valleys located in the middle of deserts, where there is not too much availability of animal manure and other sources of natural nitrogen for the farms. This reduces their yield per hectare, so if the price difference between organic and conventional avocados is not enough to cover this production deficit, they will have the incentive to turn to conventional farming.

How is ginger produced in Peru?

DDS: Ginger is an annual crop: in Peru, it is planted in September and the first ginger is ready to harvest in May. This is called young ginger and the quality is good enough for the local market, and for air shipments. The first shipments by sea to Europe are ready in late June, when the ginger is mature enough to hold during the three-week journey. While ginger in China is harvested all at once and placed in underground warehouses, in Peru it is harvested in batches, leaving the rest of the ginger “stored” in the soil. So a single farm can keep harvesting ginger for example from May until April of the next year.

These farms are mostly small scale (three hectares on average), for two reasons: because of an agricultural reform that happened around 50 years ago, land was confiscated by the government, split in small pieces and gave it away to a lot of people. Also, because of the difficult geography of the region (mountain combined with rainforest), it is not possible to mechanise production methods, so every single job on the farms has to be done by hand, which takes time and is expensive.

How are labour laws set up in Peru, and how does this affect you as a business?

DDS: In Peru, there are several labour regimes, depending on the type of economic activity involved in each case. The fresh produce industry has its own regime, which considers the nature of produce operations. It is mandatory by this law to provide health insurance, a retirement pension fund, paid vacations, overtime payments, and a share of the company’s profits to every worker in the produce industry. Despite this requirement, seven out of 10 people in Peru are not classed as ‘officially’ employed, and in the fresh produce industry, this number rises to 9.2 out of 10.

Why are such labour laws so important?

DDS: A formal economy of labour provides the conditions for improvement of the quality of life of the workers and a healthy industry overall. Taking as an example the fresh produce labour regime, since its creation in 2001, poverty in the sector has been reduced from 81 per cent to 38 per cent; exports have grown from $627 million in 2001, to $6,654 million in 2018; it has generated 800,000 new jobs with the social benefits mentioned above; and raised the average wage of farm workers from 800 Sol (£188) in 2004 to 1,500 (£352) Sol in 2018, which is an almost 100 per cent increase.

How does registering employees through the official route affect your costs?

DDS: If we only consider the payment of all the social benefits required by law for each worker, it costs the company around 1.7 times more money than if paying an informal salary. If we consider that labour costs represent approximately 20 per cent of the cost of a box of ginger, it is clear how following the official route impacts costs.

How many employees does La Grama have?

DDS: In total, La Grama has 231 employees. Of those, around 50 involve management and people performing administrative tasks, nine people are directly involved in human resources, including a nurse and a social welfare assistant (these two positions required by law), 13 agronomists who visit the avocado, ginger and exotics farms year round to provide training, technical assistance and secure compliance with regulations; 11 production and quality supervisors for the packing houses and 147 operators in the packing lines, mainly for ginger. For avocados, we work with a third party pack house, which has its own formal staff. 

How does organic production benefit the local communities in Peru?

DDS: Unfortunately, in Peru pesticides that are forbidden in Europe or the US are still being used, especially by small scale farmers who haven’t received a good education and are often tricked by salesmen into using them. Teaching these farmers to grow their crops organically not only protects them, their families and the environment from toxic pesticides, but also makes them less dependable on external farming inputs, use cheaper local resources and therefore make their farms more sustainable.

Additionally, organic farming has given them the opportunity to access international markets that value organic (compared to the local market where organic consumption is still insignificant), and therefore get better prices to invest not only in their farms, but in their families and improving their quality of life.