Citation
Building rural learning regions

Material Information

Title:
Building rural learning regions innovations in the organic agricultural industry
Creator:
Morales-Galindo, Isabel
Publication Date:
Language:
English
Physical Description:
xiv, 257 leaves : ; 28 cm

Subjects

Subjects / Keywords:
Rural development -- Mexico ( lcsh )
Organic farming -- Mexico ( lcsh )
Regional planning -- Mexico ( lcsh )
Organic farming ( fast )
Regional planning ( fast )
Rural development ( fast )
Mexico ( fast )
Genre:
bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )

Notes

Bibliography:
Includes bibliographical references (leaves 246-257).
General Note:
College of Architecture and Planning
Statement of Responsibility:
by Isabel Morales-Galindo.

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Source Institution:
|University of Colorado Denver
Holding Location:
|Auraria Library
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All applicable rights reserved by the source institution and holding location.
Resource Identifier:
63787972 ( OCLC )
ocm63787972
Classification:
LD1193.A735 2004d M67 ( lcc )

Full Text
BUILDING RURAL LEARNING REGIONS:
INNOVATIONS IN THE ORGANIC AGRICULTURE INDUSTRY
by
Isabel Morales-Galindo
B.S., ITESM-CEM, 1990
M.B.A., University of Texas at Austin, 1993
M.A., University of Texas at Austin, 1993
A thesis submitted to the
University of Colorado at Denver
in partial fulfillment
of the requirements for the degree of
Doctor of Philosophy
Design and Planning
2004


This thesis for the Doctor of Philosophy
degree by
Isabel Morales Galindo
has been approved
by
Karen R. Polenske
Ray Studer
Q.\.o4
Date


Morales Galindo, Isabel (Ph.D., Design and Planning)
Building Rural Learning Regions: Innovations in the Organic Agriculture
Industry.
Thesis directed by Professor Thomas A. Clark
ABSTRACT
Agriculture in Mexico has declined in regions with small landholdings, making
such regions weak with dying local identities, low coordination, and ineffective
local government. This decline has made migration a last, yet attractive,
resource for the younger population. I propose a new strategy to offer
alternatives to the local population and benefit from the globalization trends
with local innovations and entrepreneur coordination, using localism to its
advantage as a marketing strategy. I propose that a rural region that learns
can recapture its local identity by incorporating the rural population dedicated
to agriculture, using the normative guidelines from contemporary discourse on
learning regions, and taking advantage of global networks to complement
regional relations as they pull knowledge together. Learning regions involve
issues of networks, institutions, and innovations that capture ideal elements
for a strategy intended for rural regions.
In the literature review, I describe the conditions required in a learning region,
the motivations behind the actors, and the linkages of people, policies, and
institutions involved in the learning processes. I believe that organic
agribusiness is analogous to the high-tech industry. Each benefits from
information associated with exotic products, higher-end innovations, the
sophisticated institutional framework, and higher-order skills. To understand
iii


the learning process, I have prepared case studies documenting the evolution
of the network relations and information flows within the organic food
production and agricultural sectors in two Mexican regions. Through these
cases I document the formation of networks and learning processes in order
to generalize findings for broader applications. By this means, I revise the
notion of the learning region with particular emphasis on rural regions, and
identify key points where planners can intervene in the regional process to
encourage the establishment and positive evolution of learning regions. Such
learning regions are seen here to be a prime means to provoke rural
prosperity in accordance with this new paradigm.
Signe
Thomas A. Clark


DEDICATION
I dedicate this thesis to my father, my mother and sisters, Betty and Paty, for
their trust and continuous support; and to Gerardo who always believed in
me.


ACKNOWLEDGEMENTS
Special thanks to my advisor, Thomas Clark, for his time and dedication on
my work, and for his valuable contributions. Also I thank Karen R. Polenske
who gave me her vote of confidence when I first started pursuing my doctoral
studies and for all what I learned from her. My studies would have not come
true without the financial and professional support given to me by the
Tecnologico de Monterrey, Campus Estado de Mexico, Campus Toluca and
Campus Morelia. I greatly appreciate their support and allowing me to be
absent from work in many occasions.


CONTENTS
Figures..................................................................xi
Tables.................................................................xiii
Chapter
1. Introduction to the Study .........................................1
1.1 Problem Description................................................4
1.2 Conceptual Approach of the Research ...............................7
1.3 Research Methods for Each Line of Analysis .......................12
1.3.1 Case Study of the Organic Food Industry in Mexico ................13
1.3.2 Contrast the Case Findings with the Learning Region Guidelines
(Pattern-Matching)................................................15
1.3.3 Design the Planning Implications of the Learning Process in the
Organic Farming and Food Production Regions to be Applied in
the Small-Landholding Regions in Michoacan........................16
1.4 Primary Data Collection...........................................16
1.5 Significance of the Study.........................................17
2. Theoretical Framework ............................................19
2.1 Theoretical Background ...........................................19
2.1.1 Overview of Current Theories of Rural Development.................19
2.1.2 The Learning Region Concept ......................................24
2.1.3 Theories behind the Learning Region ..............................39
2.1.4 The Food Production Industry......................................46
2.2 Limitations of the Theory ........................................51
vii


3. Context: The Organic Agriculture Industry in Mexico and the
World .............................................................53
3.1 Institutions and Norms in Organic Production ......................55
3.1.1 Certification Process..............................................55
3.1.2 Certification Agents ..............................................57
3.1.3 Norms and Standards................................................60
3.1.4 Global Institutions for a Global Product...........................61
3.2 Organics Production in the World and in Mexico.....................63
3.2.1 Production and Consumption ........................................63
3.2.2 Organics in Mexico and Their Commercialization ....................67
3.3 How Doing Organics Increases Innovation and Learning...............75
3.3.1 By Innovating......................................................76
3.3.2 By Following Norms and Standards ..................................77
3.3.3 By Becoming Part of a Network .....................................78
3.3.4 How a Rural Region Producing Organics Becomes a Global
Player ............................................................80
4. Case Study: Los Cabos, Baja California Sur, a Learning Region......82
4.1 My Experience .....................................................84
4.2 Introduction to the Organization, Del Cabo ........................87
4.2.1 Products ..........................................................90
4.2.2 Exports............................................................91
4.2.3 The Organization ..................................................93
4.2.4 Process............................................................97
4.2.5 The Region........................................................102
4.3 The Learning Region in Los Cabos..................................112
4.3.1 Learning and Innovation...........................................112
4.3.2 Institutions and Governance.......................................118
viii


4.3.3 Social Capital and Networks......................................128
5. Case Study: Michoacan, a State with an Agricultural Experience,
but Not Yet a Learning Region ...................................133
5.1 My Experience....................................................135
5.2 General Description of Michoacan ................................137
5.3 Agricultural Production in Michoacan.............................143
5.3.1 Production, Products and Evolution...............................143
5.3.2 How Farmers are Organized........................................149
5.3.3 Institutions, Incentives and Programs Most Used and Promoted ....152
5.3.4 Avocado Production...............................................160
5.3.5 The Organic Industry in Michoacan................................165
5.4 The Factors of a Learning Region, Evaluating Michoacan ..........172
5.4.1 Innovations and Learning ........................................172
5.4.2 Institutions and Governance......................................175
5.4.3 Networks.........................................................178
6. What Constitutes a Learning Region: Two Cases of Rural Areas
in Mexico........................................................183
6.1 Revising the Learning Region Concept.............................184
6.2 The Determinant Factors of a Learning Region for Each Case
Study............................................................186
6.2.1 Learning and Innovations.........................................187
6.2.2 Institutions and Governance......................................195
6.2.3 Networks ........................................................202
6.2.4 General Issues...................................................207
6.3 Conclusions from My Findings ....................................211
6.3.1 Regarding the Learning Region Concept............................211
IX


6.3.2 About Innovations.................................................212
6.3.3 On Learning.......................................................214
6.3.4 About Institutions and Governance ................................214
6.3.5 On Networks ......................................................215
6.4 Building Rural Learning Regions ..................................215
6.4.1 Early Stage: Preparing the Ground.................................217
6.4.2 Middle Stage: Growth..............................................218
6.4.3 Advanced Stage: Expansion.........................................218
Appendix
A. Interview Guide...................................................220
A.1 Interviews to Producers, Farmers, Community Leaders or
Agricultural Technicians in an Specific Region....................221
A.2 Interviews with Associations, Networks, Suppliers or Distributors... .224
A.3 Interviews with Governmental Agencies (at the Federal, State
and Local Levels).................................................226
A.4 Figure Used to Identify their Role in the Region..................228
A. 5 Human Subjects Approval...........................................229
B. List of Interviews................................................231
B.1 Interviews in Los Cabos...........................................231
B.2 Interviews in Michoacan...........................................233
B. 3 Other Interviews..................................................234
C. Facts and Figures about Michoacan.................................235
D. Institutions and Programs.........................................240
Glossary.................................................................243
References ......................................................246
x


FIGURES
Figure
1.1 Methodology .........................................................12
2.1 The Learning Process in a Region ....................................29
2.2 Dimension of Innovations. By Maillat and Kebir 2001..................34
2.3 Conceptual Framework.................................................45
2.4 Food Production Chain................................................47
3.1 Certification Agencies by Country....................................57
3.2 Organic Agriculture Evolution in Mexico .............................67
3.3 Commercial Distribution of Organic Products in Mexico................72
3.4 The Lemon Value Chain, Dussel Peters 2002 ...........................73
3.5 The Network of Organic Farmers.......................................79
4.1 Baja California Sur in Mexico .......................................82
4.2 Map of Baja California Sur and Los Cabos ............................84
4.3 Surface Certified in Del Cabo .......................................90
4.4 Export Map...........................................................91
4.5 Boxes Shipped for Exports, 1987-2002 ................................92
4.6 Organizational Chart of Del Cabo ....................................93
4.7 Organic Agriculture Process .........................................98
4.8 Export Process .....................................................101
4.9 Exports in the Municipality of Los Cabos ...........................104
4.10 Exported Boxes in the Municipality of Los Cabos ....................105
4.11 Total Exported Boxes in the Municipality of Los Cabos ..............106
4.12 Testimonial of Mrs. Arcelia Garcia Aguirre .........................107
XI


4.13 Testimonial of Martha Zarate, Director of Commercialization,
Inmobiliaria Integral............................................109
4.14 Testimonial of Gabriel Burgoin, Mundo Organico...................111
4.15 Cluster around Del Cabo .........................................130
5.1 Michoacan in Mexico ..............................................137
5.2 Well-being Levels in Municipalities of Michoacan .................139
5.3 Land Use in Michoacan.............................................140
5.4 Agricultural Activities...........................................140
5.5 GNP of Agriculture and Livestock in Michoacan ....................142
5.6 State Agricultural Union (UAE) ...................................151
5.7 Guava in Michoacan................................................152
5.8 Programs for Agriculture at the Federal Level.....................154
5.9 Rural Development Programs .......................................156
5.10 Export to the United States, a Great Achievement ................161
5.11 Avocado Exports .................................................163
5.12 The Network of Relationships in Michoacan........................182
6.1 Innovations in a Learning Region..................................191
6.2 Cases in the Evolutive and Dynamic Dimensions of Regions .........208
6.3 Innovations in Two Regions........................................213
A.4 Figure Used to Identify their Role in the Region...................228


TABLES
Table
2.1 Determinant Criteria and Elements in a Learning Region ...............31
2.2 Influential Authors on Regional Economic Development..................42
3.1 Summary of Factors in the Organic Industry ............................54
3.2 Certification Agencies in Mexico......................................59
3.3 Land Area under Organic Management, 2003 .............................63
3.4 Retail Sales of Organic Products, 2003................................64
3.5 Retail Sales of Organic Products in Europe, 2003 .....................65
3.6 Distribution Channels for Organics Produce (percent)..................66
3.7 Size of Organic Farms in Mexico, 2000 ................................68
3.8 Surface Area of Organic Production in Mexico (ha), 1996-2000 ........69
3.9 Main Organic Products Produced in Mexico, 2000......................70
4.1 Determinant Factors and Characteristics in Los Cabos .................83
4.2 Products .............................................................90
5.1 Determinant Factors and Characteristics in Michoacan .................135
5.2 Education of the Population over 15 Years, 2000......................138
5.3 Contribution of Agriculture in GNP, 2002 ............................142
5.4 Cyclical and Perennial Crops in Michoacan............................143
5.5 Agricultural Exports of Michoacan, 1995 and 2001 ....................144
5.6 Agricultural Prices. Dollars per Ton. 2000 ..........................146
5.7 Municipalities with Agricultural Units Selling in Formal Markets ....148
5.8 Organizations in Michoacan...........................................149
5.9 ABIOEM Exports to the United States, 2000-2003 ......................168
xiii


6.1 Elements of the Learning Process and Innovations in a Learning
Region ............................................................187
6.2 Elements of Institutions and Governance in a Learning Region ......196
6.3 Elements of Networks in a Learning Region .........................203
C.1 Share of Agricultural GNP by State .................................235
C.2. Production of Cyclical Crops in Michoacan, 2001 ...................236
C.3. Production of Perennial Crops in Michoacan, 2001 ..................237
C.4. Regional Concentration of the Main Exports: FRUITS, 2001 ..........238
C.5. Regional Concentration of the Main Exports: VEGETABLES, 2001 ...239


1. Introduction to the Study
Recent trends of development theories are moving from descriptive theories
to prescriptive ones. Now economic developers need to understand what is
behind growth in order to use the existing models from developed regions to
promote development in other less-endowed areas. However, no new
theories specifically on rural development have emerged in the planning field.
Most development literature focuses on urban issues or on smaller cities
growing around a key high-tech industry. The most recent literature on rural
development sets the future agenda of rural studies, inviting us to focus on
institutions, governance, and networks, just as in the urban studies agenda.
Some books on economic geography elaborate case studies in developing
countries or agriculture-related industries and highlight the important factors
or policies followed in the developmental evolution for each specific place.
The most common concepts adapted for regional economic development
from other fields, such as organizational theories, strategic management, and
planning, are: networks, competitiveness and clusters, new institutional
economics, embeddedness, governance, and participation (Podolny, Porter,
Williamson, and Granovetter, among others). One of the most recent
concepts on regional development is the learning region, mainly studied by
European academics such as Asheim (1998) and Morgan (1997), or the
learning economy, as Storper (1998) refers to it.
The concept of a learning region is a collection of other theories such as
networks, institutions, governance, coordination, and local development
understood around the globalization trends. It therefore encapsulates
1


elements ideal to design a strategy for rural regions. A learning region is a
geographical space, under an innovation milieu that takes advantage of the
development of an anchor industry in the locality that, in most cases, serves a
global market. Globalization trends could open growth opportunities in rural
regions when policy makers and the business environment encourage local
innovations and entrepreneur coordination, using localism to their advantage
as a marketing strategy. A learning region grows through the constant
creation of innovations with a continuous learning process under an
institutional framework that acts as a facilitator and with strong networks that
disseminate knowledge internally and externally. The concept of learning
regions or economies has been mainly related to urban locations with high-
technology innovations as their growing mechanism (Storper 1998; Morgan
1997; Asheim 1998). I propose that a region that learns can also embrace
rural areas dedicated to agrarian activities as long as they are competitive
and linked to global networks, produce innovations that foster learning, and
promote the creation of new knowledge.
The overarching question of my research interest is how rural regions
develop and what factors promote local economic growth. Two choices
regarding local economy are (1) to wait for the market forces to turn rural
areas into deserted places due to out-migration, or even (2) to wait until the
invisible hand identifies the attractiveness factors of the place to allow the
economy to benefit from those. However, the first alternative is not ideal and
the second may take many decades. A better choice is to acknowledge that
unbalanced growth is present and make structural plans to induce
development in rural regions (while at the same time decrease the negative
consequences of hyper-urbanization and urban unemployment) by
2


coordinating the networks, fostering learning, and taking advantage of the
local potential.
The aim of this research is to understand the diffusion of innovations in the
organic food production system and to illustrate the learning path and
knowledge requirements that a region has and goes through that allow a rural
area to develop. The outcome of this work will be a new strategy by which
rural regions can benefit from globalization while using new forms of localism
to build competitive linkages, to work on innovations, to promote better
coordination of internal assets, and to craft effective marketing strategies.
This dissertation is organized as follows. First, I briefly review the theoretical
framework of economic development and list the relevant contingent factors
or conditions existing in cases of learning regions. The focus of my research
fieldwork is on organic farming and agribusiness as a case study due to its
inherent link with agriculture and rural areas. The organic agribusiness
requires value-added activities for niche markets, therefore promoting
industrialization. This particular industry is relatively new, so development
processes can more easily be tracked and distinguished from the background
of traditional farming, and it has qualities consonant with the learning region
concept.
I next consider that the organic methods require higher-end innovations
analogous to the ones existing in high-tech industries, due to the expert
knowledge required as well as the learning process, which are crucial for the
diffusion of information and the creation of new activities and businesses. I
approach this research with case studies of the organic farming and
conventional agriculture in two Mexican regions, one in Baja California Sur (a
3


learning place) and the other in Michoacan (a place with conventional
agriculture and few innovations). I describe the origins of innovations, the
networks of relationships, and the institutional framework in the organic
industry of these places. Finally, assuming that a learning region is desirable,
I propose strategies for rural places to have more chances to become
learning regions involving public and private interventions.
1.1 Problem Description
My interest in this research came about while I was working on regional
development planning in rural areas in Veracruz and traveling around
Michoacan observing small landholdings with fertile soil but no effective
production. Some regions in Michoacan sell their products on the roadside
and depend on income from the remittances sent by the migrating population.
At this point, I would like to differentiate region from state. A state is a
political division of Mexico; I consider a region as a geographical area within
one or more states that share infrastructure and daily activities.
The main emphasis of development studies (by Piore, Sabel, and Markusen,
among others) has been from a regional or even national standpoint on
places that are booming or that have a history of success. Little attention has
been given, however, to less well-known places, such as rural agricultural
regions. Agriculture in small landholdings with traditional methods has
declined due to many reasons, not all of which are related to globalization
and the lower prices available through freer international trade, but also due
to the increasing importance of the service industry and scale economies that
encourage large landholdings to monopolize the production. These
circumstances have made many regions weak, with a dying local identity, low
4


coordination, and no strong local government. These conditions make
migration a last, yet attractive, resort for the younger population, leading to
hyper-urbanization in large cities and the loss of population in rural regions.
My focus is on these forgotten regions with agricultural potential but currently
low profitability and productivity. I recognize that the alternatives I propose in
this research should offer sufficient remittances to small landowner-farmers
so that they will find it attractive to work their land, and they will be assured
stability with the processing activities of their produce or by selling to niche or
export markets.
Small landholding regions that depend on sales of unprocessed agricultural
products may suffer with low productivity and problems dealing with informal
intermediaries that offer lower prices as a negotiation scheme. These factors
are especially acute when other farmers are modernizing their crops with
irrigation systems and adding initial value to the products before getting them
to the markets. Also, the other, more profitable farmers probably have a wider
range of formal arrangements with retailers or wholesalers. One alternative to
reduce the problems on small landholdings would be to change the economic
dependency of selling to the centralized fresh produce market by promoting
sales in the international market by providing value-added activities that will
increase returns on crops and eventually fill the gaps of the agribusiness
cluster in fertile and productive regions. Here I am assuming that increased
agricultural production with guaranteed markets would lead to positive
agglomeration effects on local activities. The resulting investments in forward
linkages from the farms to the processing sector will change the subsistence
farming practices into more stable and fruitful economic outcomes benefiting
the population and the region at the same time.
I
5


To achieve this objective, an appropriate mix of incentives and coordinated
efforts are required to attract the farmers into new and different economic
activities and also to make sure that they will benefit from the new industry. I
argue that promoting agricultural production depends not only on economic
incentives (such as the availability of credit), but also on other "soft"
mechanisms (including the promotion of innovations, networking, and the
creation of enabler institutions) that will promote learning and will eventually
allow farmers to develop a more sophisticated local industry. Examples of
such industries are agribusiness andbetter yetniche market alternatives
such as organic food production.
It is important to identify the organizational and institutional structures suitable
for the regions to foster learning and the local creation of innovations. This
study began with the following research questions:
. How is the learning process manifested in the organic farming and food
processing regions in Mexico?
. Which are the institutions, governance structures, and networks present
(or created) in the region that transform innovations into knowledge?
. What are the planning implications to build learning regions in other fertile
rural areas?
Chapter 2 presents the theoretical framework for the study. Chapter 3
describes the context and learning process for the organic industry and why I
consider this an industry conducive to development. I then describe the cases
of Los Cabos and Michoacan in chapters 4 and 5, respectively. Finally,
chapter 6 contrasts both cases with a learning region conceptualization and
my analysis.
6


1.2 Conceptual Approach of the Research
I believe that the learning region concept contributes to the regional
development planning field by highlighting the importance of social learning
patterns that consolidate an industry, along with the institutions and
governance structures embedded in a global network. This allows a region to
be flexible and in a continuous search for improvements for its economic
activities.
First, I identified the relevant contingent factors or conditions required in a
learning region corresponding to the adoption of innovations based on the
existing literature, and recognizing the main factors existing in each of the
criteria that include a learning region (innovations and learning, institutions
and governance, and networks).
I then analyzed the information to identify how innovations are transferred
within a region: the type of innovations, learning, and networks of the cases in
organic agriculture in Mexico; the institutions and governance structures
(public and private) that promote or enhance learning; and the similarities of
those innovations with the organic farming and food production industry.
I assumed in this research that organic farming and modern food production
methods require innovations, expert knowledge, a prompt diffusion of
information (learning process), and the creation of new activities and
businesses. Successful coordination should involve the distribution channels,
facilitate contacts with the market (consumers), and find a marketing niche.
7


The principal question that gives shape to my dissertation fieldwork is the
following:
How is the learning process manifested in a farming region dedicated to
organic food production?
To answer this question I studied two regions, one that is already producing
organic products and is self-organized (referred to here as the organic
farming case); and a second one that follows conventional agricultural
methods (the conventional case). The organic farming case is in a region
south of Baja California Sur (Los Cabos) that produces basil and cherry
tomatoes. The conventional case is in the state of Michoacan; not in a
specific region, but instead highlighting the state efforts and individual
examples around that state.
The consequent questions are:
. Which are the institutions, governance structures, and networks
present (or created) in the region that transform innovations into
knowledge?
With the presence and consolidation of an organization of organic farmers,
the number of producers and organizations (governmental, private, and
nongovernmental organizations, or NGOs) increases and continues to do so,
making the network complex and the innovation opportunities richer. At the
same time, with this organizing structure the institutional changes and
governance framework evolve dramatically and quickly to adapt to the
requirements of the global markets on time.
8


What are the planning implications obtained from the case findings
to be applied to rural regions in which these and other organizations
exist?
Rural agricultural regions, characterized with small landholdings, may benefit
from the learning process in the studied cases. Designing incentives and
planning recommendations for institutional change and promoting local
learning are essential.
In order to answer these questions, I used the following methodology:
A. Elaborate a case study of the organic food production system in
Mexico, mainly about the organization of organic growers.
I concentrated on case studies of those regions dedicated to the agriculture
and their relationship with the food industry in Mexico and the world market.
Initially, I had three different alternatives that are active in organic production:
the organic organization in Baja California Sur (Del Cabo), the cooperative
growers in Oaxaca and Veracruz, and an NGO active in Puebla and Oaxaca
(Alternativas). The successful case of organic farmers in Baja California Sur
has a peculiar accumulative learning process that is self-managed and
involves many local stakeholders. Learning began with the creation of a
formal entity that organized the farmers and through time has linked many
more actors. The cases of Oaxaca and Veracruz involve the advice of
scholars in two different indigenous communities. I decided not to study these
because both are changing their farming practices toward organic production
and are in the process of opening new channels of commercialization to get
to the export market. Alternativas is an organization with a social learning
9


proposal but limited agricultural output. For the second case I chose
Michoacan that has a limited content of organic production but it is an
interesting state to study due to its apparent lack of learning.
I organized the case based on the agenda from the main factors of the
literature review. The key factors I considered are institutions and
governance, networks, innovations, and learning. To build the case, I
explored the following issues to get clues on how the learning process is
manifested in a farming region:
Identify who started the process and how the network evolved through time
(characteristics).
Trace the origins of innovations in the organic industry and identify the key
factors that enabled the beginnings of the organic industry in each place and
that facilitated the process of implementation and institutional changes
specific for the industry.
Answer the following questions:
. Who supports the organic certifiers? How are they organized? Who
is behind the certification process? What is the selection process?
What is required in the certification process? What is the protocol
and the learning process?
. How was the commercialization chain created? What are the
organizations involved in the cluster and what role does each play?
. Which are the non-local networks involved? What are the formal and
informal agreements that link them?
. How long did it take to increase the interaction among stakeholders
within the region?
10


. What are the critical success factors of the region in its learning
process?
B. Contrast findings of the organic food and farming system in both
regions with the learning region guidelines.
In this study, I compared the concept of learning regions with the findings of
the case, and then elaborated conclusions of a learning region in the rural
setting. The following propositions were used to analyze the case:
. The network is complex yet full of opportunities, and grows after the
consolidation of organic production.
. The number of organic farmers has increased just as trust and
collaboration have increased.
. The emerging norms, legislation, and rules have facilitated the production,
distribution, and exporting (selling) of products.
. The relationships with customers and international organizations are long-
term and reciprocal.
. The emerging organizations, associations, and new farms and businesses
are benefiting from the agglomeration economies and sharing knowledge.
C. Design the planning implications for small-landholding regions in
Michoacan based on the learning process of the organic farming/food
system.
For this step, based on the guidelines of a learning region and the case
studies, I worked on the planning implications to have enough elements to
11


design normative guidelines to build a learning region and offer development
alternatives to rural regions.
1.3 Research Methods for Each Line of Analysis
The basic method for this research study is the case study. From two case
studies, I then drew planning implications for other rural regions. Figure 1.1
summarizes the steps that were followed.
Figure 1.1 Methodology
12


1.3.1 Case Study of the Organic Food Industry in
Mexico
The case studies of the two organic farming regions are descriptive of the
learning region's activities and networks in their context as well as illustrative
of the learning process and innovations. I also pursued an exploratory search
on the impact of the organic production and learning process in the region's
economic and human development.
The units of analysis are the network(s) of organic producers and the learning
process. This is a single case with multiple units of analysis due to the two
regions and the number of actors involved. The list of actors includes, for
example, farmers, local businesses, local governments, organic associations,
other organizations, suppliers, customers, wholesalers, distribution channels,
and research and development institutions.
I gathered information to understand the evolution and changes of each
criteria determinant for a learning region. I looked for relevant evidence for
this case in many variables related to the region, its networks, the learning
process, and its rules and evolution. The following variables are based on the
same conceptual framework of a learning region:
A. Innovations and learning (emphasizing actions and processes)
. The time schedule of changes and the evolution shaping the learning
process and creating innovations
. The procedure of research and development, of information generation and
its diffusion
. Innovations in products as a result of agreements
13


. Number and proximity of R&D centers, universities, and high-skilled local
population
B. Governance and institutions (emphasizing organizations, agreements, and
policies)
. The changes in regulations /norms since organic producers organized
themselves
. The emerging legislation, as a result of the organic production
. The organizations and associations that surged as a result of organic
production
. Informal norms and conventions in rural economic activities
C. Networks (emphasizing formal and informal relationships among actors)
. The relationships between actors (formality, time, and location)
. The marketing channels and strategies
. Businesses, farms, associations, and voluntary organizations in each
region that form the organic food system
. The location of consumers and suppliers and the formality of agreements
D. General issues
The trends in agricultural production, both organic and with conventional
methods, in the region
I identified how these criteria were before and after the organic farming
practices were introduced to the region in order to understand the evolution
14


and improvements. I also identified the similarities (overlaps) in both the
organic and conventional regions in a search for relationships among data
and actions and also to find gaps in the information. I illustrated the
commodity chain specific for the case with a diagram (shown in respective
chapters). I identified the critical actors and their relationships related directly
to innovations to understand the learning process. I also analyzed the local
conventions that could be considered as institutions and governance, and the
activities on innovation that can be attributed to learning. Finally, I grouped all
information obtained from the cases into the categories of the determinant
criteria, and I concluded with the strengths and weaknesses of the case on
each of the criteria.
1.3.2 Contrast the Case Findings with the
Learning Region Guidelines (Pattern-
Matching).
In this phase, I organized the case findings around the learning region's
scheme. I analyzed and compared the learning region guidelines with the
findings of the case by using a matrix including the theoretical and empirical
elements found in the rural organic regions. Initially, I pattern-matched what
should be considered in a learning region for the case of the organic food
system in Mexico.
With the previous analysis, I formulated and wrote a case of a learning region
in a rural setting, identifying the key features that make the case a learning
region and also distinguishing the issues that differentiate this case from
other urban or high-tech successes.
15


1.3.3 Design the Planning Implications of the
Learning Process in the Organic Farming
and Food Production Regions to be Applied
in the Small-Landholding Regions in
Michoacan.
I concluded my study by revising the notion of the learning region with
particular emphasis on rural regions, and by identifying key points at which
planners can intervene in the regional process to encourage the
establishment and positive evolution of learning regions, seen here to be a
prime means to provoke rural prosperity in accordance with this new
paradigm.
I designed planning implications based on the theories of development, the
guidelines of a learning region, and the changes that institutions have to go
through under legislative context specific for Mexico. The planning
implications also include proposals for public and private initiatives, as well as
strategies for local governments. For both private and public organizations, I
identified the stimulus for the creation of institutions and governance
structures that promote innovations. I also emphasized the ideal
characteristics of networks, organizations, farms, and firms in order to foster
the type of environment needed to learn, cooperate, and promote
entrepreneurial activities.
1.4 Primary Data Collection
In the initial phase of the research, I dedicated my time to completing the
learning region guidelines based on the existing literature. To build the case
study, I visited the two regions and performed interviews with farmers and
with governmental institutions, local and state government officials, and other
16


local organizations. Then, I conducted interviews with global and international
organizations involved in organic production, with customers and suppliers,
and with research and development institutions via telephone and electronic
mail. I used an interview guide based on the learning region criteria to obtain
sufficient information to build the case study. I also obtained information from
informal conversations with farmers and the local population in the regions to
understand the context.
I performed a qualitative analysis of the information to diagram the learning
process and the network of relations in organic food production. I classified all
findings (organization structures, activities, and relationships) in a matrix
according to the categories in the determinant criteria of learning regions to
identify the similarities and gaps between the case and the theoretical
suppositions.
For the planning implications, I analyzed the situation of agriculture in
Michoacan and its legislation, as well as the existing associations and
institutions based on documented and archival data. Additionally to
complement this, I conducted more interviews (using a reduced version of the
interview guide used for the case) with farmers and industrialists to identify
any current problematic situations that may hinder the creation of learning
regions.
1.5 Significance of the Study
This study is not intended to create new theories, but instead to design new
strategies of structural development for rural areas that are not endowed with
social and human capital in a way such that the market alone will solve their
17


problems. The learning region paradigm applied to organic farming and
agribusiness will provide normative guidelines for rural areas. Additionally,
this development strategy increases the probability of the creation of new
local businesses in an organized way to take advantage of the fertile land
available. I expect this research study to contribute to rural development
studies in a way that planners and policy makers can start thinking about
revitalizing agricultural areas while at the same time offering a more
sustainable alternative to development involving not only the economic
structures but also the society.
The value of the findings of this study involve the planning implications
designed to promote development in other agricultural regions that are not
fully organized. Strategies focus on economic growth and on the harmonious
progress of the place and its population, where the farmers can benefit
directly from those improvements. These recommendations are directed to
community leaders in agricultural regions characterized with small
landholdings and to entrepreneur leaders looking for business alternatives, as
well as to public and private institutions that may benefit. The most important
expectation is to be able to offer attractive alternatives to improve the
livelihoods of the farmers by the formation of a learning region, to strengthen
the local networks and the institutional framework, and to create a sustainable
generation of economic activities around agriculture.
18


2. Theoretical Framework
This chapter includes two important parts that back up the conceptual
reasoning for this study. First, I describe briefly the background of the existing
literature on rural and economic development, especially in learning regions,
and I also describe the food systems. In the second part, I mention my view
of the limitations of the existing literature.
2.1 Theoretical Background
My initial interest in this study came from the rural economic development
theories that focus on identifying factors required for achieving growth and
development and that are important to design regional policies. I first describe
what I discovered about rural development. I then focus on the learning
region concept to clarify its meaning and the conditions needed to build it.
Finally, I relate these concepts to the food systems to complete the
theoretical framework for this study.
2.1.1 Overview of Current Theories of Rural
Development
There are no exact regional economic development theories. Some are
simplifications of industry location (central place theories, growth poles),
others are used to describe places, and still others are used as guidelines,
but in the end most are notions that explain how places function. John
Friedman offered an alternative on regional development policy more than
three decades ago (Friedman 1966). Emerging theories in more recent times,
19


have emphasized the urban phenomenon (sprawl, gentrification), especially
large-scale industrial complexes, and high-technology industries.
Specifically on rural development, there are also few new theories even if we
add the agricultural development literature. However, there is an ample
recent literature focused on sustainable development, but it gives more
importance to the environment than the economic well-being of the population
in rural areas (Brinkerhoff and Goldsmith 1990; Wu 2003). Some literature on
rural development presents specific cases on countries such as China and
Nicaragua, or on industries, describing their evolution and analyzing policies
inferred from their specific stories (Bingman 2002; World Bank 2003). The
World Bank has also written reports on rural development cases, as a
descriptive guideline of the structural profile on governance and sustainability
and on methodological requisites, such as participatory methods. The recent
country studies also depict agriculture dedicated to exports as the best
alternative for development in rural countries. Many of these theses, however,
are presented with a policy perspective, not necessarily as theories on
development.
Maybe most academics have given up hope on what to do in agricultural
regions given that the global tendencies lean toward mass-produced
agricultural products to reduce costs and the decreasing GNP share in most
developed countries (Asheim 1998; Morgan 1997). I am not against this, but I
do worry about the regions that have fertile land with potential for productive
purposes and now are pushing the younger population to large cities or to
other countries in search of a job. Much of the literature may seem to propose
that attracting manufacturing investments to a rural place is the solution for
generating incomes and jobs, but I believe it is not the only alternative.
20


A different school of literature on induced innovation theory, purported by
economists Hayami and Ruttan and reassessed by Koppel (1995), legitimizes
the existence of government research for agricultural development as long as
it responds to a meta-production function based on prices. This theory
proposes that a rural region will develop as a result of the application of
innovations dictated by public agencies. In a way, this influenced the green
revolution and now also applies to the biotechnology or genetically modified
crops. This theory assumes that researchers and farmers are connected,
and that innovations will be put into practice depending on the ability of
entrepreneurs. But power interests in rural areas may reduce collaboration
when innovations lead to higher profits and only a few want to keep the
benefits for themselves. This theory has the basic assumption that
innovations depend on the pre-existing structures of the place, not on
exogenous economic variables (Koppel 1995). Similarly, the concept of
agricultural extension was one mostly practiced in the United States in recent
decades, where the universities have kept linked with the agricultural sector.
On a more traditional piece, Dixon (1990) acknowledge the importance of
agriculture in third world development. They have found as well a large
tendency of household consumption in those same places. As a development
strategy, they propose intensification and commercialization of agricultural
products. They mention the major rural development strategies focused on
increasing productivity (technical), promoting fundamental social changes
(structuralist), or a combination of both (reforms and land tenureship).
The new literature on cooperatives in agriculture (Merret and Walzer 2001;
Cotteril! 1994) presents the specific technical issues on cooperatives, but at
the same time has many interesting insights for development theories; many
21


issues fit the first case I present. The main points of the new-generation
cooperatives that are relevant in development policies are: (1) that coops are
economic enterprises looking for benefits to its members; (2) that the main
purpose is wealth creation with a community-based action; and (3) that
promotes local entrepreneurial activity (coops in search of profits through
increased marketing power and adding value to agricultural products with
information of the market). Merret and Walzer (2001) propose to promote
entrepreneurs and professionalism in a region instead of promoting sporadic
big projects that would offer only temporary jobs.
Brinkerhoff and Goldsmith (1990) identify three dimensions of agricultural
development: (1) the physical-technical, (2) the economic and financial, and
(3) the institutional-human. The first is treated by agronomists and agricultural
specialists; the second by economists simplifying a complex system in few
variables; and the third is mostly ignored by these two groups. These authors
acknowledge that now the World Bank and USAID are supporting the
institutional and human factors more by restricting aid to projects that involve
social factors in their methodology of intervention.
On the planning literature, Aldrich and Kusmin (1997) try to find the
attractiveness factors of rural regions in the United States by using
determinant factors and in this way understand the present variables that
coincide with a growing region based on past growth rates. However, these
factors cannot be translated to normative actions. Barkley (1995) argues that
the new competitive advantage of rural regions comes from the human capital
and increased productivity under the new globalization conditions. But then,
again, his conclusions are more focused on infrastructure, concluding that
rural places require telecommunications quality, education, training,
22


institutions, and technology transfer in order to function like cities and be part
of world activities.
Several analysts set the new agenda for rural development and define their
concerns (Ward and Hite 1998; Goodwin 1998; Gibbs et al. 2001; Isserman
1998; Kelsey 1998; Mardsen and Murdoch 1998; Snickars et al. 2002). The
new issue mentioned most on rural development is the increased importance
of institutions for the prosperous functioning of the region. There also is an
increased participation of the population with a closer coordination among
local governments, businesses, and organizations related to the local
industries. They mention a new role of governance as the mechanism to
design the new policies in rural areas and regions in general. Finally, they
acknowledge that new organizations (private, public, and voluntary) shaping
development in rural regions must work on institutional changes to foster
social relationships including culture, entrepreneurial behavior, and access to
global markets.
Last of all, economic developers and geographers state that agriculture is not
a strategic future for rural regions (Asheim 1998; Asheim and Dunford 1997),
and planners usually relate to urban issues. This initially made my intentions
more challenging, but the rural development literature added value to my
work. I am not seeking ways to increase attractiveness of the periphery for
urban activities; instead, I want to offer alternatives for development that can
improve the livelihoods of the local population while using the land in a
sustainable manner.
23


2.1.2 The Learning Region Concept
Even before the learning region concept was formulated, Hirschman (1958)
argued that there are many resources and circumstances needed
simultaneously in most countries in order to develop, and the lack of an
entrepreneurial culture and technical and managerial knowledge is what
prevents most underdeveloped countries from progressing. To develop, a
society needs to acquire an ability to invest, making sure to identify the best
opportunities and assuring that the next investment will be complementary to
the previous ones. What is really needed is cooperative entrepreneurship and
agreements for development. Hirschman (1958) proposed that countries
should acquire manufacturing experience and knowledge (skills and attitudes
included) in order to identify their deficiencies in the combining process of
factors and elements and, at the same time, find causes and obstacles
behind each scarcity. With these introductory theories set almost 50 years
ago, the concept of agglomeration economies merged with many more
elements, resulting in industrial districts and then learning regions. I now
explore in more detail the concept and elements of the latter.
Many recent books and articles include the learning region as a title or
subject matter, but few conceptualize its theory. Boekema, Asehim, Dunford,
Amin, Lambooy, and a few others (see next section) do attempt to give a
definition and explain further the concept; however, some only present cases
and offer no definition implying a self-explanation of what a learning region
must be (Simmie 1997; Johansson et al. 2001; Scheff 2001). In this section, I
describe the definitions I found, and then I summarize three factors that I
consider to encapsulate the concept.
24


2.1.2.1 The Major Definitions of the Learning
Region
The authors that have studied learning regions emphasize issues regarding
knowledge transmission, learning, innovations, networks, governance, and
public and private institutions.
Boekema describes a learning region as a paradigm in which a learning
region is the physical expression of the understanding that economic growth
is dependent on innovation, which in turn is dependent on the creation,
dissemination and application of knowledge...[translated into] learning... and
generally learning processes are connected with space (Boekema et al.
2000, 3). He also describes a learning region as an outcome of innovations
that is recognized as a collective social endeavor.
Lambooy describes a learning region as the process of increasing integration
of actors in a certain territory... pointing towards the social aspects of the
learning process... in industrial economic structures, organizations,
institutions and culture (Lambooy 2000). Learning occurs in many forms and
many places, and allows for local and increasing integration when growing
or developing, having the opportunity to profit that in turn motivates them to
go on. He also mentions that a learning region depends on the learning
processes of the people, its organizations, and networks in a place within a
nurturing institutional structure.
Bellini presents a related concept of institutional nurturing from the Italian
experience, where development was planned with contracts, co-financed with
a vision, and monitored by institutions. In Italy, the government acted as the
engineer of networks, as the rulemaker, and as inter-institutional coordinator
25


(Bellini, in Boekema et al. 2000). But in explaining the learning region, he
nevertheless does not define the learning processes attached to, or behind,
the governmental actions; guiding alone is not sufficient.
According to Asheim and Dunford, a learning region is a network-based and
associative regional development strategy [or paradigm where] the
competitive advantage of firms is based on innovation... [Innovation being] a
socially and territorially embedded interactive process, only understood under
its institutional and cultural context" (Asheim and Dunford 1997; emphasis
added). For Boekema et al. (2000), it is a physical expression of new growth
processes.
From Amin and Thrift (in Asheim 1998), the learning region concept describes
a region with an economy that is embedded in institutional thickness, and is
characterized by its innovativeness. This, in turn, bases its competitiveness
factor on what they call, localized interactive learning, where cooperation is
promoted by the organizational innovations.
Lawson and Lorenz (1999) similarly define that in a learning region the
capacity for continuous learning and product innovation is what matters most
in the long run. Similarly, Maillat and Kebir (2001) define a learning economy
as one that has the capability to learn permanently and expand the
knowledge base with cooperation and trust.
Regional collective learning requires coordinating actions of actors through
the creation and development of shared knowledge among individuals
(Keeble and Wilkinson 1999). An assumption proposed is that the collective
learning process in a less-favored region is stimulated by persuading key
26


actors that the renewal of the place comes from within (reaching consensus),
has to be bottom up and strategic in technology development, must be
integrated to maximize economic impact, and have an international focus.
The regions focused on knowledge creation and learning go beyond
individual firms (inputs and infrastructure) where certain knowledge (tacit) is
best exchanged face to face (Florida, in Asheim 1998).
Finally, Asheim and Dunford assure that supporting agricultural development
retards growth, since the investment (money) goes to richer areas, and in
less developed regions it is harder to find new alternatives for labor (Asheim
and Dunford 1997). There are higher incomes in non-agricultural activities,
and investments are more likely to prosper in manufacturing and services.
2.1.2.2 The Concept
A learning region is considered as a new paradigm of development, not a
theory, because it cannot be proven right or wrong. The following definition is
the one that best describes the concept:
Learning region is the physical expression of the understanding
that economic growth is dependent on innovation, [which] in
turn, is dependent on the creation, dissemination and
application of knowledge. [...Knowledge] referred to as
learning, and learning processes are... connected with space
(Boekema et al. 2000, 3).
The concept of a learning region incorporates the issues of recent
development theories in a way that an innovation is analogous to an engine;
learning is the fuel, institutions and local governance are the means and
environment, and networks are the relationships that disseminate knowledge
27


and innovation requirements. It considers not only the economic side of
development, but also the human, social, and institutional sides of it related to
the production system. The course of regional development is shaped not
only or even primarily by the dictates of local public authorities, but rather by
the progressively more coordinated actions of diverse local entrepreneurs
and associated actors.
Figure 2.1 illustrates the learning process in a region. The region depicted in
gray comprises firms, local government, and the community. All these interact
with each other through common market transactions under the local rules
and norms and through the externalities that these create. To be a learning
region, a region needs a local environment that promotes cooperation,
collaboration, competitiveness, and innovations, through an appropriate mix
of institutions and governance structures. The environment is the cube that
encapsulates the local and external actors and gives depth to the
relationships. All three local agents -firms, community, and local
government- are responsible for achieving this environment. The
relationships of local firms (and farms in the case of agricultural regions) are
directly linked with the value chain of the industry, its partnerships and
markets. Within these relations are many networks with different levels of
agreements, both formal and informal. The exchange of information, the
knowledge, and the responses to global markets create a virtuous cycle of
competitiveness for the region and all its actors.
28


Figure 2.1 The Learning Process in a Region
INSTITUTIONS AND
GOVERNANCE
STRUCTURES
that foster:
Cooperation and collaboration (agreements and alliances)
Networkrig, Trust, responsibility
Knowledge creation
Technology creation and adoption, education and training,
Quality in services and products to meet standards
information,
knowledge,
know-how,
know-why
Human and
social capital
* COMMUNITY IN THE REGION
Employment,
goods and
services
LOCAL FIRMS AND FARMS
TT
Raw materials.
Intermediary
products.
Services,
Final products
Taxes
Taxes,
service
dues
Education,
infrastructure,
services
LOCAL GOVERNMENT
Policies, laws, services, credits, infrastructure
Information,
goods,
technobgy
STRATEGIC
ALLIANCES;
ASSOCIATIONS
GLOBAL
MARKETS
INCREASING THE
COMPETITIVENESS OF
THE REGION (shaded area):
With the creation of innovations
Sharing marketing knowledge
Offering quality goods
Learning region analysts use empirical evidence based mostly on European
cases (Emilia-Romana in Italy, Baden-Wuttenburg in Germany) and also
considers Silicon Valley and Route 128 (in the USA) as good examples.
Authors such as Asheim (1998), Morgan (1997), and the compilation of
authors in Boekema (2000) present several success factors in most of their
casesfactors such as the local availability and attraction of a skilled labor
force, the flexibility and mobility of this workforce within the region to share
tacit knowledge. Also, most learning regions grow around high-tech industries
and therefore require higher-end innovations that foster learning and increase
competitiveness of the firms and the region, especially when those
innovations are developed from within. Local companies cooperate and
collaborate, which, in turn, helps them to innovate. Finally, regions have
29


accessible and modern institutions that facilitate and assist economic actors,
designed by private and public coalitions. Based on these factors, a learning
region, then, is a group of networks that are innovative, and that go through a
learning process that improves the design of institutions and governance
structures that in turn promote development.
The processes by which a dynamic place becomes a learning region include
the territorial implementation of innovation on an ongoing basis (including
technological innovations, organizational, and institutional); firms cooperate
locally and compete globally; and the learning process is interactive,
continuous, and complex (Johansson 2001). A characteristic of a learning
region is that it must always be experimenting and evolving.
A learning region then, must go through a learning process whereas a non-
learning region does not go through the learning aspect in a collective
manner while performing its economic activities.
2.1.2.3 Elements of Learning Regions
Table 2.1 summarizes the elements that characterize my conceptualization of
a learning region.
30


Table 2.1 Determinant Criteria and Elements in a Learning Region
Determining factors Definition (authors) Attributes, qualities, categories
A. Innovations: The incremental On innovations:
Innovations improvements and practices New ways of doing things in a region
and Learning (technical, technological, Any positive, incremental, step of
procedural and change to achieve prosperity
administrative) new to the (development) either social,
group that incorporates them Learninq: A process that organizational, material or institutional Technological, procedural and administrative Types: imitation, incremental improvements, radical (inventions)
transforms information into On learning:
knowledge, increasing Learning is a process by which a region
capacities to act and plan obtains innovations and shares them with other actors Create value added in information to allow for greater understanding of capacities
Authors: Storper, Bellini, Learning occurs through cumulative
Boekema. experience (seeing how innovative ways work and do not work) It is a social phenomenon "Is the outcome of non-traded as well as traded linkages" (Storper et al. 1998, 23)
B. Governance: Not the On governance:
Governance government actions per se, Organizational structures, forms of
and but the power relations that behavior
Institutions enable transactions and Usually is bottom-up, from sectors and
agreements to occur. spaces to higher levels including the
Governance "as the means government
by which order is Self-organizing
accomplished ... to realize Result is formalized through institutions
mutual gains" (Williamson Actors at all levels involved
1998) Problems due to complexity in context, power structure, and selfishness of
Institutions: "Consist of some actors
persistent and connected sets Categories from fully cooperative to
of rules, formal and informal, that prescribe behavioral directive
roles, constrain activities and On institutions:
shape expectations" (Storper Rules, norms, organizations to fit the
etal. 1998, 24) emerging purposes of the economy Forms of behavior an norms or action
Authors: Williamson, Storper, Interrelated with conventions
Messner Are socially constructed
i
31


Table 2.1 (Cont.)
Determining factors Definition (authors) Attributes, qualities, categories
C. Networks Networks: "A social structure with enduring patterns of relationships among actors" (Powell et. al 1999) Also, "strategic structures that allow the incorporation of actors into chains in which the costs and gains from integration are the essential economic factor" (Beliak, in Storperetal. 1998, 53) Authors: Beliak, Cantwell, Messner, Powell Networks create entry access through information advantages Networking is about establishing linkages in order to acquire strategic resources for learning The coordination of political and economic actors Networks are self-organized and self- coordinated between autonomous actors with a common goal Networks are used as mechanisms to mobilize and pool resources Depend on structure, reciprocal dependence, sharing experiences Are cooperative and competitive Trust is crucial and relationships evolve as competitiveness increases
Source: Elaborated based on literature review
I now describe each factor further; all three are needed to understand the
evolution of economic development.
2.1.2.3.1 Innovations and Learning
For this study, I define innovations as the incremental technical or
technological improvements and practices new to the group that incorporates
it, made on time (timely) to gain an advantage over competitors. In this
definition, innovations need not be unique inventions; they also include ideas
that are new to the place or business.
Maskell assures that the dynamism in an industry is driven by innovation
(socially embedded) with constant knowledge creation. Even in countries with
low technology and high costs, it is feasible to maintain competitiveness, in
this case, local capabilities, difficult to imitate for others and key for the place,
32


will provide the competitive advantages (Maskell et al. 1998). The industry
tends to agglomerate entrepreneurial activities and innovations, and
specialize according to the local environment.
The exchange of knowledge under prosperity can stimulate entrepreneurship
and innovations creating a local culture and behavioral patterns that, in turn,
disseminate know-how (Maskell et al. 1998). Knowledge is not only on
technologies but also on logistics, organization, marketing, sales, distribution,
and relations. But in any type, trust is needed to make the collectivity effective
and increase competitiveness through sharing tacit knowledge.
To sustain growth, the region must be dynamic, learn permanently, and
innovate constantly. A knowledge-based economy has to be creative,
entrepreneurial, and have institutionalized protection of the innovations; for
example, if they are technological, they should be able to get a patent.
Innovations in agricultural areas follow a productive cycle for the region as a
whole. An increase in innovations on irrigated land increases technological
productivity, which could also lead to decreased labor. In turn, labor could
increase new activities generated by the technology in place; this could help
increase wages and production and decrease the costs of local foodstuff. The
creation of new job opportunities and the increase in demand on non-
agricultural products helps the region develop (Grabowski 1995).
The creation and use of shared knowledge shapes social relations as well as
institutions; therefore, all three are important in a region (Hakansson and
Storper, in Maskell et al. 1998, 3).
33


Maillat and Kebir (2001) illustrate the dimension of innovations (see Figure
2.2), in which a learning region has interactive and organizational learning
(innovations) at the same time.
Figure 2.2 Dimension of Innovations. By Maillat and Kebir 2001.
Evolutive
dimension
Presence of learning
Innovations Innovations with
without interaction
Absence of intervention (learning region) Presence of interactive learning
interactive learning No intervention and no innovation Interaction without innovations
Absence of organization and institutional learning
Dynamic dimension
In this figure we can also identify that a place with a lot of learning but without
interaction cannot be a learning region; the reverse is also true. If either one
is missing, the region cannot guarantee learning and development benefits in
the future.
2.1.2.3.2 Institutions
Institutions involve public and private organizations, are physical or
normative, and are local or external. The government role in building
competitiveness is marginal and needed over the long term, because results
can be seen only after decades. Building competitiveness cannot be
guaranteed unless there is a local human factor in place, nor can it be
acquired (Masked et al. 1998).
The role of public intervention should be to protect free and fair trade where
profits are kept by entrepreneurs and not by plagiarizers; to promote
34


efficiency through institutions; and to have policies fomenting knowledge
creation (Maskell et al. 1998). Most important, public policy must conform to
the market process, not work against it (Maskell et al. 1998, 190) in order to
better listen to customer needs and provide new technologies with a secure
market. Others focus only on training and education policies to improve
knowledge and qualifications.
2.1.2.3.3 Networks
Networks constitute the existing relationships (social, private, and public) that
allow knowledge dissemination among actors. Knowledge creation and
networks are linked together due to the needs of sharing tacit knowledge in a
place to increase creation and collaboration and evolve locally (Beckmann et
al. 1998). Also, networks are relevant to design new governance and
institutional structures to fit their needs. The stronger the network, the faster
the knowledge flows, facilitating the creation of successful results. Networks
act as the medium to carry the information and knowledge sharing, to
facilitate relationships among firms for innovations, and to allow for faster
access into new markets.
Proximity in networks is not necessary. Places that depend on local
resources are not the most innovative; others may have increased
collaboration even when not agglomerated. Innovation networks may not
need to be local; firms can benefit from participating in both national and
global innovation networks, especially when the needs are user-driven
(Hansen 2001). Usually, collaboration is higher in larger firms serving
international markets (Hansen 2001). So a region that has a multinational
company or one dedicated to exports has a larger tendency to collaborate. In
35


knowledge intensive industries, companies as well as the supporting
networks are sources of innovation (Scheff 2001).
Agglomerations are not necessarily regional networks, and vice versa.
Additionally, not all agglomerations learn or are competitive. The learning
capability depends on the intra-firm assets and the inter-firm supporting
institutions that develop and maintain localized capabilities (Maskell et al.
1998).
In a learning region, the goal is to maximize the number of links among actors
involved in knowledge (e.g., global networks, or contacts with universities,
ideally local ones); build partnerships, and consolidate local economic
infrastructure, such as training centers (Walter, in Johansson et al. 2001).
The network is necessary to diffuse competencies, technologies, and know-
how, and, according to the IRES European experience, this could be
promoted by regional governments to prevent competencies from going
obsolete; this is mostly done through training centers or the promotion of
technical careers (Johansson et al. 2001).
In summary, networks are systems in which the relationships create
economies of scale on various areas, which, in turn, generate cumulative and
aggregate benefits at a regional or sectorial level. Those benefits include the
increased flexibility to exploit opportunities, the possibility to have dynamic
technical improvements, formal social learning, creation of collective
knowledge, and decreased uncertainty and risk (of the market and
technological change) by understanding how markets are shaped and by
setting standards and norms.
36


2.1.2.3.4 Summary
Based on these definitions and on the main factors empirically obtained from
the successful cases, three main factors emerge that describe what is
included in a learning region: (1) innovations and learning, (2) governance
and institutions, and (3) networks. Summarizing the most important issues
from each factor in a learning region, I propose the following considerations.
First, the context, actors, linkages, and technology in a learning region
change constantly and are self-organized. All actors are willing to change and
adapt to be part of that change, and products and technologies are directly
linked with the globalization trends.
Second, the main factors on learning and innovations are:
a. Innovations are linked with growth. Some authors show evidence that
places with constant innovations have growth patterns, in terms of GDP
and new business development.
b. Innovations are dependent on the creation and application of knowledge.
Innovations include others inventions that are adapted to the specific
needs of a place or business. This is a result of the knowledge generated
by the person or organization doing the adaptation.
c. Learning is a collective social endeavor. The process of learning is
achieved through the collectivity of activities in a place where what one
learned is shared by his/her closest co-workers (or family), and in turn, to
other local organizations.
d. The learning process is an innovative activity based on localized and
interactive learning. The main actors in this process depend on the field or
37


activity and on the specialized knowledge generated by the group of
people working there.
e. The region has the capacity to increase learning. Learning is endogenous
and can be performed over and over.
Regarding institutions and governance, the main factors are:
a. Institutional thickness in the region. Public and private institutions have
well-specified norms, accepted, coherent (could be based under a
national or international law), and not bureaucratic.
b. Nurturing institutional structure. Governmental and private institutions are
negotiable, service-oriented, attentive, and flexible.
c. Inter-institutional coordination. Most changes and major projects are never
done in isolation.
d. Vision monitored by institutions. The shared vision is put into action by
those who have power to act and monitored by the institutions that define
regulations.
e. Economic structures leading and coordinating the path with a common
language and informal norms. The non-formal setting is provided by the
economic activity around the learning region and the people that work in
that particular cluster, their language, conventions, and traditions.
And finally, regarding networks:
a. Global strong networks. The most notorious networks are not necessarily
local, but instead the collection of actors is around the world.
38


b. Network-based development and associative business culture, which
grow around a set of networks with an associative culture that assures the
flow of information.
c. Increasing (ongoing) integration. Actors in the region and along the global
network are in constant communication and over the years communicate
more effectively.
d. The government as the engineer of networks, providing the structure and
increasing contacts.
e. Cooperation promoted by organizational innovations. For every new
invention, breakthrough, or adaptation, the installation of requirements in
the region is greater than the participation of the trainers.
2.1.3 Theories behind the Learning Region
In this section, I employ concepts from several schools of thought (sociology,
organizational theory, strategic management, economic development) that
build on the concept of learning regions and also are part of the new agenda
on rural studies. Economic development theories include a wide variety of
models, starting with location theories, growth theories, production models,
and, more recently, human and social-capital endowments. The school of
theorists in which I am interested lean toward the comprehension of the
modes of production, starting with mass-production, then the post-Fordist
theorists covering flexible specialization in Japan and industrial districts in
Italy (Piore and Sabel 1984; Pezzini 1998).
First, the economic development theories, like the central place theory,
studied the location of industries, simplifying places and space. Then growth
pole theories invited many governments to build industrial parks in faraway
39


places with the premise that large industrial complexes will attract new
companies as well as the related services. John Friedman, as well as
Hirschman, had identified the importance of intangibles as a precondition for
regional development where growth is an expansive mood. Among the
factors of precondition are acquisition of new knowledge, circulation of ideas,
and local leadership (Friedman 1966), all similar to the learning region
concept. From the early development theories, Friedman is the only one who
emphasizes local research. He argues that inside research is important to
avoid importing knowledge and instead to push development with a better
use of local resources. He also mentions the importance of integrating
programs that require networks to benefit more than less, especially those
from core to periphery.
The learning regions paradigm surged as a further explanation of the theories
on industrial districts. Sabel (1989) considers this flexible specialization to be
a means for endogenous growth in regions with networks of companies and
institutions that are part of a system that follows constitutional orders. These
organizational structures of networks create learning advantages over others
in inter-industry production due to the collaborative nature and gains from
sharing information and technology (Sabel 1989). The other post-Fordist
model is the formation of industrial districts (e.g., the third Italy). These are a
group of small companies in charge of different tasks that work collaboratively
and take advantage of economies of scale (of distribution and sales) as a
conglomerate, giving the group negotiation leverage with buyers and to obtain
credit (Sabel 1989; Pezzini 1998). These are also flexible due to faster
communication and the manageability of the organizational structure when
changes are needed without the bureaucracy of a large corporation (Sabel
1989). In this new industrial restructuring, firms are embedded in a
\
40


governance structure of markets, hierarchies, and a constitutional order (rules
and contractual laws). Firms interact in new changing ways led by
globalization tendencies. Networks within these districts are the connectors of
the production chain, coordinating the sector represented by associations,
apprenticeships, and informal arrangements (Sabel 1988).
Markusen studies sectoral change based on the stages of the profit-cycle and
how regions change industry agglomeration patterns. Towns are left empty
when industries looking for profits move. She proposes that for long-term
development in a place, the region has to have the ability to attract newer
sectors to supplant job losses created by departing industries. Clustering
where there are oligopolies tends to decrease entrepreneurial activities
unrelated to the industry, making focusing on the main industry more
attractive (Markusen 1985).
Industrial-district theories, along with notions of Porter's clusters and
competitiveness, has led analysts (e.g., Messner 1997; Castells 1996;
DeBresson and Amesse 1991; Podolny and Page 1997) to formulate formal
theories of networks as a development strategy for regions with a leading
industry. They have created new theories by acknowledging that relying
solely on the market mechanisms to solve the development possibilities of
regions was not enough and structural adjustments had to be made,
especially on less developed areas. From these thoughts, Storper and Scott
(1992) built into the concept of a learning economy and then European
academics such as Morgan (1997) and Asheim and Dunford (1997) came up
with the name of learning regions.
41


Table 2.2 lists the most influential topics and authors in the modern issues of
regional economic development.
Table 2.2 Influential Authors on Regional Economic Development
Main Topic Authors New issues on Economic Development Relevant issues for a Learning Region
Economic development theories Hirschman Backward and forward linkages, unbalanced growth Pull and push effect of local industries to promote growth
Perroux Growth poles Concentration of industrial activities for developing a region
Johnson Central-place theory (Christaller), rural agricultural markets Location and size of markets and infrastructure requirements
Friedman Regional planning Prerequisites for regional development with core activities
Post-Fordism Piore / Sabel Flexible specialization Policy issues, factors of development
Saxenian, Pezzini, Bianchi Industrial districts and cases Characteristics of cases with success on regional development
Markusen; Krugman Growing regions The economics of agglomeration economies
Strategic management, organizations Porter Clusters, competitiveness Factors of development; analysis of industry; competitiveness degree
Castells; Podolny Systems of networks and relationships Types of networks, categories
Gereffi Commodity chains Networks of produce and agricultural products
Social relations Coleman Social capital Community cooperation and collaboration related to organizations
Putnam Democracy and trust Trust as an invisible factor for development
Institutions and governance North New institutional economics Role of norms, rules, and organizations in the economy of a place
Williamson Transaction cost economics Role of institutions and transaction agreements
Powell Institutional social relations Greater importance of institutions over the markets
Granovetter Embeddedness Governance related to embeddedness of organizations and institutions
42


The strategic management and organizational theories include the work on
competitiveness by Porter as well as the study of networks and their role in
development by Castells and Podolny.
Important factors present in the more recent trends of regional development
approaches are the bottom-up schemes, in which local participation is the
most important asset (civic cooperation and coordination) with mediator
institutions and inter-firm relations, such as Putnams work. These should be
complemented with political and financial institutions and aligned with a more
comprehensive strategy (state or national).
According to Coleman (1990), social capital is a community asset that adds
individual and family resources with social relations. This capital is considered
to be a means of production, but, in this case, it is about the capabilities and
skills of each person in society plus their relationships that allow for economic
activities to thrive (Coleman 1990). This capital is what consolidates
economic performance at a regional level, making the place more attractive
and innovative.
Social capital increases the possibilities to design new governance and
institutional structures with autonomy and cooperation (in the form of
compliance). The resulting modes of governance could be reflected in the
new relationships and power structures involved in local development. At the
same time, the institutions could be found in the incentives, controls, and
local policies or laws related to the economic activities in a region.
The highest degree of networking involves institutions, organizations, and
firms linked with formal and informal agreements, and, at the same time,
43


embedded in policies that foster communication, innovation, and sharing of
information. Social relations and network structures generate trust, which in
turn permits the economic organizations to work toward improvements, and
that is how the economic behavior is affected positively with social networks
(Granovetter 1985).
Networks are organizations collaborating or cooperating in different
transactions and relationships (technology, information, input purchasing,
distribution) in which each organization works on what it does best and, at the
same time, incurs in non-cost power decisions that associate or ally them
together (Powell 1990). Powell assumes that transaction costs are reduced
due to shared cooperation, trust, and reciprocity. Networks include
competition, collaboration, and cooperation mixed at the same time in varying
degrees, depending on the industrial strategy (Polenske 1998).
Finally, the new institutional economics and transaction cost economics
(Williamson 1985; North and Naishul 1992) give great importance on
governance and institutions that add the human dimension to a places
development.
Figure 2.3 summarizes the conceptual approach that leads to these new
factors in development and complements the learning region concept.
44


Figure 2.3 Conceptual Framework
Agricultural
Economies and
Markets
Commodity Chains
(Gereflfi)
Mass
Production
(Fordism)
Backward,
forward linkages
(Hirschman)
Central place
theory
(Christaller)
Institutions,
NIE (North)
Flexible
Specialization
(Piore/ Sabel)
Industrial Districts
(Bianchi,
Saxenian)
Clusters, Vision
Projects (Porter)
Competi- High-
tiveness, tech
attracti- indus-
veness try
Growing regions
(Markusen,
Krugman)
Social Capital
(Coleman)
TCE, Institutions
(Williamson)
Social Relations
(Powell)
Embeddedness
(Granovetter)
Innovations,
learning process
in growing regions
(Oerlemans,
Morgan, Kaufman)
Cooperation,
collaboration,
integration
(Polenske, Piore)
Networks,
relations, form
(Caste I Is,
Podolny)
Trust (Putnam)
Governance and
institutions
(Storper)
L
E
A
R
N
I
N
G
R
E
G
I
0
N
S
45


2.1.4 The Food Production Industry
For my analysis of the food industry, I want to match the development of food
systems with the main elements of a learning region. This industry can be
seen either as an economic activity or as a potential industry for regions
capable of innovating to increase the competitiveness of a place, as I prove in
the following.
Pothukuchi and Kaufman (2000) assure that food systems constitute a field
not fully studied or taken seriously by planners. Then again, they propose to
study the relations of the food systems in the urban scene, not necessarily
the relations of the rural locations and the agricultural activities with the retail
industry in urban centers.
2.1.4.1 The Food-production Chain
Figure 2.4 illustrates hypothetically the actors involved in the agricultural
chain. Each arrow corresponds to the relationships that join two actors
(rectangles) involved in the cluster at the local (inner circle), regional (larger
circle) and national levels. Along the arrows move the flow of relationships
that go beyond the exchange of goods and services, the requirements of
innovations, and knowledge of the food industry. In my case, the organic
industry involves many innovations and new perceptions of food as healthy
and fresh.
46
i


Figure 2.4 Food Production Chain
The food-production chain for rural studies revolves around the farmers
located in a region. Some inputs, raw materials, and services are acquired
according to market price; therefore, distance is an issue, requiring them to
be, if not local, at least accessible. Going forward in the chain, the value-
added activities to process the agricultural goods and the intermediaries to
markets are crucial for the competitiveness of the chain. Associations are
represented with a different shape (a diamond) to locate them at all levels
due to the different nature of the organizations that could be involved. Finally,
research and development (R&D) and certifiers are external actors that rule
the direction of the industry and give credibility to the production system.
47


The presence of large backward and forward linkages related to a potential
industry should increase the attractiveness of a region and allow for the local
economy to grow (Hirschman 1958). Given the complexity of the production
chain in the food industry, collaboration gains relevance and the formation of
networks is crucial for the development of rural regions. Under the
globalization of markets, rural areas rely not only on the formation of global"
networks, but also on networks with other industries in order to get the
products to the markets and keep in touch with the evolution of the world
preferences.
This representation of the food system is similar to a commodity chain.
Gereffi makes reference to global commodity chains as the value-added
activities around commodities linked around the globe and represented by a
network of agents (Humphrey et al. 1998). Understanding this concept will
help explain the theoretical background of food systems because it is closely
related to agricultural areas, hence rural, in developing countries. The validity
of commodity chains is enriched by Hirschmans argument that capital should
be invested in the industries where there are larger and stronger linkages
(concerning the input-output coefficients), assuming that growth will take
advantage of the multiplier effect of the backward and forward linkages of that
industry (Meller and Marfan 1981). Commodity chains are valuable when
agglomeration economies enable cost benefits for local producers on their
backward linkages (e.g., diminishing delivery times and transportation costs)
with wholesale purchases of materials.
Similarly, clusters are a group of directly related industries concentrated in the
same geographic area as well as related to other firms and institutions
outside the region. Commodity chains are global networks of commodity-like
48


products, from production and distribution to the final consumer; whereas a
cluster is a network of related economic entities (even competitors) working
directly or indirectly in one industry.
Hypothetically, regions, states, and nations will grow when improving the
development and performance of clusters. Clusters improve the name
recognition and the market presence locally (Ellram 1990), increasing
competitiveness, and hence economic growth and employment opportunities.
For Porter (2000), a successful cluster can be identified when there is a
shared understanding of the role of the cluster, all participants focus on
removing obstacles, there is a wide involvement of all participants and
institutions, there is private-sector leadership, and when the regional structure
embraces all clusters and offers economic and political stability. But clusters
do not benefit when firms are not productive. Porter also states that clusters
provide a constructive and efficient forum for dialogue among related
companies, their suppliers, government and other institutions. Because of
externalities, public and private investments to improve clusters
circumstances benefit many firms (Porter 2000, 30). Clusters affect
competition when the productivity of firms increases, which in turn intensifies
the capacity of innovation and stimulates new business formation. To a large
extent, clusters are influenced by face-to-face communication, external
networks and institutions, formal and informal organizations, and cultural
norms.
49


2.1.4.2 The Organic Food System as an innovative
Industry to Build Learning Regions
The organic agribusiness could become comparable to high-tech industries
due to the similar high-end innovations, the sophisticated institutional
framework, and high value offered. They both serve a niche market that is
willing to pay a premium for quality and for differentiated products. However,
food products are mostly buyer-driven, whereas high-tech products are
producer-driven (Gereffi and Fonda 1992). This is an important distinction in
order to know in advance the strengths and weaknesses that a region can
work around, and to design appropriate strategies in institutional building. The
food commodity chain depends on customer needs and changes in
preferences; therefore, the bulk of arrangements and relationships should be
stronger on the forward linkages rather than on the backward. Organic
farming requires a global certification, whereas agribusiness needs to meet a
wide variety of food-safety and health-quality standards, depending on the
final market.
In order to keep up with customer changes, agricultural regions must
continually innovate by having unique distribution channels with special
marketing strategies to increase awareness of the social conditions (localism)
of rural production or the freshness of the products. Other innovations include
the development of new presentations for fruits and vegetables, such as pre-
cut or pre-packaged varieties. These, in turn, lead to innovations in packaging
materials and presentations. In order to reach new markets and innovate,
each member of the chain has the opportunity to share his/her own networks
and increase competitiveness. When all these innovations are a concern of
the region, participation increases, cooperative projects are created, and the
learning cycle starts. I describe this industry further in the following chapter.
50


2.2 Limitations of the Theory
Economic development analysts have overlooked rural development studies
for several decades. Most development analysts focus on environmental
sustainability, the growing problems of urbanization, such as gentrification,
globalization of telecommunications, the implications on urban growth, or the
role of institutions in the location of manufacturing plants. At the same time,
rural areas in most countries are going through a decline. Most neoclassical
thinkers would argue that it is the result of the market mechanism, but it is
important to take into account the consequences it implies, such as the
increased migration to cities, poverty in the urban fringe, and inactive
agricultural farmland, among others. Those who have contributed to the
limited bibliography on rural development (e.g., Ward and Hite 1998;
Goodwin 1998; Gibbs et al. 2001) do mention the future agenda and issues to
take into account, such as institutions, governance, and participation.
At the same time, new theories of development (e.g., industrial districts,
clusters, and even learning regions) exclude the rural regions, mainly
agricultural, due to their decreasing importance in the economy overall.
Instead, the theorists emphasize successful urban and modern regions
working on high-technology activities. Most of them dismiss regions in
decline, but I consider these regions to be important objects of study. In
addition, theorists on planning and economic geography do not acknowledge
the value of new agricultural activities that are opening opportunities to rural
regions and that add value to landowners and small businesses.
Alternatively, rural development authors are more dedicated to issues on
sustainability and the environment. During the last decade, some have tried
to point out the importance of agriculture, but mostly as specific cases, not as
51


a theoretical framework. Even though, the literature on cooperatives may be
of great use for future studies on development.
Analysts do not directly relate food systems and development, and most of
their writing is explanatory and not sufficiently normative. The closest
relationship between development and food or agriculture is the concept of
commodity chains (Gereffi and Fonda 1992; Humphrey et al. 1998). Then
again, they use these chains for industrial analyses and do not cover the
learning possibilities of the region, nor the institutional and governance
structures, and the arrangements that could change the path of rural regions.
Finally, Pothukuchi and Kaufman (2000) already recognize that the planning
field ignores the food system as a relevant field of study and activities, much
less when it is related to rural development.
Even with the limitations to the existing literature, the diversity of schools of
thoughts and fields has important contributions that support my interview
guideline for the case studies. I directed my efforts to innovations, learning,
governance, institutions, and networks, in order to identify the major elements
of a learning region and evaluate whether one is present.
52


3. Context: The Organic Agriculture Industry in
Mexico and the World
I dedicate this chapter to describing the world of organic agriculture in order
to set the context for the next two chapters. I believe that this new agricultural
system has the characteristics of a learning system that forces all participants
to become global, to search for quality standards, and to engage in constant
innovation.
Organic agriculture is really going back to the way agriculture was at least fifty
years ago, before the green revolution. Farming organics requires non-
chemical inputs, such as natural raw materials, composts, manure, minerals,
or biologic control. Currently, what is called traditional or conventional
agriculture uses chemicals to induce productivity. Even if going organic
appears to be going backwards, it actually requires continuous research on
soils, the best practices used in the past, local plague control methods, and
historically used non-chemical fertilizers. This discipline prepares farmers to
deal with other, more sophisticated requirements, such as the organic
standards, complying with the laws of consuming countries, and the export
process.
The organic movement started in Europe due to major health and the
environmental concerns. Farmers offered radicals and hippies their products
and eventually it became a healthier alternative for the general public.
Prices of organic products usually seem higher, but in real terms farmers
incur in higher production and distribution costs that are covered by the final
53


consumer. Over the years, however, prices have been decreasing with the
growing number of suppliers around the world. Here I describe the processes,
the agencies, and the institutions involved in certification; then the statistics of
organic production, and finally the factors I consider relevant for this industry.
I found only one research center that collects information on organic
agriculture in Mexico (CIESTAAM, see Glossary). It has been following the
evolution of production, farmers, zones, and certification since 1994. I had the
opportunity to meet with one of the main researchers in Mexico to confirm the
data presented in this chapter.
A brief description of the determinant factors in a learning region regarding
the organic industry are shown in Table 3.1.
Table 3.1 Summary of Factors in the Organic Industry
Determinant Factor Characteristics in the Organic Industry
a. Innovations and Learning Constant innovations, adapted to local needs New and indigenous methods of production Technical, managerial and procedural aspects Requires research and development constantly with specialized researchers and formal lab tests Learning is collaborative, all improvements benefit the organizations involved and the region Work is usually done in families and know-how is passed on quickly The cooperative nature of the organizations promotes social learning
b. Institutions and Governance Global norms defined by USDA, IFOAM, European Union International certification agents Organizations involved with local governments, traders and international organisms
c. Networks Global networks Attached around the farmers association
In this chapter, I first describe the institutions involved in the organic industry.
Second, I show statistics on production and commercialization around the
54


world and in Mexico. Finally, I show how the organic institutional framework
promotes development.
3.1 Institutions and Norms in Organic Production
3.1.1 Certification Process
The organic label distinguishes agricultural products from conventional ones;
with it, the producer can ask for and get a higher price. The final purpose of
certification is to give certainty to consumers for the high prices they are
paying. At the same time, it is a procedural requirement to identify the
products that meet certain standards when imported. Certification is offered
for products, processing plants, intermediaries or handlers, and restaurants.
Certain norms define the process and requirements for farms and products
that deserve the label. The farmers identify the potential markets for their
products, and choose the appropriate agency because not all labels are
accepted by all countries.
Some effort has been expended in looking for homogeneity of organic
standards and norms among nations, but this has not been achieved and
apparently it will not be soon. At the same time, however, homogeneity might
not even be desirable because accomplishing it will complicate taking into
account the complexity of the industry, the differences in markets, and local
characteristics, including politics.
The process for certification is very similar for everyone applying for organic
certification; nevertheless, the details are defined by each agency. The
certification agency acts as a supervisor only and has to maintain neutrality to
55


the producer organization. The simplified steps of the process to obtain an
organic certificate are:
1. Apply for certification to an agency (basic information collection).
2. Review of the application.
3. On-site inspections by the agency (interviews, observation, checking
products, laboratory analysis).
4. Certification status (granted, pending, or denied).
5. Issue of certificate and labels.
6. Annual inspections (random sample).
The organic label is proof of having gone through the process of certification.
Even before applying, each farm must have specific record books on every
input used for each crop. Once certified, each farmer has to continue keeping
detailed records of inputs and production to be used for the annual
inspections.
To export to the United States, not only is a certificate necessary, but also
compliance with the U.S. Department of Agriculture (USDA) regulations and
assurance that all inputs used throughout the production process are listed by
the Organic Material Review Institute (OMRI). This is a nonprofit organization
dedicated to publish and disseminate generic and specific lists of materials
allowed and prohibited for use in the production processing (abstracted from
their website http://www.omri.org). However, input providers have to be
members of OMRI in order to appear on their list, and this could become a
barrier for some imports in the U.S. market. A council reviews these materials
constantly, so the accepted inputs may change as well.
56


3.1.2 Certification Agents
There are at least 200 certification agents in the world. Each follows norms
according to their country of origin. The International Federation of Organic
Agriculture Movements (IFOAM) is the founding institution of the organic
movement in Europe, which accredits only organizations that will be in charge
of certifying but do not certify products. At the same time, organic certification
agencies have to be approved by higher-level institutions in order have
credibility when issuing labels and certifying farms. The major institutions
include: the IFOAM, USDA, the Conseil daccreditation du Quebec, Costa
Rican Ministry of Agriculture and Livestock, and Japan Agriculture Standards,
among others.
Based on CIESTAAM research and a web search, I found many agents,
mostly in the United States and Europe. The most dominant agencies are
listed in Figure 3.1.
Figure 3.1 Certification Agencies by Country
United States:
Farm Verified Organic (FVO), Organic Verification Organization of North America,
Florida Organic Growers, Oregon Tilth Certified Organic (OTCO), Organic Forum
International, Organic Growers and Buyers Association, Quality Assurance
International (QAI), Organic Crop Improvement Association International (OCIA
International).
Canada:
Peace River Organic Producers Association (PROPA), Similkameen-Okanagen
Organic Producers Association (SOOPA), Organic Producers Association of
Manitoba
Japan:
Japan Organic Agriculture and Marine Products Association (JONA).
Latin America:
________Argencert (Argentina), Ecoldgica (Costa Rica), Biopacha (Bolivia).__________
57


Figure 3.1 (Cont.)__________________________________________________________________
Europe:
Naturland, Demeter Bund, Bioland, Nature Et Progress, Ecocert, Soil Association,
Organic Farmers and Growers (OFG), Krav, Institut fur MarktOkologie (IMO),
Ekoniva, Skal.
Mexico:
CUCEPRO, CERTIMEX, Asoc. DANA, CADS, CEMEXPO and Bioagricoop._______________
Source: Elaborated with information from Gomez Tovar et al. 2000, 44-45.
Also there are states and countries with normative requirements or local
agencies. Some of the offices in United States are in states such as
California, Washington, Texas, Colorado, Maryland, and Idaho. The
European Union and other countries, such as China and Israel, have specific
import and production laws on organics.
The two most important certification agents in Mexico by 1998 were OCIA
and Naturland, covering a total of almost 70% of the zones. Both started by
certifying coffee and sesame seed (Gomez Tovar et al. 2002). According to
the most recent statistics, however, Certimex increased its participation to
24%, and Bioagricoop is increasing its share rapidly (Gomez Tovar et al.
2002). Interestingly, in a period of two years the composition of certification
agents has changed dramatically, especially among the Mexican agencies.
According to an interview with Gomez Tovar (2004), this is due to the
increased acceptance of Mexican agencies in the European market. The
certification agents that are actively working in Mexico are listed in Table 3.2.
58


Table 3.2 Certification Agencies in Mexico
Certification Agency Country of Origin Percentage of Certified Zones*1998 Certified Land (Ha) 2000 Percentage of Certified Land 2000
OCIA International USA 43.0 40,654.6 31
Naturland Germany 26.4 20,701.5 16
Quality Assurance International USA 9.6 12,463.0 10
Oregon Tilth USA 7.0 1,503.5 1
Demeter Bund, Lacon Qualitat, Demeter Assoc., Eko, IMO Control Germany, USA, Holland, Bolivia 9.7 4,277.1 3
CUCEPRO Mexico 3.5
Asociacidn Dana Mexico (Federal District, Chiapas) 3.5
CADS Mexico (Jalisco) 0.9 810.0 1
Certimex Mexico 30,952.1 24
Bioagricoop Mexico (Michoacan) 10,000.0 8
* Added percentage exceeds 100% because some farmers are certified in different agencies.
Source: CIESTAAM (adapted from Gomez Tovar et al. 2000, 52; and Gomez
Cruz et al. 2002, 326)
The possibility of selling to different countries depends on which agency
issues the label. In some cases, farmers have to be accredited by more than
one agency in order to enter into the different continents. This certainly
increases the expenses for farmers and therefore choosing a certification
agent is a decisive factor in market selection.
The major problem with certificating is that is costly; there are sometimes
language barriers between farmers and certification agents, and some
inspectors lack knowledge on tropical weather crops and conditions. In 1997,
the certification cost went from US$6,000 to $15,000 plus the membership
and annual expenses of inspection (traveling expenses, food, lab analysis),
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plus commissions on sales (Gomez Tovar et al. 2000). This increase
happened, according to Gomez Tovar, due to the increase in hectares
certified by organization and also because several groups duplicated their
certification costs by hiring two certification agencies in order to accede
different markets. Expenses can go as high as US$30,000 (Lomeli Pena
1997). Some agencies (e.g., OTCO and OCIA) charge per hour: US$20 to
$40 per hour; others (e.g., IMO Control and Demeter) charge per day:
US$200-500 per day (Gomez Tovar et al. 2000).
3.1.3 Norms and Standards
Organic production standards are similar for all normative guidelines, but
have specific requirements depending on the consumer country, varying
mostly in inputs allowed. In Europe, the norm created for organics is 2092/91,
supported by the EN-45011 (European Norm on general requirements for
organizations performing product certification systems), and the International
Organization for Standardization (ISO) 9000 rules (reference for quality
management requirements) (Gomez Tovar et al. 2000). In the United States,
norms include USDA specifications based on the National Organic Standard
Board (NOSB), and the National Organic Program (NOP), under the norm
ISO 65 (quality norm for agricultural products).
The Mexican norm for organic production and processing is NOM-037-FITO-
1995. This norm was created to define the specifications on production and
processing of organics. It went into effect two years after it was proposed in
1995 due to governmental bureaucracies. However, this norm was not
designed in conformity with any other organic norm, only for Mexican
producers, and it is not accepted worldwide.
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Argentina and Costa Rica are the only Latin American countries that sell their
exports without requiring certification because their national law is accepted
by European Standards. Paraguay and Chile are working on the same
process. Also, the Province of Quebec in Canada has a mandatory regulation
recognized by the USDA (SOEL 2003).
3.1.4 Global Institutions for a Global Product
The organic movement has a wide and global support network that benefits
farmers and organizations involved in selling organics. Once immersed in
organic activities, members of this informal network are continually providing
contacts from other useful organizations around the world. The distance or
location is secondary, and, according to the interview with Gomez Tovar
(2004), there is an innate willingness of diverse organizations dedicated to
promote environmental sustainability to provide assistance to farmers.
In general, governments in Latin America rarely have aid programs for
organic products; many farmers raise capital needs from NGOs that are
interested in social issues or in the environment. Several active international
organizations in Mexico involved in organic farming have been identified by
CIESTAAM. Some of these are: Pan para el Mundo (Brot fur die Welt),
Interamerican Foundation, Rockefeller Foundation, the Inter-American
Development Bank, Misereor (Germany), MDA (Japan), and FAN CA
(Foundation for Environmental Cooperatives) (Gomez Tovar et al. 2000). Few
government agencies in Latin America have provided direct subsidies or
economic aid for organic farmers. Some have indirect offers, such as credits,
research and training, attendance at international fairs, or help on the design
of brochures (SOEL 2003).
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Also, at the international level, organic producers and certification agencies
have the support of other institutions (for assistance, training, aid, and
keeping up-to-date on new norms and inputs). Some of the institutions that
are related to the organic movement in the world are (Robin and Runsten
1999; and based on online search of the associations): Organic Trade
Association (OTA), Organic Farmers Marketing Association (OFMA)
Produce/Perishables Committee, Buy Local movement, Fair Trade
movement, and the Independent Organic Inspectors Association (IOIA).
The IOIA provides training to inspectors from all countries; being a member
allows for inspection to be accepted by international agencies, organizations
and by local producers. Mexican members of the IOIA include: Asociacidn
Mexicans de Inspectores (AMIO) and the Comite Universitario Certificador de
Productos Organicos de la Universidad de Colima (CUCEPRO), in addition to
the CEMEXPO, CERTIMEX, and ECOMEX certification agencies, and,
finally, one Mexican engineer as an individual member. Other local inspectors
allied with international certification agencies are not necessarily members of
IOIA.
I visited a Mexican NGO that promotes cooperative organizations with
environmental or organic production. This NGO has become an intermediary
organization to promote organic products around the world, but mainly in
Mexico. It aids in contacts and places orders, and charges a commission.
Through their efforts, many coffee producers have come to the point that they
are creating a brand name, Bioplaneta, to better distribute their organic
coffee. For some of their members, this NGO is just a help in training and in
communicating the new laws.
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3.2 Organics Production in the World and in
Mexico
3.2.1 Production and Consumption
Organic production began in major consumer countries in Europe and the
United States. Over time, Latin American countries have increased their
organic production. Table 3.3 lists the countries with the most hectares
dedicated to organics and the number of organic farms in each country as of
2003.
Table 3.3 Land Area under Organic Management, 2003
Organic Hectares (000)* Percentage of its Agricultural Area Organic Farms
Total 22,811.3 398,804
1 Australia 10,500.0 2.31 1,380
2 Argentina 3,192.0 1.89 1,900
3 Italy 1,230.0 7.94 56,440
4 USA 950.0 0.23 6,949
5 United Kingdom 679.6 3.96 3,981
6 Uruguay 678.5 4.00 334
7 Germany 632.2 3.70 14,703
8 Spain 485.1 1.66 15,607
9 Canada 430.6 0.58 3,226
10 France 419.8 1.40 10,364
11 China 301.3 0.06 2,910
12 Austria 285.5 11.30 18,292
13 Brazil 275.6 0.08 14,866
14 Chile 273.0 1.50 300

20 Mexico 143.2 0.13 34,862
* include certified land area and in conversion
Source: SOEL 2003.
Australia and Argentina are the countries with most land dedicated to
organics; however, half of it is dedicated to extensive grazing. European
countries have a higher percentage of organic land compared to their total,
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due to their smaller area. In total land area, Mexico is in 20th place. Asian
countries have the least share of organic land in the world, but the most
hectares are in the process of conversion; the total organic area in Asia will
soon be 600,000 hectares. Italy, then Indonesia (not in the table), and then
Mexico are the countries with larger numbers of certified farms.
The organic market is concentrated in developed countries. The United
States alone was the greatest market in 2003; and the European Union as a
whole was the second largest (see Table 3.4).
Table 3.4 Retail Sales of Organic Products, 2003
Markets Retail Sales 2003 (million US $) Percentage of total food sales (estimates)
Total in Europe 10,000-11,000 -
United States 11,000-13,000 2.0-2.5
Canada 850-1,000 1.5-2.0
Japan 350-450 <0.5
Oceania 75-100 <0.5
Total 23,000-25,000 -
Source: SOEL 2003.
Of the European countries (see Table 3.5), Switzerland is the one with the
greatest consumption of organic products from the total food sales, the
second is Germany, and at the same time is third in total retail sales
considering countries independently.
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Table 3.5 Retail Sales of Organic Products in Europe, 2003
Markets Retail Sales 2003 (million US $) Percentage of total food sales (estimates)
Germany 2,800-3,100 1.7-2.2
United Kingdom 1,550-1,750 1.5-2.0
Italy 1,250-1,400 1.0-1.5
France 1,200-1,300 1.0-1.5
Switzerland 725-775 3.2-3.7
Source: SOEL 2003 "A . Market"
Sales of organics have kept growing steadily, at an average rate of 5%, after
high growth for the past 15 years with close to 20% growth in the U.S. alone
(Robin and Runsten 1999).
A large diversity of channels exists for organic products with increasing
demand and decreasing prices (Robin and Runsten 1999). The different
channels for selling organic products in consumer (developed) countries
include supermarkets and grocery stores, natural and health food stores,
popular fairs or local markets, and box schemes with home delivery. Table
3.6 shows the concentration of each channel in five countries. Each country
has a different structure; in general, natural and health stores are the most
common channel used.
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Table 3.6 Distribution Channels for Organics Produce (percent)
United States Germany France England Japan
Natural and healthy food stores 66 45 36 (including bakeries) 5 Second
Supermarkets 8 25 38 63 Third
Direct sales 11 22 26 (including cooperatives) 18 First
Other 15 (warehousing, large intermediaries) 8 (bakeries, pharmacies, butcheries) 10 (vegetable stores) Fourth (fast food and restaurants)
Source: CIES1 fAAM (in Gomez Tovar el al. 2000, 88)
Large food product corporations around the world also are becoming organic.
For example, General Mills bought Cascadian Farm (now a subsidiary), and
McDonalds and Safeway are buying organic land to produce their own brand
(Toyes 2003). Some organic corporations are becoming large and changing
from the cooperatives they started as. For example, Florizon (largest producer
of organic milk and related products) is a $127 million public corporation that
sells to 70% of the market nationwide in retail. Other examples are the five
giant farms that control half of the $400 million in organic produce in the
California market alone (Pollan 2001). The reorganization of food systems is
causing corporate interests to reinvent the food system on their own terms,
but at the same time they have to deal with local values and local interests
(such as buy local) (Stanford 2002).
A few countries in Latin America have a local organic market. Argentina is
one of those that has a local market. Argentinean producer groups have
worked together to have accessible products for local consumption, offering
oils, flours, honey, wine, and tea. They have spent ten years preparing
weekly boxes with organic products delivered at home, and have slowly
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created a solid market. Eventually, fresh produce was sold by the
development of associations between producers and shops (SOEL 2003).
Similarly, many organic agricultural communities exist in Europe, and local
markets have grown around the weekly box of produce (Pollan 2001).
3.2.2 Organics in Mexico and Their
Commercialization
The organic industry in Mexico keeps growing. CIESTAAM projects a
continuous growth of 45% in land area and 42% in revenue. Figure 3.2
illustrates this tendency. Organic production has grown even when the
country was in economic crisis.
Figure 3.2 Organic Agriculture Evolution in Mexico
Organic Agriculture in Mexico
dZl Surface (ha) ES-H Number of producers
AEmployment (1,000 jobs) X Revenues (US$ 1,000) J
* Estimated
Source: CIESTAAM 2000 and Gomez Cruz et al. 2003.
According to CIESTAAM, the organic industry generates 160 jobs per hectare
(ha) each year, totaling 8 million jobs for 2003. In 2000, there were more
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than 28,000 farmer organizations in the country. Small producers have an
average of 2 ha, whereas large farms average 150 ha. Half of the small farms
are indigenous (Gomez Tovar and Gomez Cruz 2002). Table 3.7 summarizes
the differences between small and large producers.
Table 3.7 Size of Organic Farms in Mexico, 2000
Type of producer Percentage of producers Percentage of land Percentage of revenues
Small 98.6 84.2 68.8
Large 1.4 15.9 31.2
Source: CIES1 FAAM (adapted from Gomez Cruz et al. 2002, 324)
Most organic farmers in Mexico have grown with help from NGOs or local
leaders. Very rarely has the government been the major promoter or even an
active actor. The organic agriculture growth can be considered as a bottom-
up scheme, although international organizations play an important role in
defining the standards and providing the initial push (these include NGOs,
local leaders, external leaders, a company with production needs, or even a
local visionary).
Mexico exports 85% of its organic production; the local market is so small that
there are no official sales figures. The general local consumer does not know
the difference between organics and conventional products. In addition, the
local stores that sell organics complain that there is not enough supply all
year long. The few organic stores are La Granja, Natural stores, Servicio Rio,
and Superama.
Table 3.8 lists the organic products sown in Mexico. Most organic land area is
dedicated to coffee production. Twenty percent of the worlds organic coffee
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is Mexican. In 1998, there was a production of 47,461 tons, corresponding to
16% of total production, and herbs and vegetables accounted for 39% of
volume, despite the smaller use of land area for these crops (Gomez Cruz et
al. 2002).
Table 3.8 Surface Area of Organic Production in Mexico (ha), 1996-2000
Product 1996 1998 2000 In transition 2000
Coffee 19,040 32,161 49,512 21,326
Blue and white corn - 970 2,074 2,597
Sesame seed 563 1,895 2,844 1,281
Vegetables* 2,387 4,391 3,307 524
Herbs - - 2,454 57
Orange - - 1,850 -
Beans - 1,241 1,334 263
Avocado 85 307 891 20
Mango - 284 875 1,200
Banana 300 500 826 -
Others 898 12,708 5,534 4,034
Total 23,273 54,457 71,500 31,302
* includes herbs in 1996 and 19$ >8
Source: CIESTAAM (extracted from Gomez Cruz et al. 2002, 323)
Production of fruits and vegetables takes place in 84 of the 262 zones in 19
states in Mexico. Vegetable production alone is the most efficient type of
crop, with the best yields for the land and greatest revenues generated. Table
3.9 compares coffee production to that of fruits and vegetables.
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Table 3.9 Main Organic Products Produced in Mexico, 2000
Product Organic Land (ha)* Number of Producers** Revenues (,000 US $)
Coffee 70,838 28,371 32,560
Fruits 11,325 2,537 31,771
Vegetables 3,831 3,592 47,218
Other 16,806 13,487 27,853
Total 102,800 47,987 139,402
* Including land in transition
** Many producers participate in more than one product
Source: CIESTAAM 2000
Organic producers in Mexico sell their products through four different
channels: commission with brokers, contracts with traders, joint ventures, and
direct sales (Gomez Tovar et al. 1999). Eighty percent of farmers use the
commission scheme.
. Commissions with brokers or importers/exporters. In this channel, brokers
keep 10% to 15% of sales and add 30% to 40% for transportation,
packaging, and taxes. These additional expenses translate into an
overprice in the final market.
. Contracts with distributors. Each contract specifies a high/low price up front
with no overprice to be paid throughout the year. Then the trader pays the
farmers with each shipment according to the contract terms, and covers
transportation expenses and taxes.
. Joint-venture contracts between farmers and a broker. Both stakeholders
set a fixed price for the product regardless of the size of the shipment or
time of year. Investments required for distribution and production, as well as
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profits, go 50/50. Production is programmed annually to be able to assure
the market.
. Direct sales (see, for example, Del Cabos case in Chapter 4). Overprices
are set directly with the customers to cover expenses on marketing, sales,
and export logistics. The overprice is justified to include the expenses of
certification, transition time with no production, labor requirements, training,
and commercialization, without compromising the revenues for farmers.
Another alternative for commercialization, but not only for organics, is the
solidarity market under the name of Fair Trade. This movement was created
to promote world trade of agricultural products from poor regions, without
intermediaries, to allow the farmers to keep most of the profits for themselves.
Coffee is the major product traded. Certification and the Fair Trade label are
required to meet social and environmental demands. These products are
priced even higher than organics, and are sold at the farmers own stores or
the chain of associates.
According to CIESTAAM, Figure 3.3 illustrates the commercialization chain of
organics in Mexico. This figure makes evident the limited commercialization
infrastructure in Mexico as well as how organized producers are immersed in
globalization directly. The direct relationship between producer and consumer
is a competitive advantage translated into knowledge of the market, direct
negotiations, and keeping monetary benefits instead of sharing out the price
along a longer value chain.
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Figure 3.3 Commercial Distribution of Organic Products in Mexico
Source: adapted from Gomez Tovar et al. 2000, 98.
In contrast, a traditional distribution system in Mexico is very different, more
vertical, longer, and less formal than that used for organic products. Figure
3.4 depicts the lemon value chain according to Dussel Peters (2002).
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Figure 3.4 The Lemon Value Chain, Dussel Peters 2002.
Source: Dussel Peters 2002.
Many informal intermediaries in Mexico, called coyotes, pay cash in
advance to the farmer on-site. In other words, they pay at the farm and
usually have their own trucks, so they pay for transportation themselves. This
requires them to have cash on hand at the time of the sale (Echanove 1999).
Traditionally, national produce is sold at the Mexico City Distribution Center,
where 80% is sold fresh through 120 wholesalers to get to their final
destination (markets, supermarkets, fruit stores, convenience stores, and
restaurants). Those 120 wholesalers are only 6% of all commercialization
channels; the other 94% are small or medium organizations and
heterogeneous channels (Echanove 1999).
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This distribution chain affects prices, which tend to triple from producer to
final consumer, leaving the least portion to the farmer. Even in the food
processing industry, where there are large agglomerations, there is still a lack
of integration (among laborers, packers, and processors). This translates into
a weak and unstable local supply, increasing demand, and high international
competition, which forces industries to import and be dependent on brokers
(Dussel Peters 2002). The international trade in farm products has a larger
concentration of strategic alliances and joint-ventures to cover more markets.
For example, 55% of exported fresh fruits and vegetables are bought by only
10 buyers (Dussel Peters 2002).
The difference for both the traditional agriculture and the organic supply
chains is the relationship between the farmer organizations and the market. It
is closer and more direct in the organic industry, with direct contact and more
awareness of needs and preferences. In a longer chain, detached from the
rural areas, the intermediaries reap the profits. The former is organized with
formal agreements and a planned schedule of shipments; the latter is
informal, with sporadic sales to the same intermediary.
Three main issues for organized farmers to take into account in order to
succeed in the commercialization of organics are as follows:
1. Having external commercialization is an expensive option for organic
cooperatives, but a viable alternative if supervised correctly (Robin and
Runsten 1999). When having a broker, it is ideal to have a management
team working closely with the broker to learn and grow together. Having
an internal commercializing team is a valuable asset, but it is a slow
process to learn as well as to find good service providers to reduce costs.
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2. In order to assure the high prices, it is important to stay in a one niche by
differentiating products through social consciousness, and above all to
develop brand recognition. However, by choosing commercialization with
intermediaries might complicate creating a brand name because they
become unattached to the farmers over time.
3. Organic farmers should create alliances with foreign brands or with
experienced producers to supply products during the winter months,
working to assure quality control (Robin and Runsten 1999).
At the same time, new farmers face some challenges that complicate the
attractiveness of selling organics. Some of the major problems regarding
costs are: the high prices of inputs (imported), the expense of certification and
transportation, the high management costs and infrastructure required, and
the high inspection costs due to the fact that most researchers are foreigners.
In Mexico, also in addition, the educational and technical levels in the rural
areas are low, with a lack of knowledge on biological control and
commercializing, and a lack of local trainers and research and development
centers. Not all local governments are willing to reduce bureaucratic
processes to facilitate working in conformity with organic standards. Some
complain about the lack of financing alternatives, others about not trusting the
contracts and much less their neighbors (e.g., using chemicals near organic
farms).
3.3 How Doing Organics Increases Innovation
and Learning
The organic agriculture environment has an institutional framework and
networks that are attractive for farmers in that they have the opportunity to
become global players and create or participate in a learning environment.
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Producing organics can help develop the regions involved by innovating, by
following international norms, and by becoming part of a global network.
3.3.1 By Innovating
Organics is an alternative for production, not only because of the different
procedures that need to be followed, also because of the distribution and
marketing innovations it requires to be placed successfully. Farmers are
acting in a corporate way in order to guarantee sales throughout the year.
Also, this new trend is allowing farmers to have more resources on innovation
(for example, 900 scientists are available in General Mills for their organic
brands) (Pollan 2001).
Science and innovations play important roles in overcoming processing and
production challenges. These innovations involve technical agricultural issues
as well as managerial and logistic procedures for the international consumers
and the development of local markets. The way of distributing organic
products also has also forced transportation companies to change and
innovate in order to meet the norms and standards required. Innovations in
the organic industry are ubiquitous. Farmers have to learn new improved
production techniques involving machinery, equipment, procedures, raw
materials and inputs. Additionally, the market demands different varieties,
different specificities (e.g., color, size, durability), which encourage organic
producers to find solutions and new products. Finally, innovations are also
involved in the logistics and managerial needs of the organization. The
organic industry requires constant evolution. Local soils require constant
adaptation to the weather and to new crops. These market needs maintain
innovations similar to those of the high-tech industry; the main difference is
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that the organic industry is market driven and the high-tech industry is
supplier driven.
In the end, the organic industry involves more than farmers in the learning
process; it involves the management team, logistics suppliers, local
government, and certification agents as well. The constant evolution forces
learning, and the global nature of organics forces sharing knowledge and
know-how. In Mexico, the state universities are closely involved with
agricultural organizations, offering courses on organics and innovating.
3.3.2 By Following Norms and Standards
Information is crucial for organic agriculture, not only information about the
product, but also about inputs, fertilizers, processing, packaging,
transportation, and labels. By following norms, the organic group keeps up
with new laws and requirements, changing quickly to meet new export
standards. The facts that no chemicals can be used and everything must be
recyclable shows much sophistication (Gomez Tovar et al. 2000).
Norms and standards required for organic products are well-defined and well-
known by leaders in organic communities. This involves a costly strategy for
development, but it can pay off its members. Once a group of farmers have
decided to produce organics, the learning process begins quickly in order to
know the process, the norms, the market, the certification agencies, and the
product. Transforming soil into organic soil may take three to four years. This
gives enough time to the organization, however, to learn more about the
markets and to identify specific clients for future sales. New clients will require
a specific supply per a certain amount of time (for example, a specified
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number of boxes weekly), and this forces the organization to plan ahead and
become professional.
When dealing solely with brokers, the annual planning may not be as
important but at the same time it cannot assure the overprice expected by
farmers. By having guaranteed sales, more credit options are available
(Dussel Peters 2002). A group of farmers can learn how to cultivate organics
initially and then continue innovating by themselves, as long as they keep in
close contact with the market, the organic norms and standards, and their
related institutions. Most organic movements in different regions in Mexico
are bottom-up, initiated by local or external leaders worried about the
community in first place and the environment in second.
3.3.3 By Becoming Part of a Network
Being integrated in the organic industry has additional benefits by being
involved in several networks: education, small loans and credits, medical
services, and communitarian stores (Gomez Tovar et al. 2000). The initial
contact is with international networks of other organic organizations, such as
certification agencies and the organic consumer network, which either
becomes the consumers or increases information on how to become organic.
The inspectors, researchers, and technicians also are contacted to transform
the region into organic. Eventually other NGOs, distribution channels, and
traders are added to the network.
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Figure 3.5 The Network of Organic Farmers
The network of organic production is shown in Figure 3.5, which shows how
organized farmers are closely and directly related with government, with
certification agencies, with research and development centers, and with
commercialization channels. The organics network has direct contact
between farmers and the different actors with increased benefits compared to
the traditional, horizontal, chain where the information and monetary value
are lost along the way to the final consumer.
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At the beginning of an organic project, the organizers should have a network
to obtain capital (NGOs, social networks, or investors) and professional
commercialization services. Choosing the right partners becomes important in
assuring the activities of the organization, especially when associating with
others who are knowledgeable in commercializing in profitable markets.
According to Robin and Runsten (1999), it is important to have a technical
team and management separated from the production, which usually is the
farmers. Also important is creating long-term relationships with suppliers, the
certification agency and consumers; and understanding the whole organic
production chain to get the most out of each transaction.
Knowing the value chain could also attract processing plants. However, in
most cases of conventional agriculture in Mexico, the problem with
processing plants is that it is cheaper to not buy local but to buy volume and
not be restricted to local conditions (Pollan 2001). Close distance with
agricultural land is not enough; contracts, joint-ventures, and strong alliances
are required to guarantee an annual supply of raw materials.
3.3.4 How a Rural Region Producing Organics
Becomes a Global Player
Organic farming forces farming organizations to have more contacts, or more
links with local, national, and international institutions. These organizations
have to be hands-on in every detail of production and commercialization, and
this makes them more prepared with a stronger foundation to compete and
negotiate in the market. These links allow for more market knowledge, more
learning, and more networks, all under stable and well-established
institutional norms.
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The agriculture industry in Mexico is full of heterogeneous cases with local
worries. In accepting the globalization of agriculture, many farmers have to go
through adaptations: produce products according to quality standards, plan
ahead, negotiate with distributors, transport companies and clients.
The importance of human behavior exceeds that of the economic forces. Not
all organic experiences can follow the same path, but the effect on the people
involved is beneficial for all.
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4. Case Study: Los Cabos, Baja California Sur, a
Learning Region
Productores Organicos del Cabo (Del Cabo for short) is an organization of
organic producers in San Jose del Cabo, the southernmost municipality of
Baja California Sur (see Figure 4.1).
Figure 4.1 Baja California Sur in Mexico
I found many characteristics in this region that are similar to a learning region,
with some exceptions due to the country-specific situation and the rural
aspect of it. I interviewed 20 people in the region in my three weeks stay,
including members of the organization, the administrative staff, the
competition, and government officials. I also gathered information from
observation, local sources, and conference memoirs. This chapter first
introduces the region and the organization, and then describes the region
according to the three major aspects of a learning region. In this chapter I
describe the major findings of the information collected, as a case study. I
combined all the information from the interviews and from secondary sources
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to present a single continuous story. Appendix A includes the interview guide
I used for all the interviews, and Appendix B the people interviewed.
Table 4.1 describes very briefly the factors that are important in this learning
region. These will be explained further later in the chapter.
Table 4.1 Determinant Factors and Characteristics in Los Cabos
Determinant Factor Characteristics in the Organic Industry
a. Innovations and Learning Organization learns, technical team teaches farmers Local engineers, packers, and administrative staff Modernization process to meet needs of the market Own tests in nursery and greenhouse (e.g., plantlet needs, tests, own local variant of cherry tomato) Machinery and equipment used by all members Irrigation systems and new fertilizers Constant training and education Innovations on the export process, on packing, on management practices, on quality and innocuousness (defined as health and safety on the post-reap process) Learning is an ongoing activity, open to all members of the family; knowledge is passed on to anyone in the region (social learning)
b. Institutions and governance Arrangements among farmers in the SSS and between Del Cabo and Jacobs Farm are formal even when not contractual. Annual plans, agreed prices, quality assurance. Export and production certificates Close relationship between organizations and local government to accede to programs and aid Mexican Norm NOM-037-FITO 1995, I FOAM, USDA (NOP)
c. Networks and Social Capital Trust in the region Leadership started external but involved the organization and now local Cooperative and collaborative nature of the Social Solidarity Society (SSS) Brand name Del Cabo, Jacobs Farm, and Joe Trades Relationships in Mexico: University of Chapingo, Universidad Autbnoma de Baja California Sur (UABCS), University of Guanajuato; with technical schools; with local government; with laboratories Relationships internationally: with universities and research centers, with certification agencies, with related organic organizations, with USDA, with transportation carriers.
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Before I fully describe the region and analyze the learning region in it, I first
describe my experience during my fieldtrip.
4.1 My Experience
Figure 4.2 shows the map of Baja California Sur on the left, and a map with a
closer look of the southern end of the peninsula, on the right.
Figure 4.2 Map of Baja California Sur and Los Cabos
I arrived in San Jose del Cabo expecting to find a learning region and hoping
to not have wasted my plans and the money spent on this trip. I did find the
learning region I was looking for, and was convinced about it more and more
every day. Upon my arrival, I was introduced by the Human Resources
manager of Del Cabo. He was very kind; he brought me to the hotel to leave
my things and then he showed me the town. Then we visited the local fair
where Del Cabo had a stand. At that moment I had my first interview, with the
engineer in charge of the greenery. I was kindly welcomed by everyone
farmers (members) and the management team.
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On my second day I had a long conversation with my host and I started
making appointments with several members of the executive committee and
with the staff and technicians. The Del Cabo plant is located in San Jose
Viejo, the oldest part of town before it became a tourist town. The
transportation was effective and the buses allowed me to get to know more
about the place and the people. I was surprised to find that taxi and bus
drivers as well as regular workers in the city know about Del Cabo and are
proud of their accomplishments.
I found Del Cabo to be a big plant, considering that it is a cooperative; it is
well organized and colorful. The color of tomatoes and basil gave a great
combination and smelled delicious. People were very friendly and open to talk
and share information, with the exception of the accountant, who did not want
to give me data on revenues because these were considered confidential. A
few times, I was told that something was confidential (in fear of their
competition knowing), but in reality, the cooperative members and staff trust
each other and know that they rather share all the information to assure the
success of the organic environment that is allowing them to live better every
day.
I was surprised about their professionalism. They might not have the most
beautiful corporate offices, but they are operational, with eight computers for
the staff, fax machines, an operator, radio communication, and very well-
defined processes and quality standards inside the plant.
A new machine at the plant will increase the speed in packing tomatoes, but
they are in the process of identifying the volume it will require, and above all
they are analyzing how it will affect their specific registration codes. They
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pack each box (shipment) based on the farmers code; no box can have
mixed batches of tomatoes from different farmers, not even mixing two codes
(different land lots) from the same farmer. The engineers are studying all the
possibilities and by the 2004-2005 cycle they will probably start using it.
I also visited another packing plant in the north, as well as the surrounding
farmers. I went with a technician and accompanied him on his daily activities.
I got the opportunity to see the cultivation, eat freshly cut tomatoes, and smell
delicious basil the whole time. I was surprised about the lot sizes: they are
small and hidden behind bushes or corn plants. Also interesting was the
amount of product that is left on the ground because it does not meet the
expected quality (having dots, incorrect shape, and incorrect color). Only the
best are chosen. Also basil twigs are left on the ground. I wonder how much
of these products can be used for conserves or spices.
The formality of processes and of the company was a nice surprise. Farmers,
regardless of academic achievement, master the production process; they
are owners of their domain. Even the shyest member is in full knowledge of
the activities of the SSS and gets involved in major decisions. They are not
afraid to make decisions and innovate even the wildest ideas.
Del Cabos executive committee hired a professional staff (none can be
members nor farmers) to manage and provide technical support. Engineers
and degree holders in several fields were hired; some are even currently
studying for their master's degrees. The staff feels proud to work in such a
company, where they can also be of so much use. I felt I visited a healthy
environment, with happy people, proud of their jobs, enjoying work, and in
constant search for competitiveness and quality. Every day, the oldest
)
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