PERU CACAO ALLIANCE II PHASE

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PERU CACAO ALLIANCE

PHASE II QUARTERLY PROGRESS REPORT: SEPTEMBER - DECEMBER 2016 (YEAR 1, QUARTER 1)

COOPERATIVE AGREEMENT NO: AID-527-A-16-00002

Implementing Partner:

Palladium

Agreement Officer’s Representative:

Fernando De Villena

Submission:

DISCLAIMER

The views expressed in this publication do not necessarily reflect the views of the United States

Agency for International Development or the United States Government.

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Table of Contents

ACRONYMS .......................................................................................................................................... 4

EXECUTIVE SUMMARY ....................................................................................................................... 6

RESULT 1: FACILITATE MARKET ACCESS ....................................................................................... 8

RESULT 2: INCREASE CACAO FARMER PRODUCIVITY AND QUALITY OF POST-HARVEST

PRODUCTS ......................................................................................................................................... 14

RESULT 3: INCREASE ACCESS TO FINANCE ................................................................................ 20

RESULT 4: FACILITATING PRIVATE INVESTMENT ........................................................................ 25

COMMUNICATIONS ........................................................................................................................... 29

LEVERAGE .......................................................................................................................................... 34

OPERATIONS ...................................................................................................................................... 37

MONITORING AND EVALUATION ..................................................................................................... 38

SUCCESS STORIES ........................................................................................................................... 44

ACRONYMS

AOR Agreement Officer’s Representative

APPCACAO Asociación Peruana de Productores de Cacao

BAS Business Advisory Services

COP Chief of Party

DCOP Deputy Chief of Party

DEVIDA National Commission for Development and Life without Drugs

FONDAM Fund for the Americas

INTP Integrated Nutrition and Timely Pruning

IPM Integrated Pest Management

LOP Life of Project

M&E Monitoring and Evaluation

MFI Microfinance Institution

MINAGRI MInistry of Agriculture and Irrigation

NGO Non-Government Organization

PCA Peru Cacao Alliance

PMP Performance Monitoring Plan

PM Program Manager

PD Project Director

PIRS Performance Indicator Review Sheets

PRODUCE Ministry of Production

PROMPERU Exports and Tourism Promotion Board of Peru

SOE Schools of Excellence

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STTA Short Term Technical Assistance

USAID United States Agency for International Development

EXECUTIVE SUMMARY

Key actions undertaken during the first quarter of the Peru Cacao Alliance’s second phase were

geared toward hiring key personnel, opening the Lima and field offices, building our library of

communications tools, building confidence and alignment among critical Alliance partners towards

project objectives, and developing joint strategies with these partners to implement the project. We

also finalized strategies to provide technical assistance on a massive scale to farmers aligned with

the project, began efforts to seal commercial relationships and new marketing channels, and started

our work to expand access to finance among our Alliance partners, namely cacao farmers and firms.

This quarter, the project team shared the Peru Cacao Alliance’s (PCA) strategy in meetings with all

of the pre-identified supply chain partners, agricultural technology supplier partners and potential

financial institution partners. In each of these meetings, we outlined our principal objectives for this

phase of the Alliance, namely:

a. Increase cocoa productivity and improve quality through post-harvest processes;

b. Facilitate access to differentiated markets;

c. Increase access to financing;

d. Facilitate private investment in the agroforestry value chain.

Through these discussions, we agreed upon a number of activities to meet the above objectives.

The initiative to develop “Schools of Excellence” to improve Cocoa Productivity and Quality was one

activity that stood out as critical. At these schools, and through training elite trainers and technology

agents who will then train Alliance farmers, we will undertake a large-scale technical assistance

effort across the three target regions. The effort is sustainable given that Alliance partners are co-

sponsoring these schools. For example, Yara and Husqvarna developed training sessions for PCA's

technicians. They also participated in the schools' initial sessions, training technicians and lead

producers from participating institutions.

PCA designed the themes for the initial training sessions together with our Alliance partners. Topics

identified and requested by these partners included plant nutrition, timely pruning (INTP) and

integrated pest management (IPM). Nine hundred and fifty-seven male and female growers from

target regions participated in the first training sessions and field activities.

To facilitate access to differentiated markets, during this quarter PCA strengthened its ties with

international buyers, including ICAM, Casa Franceschi and COLCACAO. We organized field visits

for these companies to showcase the quality of Peruvian cacao, specifically how it is dried and

processed following harvest. We also introduced these buyers to other Alliance partners with whom

they can form commercial relationships. Facilitating these sorts of purchase agreements is the

principal strategy we employ to assist producers access differentiated cacao markets. Employing

this strategy requires that we proactively define, expand and put in place on a wider scale proper

harvest and post-harvest protocols among Alliance members to ensure the high level of product

quality required by these sorts of exigent buyers. In response to this challenge, the Alliance, along

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with the Peruvian Association of Cacao Framers (APPCACAO), will develop a cacao quality

management program starting in February 2017.

To expand financing access, this quarter we undertook a number of activities. First, we began a

research effort to refine our strategy and activities to expand finance and investment along the entire

cacao value chain, which we completed in January, the content and results of which will be included

in the next quarterly report. While we refined our finance strategy, PCA team members began to

coordinate pre-planned activities with financial entities. For example, PCA staff met with Agrobanco

to begin planning to expand the pilot program it began with Agrobanco under the first phase. Under

this pilot, we co-financed credit promoters in all three regions to identify new clients in need of

financing, and packaged loan applications for submission to Agrobanco. Under phase II, we intend

to engage nine credit promoters to expand credit to farmers from Agrobanco who are seeking yield

and production increases of cacao and banana. These credit promoters will work in concert with the

Schools of Excellence, and will provide financial education to increase the appetite for credit among

PCA farmers. AGROBANCO has already developed a financial literacy curriculum, which will be

adapted and provided via three workshops (one per region) to train financial literacy facilitators,

planned for February 2017.

To expand investment in target value chains, Alliance team members held meetings in Peru and in

Europe with several potential investors, including Barry Callebaut and Lindt. These meetings

focused on the status of Peru’s cacao sector, as well as the importance of developing stockpiling

schemes to aggregate sufficient cacao, and investing in post-harvest processing systems for wet

beans to ensure proper quality control. A number of investors followed up with visits to Peru to

conduct preliminary due diligence on their investment concepts, and others are conducting the final

financial analysis required to finalize their investment proposals.

The Alliance also spent the first quarter sharing PCAII’s proposal and strategy with a range of

strategic partners and co-investors from the public and private sectors to ensure alignment and

acceptance, including regional and local authorities, regional governments, local governments,

DEVIDA, Fondo Empleo (employment fund), FONDAM, Agrorural, among others. PCA’s proposal

and strategy were positively received by these entities. One outcome worth mentioning as a result of

these coordination meetings is a request we received from the Ucayali regional government, asking

if we could include their extension agents into our training programs, and that we jointly implement

the technical assistance program in that region.

Last, but not least, we also spent last quarter ensuring acceptance and alignment with our private

sector partners through a series of meetings, and are pleased with the overwhelmingly positive

response that these actors have with the PCAII proposal and strategy. These private sector actors

include supply chain actors, technology suppliers, financial institutions, and producer organizations,

cooperatives and associations. The predominant opinion is that the second phase of the Alliance is

an innovative proposal that addresses relevant issues that remain barriers to improving growers'

incomes and increasing the competitiveness of the overall supply chain. This response was captured

in our first meeting of private sector partners held in Lima, and attended by 15 of PCA’s private

sector partners (and leverage partners), who reaffirmed their commitment to the program, and to

offer access to technology, financing and differentiated markets for members of the cacao, banana

and wood supply chains. We also established a private sector steering committee this quarter, with

José San Martín, General Manager of the exporter ROMEX, as its President.

RESULT 1: FACILITATE MARKET

ACCESS

TABLE 1: CALENDAR OF ACTIVITIES R1: FAMILIES FROM CONSOLIDATED RURAL AREAS OF ALTERNATIVE DEVELOPMENT ARE PUT INTO DIRECT CONTACT

WITH END BUYERS IN HIGH VALUE MARKETS THROUGH "SUPPLY CHAIN MANAGERS (SCM)" BY THE END OF THE

PROJECT IN 2021

DESCRIPTION OF ACTIVITIES AND SUB-ACTIVITIES

PERIOD (September-December 2016)

September October November December

A.1.1 Facilitate purchase agreements between end users and supply chain managers (SCM)

A.1.2 Consolidate and increase professionalism of farmer organizations by providing tools to improve their processes and member services, including a gender focus.

A.1.3 Support supply chain managers (SCM) to establish relationships with independent farming households

A.1.4 Develop guidelines and an action plan for managing cadmium use in cacao

A.1.5 Support supply chain managers (SCM) and end buyers in the development and promotion of differentiated products

A.1.6 Create supply agreements with end buyers of chocolate and other buyers of products from the Amazon

A.1.7 Design and implement a program for supply chain managers to attend specialized trade fairs in order to expand market access

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Activities

A.1.1 Facilitate purchase agreements between end users and supply

chain managers (SCM)

This quarter, the PCA team supported international cacao buyers ICAM Spa, COlCACAO, Hacienda

la Tentación and Casa Franchesci to create commercial relationships with Alliance partners/supply

chain managers (SCM) to ensure the supply of quality cacao in sufficient volumes. These

commercial relationships could potentially include investment from these buyers to ensure the

reliability of the supply chain. PCA organized in-country visits for these buyers/investors to the

Peruvian Amazon, including meetings with potential suppliers.

ICAM Spa is interested in expanding its portfolio of cacao suppliers, so PCA introduced this firm to

the Yanajanca growers’ association, the Cordillera Azul cacao cooperative from Huánuco, the Fine

Flavor and Aromatic Cacao Cooperative, and the Agroindustrial Curimana cooperative from Ucayali.

The company’s representative has confirmed that they are planning a second visit wherein they will

meet with organizations to examine their storage plans for the 2017 campaign, and consider the

possibility of entering into purchase agreements.

Three representatives of COlCACAO/Hacienda la Tentación, a Colombian company with offices in

Belgium, visited the regions of San Martín, Huánuco and Ucayali November 15-17. The visit was

arranged following several Skype calls between the PCA team and the buyer to coordinate trip

details. This buyer is specifically interested in buying and distributing Peruvian cacao in the

European market. PCA arranged for COICACAO representatives to meet with Alliance partners

MEGAMAR, AMT Agroindustrias, Cooperativa Tocache, ASPROC NBT, ACOPAGRO and Allima

Cacao towards this end. As a result of the visit, COICACAO expressed an interest in developing a

commercial relationship with these Alliance partners. The next step towards sealing this relationship

is coordinating a shipment of samples for this buyer and developing a cacao supply proposal for

COICACAO from these Peruvian firms. The PCA team will provide technical support in both

activities.

Casa Franceschi, a PCA Alliance partner firm, is interested in developing new, cacao flavor profiles

from the region. This quarter, Casa Franceschi explored the possibility of sourcing fine flavor cacao

from different areas of Peru, such as Chazuta. Towards this goal, PCA coordinated the shipment of

samples from the Allima Cacao and Casa Qoya cooperatives to Casa Franceschi, fueling the

company’s interest. Following numerous Skype meetings, PCA arranged for the company's Director

to visit Chazuta on December 13 and 14, during which he established contacts with both

cooperatives with the hope of sealing a commercial relationship in 2017. The PCA team will provide

technical assistance to these potential suppliers this quarter to follow-up on this supply lead.

A.1.2 Consolidate and increase professionalism of farmer

organizations by providing tools to improve their processes and

member services, including a gender focus

Given the positive correlation between organized producers and strong associations with the

capability of meeting buyer requirements, PCA partnered with the Ministry of Production this quarter

to expand the use of the of the MyCoop tool, designed to strengthen producer organizations. PCA

and the Ministry will apply this tool to strengthen 15 PCA producer organizations. Towards this

objective, we carried out the following activities this quarter:

• Trained two ACOPAGRO representatives, a representative of the Fine Flavor and

Aromatic Cacao Cooperative, and a representative of Agroindustrial Curimaná, as

MyCoop trainers. The week-long training course was held in Lima in November

2016.

• Scheduled MyCoop workshops for 15 organizations in the regions of San Martín,

Huánuco and Ucayali to be held in February 2016.

In addition to the above, PCA will support the partner associations/cooperatives to develop and

implement institutional strengthening plans to be put in place during the course of receiving the four

MyCoop training modules.

A.1.3 Support supply chain managers (SCM) to establish relationships

with independent farming households

PCA arranged meetings and purchase agreement discussions between Alliance partner AMT

Agroindustrias and cacao growers from Shambillo, Alto Shambillo, Selva Turística, Boquerón, Los

Olivos, Vigo, Sion, Nuevo Jaén, Santa Rosa, Huipoca, Hormiga, and Pueblo Nuevo communities

from the district of Padre Abad on November 8, 9, 10, 13, 19 and 20, respectively. AMT

Agroindustrias needs to consolidate its supply chain of wet beans and is very interested in

purchasing cacao from these geographic areas.

PCA also conducted joint visits with Chocolatería Amazónica to the areas of Sisa, Chazuta and

Naranjo in the region of San Martín in October and November 2016. Leading producers have since

delivered samples to this buyer to explore the possibility of a direct, commercial relationship based

on higher product quality. PCA will follow up to seal this relationship in January 2017.

A.1.4 Develop guidelines and an action plan for managing cadmium

use in cacao

This quarter PCA held a series of meetings with private sector representatives, including four

Peruvian and Colombian experts, on the subject of cadmium. These meetings took place on October

24, within the context of the XXI Latin American Congress of Science. These meetings led to the

suggestion that starting in 2017 Peru and other cacao-producing, Latin American countries should

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unite to define standards to measure and determine appropriate, maximum cadmium levels in soil

where cacao is grown, in cacao beans, or in cacao derivatives. To date, no maximum values have

been set, other than those mentioned in the European Union Regulation No. 488/2014. This is to

counterbalance what is considered an “overstretch”: using trace values of cadmium in chocolate

products to allege that the soil is "contaminated" or that the cacao has "too much" cadmium.

Over the next few months, the PCA team will continue to meet with and drive standardization efforts

together with the public and private sectors in Peru concerned with the issue of cadmium.

A.1.5 Support supply chain managers (SCM) and end buyers in the

development and promotion of differentiated products

Since October 2016, PCA has been coordinating with the Embassy of Italy’s commercial office in

Peru to develop a strategy to build the cacao and chocolate supply chains from Peru to Italy.

Marketing experts will form part of a group that designs a country strategy in partnership with

PROMPERU, PRODUCE and MINAGRI for the promotion of Peruvian cacao and chocolate in Italy.

This strategy includes activities like involving Italian chocolatier experts already located in Peru to

evaluate different cacao samples, and collaborating with companies to share knowledge about

cacao profiles demanded by the Italian market. As part of this strategy, Peruvian actors will

participate in two chocolate trade fairs in Italy, Euro Chocolate and Salón del Gusto during the

second half of 2017, and Italian experts will arrive in Peru in March. A second visit of Italian experts

will arrive in July for the Salón del Cacao y Chocolate event, and a third visit will take place during

the EXPOALIMENTARIA fair.

A.1.6 Create supply agreements with end buyers of chocolate and

other buyers of products from the Amazon

At the end of 2016, PCA helped two buyers connect with producer organizations in the San Martín

region, with the goal of sealing purchase agreements between the parties. Details include:

• PCA facilitated the first meetings between Chocolatería Amazónica and a leading

producer partner Oro Verde. The goal of these first meetings was to begin the

process of defining harvest and post-harvest protocols.

• PCA strengthened an existing commercial arrangement between Orquídea and

Allima Cacao. PCA intervened to finalize a purchase agreement and a price setting

system to supply cacao in 2017.

PCA also held meetings with Ecuadorean company República del Cacao (a chocolate producer and

marketer) to develop the Rincón del Emprendedor or Entrepreneur's Corner, a space within

Republica del Cacao's shops to display cacao-derived products such as jams, jellies, and beauty

products. Towards this idea, PCA coordinated multiple meetings between República del Cacao and

several companies, including Misky Cacao, Chocolate Pasión and Kreyol. Representatives from

República del Cacao's headquarters in Guayaquil evaluated cacao samples and PCA is assisting

participating companies to incorporate their product recommendations. Once the initial pilot is

underway, we expect to identify additional companies to offer their products via this marketing

channel in 2017.

A.1.7 Design and implementation of a program for supply chain

managers (SCM) to attend specialized trade fairs in order to expand

market access

See above information on supporting participation of PCA partners in relevant trade fairs (Euro

Chocolate, Salón del Gusto and EXPOALIMENTARIA).

Challenges

• PCA recognizes it must have a better value proposition to position cacao products for

international buyers. On the one hand we need a strategy to deliver improved,

uniform product quality in sufficient volume. To do this, we will motivate/facilitate

more Alliance partners (supply chain managers) to invest in stockpiling and creating

post-harvest facilities for wet cacao beans, thereby ensuring improved product

quality and quantity for international markets.

• On the other hand, PCA also needs to improve our Alliance partner’s ability to

segment flavor profiles so we can market each flavor profile to the appropriate buyer.

Our strategy to address this challenge is to create a set of cacao quality experts and

specialists within partner companies and organizations, who manage centralized

profit centers and can charge local players for their expertise. These experts can

help identify the flavor profiles offered, and match them to buyer requirements.

• State-run institutions continue to implement work in the cacao supply chain in the

zones of influence of PCA. To ensure that resources are used appropriately and that

we are not undermining each other’s efforts, improved coordination is required.

PCA’s team continues to spend time coordinating its plans with state-run partners.

Achievements

Facilitated two investor visits for Casa Franceschi and COICOCOCA to Peru to

establish commercial ties and set the groundwork for new, potential investments.

Trained four representatives of producer organizations as MyCoop facilitators. Plans

in place to conduct institutional building workshops for 15 cooperatives in San Martín,

Huánuco and Ucayali regions.

Connected a number of buyers with producers to establish new, direct commercial

relationships.

Kicked off work to address issues related to cadmium in partnership with the public

and private sectors in Peru.

Launched a strategy together with the Commercial Office of the Italian Embassy in

Peru to strengthen the supply chain of fine flavored cacao from Peru to Italy.

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Scheduled the first mission to Peru in March 2017 to evaluate cacao samples from

PCA's member organizations and companies.

TABLE 2: PMP INDICATOR RESULTS

OBJECTIVE / RESULTS INDICATORS GOAL YEAR 1 PROGRESS OF

INDICATORS

RESULT 1.

Families from consolidated

rural areas of alternative

development are put into

direct contact with end

buyers in high value

markets through "Supply

Chain Managers (SCM)" by

the end of the project in

2021

% of families organized

centrally through a SCM

2,800 families TBD1

Number of families

accessing new market

opportunities

1,000 families TBD2

Sales generated

11,232 metric tons US$ 25.8 million

TBD3

Cadmium-related

agricultural policies

introduced

0 0

1 Potential farmers haven been identified, as well as the supply chain managers present in the production area. Based on this information we have been developing strategies with said supply chain managers, a process which shall continue throughout the Alliance’s implementation. 2 We have begun making the necessary arrangements since the cocoa campaign begins in April 2017. 3 This is an annual indicator. We are on target to meet this progress indicator by the end of the fiscal year.

RESULT 2: INCREASE CACAO

FARMER PRODUCIVITY AND

QUALITY OF POST-HARVEST

PRODUCTS

TABLE 3: CALENDAR OF ACTIVITIES R2: RURAL HOUSEHOLDS IMPROVE THEIR FAMILY ECONOMY BY INCREASING AGRICULTURAL YIELDS AND THE NUMBER OF NEW

AREAS OF THE AGROFORESTRY SYSTEM AREAS IN DEGRADED ZONES

DESCRIPTION OF ACTIVITIES AND SUB-ACTIVITIES

PERIOD (September-December 2016)

September October November December

A.2.1 Develop and implement a methodology for mass adoption among small farm owners of new technology packages for agroforestry system products (AFS)

A.2.2 Develop a strategy to expand the distribution network of agricultural inputs, fertilizers, equipment and post-sales technical services by our technology supplier partners

A.2.3. Develop and implement an online technical support system for crop management and integrated pest management, among others

A.2.5. Develop agricultural extension services together with supply chain managers (SCM)

Activities

A.2.1 Develop and implement a methodology for mass adoption

among small farm owners of new technology packages for

agroforestry system products (AFS)

To improve rural households’ crop performance and increase the areas under production, we

designed the "Schools of Excellence" concept this quarter and began implementation of this

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methodology. The Schools of Excellence represent the principal methodology of technology transfer

we will utilize to improve and disseminate farmer “best practices” on a large scale. To take the

Schools of Excellence from concept to reality, we undertook the following activities this quarter:

a. Prioritization of key issues

PCA’s technical team, in close coordination with the Alliance's supply chain managers and partners,

spent this quarter prioritizing key technical assistance activities considering the cacao crop

agricultural calendar and methods to deepen and expand proven agricultural practices.

Following consultations, the priority themes identified for the Schools of Excellence training

programs were defined as:

• Integrated nutrition and timely pruning (INTP)

• Integrated pest and disease management (IPM)

• Soil conservation and management

• Plantation density management

• Irrigation.

b. Selection of the “elite technicians"

The Alliance also selected 12 “Elite Technicians” to participate in the Schools of Excellence, and to

provide technical assistance and extension to PCA farmers. The selection criteria required that these

elite technicians have sufficient knowledge of good agricultural practice managing cacao crops, as

well as be familiar with training tools for small producers within the micro-corridors.

c. Training of elite technicians

To refresh, improve and strengthen the skills of PCA's elite technicians to ensure production quality

and yields, and in partnership with Alliance partners Yara and Husqvarna, the following training

sessions were held this quarter:

Between October 16 and 28, 2016, nine elite technicians (8 men and 1 woman)

received training in INTP and IPM by recognized experts. The theoretical and

practical training helped standardize messages to be imparted to farmers, as well as

farmer evaluation criteria and how to apply corrective measures.

November 10-11, 2016, 3 elite technicians from the San Martín region (2 men and 1

women) received training from a Husqvarna representative in the use of pruning

tools to ensure proper crop management tools. This training also included the

regional director and business manager of the Alliance, a Casa Qoya technician, 3

Allimacacao technicians and 2 ROMEX technicians.

On November 21 and 22, 2016, in the city of Lima, the technical management team

at Yara, a fertilizer supplier, trained all of PCA's elite technicians and technical staff in

aspects of cacao fertilization, including soil analysis interpretation, nutritional

deficiencies, soil types and physical and chemical characteristics of soil.

d. Development of training tools.

The Alliance created two training modules this quarter related to INTP and IPM, as

mentioned previously.

e. "Specialized technicians" take over training responsibilities

Through Alliance staff and PCA partners Yara and Husqvarna, we also provided training to

technical facilitators and farm leaders this quarter, including:

On November 26, the first INTP training session took place in the Chazuta micro-

corridor. The session was attended by 20 technicians and farm leaders (19 men and

1 woman). Training was provided by Yara and Husqvarna's technical staff.

On December 2, we held an INTP training session for 18 technicians (12 men and 6

women) in the Saposoa micro-corridor (San Regis), also with participation of Yara

and Husqvarna trainers.

Two IPM training sessions were held in the Huánuco regional office this quarter,

training 43 technicians (of which 38 of the participants were men and 5 were

women). Training sessions were carried out in the Naranjillo and Yurimaguas

communities.

f. Production training sessions in farming micro-corridors.

• The farming cooperative ACOPAGRO conducted a technical training in IPM for

cacao farmers in 16 base communities, including 730 producers, 73 of which were

women.

• Several organizations—Allima Cacao, Casa Qoya, Coopalgsa—also conducted

training sessions in IPM and INTP targeting 60 producers, of which 10 were women.

• Seventeen farmers also participated in two IPM field days, of which 15 were men and

2 were women.

• The Huánuco regional office also gave a master training class on IPM this quarter, in

which 150 farmers participated, 48 of whom were women.

In addition, coordination meetings were held with:

• Inka Crops, with whom we discussed the status of the supply chain. The purpose of

the meeting was to design a technology package for bananas to increase both yields

and fruit quality.

• Reforestadora Amazónica S.A. (RAMSA), with whom we have been working on

designing a technology package aimed at proper management of forest species (of

Bolaina and Capirona) which are in high demand on both the local (regional) and

national markets.

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A.2.2 Develop a strategy to expand the distribution network of

agricultural inputs, fertilizers, equipment and post-sales technical

services by our technology supplier partners

PCA's technical team, through the schools of excellence, worked this quarter to identify lead farmers

who we can appoint to take responsibility for expanding the use of inputs, equipment and technical

services among neighbor farmers. Identifying and empowering lead farmers is a second strategy we

will undertake to meet our goals of increasing yields and production levels. The PCA team undertook

the following actions this quarter towards this goal:

• Identified 120 leaders (48 in the San Martín region, 56 in the Ucayali region and 16 in

the Huánuco region) of which 96 are men and 24 are women.

• Shared the lead farmer strategy with Alliance partners, and identified farmer leaders

to test out the idea.

• Planned for the roll out of “lead farmer” trainings via the Schools of Excellence.

On December 1-2, in preparation for the trade show EXPOTOCACHE 2016, the PCA team

connected Alliance partners Yara, Husqvarna and San Fernando with approximately 1,200 cacao

producers. The purpose of this linkage was to introduce producers to the advantages and benefits of

the Alliance partners’ products and equipment.

A.2.3 Develop and implement an online technical support system for

crop management and integrated pest management, among others

To design a technological platform that provides “real time” answers to crop management queries

coming from producers, we conducted the following actions:

• Improved the efficiency of the system to send mass text messages from the Alliance

to participating producers. To such end, we hired the services of a telephone

company and developed a guide on how to write messages.

• Evaluated Yara's online technical assistance system called CHECKIT. Through this

system, the company provides direct, real-time technical support for farmers that use

Yara’s products. PCA is currently evaluating the applicability, functionality and

practical use of this system by project technicians, as well as for producers.

A.2.5 Develop agricultural extension services together with supply

chain managers (SCM)

The Schools of Excellence described previously are our principal tool to provide agricultural advisory

services in partnership with Alliance partners to PCA farmers. In addition, this quarter we conducted

the following activities:

• Tested, in partnership with TABASC, a biological pest agent supplier, the application

of entomopathogenic fungi like Beauveria sp and Trichoderma sp in collaboration

with our field offices. The application of biocontrol agents is under evaluation in 13

plots, seven of which are located in the Ucayali region and six in the Huánuco region.

• Supported Alliance partners ROMEX and the Agroindustrial Tocache cooperative

develop and submit funding proposals to the INNOVATE fund in Peru. This fund is

managed by PRODUCE, and the goal of the fund is to promote technological

advances in production with added value. The projects include: “Developing a fine

flavor cacao fermentation prototype and establishing cacao flavor profiles in

Cooperativa Tocache’s area,” and “Extraction and characterization of the pectin

obtained from cacao husk at different stages of maturity at a pilot plant level and

under the conditions of the San Martin region.”

Challenges

• There is a shortage of qualified personnel to assume the elite trainer role in the

cacao growing areas of Ucayali and San Martín. Given this shortage, we have

decided to identify trainers with potential, and train these to get them up to speed on

best practices in cacao crop management. PCA held open calls this quarter to recruit

and select qualified trainers, and designed and put in place a training program to

improve the knowledge gap among those identified to play the elite trainer role.

• PCA's public and private partner institutions have limited staff. Private sector staff

tend to prioritize activities from existing strategic plans, which sometimes include

issues or activities that stray from PCA's objectives. To overcome this challenge, we

have asked Alliance partners to appoint coordinators for our joint activities, and we

have held meetings with these project coordinators to conduct joint work planning,

prioritize common efforts, and to train personnel who will interact most closely with

PCA’s elite technicians.

• The effects of climate change have led to the increased incidence of the mazorquero

worm, the scientific name of which is Carmenta sp. This pest has become

increasingly widespread, infecting the inside of the cacao pod, rendering it useless.

In response, PCA, in close collaboration with the ACOPAGRO cooperative, has

developed integrated pest management strategies for cacao farmers in the regions of

San Martín. PCA's technical personnel in each of these regions continues to identify

and evaluate the pest's behavior (Carmenta sp) to refine these pest management

strategies. Our strategies to manage the worm are based principally on improved

crop management (pruning), identifying infected cacao pods and immediately

separating these from the rest, protecting the infected pods with tarps and other

covering underneath to avoid their spread beneath the soil or in their evolved form of

moths. The IPM trainings scheduled for the end of the next quarter will contribute

greatly to combatting this pest. PCA has also developed a number of

communications strategies to reinforce the pest management strategy, including

creating flyers, holding interviews with the press, and creating a cumbia song on how

to deal with the moth that will be played on the radio in rural areas.

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Achievements

Twelve elite technicians trained to work via the Schools of Excellence.

Curriculum developed for the Schools of Excellence on the subjects of INTP, IPM,

irrigation, plantation density management, and soil conservation and management.

Nine hundred and fifty seven producers trained in INTP and IPM.

Co-development and sponsorship from three, private sector Alliance partners (Yara,

Husqvarna and TABASC) in the design and launch of the Schools of Excellence.

TABLE 4: PMP INDICATOR RESULTS

OBJECTIVE / RESULTS INDICATORS GOAL YEAR 1 PROGRESS OF

INDICATORS

RESULT 2.

Families from rural

consolidated areas will

improve their family

economy by increasing the

productivity of their plots

and by increasing new

areas of agroforestry

systems in degraded areas

by the end of the project in

2021

Increase in cacao

productivity

650 kg/ha TBD4

Assisted hectares

43,200 ha

1,435 ha

Average no. of hectares

per family

2.4 ha of cacao

TBD5

Families assisted by

various outreach programs

18,000 families

957 producers

Women who participate in

various outreach programs

1,500 women

108 women

4 This is an annual indicator. We are on target to meet this progress indicator by the end of the fiscal year. It will also require a baseline. 5 This is an annual indicator. We are on target to meet this progress indicator by the end of the fiscal year. It will also require a baseline.

RESULT 3: INCREASE ACCESS

TO FINANCE

TABLE 5: CALENDAR OF ACTIVITIES R3: CONSOLIDATED RURAL FAMILIES AND OTHER STAKEHOLDERS IN THE VALUE CHAIN TO IMPROVE THEIR ACCESS TO SHORT

AND LONG-TERM FINANCING AIMED AT IMPROVING THEIR LEVELS OF EFFICIENCY AND PRODUCTIVE EFFICIENCY IN ORDER TO

OPERATE AT FULL CAPACITY.

DESCRIPTION OF ACTIVITIES AND SUB-ACTIVITIES

PERIOD (September-December 2016)

September October November December

A.3.1 Hire financial facilitators to negotiate short and long-term financing for the supply chain managers (SCM) and farmers from different financial institutions

A.3.2 Ensure women’s priority access to financing

A.3.3 Sign (MOU) agreements with financial institutions to finance producers directly

A.3.4 Expand the use of mobile money services (eWallet)

Activities

A.3.1 Hire financial facilitators to negotiate short and long-term

financing for the supply chain managers (SCM) and farmers from

different financial institutions

During this quarter, the PCA team held preliminary meetings with numerous financial entities,

including Agrobanco, Cooperatives Abaco and ACOPAGRO and insurance company La Positiva to

discuss the project’s financial services strategies. The PCA team also met with numerous supply

chain managers and firms to determine how they are providing/receiving financing now, and whether

financial facilitators would be a useful intervention. The findings from these meetings and research

conducted this quarter to refine the project’s broader financial services strategy confirmed the utility

of financial facilitators deployed at the farmer level as well as at the SCM level to channel more

financing towards these actors.

21

Alliance partner Agrobanco is one of the most prominent lenders to the agribusiness community

nationally, and offers under-market interest rates. This entity is highly interested in continuing a pilot

begun with PCA in March 2016 PCA’s that relies on financial facilitators to identify new clients and

package loan applications for these among PCA farmers. Agrobanco has offered to begin this work

starting in early 2017, so preparations are underway to identify financial facilitators, train these and

put them on performance-based contracts during the first quarter of calendar year 2017.

However, this activity is just one of a series of interventions that PCA would like to put in place to

facilitate more finance along the cacao and agroforestry value chains via a wider range of financial

institution partners and tools. PCA’s Program Director/Access to Finance Manager conducted a

research assignment this quarter to develop a broader financial services strategy for the project, and

will submit this to the team and USAID during the first quarter of 2017. Following a meeting with

USAID, a detailed implementation plan will be designed and agreed upon activities can be rolled out

throughout 2017.

A.3.2 Ensure women’s priority access to financing

PCA collected baseline data this quarter to determine the extent to which women are under-

represented in receiving and utilizing financing for agroforestry activities. Alliance subcontractor

Uniterra is concurrently conducting research to determine the specific barriers to expanding

women’s access to finance within the project, and specifically for women in the target regions.

Once this research is developed, PCA will finalize its sub-strategy and activities to ensure that

women are appropriately represented in terms of accessing finance given their level of participation

in the value chain as their male counterparts, and are using finance to improve yields and income.

A.3.3 Sign (MOU) agreements with financial institutions to finance

producers directly.

In November and December 2016, numerous meetings were held with Agrobanco to firm up details

of the co-financed plan to expand financing to thousands of PCA producer partners. The terms of

this arrangement will be included in an MOU with Agrobanco and will be signed in the first quarter of

2017. Based on preliminary research results, we also believe that significant work is required to

stimulate demand for credit, as very few producers actually apply for credit. Therefore, we intend to

include financial education as a component of our MOU with Agrobanco, which has already

developed modules we can easily adapt for use with lead trainers who can then impart information to

PCA farmers. As a first step, the Bank has committed to provide three financial education workshops

in February and March in San Martín, Huánuco and Ucayali and in collaboration with our Schools of

Excellence in these regions to train instructors on themes of financial education with the goal of

encouraging more farmers to agree to apply for credit.

A.3.4 Expand the use of mobile money services (eWallet)

PCA also held meetings with the

technical and management teams

of electronic payment company

Pagos Digitales del Perú (PDP).

PDP is interested in expanding the

use of their electronic payment

product among PCA cacao

farmers, in a pilot called eWallet

(or BIM, for its acronym in

Spanish). The cooperative

Acopagro is interested in piloting

this product, and has already

begun promotion of the BIM

among its members. We have

jointly selected the location of

Juanjui as the location of the PDP-

PCA BIM pilot. Greenhouse for forestry seedlings in Aucayacu, Huánuco, July 2016

Challenges

• The existence of an eWallet product does not mean it can be rolled out immediately

in the pilot location. “Best practices” in digital finance requires that we build an

ecosystem of actors who will use the eWallet/BIM tool so that farmers can receive

digital money through cacao sales and spend digital money prior to initiating the pilot.

We also need to design an incentives system to stimulate use of the product among

the various actors, especially among reluctant farmers, who may fear their money is

lost if they cannot hold it in their hands. In other words, further analysis of the market

is required prior to launching this eWallet tool among the PCA farmer population.

o As a first step, initial information was gathered from Acopagro members this

quarter about their use of cash received for sales of cacao. Some of this

information will serve to inform the more detailed survey and mapping of how

cash is utilized among the population in Juanjui. Baseline information will

complement this data gathering exercise. In other words, creating a “value chain

map of cash” is the first step in identifying which vendors and actors should

participate in the eWallet/BIM system and how.

• The other challenge related to rolling out this eWallet/BIM tool is a resource

challenge. Conducting detailed mapping and analysis is costly (PDP estimates the

cost of this study at $100,000). In addition, PDP recommends that we develop a set

of financial incentives for actors to use the BIM tool, which could also be costly

depending on what would be appropriate. To address this resource challenge, PCA

will ask PDP to cost-share or entirely finance the development of this mapping and

23

analysis study, and to source the incentives resources during the first half of 2017, so

we can roll out the digital payments tool during the second half of the calendar year. 6

• Agrobanco cannot be the only actor the Alliance works with to meet the financing

needs across the entire cacao, banana or wood sectors, as it does not have the

resources or capacity to meet the demand presented. Therefore, PCA must establish

relationships with multiple financial institutions to stimulate finance across the entire

value chain. A strategy to broaden and deepen our financial services strategy to

incorporate new actors and risk mitigating tools will be submitted to USAID in

January of 2017, and approved strategies will be rolled out during the remainder of

the year.

Achievements

Agreed with Agrobanco on the terms of a relationship to co-finance the expansion of

financing and financial education to PCA producers. This pilot will begin in February

2017.

Finalized a relationship with Pagos Digitales (PDP) to jointly roll-out an eWallet tool

in a pilot region over 2017.

PCA conducted research and developed a refined financial services strategy for the

program. This updated financial services strategy will be presented to USAID in

January 2017, a detailed implementation plan will be put in place, and agreed upon

activities will be rolled out over the remainder of 2017.

TABLE 6: PMP INDICATOR RESULTS

OBJECTIVE / RESULTS INDICATORS GOAL FOR

INDICATORS

PROGRESS OF

INDICATORS

RESULT 3

Consolidated rural families

and other stakeholders in

the value chain to improve

their access to short and

long-term financing aimed

at improving their levels of

efficiency and productive

Value of rural-agricultural

loans

US$ 0.5 million

TBD7

Number of families to

access credit

500 families

TBD8

Number of beneficiaries

using eWallet

500 beneficiaries TBD9

6 If PDP fails to cover the costs of this initial study, PCA will find a lower cost alternative to gather this data. 7 We estimate that the Agrobanco pilot alone will easily release at least this amount of loans to members of the cacao and other agroforestry product value chains before the end of the 2017 fiscal year. 8 We believe we will easily meet this progress indicator via our pilot with Agrobanco. 9 We are on target to meet this progress indicator by the end of the fiscal year.

OBJECTIVE / RESULTS INDICATORS GOAL FOR

INDICATORS

PROGRESS OF

INDICATORS

efficiency in order to

operate at full capacity.

25

RESULT 4: FACILITATING

PRIVATE INVESTMENT

TABLE 7: CALENDAR OF ACTIVITIES

R4: INCREASED PRIVATE INVESTMENT IN PRODUCTIVE CHAINS PROMOTED BY THE PERU CACAO ALLIANCE private investment increases in the productive chains promoted by the Peru Cacao Alliance

DESCRIPTION OF ACTIVITIES AND SUB-ACTIVITIES

PERIOD (September-December 2016)

September October November December

A.4.3 Drafting proposals for interested investment funds and investors

Activities

A.4.3 Drafting proposals for interested investment funds and

investors

In preparation for this activity,

during this quarter, PCA met with a

wide range of Alliance partners to,

among other issues, discuss their

investment needs. We found that

many of the Alliance’s partners of

the small and medium enterprise

(SME) size struggle to find the

appropriate combination of finance

and investment to continue

growing their enterprises to meet

international and domestic market

demand. For example, many firms

are unclear of the opportunities for

equity investment, and have few

connections with finance and

investment entities. The details of

these conversations and specific

investment needs identified are

CEO of Q'uma Chocolates visiting fine flavor cacao plots in

Chazuta. Q'uma is making investments in "bean to bar"

chocolates. San Martín, August 2015.

outlined in the Trip Report conducted by Palladium’s Program and Finance Manager as well as a

Partner in Palladium’s U.S. Business Unit during their visit to Peru in October 2016. These meetings

solidified the need to conduct a more detailed assessment of a range of investment proposals that

can be appropriately packaged and presented to potential investors and investment funds

domestically and internationally. A Scope of Work to conduct this assessment of potential

investment “deals” will be drafted during the first quarter of 2017, and a short-term consultant will be

sourced to conduct this assignment. The packaging of deals is an activity that Palladium has

previously conducted in a number of countries, so we will use an existing design for an investment

booklet, and make these available in paper and electronic form, and will utilize a variety of

communication channels to market these deals appropriately among potential investors. Once the

investment deals are identified and packaged, PCA will then assign consultants or financial

facilitators to these deals to ensure that investment proposals are developed and presented to a

range of equity, debt and other investors. These follow-on activities will take place in 2017.

The first meeting of private, PCA Alliance partners was held on December 15 in ROMEX’s

auditorium. This meeting was attended by more than 15 private companies involved in activities

such as the Schools of Excellence, the eWallet initiative and the upcoming Agrobanco financial

education program. The event allowed PCA to ensure that its partners are equally familiar with the

Alliance's objectives, results and indicators, in order to align all participating parties' interests

towards mutual ends. PCA used this meeting to create a steering committee of PCA partners, and

Alliance members elected ROMEX's general manager as the Committee's Chairman.

Also during this quarter, one of Palladium’s PCA team members met with potential, global investors

Barry Callebaut, Cargill and Lindt on the subject of supporting development of Latin American origins

on a large scale. The results of these conversations are as follows:

• Barry Callebaut’s Gourmet division would like to connect with PCA to arrange large

scale purchase of Peruvian cacao, in part due to their new, corporate strategy to

sustainably source 100% of their cacao by 2020. Towards this end, Barry Callebaut

is also considering developing large, nucleus farms in combination with outgrowers in

Latin America (right now they are considering Ecuador and Brazil for this investment)

to ensure sourcing more cacao at scale. PCA team members are trying to steer this

investment towards Peru instead, with the hope that PCA could connect smallholder

farmers with this anchor investor. PCA’s Eduardo Tugendhat will continue

discussions with these investors to move these potential investments forward in

2017. These interventions are considered part of Palladium’s cost-share to PCA, as

Mr. Tugendhat’s time and travel costs are not reimbursed by the project.

• Lindt is interested as a buyer only, and they are interested in working with a supplier

that can provide a minimum of 1,000 tons of product. PCA is working to arrange joint

sourcing of cacao to meet this key buyer’s minimum requirements.

• A few other investors have expressed interest in visiting Peru to witness the PCA

model in action (e.g. Nestle and Mondelez). Mr. Tugendhat will continue to follow up

on these leads in 2017.

Also this quarter, the PCA team began to recognize the value of its traceability system and geo-

traceable mapping capability to motivate potential investors to make new investments along the

cacao value chain. Whereas the traceability system was developed principally to calm buyer nerves

27

about sustainable sourcing, we now realize that data in this system is a powerful tool to mitigate

investor risk and to support due diligence when seeking new investment opportunities. For example,

the PCA team routinely meets with local investors to generate demand-driven data calls, create

maps and suggest locations for new investments in infrastructure (such as post-harvest warehouse

facilities, and areas to create cacao plantations). The team will continue to use the traceability

system to support investors in their data collection and due diligence exercises, and will also include

these investment opportunities in the packaging exercise in the case these potential investors are

also seeking co-investment.

On November 28-30, the company Bazo, Bosa, and Buse visited PCA's three regional offices,

including visits to business and organizational models such as ACOPAGRO, APAHUI. MEGAMAR,

among others. The goal of this potential investor’s visit was to invest in the development of

centralized storage systems that will enable them to control the quality of the cacao to be purchased.

Next steps to finalize this investment include an analysis of the best areas in which to set up the

centralized processing center, as well as a financial analysis of the investment.

PCA also addressed the overall enabling environment to facilitate new investment in the cacao chain

this quarter. Along these lines, the PCA team organized a meeting between the regional government

of Ucayali (GOREU) and Alliance partner Megamar on December 9. The regional Governor and

three regional advisers attended the meeting along with Megamar and PCA representatives. Topics

covered during this meeting included improved security in the region, the theft suffered by the

company, as well as recommendations for improvements in road infrastructure. The regional

authority responded favorably to these issues, committed to addressing them, and took swift

measures to strengthen security through expanding police presence near Megamar operations and

to expedite its efforts to allocate machinery towards improving existing roads in the Curimana area.

In terms of new investments made by SCMs this quarter, AMT Agroindustry completed an

improvement to their drying area as well as civil works at their facility to function at 100% post-

harvest processing capacity. Also this quarter, as previously mentioned, this Alliance partner sought

PCA’s assistance to connect with cacao-producing communities to ensure supply of sufficient wet

beans to run their post-harvest facility at 100% capacity. As a result, a more direct relationship was

created between producers and a buyer, as well as a stronger, mutual commitment from both

parties.

Challenges

• International investors are intrigued with how PCA has been able to plant so much

fine flavor cacao in a short period of time, in collaboration with smallholder farmers in

a traceable fashion. Most would love to purchase cacao from Peru now, but the

amounts of cacao available via PCA Alliance partners still remain relatively modest to

be seriously considered by these large, global buyers. The Alliance therefore must

continue its efforts to promote investment in improved post-harvest infrastructure,

standardized harvest and post-harvest protocols, and new flavor profiles from

supplier producers' territories.

• Security will continue to be a problem for investors in remote areas. To ensure safety

of investments, PCA will continue to facilitate the involvement of local and regional

governments in cacao productive chain activities.

Achievements

Met with potential investors in Europe to identify (and encourage) potential

investment deals and new commercial relationships in Peru.

Encouraged GOREU to strengthen security for cacao investors and other private

sector partners in the Ucayali region, and to allocate machinery to ensure

maintenance of rural roadways, facilitating the transfer of cacao from farms to

buyers/post-harvest processors.

Established PCA's private sector steering committee

TABLE 8: PMP INDICATOR RESULTS

OBJECTIVE / RESULTS INDICATORS GOAL FOR

INDICATORS

PROGRESS OF

INDICATORS

RESULT 4:

Direct private investment

increases in the productive

chains promoted by the

Peru Cacao Alliance

Facilitated Investment

$5 million

TBD10

10 We are confident we can meet the investment indicator this year based on the activities outlined in this section of the report.

29

COMMUNICATIONS

Activities

During this reporting period, communications activities were undertaken nationally, and focused on

presenting phase II of the Alliance to our public and private partners and communities of interest in

each region. Presentations were given to target audiences via interpersonal communication

methods, including meetings, group lectures and video-conferencing. The message provided

focused on presenting the

Alliance's model, and delivering

positioning messages of improved

yields, quality, access to finance

and access to differentiated

markets, as key elements to

improve the incomes of 20,000

families in the target regions.

Our objective in terms of promoting

our image is to position the

Alliance as a facilitator of private

investment in the target

agroforestry value chains of the

Peruvian Amazon with the goal of

improving the income of 20,000

families.

PCA communication activities

were designed this quarter to

stimulate the following behavior changes:

• For cacao, banana and wood male and female producers to invest in agricultural

technology (in nutrition, pruning, irrigation) to increase yields on their parcels.

• For these same producers to apply for financing, thereby promoting an investment

culture in their agricultural businesses.

Following meetings with private sector partners, PCA’s communications team contacted the

communications teams within each private entity to request relevant branding materials, access to

logos and corporate identity kits. These actions were designed to position the Alliance as an active

collaborator with private sector actors involved in disseminating technology and financing to PCA

producers, and to ensure appropriate brand positioning of each one of our co-investors/leverage

partners.

Launch of the "Aromines", characters that play the roles of the

different varieties of fine flavored cacao which are used in

producer trainings on clonal arrangements. Las Mercedes,

Curimaná. Ucayali, 2015.

In addition, PCA’s communications team developed event materials and handled logistics to manage

the launch of the Schools of Excellence this quarter. PCA hosted seven public events in November

and December (two in Huánuco, two in Ucayali and three in San Martín). PCA's private partners

Yara, Naandanjain, Husqvarna, Agrobanco and San Fernando (through its sub-brand Mallki)—

attended were actively involved in planning and implementing these events. Due to the strength of

PCA and our partners, more than 700 people attended these launch events, which also represented

another method to announce the re-initiation of Alliance’s work in the regions in benefit of small

farmers.

Messages disseminated at these events included the importance of increasing cacao yields, the

need for continued transformation of the cacao value chain, and the importance of creating shared

value through new private investment (from firms and producers), and the fact that cacao farming is

a profitable business.

In the case of Huánuco, PCA organized a roundtable with regional media during the last week of

November to reinforce the Alliance's new messages and initiate new partnerships with regional

actors during this new phase.

In San Martín and Huánuco, we developed the slogan, "Mazorquero, en mi parcela no te quiero”

(Spanish for "Mazorquero, I don't want you on my plot," which will be used to support the integrated

pest management (IPM) strategy designed by the PCA technical team. The communications team

developed a set of informational tools and public service announcements based on this slogan,

including radio spots featuring a cumbia musical number, a text messaging plan (SMS), information

pamphlets and newsletters targeting producers and community activists (who will create a small

theater production to disseminate the slogan more widely).

In addition to designing these tools and an initial graphic package, PCA’s communications team

designed templates and products for social media platforms, and activated the Alliance’s Facebook,

YouTube, Flickr and Issuu accounts, assuming approval of the Alliance's social media and outreach

plan.

Challenges

• Positioning the Alliance as a facilitator of private investment requires a shift in the

mindset of a number of our public and private partners, who perceived the Alliance

differently during our first phase. Therefore, we must work in close partnership with

our private sector partners to reinforce and communicate the message that the

Alliance represents a model of shared value investment, in which all partners win.

Achievements

The PCA team produced two new videos covering our work in San Martín. The first

video covers a training workshop PCA sponsored together with Alliance partner

Husqvarna to improve use of agricultural machinery for pruning in Tarapoto. The

31

second video covers the first session of the Schools of Excellence in Chazuta which

was held in November.

PCA created a new communications strategy and designed multiple tools to support

technical implementation, such as the mazorquero slogan and tools.

PCA was featured 28 times in the national press this quarter in print, digital, radio

and television media. The majority of coverage was related to launch events and

highlighted regional government commitments (from San Martín and Ucayali) to

improve cacao productivity and quality.

This quarter PCA received approval from USAID Washington on its request to create

an institutional website for the Alliance. The final website design and site map will be

presented for final approval in early 2017.

Below is a table representing the communications events supported by the PCA team this past

quarter:

TABLE 9: EVENTS SUPPORTED BY THE PCA

EVENTS SUPPORTED BY

THE PCA COMMUNICATION

TEAM Q1

SEP 2016 OCT 2016 NOV 2016 DEC 2016

TARGET AUDIENCE PARTNERS / ALLIES

S 1

S 2

S 3

S 4

S 1

S 2

S 3

S 4

S 1

S 2

S 3

S 4

S 1

S 2

S 3

S 4

LAUNCH OF THE SCHOOLS OF EXCELLENCE IN JUANJUI

x

Cacao producers from the province of Marisca Cáceres, ACOPAGRO technicians, private partners, ally institutions, potential partners and allies, potential supply chain managers, the broader public

Cooperative Agraria Cacaotera ACOPAGRO, YARA, Husqvarna, San Fernando, Naandanjain, Agrobanco, DEVIDA, regional government of San Martín

SIGNING OF MOU WITH REGIONAL GOVERNMENT OF UCAYALI

x

Peruvian government representatives in the Ucayali region linked to the development of the cacao value chain, the Office of Economic Development, private partners and the broader public

Regional government of Ucayali, Husqvarna, Naandanjain, Agrobanco, DEVIDA

LAUNCH OF THE SCHOOLS OF EXCELLENCE IN NESHUYA

x

Producers in the province from Neshuya, Aguaytía and Curimaná, MEGAMAR representatives, technicians from the cooperative Alto Huallaga, private partners and the broader public

AMT Agroindustrias, Husqvarna, Naandanjain, Agrobanco, DEVIDA, YARA, San Fernando

LAUNCH OF THE SCHOOLS OF EXCELLENCE IN TINGO MARIA

x

Cacao producers in the province of Leoncio Prado. Private partners, ally institutions and potential partners and allies Potential supply chain managers and the broader public

Cacao cooperative Alto Huallaga, cooperative Naranjillo. Husqvarna, Yara, Agrobanco, San Fernando

33

LAUNCH OF THE SCHOOLS OF EXCELLENCE IN TOCACHE

x Cacao producers in the province of Tocache. Private partners, ally institutions and potential partners and allies

Central of Aromatic Cacao, CAT Tocache Husqvarna, Yara, Agrobanco, San Fernando

LAUNCH OF THE SCHOOLS OF EXCELLENCE IN CHAZUTA

x

Cacao producers from the province of Chazuta, Allima Cacao technicians, private partners, ally institutions, potential partners and allies, potential supply chain managers, the broader public

Cooperative Agraria Cacaotera ACOPAGRO, YARA, Husqvarna, San Fernando, Naandanjain, Agrobanco, DEVIDA, regional government of San Martín

PARTICIPATION IN THE LAUNCH OF EXPO TOCACHE IN TINGO MARIA

x

Regional government of San Martín - zonal offices of Tocache, municipality of Tocache, municipality of Leoncio Prado, public opinion leaders in Tingo María and Tocache

Regional government of San Martín - zonal offices of Tocache

PARTICIPATION IN THE EXPO TOCACHE - TOCACHE

x Regional government of San Martín - zonal offices of Tocache, municipality of Tocache, public opinion leaders in Tocache

Central of Aromatic Cacao, Husqvarna, Yara, Agrobanco, San Fernando

ROUND TABLE WITH LOCAL JOURNALISTS-TINGO MARIA

x Journalists and media of Leoncio Prado / Tingo Maria, broader public

PARTICIPATION IN THE I FESTIVAL OF CACAO IN AUCAYACU-TINGO MARIA

x

Cacao cooperatives and associations of Aucayacu Cacao farmers of Aucayacu Broader population of Aucayacu

Municipality of José Crespo and Castillo Husqvarna Agrobanco

FIRST MEETING OF THE ALLIANCE'S PRIVATE SECTOR PARTNERS

X Private partners of the Alliance with whom a relationship had already been established

Husqvarna, Yara, Agrobanco, Pagos Digitales, Uniterra, Naandanjain, Reforestadora Amazónica, Inka Crops, Romex, San Fernando, La Positiva Seguros, Casa Franceschi, Acopagro, MEGAMAR

LEVERAGE

Activities

This quarter, PCA held meetings with Alliance partners to orient these actors on rules and

procedures surrounding their leverage contributions to the Alliance, such as:

• Definition of what constitutes leverage

• Leverage characteristics

• Cash contributions

• In-kind contributions

• Contribution categories

• Procedures and processes to report leverage to PCA

The PCA team designed and shared the forms with partners that we will use to collect information on

partner leverage throughout project implementation. We explained the reporting procedures and

the breakdown of each type of leverage contribution (in kind and cash) required to conduct adequate

monitoring of partner co-investment. Leverage contributions are linked to the commitments

established in Alliance partner letters of commitment.

In these meetings, PCA explained how leverage contributions will be formalized in Memoranda of

Understanding (MOU) that partners will sign with the project, along with additional information and

annexes.

The procedure is that each quarter, leverage partners will submit leverage contributions developed

in coordination with Regional Office leverage specialists, establishing the nature of the contribution

(cash or in kind) and the "leverage detail" to define the category or type of contribution.

Prior to submission, leverage forms must be duly signed by a responsible party from each partner,

and consolidated to develop the Alliance’s quarterly leverage report, to be attached to quarterly

reports.

TABLE 10: SUMMARY OF THE LEVERAGE FORM REQUIRED FROM EACH ALLIANCE PARTNER

35

Challenges

N/A

TABLE 11: SUMMARY TABLE COLLECTED OF LEVERAGE AMOUNTS FROM ALLIANCE PARTNERS THIS QUARTER.

Leverage Information Collected for the October-December 2016 Reporting Period

Partner Cash US$ In Kind US$

Total US$

Leverage Contribution to Program indicator

Agaria Cacaotera ACOPAGRO LTDA.

0 754 754 R2. Increase in cacao productivity

Agraria-ALLIMACACAO-Ltda.

0 202 202 R2. Increase in cacao productivity

Agraria-ALLIMACACAO-Ltda.

0 394 394 R2. Increase in cacao productivity

El Gran Saposoa Ltda -COOPALGSA

0 483 483 R2. Increase in cacao productivity

HUSQVARNA PERU S.A.

0 4,293 4,293 R2. Increase in cacao productivity R4. Investment value provided

HUSQVARNA PERU S.A.

0 1,517 1,517 R2. Increase in cacao productivity R4. Investment value provided

HUSQVARNA PERU S.A.

0 1,395 1,395 R2. Increase in cacao productivity R4. Investment value provided

HUSQVARNA PERU S.A.

0 402 402 R2. Increase in cacao productivity R4. Investment value provided

HUSQVARNA PERU S.A.

0 434 434 R2. Increase in cacao productivity R4. Investment value provided

HUSQVARNA PERU S.A.

0 1,183 1,183 R2. Increase in cacao productivity R4. Investment value provided

Diario Voces San Martín

0 811 811 R4. Investment value provided

TOTAL 0 11,868 11,868

37

OPERATIONS

TABLE 12: PROPOSED ACTIVITIES FOR OPERATIONS AREA

Proposed Activities

2016

Sep Oct Nov Dec

Registering the local entity to legally manage PCA - Phase II

Obtaining the Tax Identification Number (RUC and SOL code)

Opening bank accounts in PEN and USD currency

Hiring Staff

Negotiating and finalizing office lease agreements for Peru Cacao Alliance - Phase II

Obtaining Operating Licenses for project offices

Implementing an occupational safety and health management for Peru Cacao Alliance - Phase II

Providing training on Palladium International Policies

Hiring phone and internet services

Implementing an accounting system and complying local tax obligations

Asking for Advanced Requests and delivering SF425 accountability formats

Implementing a financial monitoring system by programmatic areas

Activities

• In September 2017, Palladium Group Peru SAC obtained its registry under the

Peruvian Public Registers.

• On October 1, 2017, Palladium Group Peru SAC obtained its tax identification

number (RUC), as well as its SOL code.

• On October 17, 2017, Palladium Group Peru SAC opened PEN and USD-

denominated bank accounts.

• Between October and December 2017, Palladium Group Peru SAC hired 39 people.

• Between October and December 2017, Palladium Group Peru SAC negotiated and

signed the lease agreements for offices in Lima, Pucallpa, Ucayali and Tarapoto.

• The operating licenses for project offices are in process.

• The implementation of an occupational safety and health management plan for Peru

Cacao Alliance - Phase II is in process.

• In September, and again in November-December 2017, PCA’s team was trained by

staff Palladium home office staff in Palladium International Policies related to

accounting, procurement and other operational management tasks.

• Although all the Peru Cacao Alliance’s offices have telephone and internet service,

we are currently in the process of renegotiating terms and conditions of the services

in order to access improved services.

MONITORING AND EVALUATION

This quarter's monitoring and evaluation activities have focused on planning and implementing the

baseline study to determine baseline indicators for indicators defined within Palladium’s cooperative

agreement with USAID.

TABLE 13: GDA INDICATORS (PERIOD 2016-2021)

The table above shows the 16 performance indicators PCA will track during 2016-2021 as required

in Palladium’s Cooperative Agreement with USAID. Not all of these indicators require a baseline,

however PCA nevertheless conducted a baseline survey which included questions on subjects of

interest including fertilization practices, machinery use, perceptions of the eWallet tool, and

perceived risks. This information from the baseline study will greatly inform our strategies and

activities in the field.

Following the collection of baseline information, PCA will conduct periodic evaluations to measure

progress against baseline figures (at intermediate stages or at the end of the project). For these

INDICATORS

Impact indicators

Change in household income (cumulative change in income) Yes Annual Annual Survey

Number of Households Assited Yes QuarterlyMonthly /

Annual

M&E System /

Survey

% female participantes in USG-assisted programs designed to

increase access to productive economic resources (assets,

credit, income or employment)

Yes Quarterly Monthly /

Annual

M&E System /

Survey

Value of investment faciliated (GDA constributions) Quarterly Quarterly M&E System

Number of FTE jobs created Annual Annual M&E System

Activity Outcome Indicators

Productivity increased

Yield/Hectare (average) of cacao Yes Annual Annual Survey

Hectares under assitance (all crops) Yes QuarterlyMonthly /

Annual

M&E System /

Survey

Average # of hectares of agroforestry crops per beneficary Yes Annual Annual Survey

Market access increased

% of households cooperating with farmer groups (formal and

informal) to aggregate pruchases and saleYes Quarterly Monthly M&E System

#of households accessing new market opportunities Quarterly Monthly M&E System

Metric tons of sale generated AnnualAnnual /

Quarterly

Survey / M&E

System

Value of annual sales (all products collected at farm level)

attributed to program implementationAnnual

Annual /

Quarterly

Survey / M&E

System

# of policies, regulations, administrative procedures passed for

implementation, as a result of USG assistance (linked to

cadmium research)

Bi-Annual Bi-Annual M&E System

Improved access to financial services

Value of agricultural and rural loans Quarterly Quarterly M&E System

# of households receiving USG assistance with access to loans Quarterly Quarterly M&E System

# of beneficiaries using mobile money services Quarterly Quarterly M&E System

Reporting

frequency

Data

collection

frequency

Data

collection

method

Baseline?

39

evaluations, we will use a trend analysis methodology to measure changes, because the purpose is

to observe changes over time within same target population.

The following graphic11 outlines the baseline study methodology:

CHART 1: FLOW CHART FOR A BASELINE

1.1. Zone or area of intervention

We will conduct the baseline in the following regions:

• San Martín Region: Including 232 localities within the provinces of Bellavista, El

Dorado, Huallaga, Lamas, Mariscal Cáceres, Moyobamba, Picota, San Martín and

Tocache.

• Huánuco Region: Including 184 localities in the provinces of Leoncio Prado, Marañón

and Puerto Inca.

• Ucayali Region: Including 177 localities in the provinces of Coronel Portillo and

Padre Abad.

1.2. Research topics

To conduct the baseline survey, we will conduct an interview using a questionnaire (survey data

sheet) with a sample of producers or producers and/or heads of household. This questionnaire

consists of 18 sections and a total of 113 questions summarized in the following table:

11 David Medianero Burga’s “Baseline Study Methodology”.

Target population

Study objectives

Variables and Indicators

Definition of sampling

frame

Development of database

FieldworkPilot testingQuestionnaire

design

Data analysis Results

FIGURE 1: MODULES AND CONTENT OF THE BASELINE SURVEY

SURVEY STRUCTURE

Module I: Demographic Characteristics

Section A: Registration of Household Members

Module II: Economic Development

Section B: Characteristics of the Property Section C: Agricultural Production Section D: Livestock Production Section E: Forestry production Section F: Mining activities Section G: Other household income

Module III: Earnings

Section H: Organization Section I: Technical assistance Section J: Cacao (harvest/post harvest/sale) Section K: Cacao (soil/fertilizers/fertilization) Section L: Cacao (use of pesticides and others) Section M: Financing/credit/savings Section N: Telephony/Internet/eWallet Section O: Insights Section P: Gender Section Q: Environment Section R: Agricultural insurance/perception of risks

We have also customized an additional survey instrument (survey data sheet) for women, for use

among female heads of the household, or a woman over 18 years of age who is member of the

family being interviewed. This questionnaire, which consists of 4 modules for a total of 13 questions,

is summarized in the following table:

FIGURE 2: MODULES AND CONTENT OF THE GENDER SURVEY

DATA SHEET STRUCTURE

Module I: Role in decision making process regarding production and income generation

Module II: Access to productive capital

Module III: Access to credit

Module IV: Associative activities

1.3. Sampling frame and selected sample

To determine the sampling frame, producers that installed cacao with the Alliance's support

during2012-2016 were used as a reference. Localities with less than 10 people were excluded; as

41

were those that would not be part of the stage II of the Project because they did not meet the

expected conditions (e.g. accessibility, geographic location, etc.).

The following table shows the composition of the sampling frame:

TABLE 14: SAMPLING FRAME BY REGION

REGION

LOCALITIES (conglomerates)

PARTICIPANTS

HUANUCO 184 4,157 SAN MARTIN 232 6,288 UCAYALI 177 4,431

TOTAL 593 14,876

Source: The Alliance's M&E System

The following table illustrates the selected sample:

TABLE 15: SAMPLE BY REGION

REGION LOCALITIES

(conglomerates) Sample

HUANUCO 36 360

SAN MARTIN 37 370

UCAYALI 36 360

TOTAL 109 1,090

Source: The Alliance's M&E System

A sample of 10 producers was determined by locality, for a 95% confidence level and or margin of

error of +/- 5 percentage points.

1.4. Fieldwork and next steps

Fieldwork to conduct the baseline study was carried out December 2-17. The instruments developed

were applied to Alliance member producers. As a result, 1,135 baseline surveys and 696 baseline

surveys among women were completed. As shown in the table below, there was an oversampling of

45 surveys, which will reduce the final error margin.

TABLE 16: SAMPLE BY REGION (PLANNED AND ACTUAL)

REGION Actual sample Planned sample

HUANUCO 401 360

San Martín 364 370

UCAYALI 370 360

TOTAL 1,135 1,090

Source: The Alliance's M & E System

PCA’s M&E team will encode and digitalize the surveys collected next quarter (January 2017). Next

steps for Quarter 2 will be the development of an encoded, consistent database, data analysis and

the generation of baseline results.

The table below lists the final performance indicator table submitted to USAID in the formal

monitoring and evaluation plan this past quarter.

43

TABLE 17: PMP INDICATORS – PERU CACAO ALLIANCE PHASE II

TABLE: PMP INDICATORS - PERU CACAO ALLIANCE PHASE II

Date Actual Target Actual Target Actual Target Actual Target Actual Target Actual Target Actual

1 1/1/2017 TBD 30% 0 5% 10% 20% 30%

2 20,000 957 18,000 957 20,000 20,000 20,000 18,000

3 30% (6,000) 108 25% 108 30% 30% 30% 30%

4 US$ 50M US$ 5MM US$ 10 MM US$ 15 MM US$ 15 MM US$ 5 MM

5 33,000 17,000 22,300 30,000 30,000 33,000

6 1/1/2017 TBD 1,000 kg/ha 650 700 800 900 1,000

7 52,000 43,200 48,000 50,000 52,000 50,400

8 1/1/2017 TBD 2.8 2.4 2.4 2.5 2.6 2.8

9 1/1/2017 TBD 70% 20% 40% 60% 70% 70%

10 20,000 1,000 5,000 7,000 6,000 1,000

Quantity (Metric Tons) 137,268 11,232 21,168 25,200 33,696 40,824

Value (US$ MM) 93.9 25,833,600 48,686,400 57,960,000 77,500,800 93,895,200

12 2 0 0 1 1 0

13 US$ 10 MM US$ 0.5MM US$ 3MM US$ 3MM US$ 3MM US$ 0.5MM

14 10,000 500 3,000 3,000 2,000 1,500

15 10,000 500 3,000 3,000 2,000 1,500

FY2019 FY2020 FY2021

11

FY2018

Source: Monitoring and Evaluation Area

FY2017Global

Household Income (US$)

Number of ass is ted fami l ies

Increase cacao yield

Number of ass is ted hectares

Average hectares per fami ly

Percentage of fami l ies connected to a

productive va lue chain system

Number of pol icies , regulations and

adminis trative procedure on cadmiun content

Farms loans

Jobs created

Number of ass is ted woman

Value of faci l i tated investment

Sales

Number of fami l ies with access to loans

Number of beneficiaries us ing mobi le money

Number of fami l ies with access to new market

opportunities

Result

No.Indicator

Baseline

SUCCESS STORIES

Hamilton Gonzáles as he applies

biocontrol agents to his cacao plot.

"I am committed to my

neighbors in San Regis. I

want to help them increase

productivity and put an end to

the mazorquero."

Hamilton Gonzáles

Partner producer

Investment and entrepreneurship: first steps of future

technological agents in the Huallaga corridor

Together with a set of private sector partners, the Peru Cacao Alliance (PCA) formally launched its

“Schools of Excellence for Cocoa Productivity and Quality” along key corridors in the San Martin

province in 2016. Key corridors have a sizeable concentration of cacao crops, an important number

of independent growers, are fortunate to have the presence of successful cooperatives such as

ACOPAGRO and COOPALGA, and also are home to public entities implementing complementary

initiatives, such as the Rapid Impact Project for Sustainable Integral Development of Huallaga (PIR-

DAIS Huallaga).

The village of San Regis in the Saposoa District of the province of Huallaga was the setting for the

first training given by the PCA and Alliance partner Schools of Excellence. The inaugural session

targeted lead producers and field technicians, and focused on sharing information related to topics

of interest, such as Integrated Nutrition and Timely Pruning (INTP). During the fieldwork designed

to complement training sessions, participants such as producer Hamilton Gonzáles showed

remarkable initiative and disposition to collaborate with PCA and its Alliance partners. Mr. Gonzáles

offered his cacao farm to hold demonstrations of machinery provided by Alliance partner Husqvarna,

as well as to demonstrate the effectiveness of Yara’s input products. He has 3.5 hectares of cacao in

production, and reached cacao yields of 800 kg per hectare in 2016.

In recognition of the presence of the mazorquero worm on his and neighboring plots, and after

receiving a training at the School of Excellence, Mr. Gonzáles contacted Husqvarna to purchase a

motorized backpack for $1,450 Peruvian soles, so he could spray his crop with biocontrol agents like

Trichoderma sp and Beauveria sp and eliminate this pest. He purchased these inputs from TAP

Laboratories. This action significantly reduced the presence of the mazorquero worm on his cacao

plot, ensuring more income from his cacao business this year. Following recommendations received

from PCA-trained elite technicians, Mr. Gonzáles invested an additional $49 Peruvian soles in inputs

per hectare for each application to ensure his production levels and yields; in a year he expects his

yields to increase from 800 kg to 1,200 kg. per hectare.

But Hamilton has taken things even further. Understanding that while he may have solved his own

problem, he recognizes that the pest threat continues in his community. He therefore has decided

to start a business offering advisory services to his neighbors, putting into practice his leadership as

a farmer. In December 2016, he supported five neighbors to fight the mazorquero worms on their

plots, eradicating a total of 12.5 ha of cacao crops owned by three COOPALGSA farmers and two

independent producers. For each hectare sprayed, Gonzáles receives a payment of $25 soles. His

consulting fee includes personalized advice on machinery use, mixing biocontrol agents and

application of these to crops.

"I want to position myself as a specialist in nutrition and fertilization, care for my cacao and [help]

my neighbors learn from what I know. I want to offer this service so that everyone in San Regis can

produce more and more on their plots," says Hamilton Gonzáles. He also promises to continue

attending the Schools of Excellence because there he can learn first-hand the best techniques to

continue to increase productivity in his cacao plot.

Hamilton Gonzáles: first actions of a leader and future

technological agent in the Huallaga corridor.