Oscar Abello

NexThought Monday: How to Eat Your Chocolate and Advance Development, Too

Editor’s Note: This post was adapted from an aritcle on the Center for International Private Enterprise blog. The original article may be found here.

Conflict chocolate is nothing new. West African countries produce 70 percent of raw cocoa worldwide, led by conflict-ridden Cote d’Ivoire and its 1.3 million tons of annual production. But new efforts to curb illicit flows of cash could be the first steps toward limiting the ability to support violent conflict with funds from trading in valuable commodities such as cocoa.

A 2007 Global Witness Report illuminated the primary structures used to siphon off cocoa trade revenues to fund violent conflict in Cote d’Ivoire. Besides paying for more guns and bullets, the abuse of these funds also means less trust in public institutions and fewer dollars going to cocoa farmers and workers.

According to the Global Witness report, the national cocoa and financial institutions created under former President Laurent Gbagbo to centralize cocoa sales and exports offered $20.3 million in direct support for war efforts on top of export revenues that Gbagbo’s government tapped for $38.5 million more in arms purchases between 2004 and 2007; meanwhile the opposition forces Nouvelles movement simply seized control of cocoa export tax revenues over part of the country’s cocoa producing region, bringing them $30 million between 2004 and 2007.

Plenty of those dollars are just a few degrees of separation from the wallets of consumers in the United States and Europe. But there’s a bigger picture here than the consequences of self-indulgence.

Global Witness and its supporters aimed to convince the global cocoa industry to be more transparent and to avoid funding conflict through its raw cocoa purchasing. While that is a worthy cause, boycotting chocolate or limiting global cocoa purchases to ethically certified sources threatens to cut off vital – albeit tainted – sources of income for many West African cocoa farmers, who may be poor themselves in addition to employing the poor on their farms. Wouldn’t it be wonderful if there was a way to stop or limit funding conflict while eating chocolate too?

Well, there is.

The Global Witness report did not address the issue of how governments and opposition movements manage to store and exchange such large sums of money for purchasing large volumes of small arms on the black (and gray) market.

Financial systems have become increasingly globalized and the technology to manage them has shrunken to the point where you can fit gigabytes upon gigabytes of data onto servers in a closet with an Internet connection. It has never been easier to store and exchange money safely and in large volumes.

Such ease has been a powerful force for extending greater global economic opportunity to an unprecedented percentage of world population. Unfortunately, some of that opportunity has been in illicit trading of small arms – along with drugs, endangered animal species, counterfeit goods, and human beings, all vividly documented in Moises Naim’s Illicit: How Smugglers, Traffickers and Copycats are Hijacking the Global Economy.

According to Washington, D.C.-based Global Financial Integrity (GFI) developing countries lost billions per year from 2000 to 2008 in illicit financial flows-money that is illegally earned, transferred or utilized. GFI estimates that about 3 percent of $1.8 trillion in annual overall illicit financial flows comes from bribery or theft by public officials, including money from conflict cocoa.

While Africa’s 2000-2008 average of $50 billion in annual illicit financial flows is a small percentage of the global total, it is enough to make the continent a net creditor to the rest of the world, according to GFI. It is also $50 billion that would otherwise find its way into Africa’s domestic capital markets, public services, public works, and citizens’ wallets.

The World Bank and the International Monetary Fund recently announced their own internal efforts targeting illicit financial flows in one form or another. If successful, these efforts alongside countries coordinating on financial transparency across borders would help to curb or even eliminate the ability to store and transfer funds for destructive purposes.

By promoting financial transparency, you can eat your chocolate and help advance peace, prosperity, and development too.

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Agriculture, Impact Assessment