What happens when Walmart comes to Nicaragua?

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Walmart now has stores in more than fifteen developing countries in Central and South America, Asia and Africa. A glimpse at the scale of operations: Nicaragua, with a population of approximately six million, currently has 78 Walmart retail outlets with more on the way.

That’s one store for every 75,000 Nicaraguans; in the United States there’s a Walmart store for every 69,000 people. The growth has been rapid; in the last seven years, the corporation has more than doubled the number of stores in Nicaragua.

When a supermarket chain like Walmart moves into a developing country it requires a steady supply of fresh fruits and vegetables largely sourced domestically. In developing countries where the majority of the poor rely on agriculture for their livelihood, this means that poor farmers are increasingly selling produce to and contracting directly with large corporations. In precisely this way, Walmart has begun to transform the domestic agricultural markets in Nicaragua over the past decade. This profound change has been met with both excitement and trepidation by governments and development organizations because the likely effects on poverty and inequality are not known, in particular:

•     What existing assets or experience are required for a farmer to sell their produce to supermarkets?
•     Do small farmers who sell their produce to supermarkets benefit from the relationship?
•     What is the role of NGOs in facilitating small farmer relationships with supermarkets?

Supermarkets require that farmers meet standards related to production, post-harvest processing, and delivery; for example, the use of specific pesticides and fertilizers and the cleaning and packaging of vegetables. Moreover, supermarkets generally require farmers to guarantee production year round, which requires planning (sometimes across multiple farmers), irrigation and capital. These requirements can present significant challenges to small farmers with little capital and it is thought that such challenges could strongly effect which farmers sell produce to supermarkets.

Generally, researchers have studied the inclusion of farmers in supply chains by measuring the income, assets and welfare of a group of farmers selling a crop to supermarkets (“suppliers”) with a similar group of farmers selling the same crop in traditional markets (“non-suppliers”). This research has provided important insights but has struggled with two persistent challenges.

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