Reorienting export production to benefit rural producers : annatto processing in Peru

A recent project in rural Peru devoted to developing and commercially applying a simple, labor-intensive technology for annatto -- a natural food colorant derived from the seeds of the achiote tree (Bixa orellana) -- demonstrates the inherent advantages of locating processing industries closer to the raw material sources. This report provides a case study of the project. Topics covered include: project description; raw material and product; supply and demand for annatto; growing and harvesting of achiote trees; dehusking of achiote seeds; annatto processing technology; technical and managerial problems at the processing plant; effects of government policies; impacts on small-scale producers; and financial and economic viability of annatto processing. The study shows that the decentralization of primary processing industries is an effective strategy for rural development where appropriate technologies for small-scale production are available and infrastructure is adequate. However, such rural industries are often constrained by an inability to obtain financing (especially working capital) and to attract and retain capable managers, as well as by the macroeconomic and sectoral policies of governments that favor established, large-scale industries and traders.