In Honduras, COVID-19 and Hurricanes Eta and Iota, which struck Honduras in November 2020, disrupted agricultural and food systems in multiple, significant ways.

Hurricanes Eta and Iota damaged more than 75,000 hectares of agricultural production. Together with COVID-19, these crises have plunged Honduras into a deep recession. National data sources show that 51.6% of Honduran households experienced a decrease in household incomes after these events.

The USAID/Honduras Transforming Market Systems (TMS) Activity invests to build the resilience capacities of food and agricultural market systems to better manage risk, so that Honduran farm households and agribusinesses can maintain jobs and income and bounce back after climate and market shocks. Building these capacities is critical to reducing vulnerabilities to disruptions, which are almost always associated with patterns of outmigration from rural areas to cities and beyond.

Disruptions in Honduran food and agricultural systems

At the Market Systems Symposium 2021, TMS presented four changes or trends that have been accelerated by COVID-19 and Hurricanes Eta and Iota. These changes provide opportunities for broader food and agricultural systems transformation. For each of these opportunities, TMS has partnered with similarly “disruptive” private sector partners to try to drive to scale broader systems changes that will build long-term resilience capacities in the Honduran economy and reduce the drivers of outmigration.

1. Direct-to-consumer distribution channels through e-commerce

The first change is the convergence of digital and e-commerce technologies with the increasing healthy eating habits of consumers. A bump in consumer demand for natural and fresh foods, which was spurred by the closure of restaurants and social distancing measures, has expanded opportunities for food distributors to provide direct-to-consumer food delivery services in urban and peri-urban markets.

To harness this disruption, TMS has engaged several private sector food distributors to establish direct-to-consumer distribution channels. One such partner is Seedlings and Herbs of Honduras (Pyflor), a fruit and vegetable distributor. During the pandemic, Pyflor opened an e-commerce platform and initiated delivery services, expanding to six new cities in Honduras.

TMS helped to accelerate Pyflor’s expansion with cofunding that allowed the company to quickly open new collection and dispatch centers in these expanded geographic areas. With TMS facilitating new linkages, Pyflor was able to grow and diversify the number of growers and other local businesses, such as bakeries, that sold through their platform. Following Pyflor’s example, other Honduran food processors have adopted similar distribution models.

2. Decentralization of agroindustry operations and supply chains

The second change is the decentralization of agroindustry’s processing operations and product sourcing to be more resilient. Government-imposed restrictions on transporting goods by land, water and air during COVID-19, and Hurricanes Eta and Iota’s destruction of about 80% of the banana crop along the north coast have accelerated investments by agroindustry in diverse areas to mitigate the impacts of future shocks like these.

For example, Dinant, one of the largest food processors in Honduras, imports potatoes from Holland, Canada and Chile for chip manufacturing. Dinant experienced supply disruptions, which allowed a local Honduran producer, JJ Agro, to enter its supply chain. To harness this disruption, TMS coordinated with the National Potato Council to import industrial-variety potato seeds from the United States and to support Honduran growers to now grow for Dinant.

This initial pilot generated a proof of concept, and the mechanism is now scaling to include other smallholder growers in this supply chain. Commercial banks, such as Banco Lafise, are providing the private capital needed to finance this expansion. Further, more than seven international agricultural companies and the Honduran Secretariat of Agriculture and Livestock are now trialing more than 32 new potato varieties to fully realize this market, estimated at $24 million per year.

3. Diversification of product and market mix of agroindustry

The third change is the private sector’s growing emphasis on higher value and diversified products in Honduras to reduce vulnerability to market-based shocks and to improve resiliency. The disruptions caused by COVID-19 and Hurricanes Eta and Iota have only accelerated Honduran agroindustry’s desire to invest in diversification of their product and market offers to be more competitive and resilient.

From its inception, TMS has engaged with Honduran agroindustry to develop and strengthen diversified value chains to mitigate the agricultural sector’s high vulnerability to long-term trends of natural resource depletion, climate change risks and market price shocks. For example, TMS has a partnership with EFI Solutions to create new opportunities for coffee farmers by planting cardamom, ginger, vetiver and lemongrass for high-value processing. These alternative crops help reduce vulnerability to coffee price fluctuations and provide more stable incomes for rural households, thereby reducing outmigration of rural producers and wage workers during the off-season.

TMS has partnerships with more than a dozen private sector enterprises to develop and strengthen nontraditional value chains, such as cardamom, okra, allspice, bread fruit, strawberries, ginger and many other nontraditional crops. Through an alliance with the National Investment Council of Honduras, we are scouting more than a dozen more opportunities and building out market intelligence capabilities for industry to continue to pursue diversification.

4. Investment in risk-mitigating technologies and infrastructure

The fourth change we are seeing is an increased willingness on the part of agroindustry to invest in risk-mitigation technologies and services. This has created new opportunities for investments to develop support service markets for agriculture. These opportunities range from renewable energy and greater demand for improved logistics infrastructure to a host of information and communications technology (ICT) solutions. 

TMS supports these opportunities by building the business case for investment. For example, with the renewable energy firm Innovation Business Solutions, TMS cost-shares in feasibility studies for investments by agroindustry to mitigate the stress of rising electricity costs. With the ICT solution Agtools, TMS has supported demonstrations to local industry leaders on how they can improve their market analytics and forecasting capacities. In the case of the new Palmerola International Airport in Honduras, TMS convened public and private actors to develop an Airport Master Plan to support turning the region into a logistical and transport center for exporting perishable products and processed foods by air.

Lessons learned on harnessing disruptions for transformational change

As market systems practitioners, we operate through constantly shifting contexts and continual disruptions. The sooner we can see changes or disruptions coming, the more we can capitalize on those changes or disruptions to advance our development objectives. However, this can be a particularly difficult thing to do when we are also trying to mitigate the harm of a particular crisis. 

One of the key reflections from the Market Systems Symposium 2021 session was the need to develop a mindset and discipline for recognizing the “weak” signals of change. Weak signals are simply data points that could suggest a broader change or disruption is underway. The process of recognition requires deliberate practices around scanning the periphery or environment for weak signals — a task that is often best suited for frontline staff — and structuring intentional spaces to discuss those signals. Such spaces should be outside of regular meetings when the group focus is on the most pressing issues, or “strong” signals.

Finally, we need to reframe our understanding of resilience and disruptions. In addition to reacting to mitigate the downside risks or harm, we should learn how we can be more proactive and harness disruptions as a way of advancing transformational change. This framing is articulated in USAID’s Market Systems Resilience: A Framework for Measurement, which essentially asks how we, as development practitioners, can be more proactive about managing risk to better achieve and sustain our development objectives.