Kevindoylejones
Jul 24, 2017 · 3 min read

I am working the Ejido Verde story here, the one for investors. I am engaged in the kind of due diligence I did around our deals at Good Capital’s successful impact investment fund, which returned more than 15% IRR, on three deals with Mission Insurance, along with one failure.

The risk I am managing for is behavior change. The indigenous people we work with, the Purapecha people of Michoacan, will have their lives transformed by this project, if we succeed, and we are putting the pieces in place to succeed very well, I think. They will earn 5x what they make from subsistence farming, and will own a valuable natural resource in a large industrial supply chain and make 95 cents on the dollar while they do it. This will create mind boggling wealth that will be owned communally; one six thousand person community that recently pledged to grow resin producing pine on 408 hectares will earn $49 million during the 30 years of the project.

But for that to happen, there needs to be two important behavior changes the community will have to embrace. They will be growing 850 vs. 85 pines per hectare, and though these indigenous families who take care of their particular five hectare plot of so will not have to treat this like a job, the land will still have to be managed with that amount of weekly attention. Second, they will have to learn how to think about working for long term assets. They do not know how to do that; they never had that opportunity before.

On the second, there is a lot of research, some by Ben Mangan at Haas Business School at UC Berkeley on how different cultures respond to asset creation that can be learned from, and second several fair trade coffee cooperatives have learned how to handle the fair trade premium well. The virtue of the fair trade premium, and the best thing about the whole cumbersome fair trade system, is that the community gets to decide what to do with the money they earned; so it is giving power and agency to people who have had not had that. We want Ejido Verde to draw on those resources and other partners we bring to the table to work on that issue, and the related one of changing work behavior when you are scaling without regimenting people into being employees to be ordered around as they did in Brazil. That means working with the community to learn new collective management methods that can take the place of an employer but that works within indigenous culture. We’ve only started looking at that one, but Shaun Paul says we just have to build it into the cost of the loans. And then maybe contract with a non profit for service delivery, and pay the coop for being involved in peer learning, perhaps. When you have a deal that can pay for the essential social costs, it’s much more certain than asking for donations and grants for, though we will do that, too.

And that’s the great thing about this deal; if makes 14%irr, creates transformative community wealth and it has a huge local environment and climate change impact. There are already more deer and coyotes in the. 2,400 hectares under production and the temperature is cooler there and the ground water has improved. The project will sequester hundreds of millions of pounds of carbon.

Kevindoylejones

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