Business Magazine

Eat Your Chocolate & Strengthen Democracy

Posted on the 29 June 2011 by Center For International Private Enterprise @CIPEglobal

Eat your chocolate and strengthen democracy too

(Photo: Sarah Gerrity/Sweetsonian.com)

Conflict chocolate is nothing new. West African countries produce seventy 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 fund violent conflict using 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 stealing of these funds also means fewer dollars going to cocoa farmers and less trust in public institutions.

According to that 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.

While 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, the 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.

As 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 into 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.

Washington, D.C.-based Global Financial Integrity (GFI) has emerged over the past few years as the leading voice on the topic of illicit financial flows – the use of tax havens, legal loopholes, transfer mis-pricing, secret bank accounts and other tools to store and transfer large volumes of money. The vast majority of illicit financial flows comes from multinational corporations trying to reduce or eliminate tax obligations in developing country jurisdictions with typically low tax collection infrastructure. But governments, opposition movements, criminals and violent outfits of all types use many of the same tools to store stolen or siphoned funds and to pay small arms dealers. It’s much safer than carrying briefcases full of cash around war zones.

GFI is the lead member of the Task Force on Financial Integrity & Economic Development, a global coalition of civil society organizations and over 50 governments working together to reduce illicit financial flows and raise awareness of their effects–perpetuating armed conflict, hobbling economies, and eroding democratic governance in places like Cote d’Ivoire, to list a few. 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 strengthen peace, prosperity, and democracy too.


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