Market failures and poverty: the example of the cocoa sector in Cote d'Ivoire

Given the importance of market failures in Cote d'Ivoire, the question arises to know whether the liberalisation process in the cocoa sector led to an increase in producers' welfare, and especially in the poorest. We show that a major consequence of the liberalisation was a sharp decline in forward transactions on the international market and at collect level. This phenomenon led to an increase in producers' vulnerability, as their exposure to income risk rose dramatically and the range of risk-coping instruments was narrowed. Because of their low capacity to save, the absence of any insurance mechanism and an underdeveloped credit market, households were not able to smooth their consumption and had to cut down some expenditure. Scholarship expenses, which occur before the beginning of the cocoa season, were especially affected. Besides, the liberalisation was followed by a significant decrease in the role played by the co-operatives.