By Dan Collyns
BBC News, San Martin, Peru
Manuel Tuahama says cocoa production brought peace to the region
Coffee and chocolate have really given a lift to Manuel Tuahama's life.
"There was a lot of killing, there were shoot-outs, fights, even at festivals. There was no peace," says the 34-year-old farmer who used to grow coca, the raw material used to make cocaine.
"Nowadays in this part of San Martin we say 'coffee and cocoa yes, coca no'."
The San Martin region in northern Peru used to be best known for drugs and the Shining Path rebels. Its forested hills made ideal guerrilla hideouts and were perfect for growing coca.
In the midst of the terror and insecurity, UN official Jochen Wiese offered peasant farmers the option of leaving coca for coffee with the incentive that if they worked together their product could reach the international marketplace.
That was 24 years ago. Today around 1,200 local families are part of a successful co-operative called Oro Verde, or Green Gold, which grows organic and fair-trade coffee and cocoa.
But now the stability enjoyed by the co-operatives faces a new threat from the global economic downturn.
"Anyway you look at it the crisis will affect our organisation commercially, we have fewer contracts than the year before," says co-operative co-ordinator Teofilo Beingolea.
Jochen Wiese still works for the UN Office on Drugs and Crime (UNODC) in San Martin. He is convinced the only way the co-operative can survive the crisis is by improving the quality of its product.
The question is, are Western consumers still willing to pay more for the feel-good factor which comes with a cup of fair trade coffee?
Ed Canty, a buyer for Vermont-based Green Mountain Coffee, thinks the answer is yes.
"Call it the Obama factor, I don't know what it is, but the bottom line is consumers are buying more fair-trade organics in coffees, which is great.
Ed Canty and Adam McClellan are helping farmers improve quality
"They are saying 'I need to be more careful how I spend my money' but they are also realising how we got into this situation to begin with."
He says the crisis has reduced the cash flow of multinational coffee companies interested in Peru, making it easier for more grass roots organisations like Oro Verde to compete.
Ed has teamed up with Adam McClellan, from the speciality coffee exporter Sustainable Harvest, to teach Oro Verde farmers how to "flavour-profile" their coffee using a tasting technique known as "cupping".
Adam says they are working to build a long-term relationship with their growers and are committed to helping them improve the quality of the crop.
"People are starting to realise that a higher price is linked to higher quality and a better quality of life for the producers through fair trade and organic certification," he said.
"It is also a co-operative structure that can be sustained."
But it is not just the growers and the buyers who have an interest in keeping such co-operatives afloat - for the Peruvian government and the UNODC they are a valuable tool in the war on drugs.
In Peru's central jungle region, where the eastern slopes of the Andes drop into the Amazon rainforest, co-operatives like Oro Verde are the exception rather than the rule.
Peru is the world's second-biggest producer of coca and cocaine and UN figures for 2007 indicate it produced 290 tonnes of the drug from 53,700 hectares of coca. Almost three-quarters of the cocaine goes to Europe.
'Cupping' is a tasting technique used to describe coffee flavours
"It's the small poor farmers who have migrated from the Andean region who grow the coca," said Mr Wiese.
"They are doing it because of a lack of options and are absolutely willing, in principle, to leave it behind."
Flavio Mirella, the UNODC's regional representative, said: "What is happening here is a seed which I hope will grow into something much bigger for the rest of the country."
He said 23,000 families now benefit from co-operatives growing coffee, cocoa and palm hearts but the organisations need more private investment and credit to help them through the financial crisis.
But drugs policy analyst Ricardo Soberon disputes that figure.
One of the reasons the co-operative movement has not taken off, he says, is that it is too closely linked to international market behaviour.
"It has only worked in particular areas, in certain circumstances and for a reduced amount of time," he said.
Secondly, Mr Soberon says, the Peruvian government has to take "radical steps to start respecting people".
"I'm talking about citizenship".
Mr Soberon says the military operation against Shining Path rebels in one of Peru's biggest drug-producing zones, the Ene-Apurimac River Valley, or VRAE, resulted in human rights violations.
"There is schizophrenia in the public policy on coca and that has been the situation in Peru for the last 20 years," he said.
"It's been kidnapped by US policies which design and define its priorities."
Coca cultivation is not illegal in Peru if growers sell the crop to a state-run company, Enaco, that sells the leaves for use in tea. Still, police say more than 90% of Peru's crop goes to the illegal drug trade.
Mr Soberon backs a plan to turn coca leaves into a flour to be used in a range of products including shampoo, soaps and sweets, but the government has dismissed it despite first-stage approval by a parliamentary commission.
Coca can produce up to four crops a year and there is no shortage of buyers. A peasant farmer can earn around $2.50 (£1.70) per 1kg of leaves.
At least 60,000 families in Peru live from growing coca, unwittingly partaking in a thriving if illicit international market.