Santoyo, A. (2015). How Impact Investing is Saving Nicaragua’s Coffee Industry. Solutions 6(6): 78–80. https://thesolutionsjournal.com/2015/6/how-impact-investing-is-saving-nicaraguas-coffee-industry
On The Ground
How Impact Investing is Saving Nicaragua’s Coffee Industry by Anahi Santoyo
Ingmar Zahorsky
Coffee pickers harvest beans on a farm in Nicaragua. Coffee production is integral to the Nicaraguan economy, but about half of the country’s coffee farmers live below the poverty line.
T
hree years ago I was studying the fair trade movement in northern Nicaragua and the impact it was having on small-scale coffee farmers. Contrary to what most consumers think, fair trade doesn’t necessarily improve coffee farmers’ livelihoods. Despite the increased income they received, I was shocked by their continuing lack of opportunity and support. Most of them lived in remote rural areas, relied on rain-fed agriculture, and worked brutally long hours trying to support their families. I realized that for a fairer system in the coffee industry, it is not enough to make a living; it is also important to improve living conditions and to provide the farmers with the tools to exit the poverty cycle. Since the beginning of the nineteenth century, Nicaragua has been
economically dependent on coffee production. Nicaragua is one of the poorest countries in the Western Hemisphere.1 Most importantly, coffee accounts for 13 percent of total exports, with a value of USD$381 million.2 Considering that 43 percent of Nicaragua’s gross domestic product (GDP) comes from exports,3 coffee is integral to the economy. International demand for coffee has led to the country’s elite expropriating most of the suitable land from the indigenous population, and then forcing them to work in the coffee industry. The rest operate small holdings in remote areas. About half of coffee producers— mostly family farmers—live below the poverty line.4 There are several reasons for this. Coffee only provides income during the three harvest
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months of the year. At the same time, most coffee producers aren’t doing the selling themselves but rely instead on middlemen, who glean profits at their expense. It is also difficult for coffee producers to get access to capital and credit. As a consequence, producers will not have money to buy the necessary inputs for the next harvest, reducing their ability to scale up and improve their harvests and resulting in negative effects such as exposure to crop diseases and a lack of quality control. Coffee plants take between three to four years of growing before they are ready to be harvested, meaning that it is labor intensive and requires many agricultural inputs without providing an immediate yield. To try and overcome the main challenges of the coffee industry, farmers in Nicaragua have traditionally organized themselves into cooperatives to push for fairer prices. According to Crecencio Espinoza, president of the Augusto Cesar Sandino Cooperative, a member of CECOCAFEN, “if we weren’t organized in a cooperative we would be the poorest country in the world, because we wouldn’t have any source of support.”5 Cooperatives are a support system for small coffee farmers that help them negotiate better wages. For example, PRODECOOP, one of the largest coffee cooperatives in Nicaragua with 22 years of experience, generally pays members 20 to 30 percent above the national average.6 In Nicaragua, the cooperative system has an interesting connection to the past. The idea of cooperatives came from Augusto César Sandino, a guerilla leader that fought against the United States during the second occupation of Nicaragua. He became a national hero and his name was given to the revolutionary group that led the country for almost eleven years. Two of his main ideals were forming a popular party and organizing land