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New president gives Nicaraguan coffee exporters hope
The Tea & Coffee Trade Journal / February 1997

By Larry Luxner

ORO VERDE, Nicaragua -- Approaching the José Benito Jiménez coffee cooperative along a winding, tortorous 20-kilometer road from Estelí, the first thing one notices about this place is its poverty-stricken appearance, and its lack of running water or electricity. The mountain scenery is spectacular, yet children play on dirt floors while stray pigs root around in the garbage.

Yaneth Rivera Zamora says it used to be worse. "Before, all these families lived in one house. Now they each have their own living areas."

Rivera is credit manager of Prodecoop S.A., an acronym for Promotora de Desarrollo Cooperativo de Las Segovias. Founded in 1993, Prodecoop -- based in Estelí --is the trading wing for 69 rural coffee cooperatives that embrace 2,340 members, including 502 women. Prodecoop markets its coffee in the United States through Equal Exchange, a Massachusetts-based non-profit organization that puts emphasis on paying farmers fair market prices for the coffee it buys. From sales to the global alternative trade market, says Equal Exchange, Prodecoop will generate over $600,000 in premiums for its members, who use the money to pay off bank debt, improve nutrition and avoid the loss of their land.

"We give them financing so they can maintain their coffee plantations and pay for expenses such as repairing their fields and paying minimum salaries," Rivera explains during a quick tour of the finca, adding that "about 70% of the cooperatives were founded by the Sandinistas."

Not surprisingly, a fading political slogan at the center of José Benito Jiménez promises that "con Daniel y Sergio, todo será mejor -- with Daniel and Sergio, everything will be better."

Yet in October, much to the disappointment of campesinos around here, former Sandinista President Daniel Ortega -- out of power since 1990 -- lost a bid to get his old job back. Instead, Nicaraguans overwhelmingly elected Managua mayor Arnoldo Alemán to their nation's highest office.

Alemán, to be inaugurated Jan. 10, 1997, is himself a coffee farmer, among other things. In defeating Ortega, the right-of-center politician ensured that Nicaragua would continue the free-market policies adopted by outgoing President Violeta Chamorro, and reject once and for all the Soviet-style planned economy approach that Ortega had embraced when he ran the country from 1979 to 1990.

"We basically hope there will be an opening in the sense of foreign capital coming in, and that there'll be an improvement over before," says Traugott Horsch, who came to 1984 from his native Germany, eager to help the struggling Sandinista movement. But he soon became disillusioned with Marxist rhetoric and eventually went into business for himself. Horsch is now one of Nicaragua's largest melon farmers. "The Chamorro government made it possible to export. What we are hoping is that there'll be more foreign investment. But I don't see any big changes immediately."

Gerry Lamberty, an advisor to Nicaragua's Association of Producers of Non-Traditional Exports (known by the Spanish acronym APENN), says Alemán has promised to create 100,000 jobs during his first year in office, in three sectors: agribusiness, tourism and free-trade zones. In early December, the president-elect announced his selection of conservative politician Emilio Alvarez Montalvan to head the Ministry of Foreign Affairs, and former Central Bank chief Francisco Laines to head the Ministry of Economy.

"In agriculture, they haven't been all that specific, but they'll certainly promote non-traditional exports," said Lamberty, who is based in Managua and works on a U.S. Agency for International Development contract. "Alemán says he's going to give the land back to the people, and will compensate the former owners in some way. The problem with agriculture is the residue left over from the Sandinista period, where a lot of people became accustomed to not repaying loans. In Nicaragua, you still have a lack of confidence."

Nicaragua, whose population has more than tripled in the last quarter-century, now has 4.35 million people, yet remains the most sparsely populated country in Central America after Belize. It is also the poorest, with a per-capita income of under $500. And except for a few hotels and shopping malls going up in the suburbs, Managua still hasn't recovered from the 1972 earthquake that devastated this once-bustling city.

According to official statistics, agribusiness accounts for about 30% of Nicaragua's $1.8 billion gross domestic product. In 1996, the top agricultural exports -- in descending order -- were coffee, beef, sugar, seafood and bananas. Coffee alone represents nearly 5% of the country's GDP and 27% to 30% of farm exports.

Earlier this year, Dole subsidiary Standard Fruit Co. said it would invest $15 million in Nicaraguan banana production. Standard Fruit pulled out of Nicaragua in 1982 after the Sandinistas nationalized banana exports. Del Monte is said to be considering some limited investments in the country as well.

In addition, the Export-Import Bank of the United States announced it would start funding development projects in Nicaragua, and the World Bank has included Nicaragua among a list of 41 heavily indebted poor countries that will benefit from a newly established trust fund to be managed by the bank's International Development Association.

In 1997, Nicaragua will issue coffee bonds to finance its coffee production, says the Nicaraguan Coffee Growers Union. The introduction of these bonds, worth $100 million, will raise fresh finance for coffee producers.

Even so, Lamberty observes that Nicaragua has yet to reach the level of exports of 1977, two years before the Sandinistas overthrew the right-wing Somoza dynasty.

"It's a general assessment that 10 to 12 years of sandinismo put the country back to 50% of what they had before in terms of per-capita income," he said, adding that exports such as peanuts, tropical flowers and ornamental plants might be easier to get into for Nicaragua than fresh produce. "Central Americans are now occupying practically the whole window that's available. They are limited to that window, and it's getting harder and harder to survive in a much more competitive world."

While they're not considered investors in the strict sense of the word, two U.S. organizations -- Equal Exchange and Sustainable Harvest -- are currently active in Nicaragua, striving to improve the quality of Nicaraguan coffee as well as the living standards of those who cultivate it.

Equal Exchange, which has closely identified itself with the Sandinista movement, buys coffee from Prodecoop and markets it under the following: Organic Café Nica, Organic Café Nica Swiss Water Decaf, Organic Breakfast Blends, organic pillow-packs and organic packaged coffees.

"In addition to paying a preferential price for the first container of organic coffee from the co-op, Equal Exchange provides something priceless: access to other markets, and expertise on how they work," says a company brochure. "From the beginning, the company's goal was essentially to make itself obsolete as the cooperatives' major customer and to promote expansive trading potential, as often as possible at preferential prices."

Prodecoop groups cooperatives in the departments of Estelí, Madriz and Nueva Segovia -- all Sandinista strongholds that suffered horribly during the civil war that gripped Nicaragua throughout the 1980s. From 1985 to 1990, During that time, Equal Exchange, Thanksgiving Coffee and other buyers that wanted to import Nicaraguan coffee had to have the beans shipped to Canada and roasted there, in order to circumvent the Reagan administration's trade embargo.

Margarita Cajina, export manager of Nicaragua's Unión Nicaragüense de Cafetaleros (previously known as Concafé), said that total 1996-97 coffee production came to 1,220,000 quintales, of which 1,050,000 quintales was exported. Nicaragua's chief customers for that coffee were Western Europe (60%), the United States (20%) and the Far East (20%). Based on an average $108 per quintal, that means total export revenues of around $132 million this season.

Under the Sandinista regime, coffee growers were required by law to sell their beans to Encafé (Empresa Nicaragüense de Café), a state monopoly. In 1991, following the Sandinistas' loss of power, that ended, and the coffee market was opened to competition for the first time in years. Among the country's largest exporters today are Encafé, the Ecodepa cooperative and CISA.

Yet volume coffee sales may not be Nicaragua's brightest hope.

"We believe that shade-grown coffee is better-quality," says David Griswold, president and co-founder of Sustainable Harvest in Emeryville, Calif. "If they want to be a commercial coffee player, that's one thing, but Nicaragua needs to focus on how to get into special niche markets." Griswold's company has agreements with five different Nicaraguan farmers' groups cultivating certified organic as well as shade-grown traditional varieties such as tipica and bourbon.

"We're also working with government coffee institutions to help orient them to the specialty market, because a lot of their coffee has gone to Germany and other European countries, and people here generally don't carry Nicaraguan on their board, especially roasters," says Griswold, who founded the Aztec Harvest cooperative in Mexico and continues to buy coffee beans from throughout the Americas. "It's really one of the great undervalued coffees in terms of its taste attributes."

Griswold says his company expects to import 3,000 bags of coffee during the 1996-97 season, generating revenues of $2-3 million. And despite Nicaragua's past turmoil, he says, political ideology has little to do with current success. "We have a lot of old friends that were part of the Sandinistas, but also people in the new government. When you go in there talking business into high-end markets, everyone's one the same page."

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