The Inter-American Development Bank (IDB) will provide long-term loans to help Nicaraguan coffee farmers combat the devastating effects of the coffee rust fungus, which has swept through Central America, crippling production and threatening the livelihoods of millions who depend on the coffee industry.
The project is a partnership between the IDB, Exportadora Atlantic (a Nicaraguan subsidiary of the coffee trader Ecom), Starbucks Corporation, the International Finance Corporation (IFC, a member of the World Bank Group), and the Global Agriculture and Food Security Program (GAFSP).
The signing of the loan with Atlantic marks the first operation under the $100 million Ecom Coffee Renovation Facility approved by the IDB’s Board of Executive Directors, in which the IDB is expected to provide loans amounting to $40 million for projects with Ecom subsidiaries in Costa Rica, Honduras, Mexico and Peru, as well as Nicaragua. For future operations in Mexico, Peru and Costa Rica under the Facility, funding from the IDB’s ordinary capital is expected to be complemented by a risk-sharing guarantee of up to $12.2 million from the Canadian Climate Fund for Private Sector in the Americas (C2F), administered by the IDB.
In Nicaragua, the IDB will invest $12 million in a total loan program of $30 million administered by Atlantic. The IFC will invest $12 million; Atlantic will invest $3 million, as will coffee roaster and retailer Starbucks Corporation, which will purchase the certified coffee from the project from Atlantic. The GAFSP Private Sector Window will share risk with the IDB and IFC, thereby lowering the level of interest rates charged to farmers.
In parallel with IDB funding in Nicaragua, a grant to be provided by the IDB’s Multilateral Investment Fund (MIF) as part of a technical assistance package totaling $546,305, is aimed at supporting the management of Atlantic’s portfolio of credits to small producers. The MIF operation will finance local climate change assessments and strategies for empowering female farm workers and farm owners.
Coffee is Central America’s leading export. In some countries coffee rust, or la roya, has affected up to 70 percent of plantations. The disease attacks coffee leaves and chokes off nutrition to the coffee cherries that protect the beans. In Nicaragua, this project will help approximately 550 farmers, many of whom work less than 12 hectares, replant and renovate their farms. It will provide them with new coffee varieties that are resistant to the fungus and technical support to improve their agricultural practices.
“This is one of the first private-sector climate adaptation projects to be approved by the international financial institutions, in partnership with like-minded industry leaders and donors committed to sustainability,” noted Hans Schulz, General Manager of the IDB Structured and Corporate Finance Department and interim Vice President for the Private Sector. “We hope that this project in Nicaragua can be replicated successfully in other countries in Central America.”
“This partnership will help us provide farmers not only with financing to replace old, diseased plants with disease-resistant varieties, but also technical assistance to help them make farming practices more sustainable,” said Edward Esteve, CEO of Coffee and Cocoa at Ecom.
Craig Russell, Executive Vice President, Global Coffee, Starbucks said, “Providing access to financing is part of Starbucks comprehensive approach to supporting farmer livelihoods around the world. This unique loan program helps farmers make strategic investments in their infrastructure, offering the stability they need to manage ongoing complexities so that there is a future for them and the industry.”
“Small farmers are particularly vulnerable to the effects of La Roya, as they cannot access financing to purchase new plants and wait out lost income for the three to five years required for new plants to mature and produce income,” said Alzbeta Klein, IFC Director for Manufacturing, Agribusiness and Services.
About the IDB
The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source oflong-term financing for economic, social and institutional development in Latin America and the Caribbean.The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.
GAFSP is a global effort that pools donor resources to fund programs that increase agricultural productivity in countries with the highest rates of poverty and hunger. Its objective is to improve incomes and strengthen food and nutrition security. Through its public sector window, GAFSP helps governments develop national agriculture and food security plans. Its private sector window—managed by IFC and supported by the governments of Canada, Japan, the Netherlands, the United Kingdom, and the United States—provides long- and short-term loans, credit guarantees, and equity to private sector companies to improve productivity growth, deepen farmers’ links to markets, and increase capacity and technical skills.
About Exportadora Atlantic, S.A.
Exportadora Atlantic S.A. was founded in 1997. Its head office, which is based in Managua, is supported by an extended network that includes two regional offices, forty buying stations, and nine dry mills. Together they function as a collective unit, possessing the level of national representation needed to advance the Nicaraguan green coffee industry. Exportadora Atlantic dominates more than one-third of the market share due in part to its active stand with farmers and roasters. As a company committed to promoting market transparency and quality within the industry, Exportadora Atlantic works directly with local producers to educate them about quality issues. During training sessions and open forums, Exportadora employees train farmers in coffee preparation, milling, defect counts, and cupping.
With facilities located throughout the country, the company has access to organic, estate, and traditional Nicaraguan coffee. Exportadora Atlantic tailors these coffees, creating unique varieties from a standard product.
Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting high-quality arabica coffee. Today, with stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup.
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. Working with private enterprises in about 100 countries, we use our capital, expertise, and influence to help eliminate extreme poverty and boost shared prosperity. In FY14, we provided more than $22 billion in financing to improve lives in developing countries and tackle the most urgent challenges of development.
- Christopher Barton