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Interamerican Development Bank, World Bank and USAID express support as central america faces coffee and rural development crisis

ANTIGUA, Guatemala, April 5, 2002 — The Inter-American Development Bank (IDB), the World Bank and the U.S. Agency for International Development (USAID) today expressed their support for Central American countries as they seek to promote sustainable rural development amid a crisis in the coffee sector.

"The drop of international coffee prices to their lowest level in a hundred years, in real terms, is an economic and social disaster that has cost Central America, directly or indirectly, some 600,000 jobs," said Martin Raine, Sector Leader of the World Bank’s Sustainable Development Sector for Latin America and the Caribbean, at a regional workshop here, whose theme was The Coffee Crisis and its Impact on Central America: the Situation and Courses of Action.

The conference, held April 3-5 and sponsored by the three institutions, was attended by Central American Ministers of Agriculture, namely: Alfredo Antonio Robert Polini of Costa Rica; Salvador Edgardo Urrutia Loucel of El Salvador; Jorge Rolando Escoto of Guatemala; Mariano Jiménez Talavera of Honduras; and José Augusto Navarro of Nicaragua. Also attending were about 250 coffee producers, heads of coffee-buying and roasting companies, non-governmental organizations and coffee industry experts.

"Structural changes in the sector, both on the supply and demand sides, have created a need for new answers that restore viability by strengthening the comparative advantage of countries and of each producer," said Robert Kaplan, Chief of the Environment and Natural Resources Division of the IDB.

The IDB, the World Bank and USAID said the workshop had been productive as it offered a unique opportunity to exchange ideas among producers, governments, coffee-buyers and coffee-roasters, as well as NGO representatives.

The three institutions offered to continue facilitating the dialogue, as well as solutions emerging from it. The three institutions will support the Central American countries with technical assistance, reallocated portions of existing loans aimed at sustainable rural development, and consideration of new financing in response to requests from the governments.

Such initiatives would aim to maximize Central America’s comparative advantages in production of high-quality coffee, while also promoting processed products with significant value-added, improve marketing, and seeking sustainable alternatives to diversify the rural economy, all in an effort to ease the social crisis in the countryside.

"While one of the most urgent strategic challenges is to promote viable production of high-quality coffee, there is also a need to assist producers currently at a competitive disadvantage who want to diversify their production to other activities that are more viable," said George Carner, Program Director for USAID in Guatemala and Central America.

The IDB and the World Bank, which currently provide more than $500 million in financing for rural development programs in all the Central American countries, said these resources are devoted to investments and technical assistance in the rural sector, including coffee, to improve the competitiveness of farmers, especially the poorest ones. Both institutions indicated a willingness to re-allocate project financing in other sectors, at the request of governments, to address the social crisis in coffee-producing areas. They also expressed readiness to collaborate with countries in implementing their national strategies to address the coffee crisis, including consideration of new loans.

USAID announced it will launch a $6-million Special Coffee Program to provide technical assistance, promote commercial alliances in each Central American country, support marketing and certifications of origin, as welll as policies that promote an optimum market supply of high-quality and alternative coffees. This program, part of an initiative entitled Alliance for Opportunity in Central America and Mexico, will be accompanied next year by another one aimed at helping Central American countries diversify their agriculture.

At the regional workshop, many coffee-buyers expressed their interest in drafting long-term contracts with producers to improve and stabilize coffee prices. Participants also expressed interest in increasing the number of environmental projects focused on production and marketing of coffee, which would have the effect of increasing its price.

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