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Central American University - UCA  
  Number 182 | Septiembre 1996
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Nicaragua

The Coffee that Comes Out on a Mule

It is not right that so many thousands of rural families in Nicaragua should continue producing coffee with so many difficulties. Every one of the candidates should feel challenged to support them, count on them and believe in them.

Miguel Alemán

Traveling through the country, we find many areas with no bank branches or agencies. Small producers have nowhere to go to get credit. Even if they do find a bank, but have no property deed, they are ineligible for credit. "We're going to fix this!" claimed one vice presidential candidate upon kicking off his party's electoral campaign.

Six years after the end of the war, Nicaragua still produces less coffee than any other country in Central America, even though it has enjoyed very generous foreign aid, and has a national plan to renovate and recover coffee, abundant agro ecological potential and people who know how to grow, pick and process quality coffee. Was this contradiction what the vice presidential candidate was talking about?

Nearly 65,000 acres are planted with coffee in Nicaragua. Over two thirds of this land is in the mountainous regions in the central part of the country and generates 75% of total national production. For every 10 acres of coffee, 7 are on farms such as that of Esteban Blandón, a peasant from Jinotega who works just over 24 acres with his three sons: under 2 of coffee, some 15 of pasture--but only for two cows and a mule--and about 3 of corn and beans for family consumption and sale. Although the authorities seem not to realize it, half of all national coffee production--roughly 4 500,000 pounds--comes out from diversified small farms like this on the back of a mule.

The Coffee that Rides in Trucks

Not all the coffee grown in the interior comes out on mule back. The largest coffee haciendas are located in zones that are easy to get to, linked to dense networks of all weather roads that connect them to the main cities in the interior. Most of these haciendas were not affected by the war, but many were expropriated for one reason or another by the Sandinista government, which invested heavily in them. Some of these big haciendas have been turned over to peasants, who subdivided them into individual plots. Others have been returned to their old owners and still others now belong to associations of workers, a new economic formula. In a number of the latter, former Sandinista government officials and technicians are attempting to live out "scientific socialism" while the "worker owners" continue working as farmhands and the administrators are the true owners.

Some of the old owners received bonds in compensation, while others only got promises of indemnification. When the correlation of forces at the local level allowed, some of these former owners succeeded in evicting the peasant occupants or reached an agreement with them to keep them on as wage workers. A number of coffee haciendas located in the most outlying areas, whether large medium or small, were returned to their owners completely destroyed. These owners have had to start again from scratch in the adverse economic and social context of the 1990s.

The Banks: Closed Doors or Red Tape

The latter was the case for Esteban Blandón and another 20,000 peasant families on returning to their war ravaged farms in 1990. Six years later Esteban says, "I haven't been able to put the farm fully back in action because the bank's doors are closed to us." In the mind of the rural population, both poor and better off, the closed banks have become the most negatively expressive symbol of the economic policy that has dominated the Violeta Chamorro government. For that reason, the promises that Esteban heard the opening Sunday of the vice presidential candidate are very tempting and resonate strongly in his ears.

After six years, the big coffee growers--those more closely linked to the government and represented in the National Coffee Commission (CONCAFE)--have restored, recovered or technologically upgraded their coffee plantations with state help. It is expected that, thanks to these investments, Nicaragua will significantly increase its production in the next four years. Up to this year some 17,600 acres of coffee have been renovated with financial support from the commercial and state banks. The large coffee businesses cornered about 75% of this financing. Another characteristic of the Chamorro government's economic policy is that the doors of the banks are not closed to everybody.

Another 20,000 acres of coffee were upgraded, recovered or renovated through the efforts of growers like Esteban Blandón. One of the major barriers to such farmers gaining access to the financing programs has been the technical packages to which the banks' coffee credits are tied. The growers are required to apply a highly specialized technology, which is both beyond the economic reach of these families and incompatible with their other economic activities.

The plantations that the bank obliges them to install could theoretically yield nearly 24 hundredweight of beans per acre, but at very high costs. Some analysts see these mandatory technological packages as vestiges of the "green revolution" that prevailed in the 1980s, based on a broad policy of subsidies. That project was a failure: it required enormous expenses for imported inputs, while the resulting exports were affected by the drop in international prices.

Installing high cost, high yield plantations would be economic suicide for farmers who are located in regions with poor road networks, who may not even have a mule, and whose ability to process the coffee once harvested is limited by their lack of access to pulping machines, fermentation basins and washing troughs. These farmers have less specialized plantations, with few trees per acre, and generally mix coffee with plantains and citrus trees. They cannot make a significant leap in their yield that way, never going much over 4 hundredweight per acre, but they work according to their family labor possibilities and thus respond to their cash needs in different periods of the year. Deciding on non specialized plantations with low yields is thus not the option of a "dumb Indian" opposed to "development" and "technological advances," but is the fruit of a thought out rationale that is beneficial to these families.

Why Not Invest in Them?

It does Nicaragua no good for these families to continue planting coffee under such adverse conditions. National production was once higher with policies that fostered the development of coffee cultivation on these farms, and could be again.

If these growers were to increase their yields to 8 9 hundredweight per acre, national production would rise by nearly 16,500 hundredweight of coffee, which, at current prices, would mean some $27 million additional in export earnings. It must also be kept in mind that these families only spend $25 to produce a hundredweight of coffee, while the largest enterprises require over twice that amount to produce the same 100 pound sack of coffee. Since growers like Blandón represent such a huge export potential, Nicaragua, currently staggering under the weight of its enormous foreign debt and in urgent need of quickly increasing its exports, does not have the luxury of abandoning these producers to their unprotected fate.

One major attraction for supporting the renovation of these farms is that the cost of installing one acre of coffee with an intermediate technological level, which is what suits the farmers themselves, is under $1,800, half of what it costs to install an acre with specialized technology. Restoring some 17,500 acres on these farms would cost the government just over $15 million, whereas the more specialized type of coffee would require $30 million. A reduction of the foreign debt is the most likely and expected scenario for the coming years, which makes support for these families who can contribute more foreign exchange at a lower cost even more appealing.

Nicaraguans are sick of hearing the government say that the country can produce more and save more dollars, that our economy's major illness is that we consume more than we produce and that this is why we are so deeply in debt to the international banks. So far, the official solutions do not go beyond firing thousands of public employees and closing dozens of state bank branches. Why not invest in these families, who can generate dollars at minimum cost, according to the formula proposed by the World Bank itself?

Coffee with "Aroma de difficultades"

Governments in all other coffee producing countries in the world protect and support their national growers when international coffee prices drop. In the Colombian soap opera "Cafe con aroma de mujer," which has been so popular in Nicaragua, we all saw how the Colombian government subsidized the growers' fight against coffee diseases. Given coffee's importance, protecting growers through thick and thin has an obvious economic rationale.

In Nicaragua, in contrast, the Chamorro government has had no program to recover and develop the farms of small and medium rural coffee operations during its nearly seven years of administration, despite such clear and persuasive arguments. Only 25% of the credit earmarked for investment in coffee production has gone to these families, and the situation of short term credit is even more unfavorable. The rural roads that already existed in the 1970s and were key to getting the coffee out of the mountains have still not been reactivated.

Farmers like Esteban Blandón have had to deal alone with the low prices for coffee, corn and beans, and to resign themselves to the closed doors of the banks and the deep ruts in the roads on which they take their few sacks of coffee out on the back of their only mule. The crisis has recently become so acute that they have had to sell their own production at futures prices just to buy medicines, clothes and the inputs they need to produce. This means that they get 20% less than the price they would get if they sold it only a few months later.

A Policy Change Is Needed

The inequity is even greater if one contrasts the situation of these rural growers with that of the sugar producers, whose oligopolic businesses are sustained and even enriched through the subsidy of thousands of Nicaraguan consumers who are forced to buy their sugar at higher than international prices. The owners of these plantation/refineries even own banks, and despite the fact that this gives them access to enormous economic resources compared to those of Esteban, they receive help from a state policy aimed at protecting them from the complex international economic framework.

Since small and medium rural family businesses have little representation in the upper ranks of power, their impact on the economic policy debates is minimal. Nonetheless, reducing rural poverty and unemployment and disarming the armed bands in the countryside depend largely on making a profound change in the questionable economic policy of these years.

It is, however, not only unjust to treat the farmers of the interior so unequally; it is also irrational, since they have such high economic potential for Nicaragua. If the new government were to change its vision of the productive role of small and medium rural enterprises, Nicaragua could enter the next century with hope and with feet of iron instead of clay, even if coffee does continue to come out on mule back.

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