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.
