A New Nicaragua
How This Spirited Producing Country Is Facing the Coffee Crisis
Story and Photos by David Griswold

When the American specialty market expanded in the 1980s and '90s, U.S.-imposed trade embargoes against Nicaragua's Sandinista government kept Nicaraguan coffees off of America's store shelves. As a result, Nicaragua never made it onto the radars of most American coffee consumers. But while the country has suffered from anonymity among consumers, industry buyers have long known of Nicaragua's superb coffees, including heirloom bourbon and typica varietals, most of which grow under dense shade in extremely fertile volcanic soil at altitudes between 3500 and 5000 feet.
   Unfortunately, even among loyal buyers, Nicaragua's reputation has occasionally fallen prey to inconsistencies in coffee exports, a problem wrought by unstable political systems, civil war and natural disasters. In the late '90s, for instance, the country was ravaged by Hurricane Mitch, one of the worst natural disasters in Central American history. The powerful storm destroyed much of the infrastructure of the rural countryside and displaced tens of thousands of coffee farmers and plantation workers. Five years later, Nicaragua is still recovering.
   But today, the country is making a comeback in the specialty coffee sector, and many roasters are paying more attention to Nicaragua as a single-growth origin. These buyers are moving it from the blend obscurity it has often known to a single-origin coffee that stands alone on the basis of quality. In fact, so many buyers from the U.S., Europe and Japan are now visiting Nicaragua that it can arguably be called one of the most popular coffee origins this year.
   Last February, I traveled to Nicaragua on a coffee sourcing trip. I had visited the country's coffee regions periodically over the past nine years, but this time I could tell things on the coffee farms were more desperate than ever before. The economic impact of low world coffee prices has devastated all sectors of Nicaragua's economy. But despite these immense obstacles, there are still signs of optimism and innovation, and the Nicaraguan people continue to surmount their challenges by implementing new coffee business models. Perhaps as a result of facing so many different crises over the years, Nicaragua will be able to turn the current coffee crisis into more of an opportunity than a hurdle.

The Coffee Crisis
For Nicaragua, the impact of the current coffee crisis has been enormous. Coffee provides jobs for more than 200,000 Nicaraguans, and it is the country's most valuable agricultural crop, comprising about 20 percent of the total export income. While low prices impair all countries producing washed arabica coffees, it seems the pain is magnified in Nicaragua. More economically diverse producing countries, like Costa Rica, ease the economic blow of low coffee prices with eco-tourism and jobs from corporate factories like Intel.
   Unfortunately, Nicaragua has few economic alternatives to coffee. "This year the drop in coffee 'C' Market prices will mean the rural areas will get about $100 million less than they would in typical years," says Roberto Bendanya, vice minister of agriculture for the Nicaraguan government. "It has a direct impact on the income of more than 30,000 coffee farmers, especially in the rural regions where it is grown." (For more on Bendanya's view of the crisis, see the interview on page 52.)
   Such economic and social dislocation affects hundreds of thousands of people, and levels of unemployment, migration and health problems in Nicaragua are staggering. A recent study conducted by students at the University of California-Santa Cruz found that the child malnutrition rates in the country's coffee regions are at 21 percent, compared to a national rate of nine percent. "When we say a coffee farmer is at risk, we're not just talking about the risk of losing their home," says Mike Maxey, Nicaragua's director for the United States Agency for International Development (USAID). "We are talking about people who are starving. Seventy percent of the rural population is living on less than two dollars a day."
   "The impact of low prices is dramatic," adds Chris Bacon, a University of California-Santa Cruz graduate student who studies the social and economic conditions of Nicaragua's coffee sector. "Coffee income allows people to buy food, shoes and school notebooks. The bulk of the crisis has fallen on seasonal and permanent workers on private coffee plantations. In the Matagalpa region alone, 20 of 25 large coffee farms have shut down."
   According to government statistics, unemployment levels are now reaching 80 percent for many of Nicaragua's 150,000 coffee farm workers. Without land or money, they are forced to migrate from coffee-growing areas to urban centers, where they usually end up in shantytowns that are mushrooming on the borders of cities like Managua and Matagalpa. Many others venture farther north to the United States.
   Over the next several years, the U.S. government and other development and aid agencies plan to fund more coffee-development programs in Nicaragua. According to Maxey and Bendanya, long-term answers to the country's problems will build on enterprise solutions and on many of the current successes Nicaragua has seen in the specialty sector, such as coffee cupping labs, Internet-based coffee auctions, cooperatively run wet mills and organizations that focus on quality, and the increasing capacity of local people to operate farmer development programs.

Crisis or Opportunity?
"Crisis can tear people apart or it can bring them together," says Bacon, noting that the current crisis is forcing farmers to reevaluate how they cultivate coffee. For instance, "Many Nicaraguan farmers are finding that by being part of a cooperative and producing certified-organic and fair-trade coffees, they can survive this crisis," he says.
   In 2002, Bacon and other researchers surveyed 240 small-scale farmers in the Matagalpa and Jinotega regions and found that farmers linked to fair-trade and organic markets garnered prices two to three times higher than the national average. "We also found that these farmers felt four times more confident that they wouldn't lose their land to bank foreclosure," says Bacon.
   He says the crisis has been most devastating to large coffee farms, and the strained market is causing the small-scale farm model to be re-examined as a more sustainable solution. "If you look at the figures nationally, large coffee farms are carrying the biggest debt with banks," Bacon says. "They have a high-input, high-output model that isn't working-high prices for inputs and high prices for labor."
   Thus, Bacon says small growers who farm organically and use their own labor are more likely to survive. "They grow about half the food they need right on their own farm. Small farmer co-ops feel that their business model is being recognized, not just by their government, but more importantly, by buyers. Small-scale Nicaraguan farmers are seeing a difference, not just in higher prices, but in the power of being part of a group. They feel that they are part of a change that is bigger than themselves. It's very powerful."

Centralized Wet Mills
Large or small, most Nicaraguan farmers are realizing that those who focus on quality and innovations are the ones who will overcome this crisis. Even larger, private farmers are learning to work collaboratively in an effort to create their own success stories. In Jinotega, for instance, I visited medium- and large-sized coffee farms that are working as a consortium in a centralized wet mill project called Pueblo Nuevo. Pueblo Nuevo is supported by USAID and the Nicaraguan Ministry of Agriculture and run by TechnoServe, a nonprofit U.S. development consulting agency.
   "In terms of cost, there's not much chance of Nicaragua competing with some of the bigger players, such as Brazil," says Tom Kilroy, a former McKinsey consultant who will spend this year in coffee regions helping TechnoServe. "Pueblo Nuevo is a centralized wet mill trying to improve quality. Before, these farmers were each processing their own coffee. They were using dirty water and the coffee was not coming out at a high quality level."
   By working to improve quality, Pueblo Nuevo farmers hope to move up to better market prices. But it was important for them to find the support of a coffee buyer early in the process. In this case it was Pete Rogers, a coffee buyer for JBR/San Francisco Bay Coffee of San Leandro, California. "When I first visited three years ago, their wet mills were pretty horrific," Rogers recalls. "They asked me how they could sell to the gourmet market, so I got involved in this wet mill project."
   For Rogers, the key is for roasters to stand by farmers as they face these new challenges. "Roasters have to support projects like these that help improve quality," he says. "If we support them by buying their coffees at a good fixed price, they will support us with higher-quality coffee."

Cup of Excellence Auctions
Nicaragua has recently succeeded in revealing itself to a wider audience by finding alternative markets, like the Cup of Excellence coffee competition and auction. "There is a growing awareness that Nicaragua has some great, unique tastes," says Susie Spindler, who spearheaded the highly popular Cup of Excellence program. "Because the majority of the coffees are fair-trade and organic, roasters tended not to identify the particular farm or co-op, so the top-quality coffees never had a chance to stand out."
   The Cup of Excellence program occurs annually in numerous coffee-producing countries. The goal is to discover and help market the finest coffees of a particular origin. By sorting through hundreds of entries from hopeful farms, a jury of international cuppers selects the top coffees to be sold in an Internet-based auction. The coffees are auctioned off in small lots of 10 to 100 bags to bidders around the world. Prices fetched are well above the world market price, and in many cases, the auction introduces "undiscovered" farms to a wide range of buyers. "The Cup of Excellence has given Nicaraguan producers the ability to see if improvements in quality, though such efforts as cupping labs, are making a difference," says Spindler. "It also empowers producers to know what they have in terms of quality.
   Why market real diamonds for the price of fake ones? They need to know which ones are real."

Rural Cupping Labs
Perhaps the most significant innovation in terms of teaching farmers about the taste of their own coffee has been the advent of rural coffee cupping labs. These newly constructed labs were created several years back by Thanksgiving Coffee's Paul Katzeff. Working with the Cooperative League of the United States (CLUSA), Katzeff received USAID funding to build nine cupping labs for Nicaraguan grower cooperatives in rural regions. (For more information on the cupping labs, see "The Green Café" in the April 2002 issue of Fresh Cup.)
   These cupping labs allow small-scale farmer cooperatives to taste and evaluate the best of their harvest in a specialty coffee setting. In Jinotega, I visited a cupping lab set up by the SOPPEXCCA cooperative. The SOPPEXCCA farmers claim that it is the first cupping lab in Jinotega, a city many call "the coffee capital of Nicaragua."
   The room is beautifully appointed and spacious, with plenty of room for eight people to cup side by side. It is equipped with multi-barreled Brazilian-built sample roasters and American-made coffee grinders. On the walls are dozens of new crop green samples in carefully marked containers stretching from one end of the wall to the other. Warm wood paneling, white tiled floors and plenty of light provide a perfect environment for buyers and sellers to talk coffee.
   As the co-op staff prepares to cup coffee from a dozen farms, I think about the uniqueness of this experience. After all, I can't recall many places in the world where small-scale farmers and their customers have the chance to cup coffees side by side. "Having the cupping lab at our own co-op is a tremendous advantage," says Victor Manuel Gonzales, vice president of SOPPEXCCA. "Before the cupping labs, we didn't have an instrument to [gauge] the quality of the cup-to know if the farmer's hard work was making a difference. Now the farmers can taste their own coffee."

Creating Local Capacity
Another possible solution to the coffee crisis is providing more coffee processing training to growers, says Jose Adan Lopez Zelaya, president of Union de Cooperativas Agricolas de Mancotal, an organic coffee co-op located in the Mancotal region of the Jinotega mountains. "Training is one of the most important needs of a producer in Nicaragua," Lopez says. "Small producers need people to teach them how to produce high-quality coffee. But with prices so low, it's hard for a cooperative to afford the staff needed to provide that training."
   Building local capacity is vital to the long-term success of coffee projects, but it is an issue that is often disregarded when development projects are planned. Many development organizations and other multilateral agencies have little to no coffee knowledge. Because of this, they tend to spend large budgets on salaries for outside advisers and on infrastructure that is often inappropriate for local conditions. In contrast, the more successful ventures, such as the cupping lab program, train local co-op staff and farmers to manage the projects. "We have to create locally based training programs that build the capacity of our co-op members," says Fatima Ismael, general manager of SOPPEXCCA. "We have to break our dependency on technicians and professional consultants who come from the outside. They do their project, but when the money runs out, they go. If we are not trained, they take that knowledge with them."
   Ismael focuses her co-op's efforts on building local capacity in cupping, business strategy and better administration. For example, cooperative staff cuppers run the cupping labs and share the quality results with member farmers. They avoid paying for outside laboratories to provide them with cupping results. And as the only cupping facility in Jinotega, SOPPEXCCA generates additional income by cupping coffees for other groups and private farms.
   One of the most inspiring stories of training local workers involves Marbely Garcia Lopez, SOPPEXCCA's quality control manager. Only 23 years old, Lopez's skill as a cupper has made her one of Nicaragua's specialty coffee success stories. Lopez grew up picking coffee with her parents on a large plantation. She eventually moved to the mountain town of Esteli in search of work, and she became involved in a Nicaraguan co-op program that offered training classes on such topics as environmental education and English. When the USAID cupping lab project developed, Lopez decided to learn how to cup coffee, and after two years of honing her skills, SOPPEXCCA offered her the position of head cupper. She was the first person to be hired to run the new cupping labs. Lopez has even been recruited as a judge by the Cup of Excellence. Good training and innate cupping skills have taken her far beyond her home in the mountains near Jinotega.

Cupping With Customers
From a business perspective, employing a skilled cupper can be a noticeable advantage to a co-op because it creates a situation in which producers and buyers can communicate in the language of flavor and taste. Such was the case for Peet's Coffee & Tea coffee buyer, Doug Welsh, who traveled to Nicaragua recently to sample new-crop coffees at SOPPEXCCA's cupping lab. Peet's purchases a coffee called "Hermanas," which is exclusively grown and processed by the 140 female farmers of the 400-member SOPPEXCCA co-op. Welsh cupped with two staff cuppers from the nearby PRODECOOP of Esteli, which had also brought in samples for purchase considerations.
   After the water was poured over the coffee grounds, the cuppers silently made their way around the table, slurping and spitting. "We had 10 coffees on the table, and there was one that jumped out," says Welsh. "It had more acidity, an elegant texture and a sweet floral aroma. As a cupper, you can get addicted to that kind of experience-that moment when you find a spectacular coffee. And sometimes someone else at the table feels the same way. I looked at Marbely and we both smiled because we knew this was the one coffee-at least for that table-that stood head and shoulders above the rest. Afterwards, we turned the cards over (to find the farm names), and the coffee we both liked was the one we'd bought the previous year and would buy again this year. I felt happy and proud for them because things don't always work out that way."
   Such an experience highlights the hope emanating from Nicaragua's coffee sector, and it proves that the country's coffee farmers are finding innovative ways to overcome the challenges facing their country. Perhaps specialty coffee can lead the way.

Nicaraguan Solutions to the Coffee Crisis:
An Interview With Roberto Bendanya

In addition to working as executive director of the Specialty Coffee Association of Nicaragua and serving as a member of the Specialty Coffee Association of America's International Relations Committee, Roberto Bendanya is Nicaragua's national vice minister of agriculture, which means he is charged with the daunting task of finding solutions to the difficult problems facing his country's agricultural sector. For the coffee sector to survive the ongoing pricing crisis, Bendanya, whose family has cultivated coffee for decades, believes Nicaragua must focus on quality, business alliances and diversification. During my recent trip to Nicaragua, I sat down with Bendanya to hear his views on the future of Nicaraguan coffee.

David Griswold: What steps does Nicaragua need to take to survive this coffee crisis?
Roberto Bendanya: Through coffee, I have seen how we can create alliances with our northern neighbors, and through alliances, we can have economic growth and development for all of our people. We need to keep working on coffee quality, and we're lucky to have good altitudes and good processing to produce washed coffee. But we're now focusing on diversification. We want to help farmers depend less on one income or economic activity, so we're getting them involved in forestry and dairy.

DG: What does working on quality mean for Nicaragua?
RB: With small producers, we want to help strengthen the organizations, following the examples of several great co-op models that already exist here. In the quality component, there are two things that are helping. One is the newly constructed (USAID-funded) cupping labs. They have been a key factor pushing that effort, as cupping allows producers to know their product. The second factor is the Cup of Excellence competition. This event creates an educational component that helps producers learn about their product. Also, producers have direct contact with roasters, so it allows very small producers to have commercial relations with small roasters. The Cup of Excellence creates an environment of healthy competition to make our coffee better. As producers, we believe that we all have the best coffee, and the Cup of Excellence provides a transparent arena where we can prove what we are doing.

DG: How does current commodity pricing impact the average coffee farmer in Nicaragua?
RB: For the small producer, it is just a life of survival. Some of the growers' kids are now unable to attend school because they must help the family find income. For larger producers, it affects their hired employees, who also are the poorest segment of the country's population. Last year, 10 kids died because their parents were unable to find employment. We are looking for emergency solutions, like Food for Aid work, but that is temporary assistance. We must focus on more long-term solutions.

DG: How do you view the U.S. coffee industry's response to the coffee price crisis?
RB: I think the 'C' Market is not doing anybody any good. It creates liquidity, but to the washed producer, it is only doing harm. For the value of the coffee and the work it takes to produce it, we cannot stay within the 'C' Market. It frustrates me sometimes because I lived in the United States for more than 10 years. I feel I am part of the U.S. I recognize the solidarity that exists within the population, and the willingness to help. But obviously, there is not enough knowledge among American consumers about what is happening. I think if more of the population knew what was going on around the corner from them, there could be much greater support.



Nicaragua at a Glance

• Number of coffee producers: 30,000
  
• Number of permanent workers involved in coffee farms (typically): 50,000
  
• Percent of unemployed permanent coffee farm workers from the 2003 harvest: 80%
  
• Number of temporary workers involved in coffee farms (typically): 200,000
  
• Percent of unemployed temporary coffee farm workers from the 2003 harvest: 50%
  
• Size of the 2002­2003 coffee crop: 1.35 million bags
  
• Size of the 2002­2003 specialty coffee crop: 135,000 bags

David Griswold is the president and founder of Sustainable Harvest Coffee Company, a Portland, Ore.-based green coffee importer who finds exemplary farms of organic, shade-grown and fair-trade coffees for specialty roasters though its relationship coffee program. For more information, visit www.SustainableHarvest.com