Brewing Hope for Coffee Farmers in Nicaragua

January 24, 2022

By Daphna Berman

Until recently, Bismarck Huete would need to travel at least two days to buy fertilizer, seeds and other agricultural products for his small family farm in El Tortuguero, a remote stretch of land on Nicaragua’s Caribbean Coast. He made the journey— eight hours on a bus through muddy, often-flooded roads, followed by several hours on foot to the nearest town—just once a year. As Huete tells it, the long distance was just one reason the journey was so infrequent: Purchasing fertilizer to cover his entire field was often too expensive. With sky-high interest from village lenders, he preferred watching his plants wither, rather than shouldering debt he could never repay.

But Huete’s luck is starting to change. He recently joined a program sponsored by the Mercon Coffee Group— a vertically integrated global green coffee supplier with expertise that spans the entire supply chain. The company provides farmers like Huete with small loans to purchase plants, fertilizers, and other inputs to plant Robusta coffee plants. Robusta coffee, a species mostly used in instant coffee and espresso blends, thrives in the tropical climate of Nicaragua’s Caribbean coast, where it was first introduced in 2013.

Mercon is working in partnership with IFC, with support from the Private Sector Window of the Global Agriculture and Food Security Program (GAFSP), to help strengthen its operations in Central America and support coffee producers like Huete along the coffee value chain. IFC and GAFSP’s recent investment and advisory support aims to improve the productivity of the coffee sector, promote business sustainability, and protect jobs in rural areas, driving recovery and growth in Nicaragua, Honduras, and Guatemala, where the coffee sector is an important contributor to the local economy.

“We’re creating opportunities for producers, while also creating a high-quality coffee supply that’s a good fit for many of our buyers,” said Adolfo Lugo, Mercon’s Origin Corporate Manager.

Coffee is Central America’s second largest export, accounting for more than ten percent of the world's exported coffee and generating around two million jobs in the region. More than 90 percent of Mercon's coffee suppliers are small and medium-sized producers in rural towns. In Nicaragua, one of Latin America’s least developed countries, agriculture is critical and accounts for about 30 percent of total employment. Mercon has been a key player in the country’s coffee industry, with 35 percent of the country's total coffee exports.

But climate shocks have made farming a struggle, particularly in the Caribbean Coast, one of the poorest regions of Nicaragua, where rain falls 10 months a year. Local roads that connect coffee-producing regions to larger communities are often flooded or washed away, and donkeys are considered among the most reliable forms of transportation—which makes market access challenging nearly year-round.

Mercon pioneered the production of Robusta in Nicaragua more than ten years ago and over the course of a decade, has expanded its Robusta farms, developed a farmer supply chain, established the first Robusta processing mill in Nicaragua and invested in coffee-producing communities in the Caribbean Coast through the Seeds for Progress Foundation. Mercon’s investment in the supply chain is estimated at US$ 20 million and as Lugo explained, “we’re building an agricultural coffee industry in one of the most remote areas and we’re doing it from scratch.”

With support from IFC and GAFSP, Mercon is providing training to an initial group of 200 farmers along the isolated Caribbean Coast. A team of six agronomists travels to local farms, teaching planting, fertilizing, weed control, coffee tree maintenance, cherry picking, and harvest techniques. “We are seeing huge improvements in the quality and quantity of the coffee beans,” Lugo added. “The leaves are greener, the size of the bean is larger, and we’re seeing more beans per node. It’s still early in the process, but we’re seeing indications that the training is making a difference.”

Farmers who have participated in the program agree. “Before I learned proper techniques, the beans were small and the plants were weak and floppy,” said Levis Palacios, who plants corn, beans and yucca, in addition to coffee. “My plants are stronger and healthier now.”

Farmers like Huete and Palacios first began coffee farming as part of PAIPSAN, the World Bank’s Caribbean Coast Food Security Project (PAIPSAN), which was supported by the Public Sector Window of GAFSP. PAIPSAN, which was developed to enhance food security, nutrition and incomes for smallholder communities along Nicaragua’s Caribbean Coast by promoting agricultural diversification through cash crops, ended in December 2019, just as the coffee entered its first year of production. But some farmers struggled to connect to markets, particularly given difficult travel conditions.

IFC’s work with Mercon created a bridge with the Public Sector Window project, helping boost quality and production through Mercon’s technical assistance, while also creating stronger linkages so that farmers had a reliable and accessible buyer. In coordination with Mercon, three local collection centers were set up to mitigate the travel challenges that otherwise prevented the smallholders from offloading their coffee, creating a seamless access to markets that hadn’t existed previously. Since 2021, Mercon has purchased more than 158,000 kilograms of coffee at these three locations.

With support from IFC and Nitlapan, a local research and development company, Mercon also supplied solar dryers, which dehydrate the coffee using the sun in just eight days. Robusta coffee beans are processed naturally so beans harvested in the morning need to be delivered that afternoon, or risk fermentation. For Mercon and the smallholders along the Caribbean Coast, the solar dryers—which are shared by the farmers— mean that they can still deliver high-quality coffee to meet Mercon’s standards. As Lugo explains, the dry cherry is lighter, easier to transport, and can be stored for much longer. “It’s a natural process that has given the farmers a real solution and opened up a market they didn’t have before,” he said.

Coffee producers in Nicaragua carry out harvesting work (2021).
Coffee producers in Nicaragua carry out harvesting work (2021). © IFC

For farmers like Norlan José Gonzalez, the arrangement with Mercon has been a “win-win.” Gonzalez previously raised cattle on his farm but added coffee recently in the hopes he could provide a better future for his family. “Before Mercon, I never was able to get a loan. The rates were too high,” he said. “This program is good for everyone: Mercon is making profit and so am I.”

Farmers in the Caribbean Coast may also be eligible to secure land titling for their family farms through the on-demand window of the World Bank-financed Property Rights Strengthening Project (PRODEP III). The land titling would provide financial security for the farmers—and help increase the loan amount they’d be eligible for through Mercon’s financing.

Gonzalez, a 33-year-old father of two, is already reveling in the higher quality of life he’s been able to provide his family. “I am teaching my son how to plant coffee and hope he joins me in the coffee business,” he said. “I want to build a legacy for my family.”

Published in January 2022