Brewing Up a Private Sector Solution to Coffee Rust

They call it “La Roya”, or the rust. 

An insidious orange fungus that has wreaked havoc across Central America’s coffee farms—withering leaves, choking coffee berries, and turning lush verdant slopes into barren landscapes.

For over 150 years, La Roya has been the curse of coffee farmers across the globe. But in recent years, owing largely to climate change, the disease has regained a foothold in Central America, where over 1.5 million people depend on coffee for the livelihoods. Coffee rust has affected 40 percent of coffee plantations in Honduras and Nicaragua and up to 70 percent in Costa Rica, El Salvador, and Guatemala.

Although research has shown that coffee rust can be combated through replanting programs coupled to good agronomics, this solution has proven a challenge for small farmers in Central America—many of whom have limited access to long-term financing and resources. This is where IFC can help.

In Nicaragua, where coffee is one of the largest sources of rural employment and accounts for over 15 percent of exports, IFC and the Global Agricultural Food Security Program (GAFSP) are developing an innovative model for providing affordable, long-term financing and technical assistance to coffee farmers so they can renovate their farms.

IFC and GAFSP—in conjunction with the Inter-American Development Bank, Ecom, Exportadora Atlantic, and Starbucks—will provide a $30 million package of financing to farmers for the renovation of over 5,000 hectares of coffee plantations affected by La Roya in Nicaragua. The project will help to mitigate climate change by deploying a scalable model of climate-smart renovation that could be replicated by other countries and coffee traders.

This unique project, which is IFC’s first agri-climate project in Latin America, will also be combined with advisory services on agronomic and climate best management practices. GAFSP will provide a 25 percent first-loss guarantee for IFC’s investment, which will lower risks and the level of interest rates charged to farmers.

IFC and GAFSP are hopeful that this collaborative effort will help secure coffee supply and jobs in Nicaragua for years to come, eradicating some of the extreme poverty that the fungus has already wrought on the lives of small farmers.

Video: Helping Farmers Combat Coffee Rust in Central America