Nicaraguan political crisis impacts coffee farmers

On 18 April 2018, protests erupted across Nicaragua in response to President Daniel Ortega’s unpopular social security reforms that would see taxes rise and benefits fall. Protesters bore Nicarauga’s national flag, its blue and white background contrasting with the red and black of Ortega’s Sandinista National Liberation Front party. Authorities met protesters, initially consisting of a large number of students and the elderly, with large amount of violence. After five days, approximately 30 people were reported dead and Ortega announced the cancellation of his reforms. However, it did little to extinguish the spark that had been lit among the Nicaraguan community and protests continued. Specialty Coffee Association of Nicaragua (ACEN) President Carlos Alberto Bendaña tells Global Coffee Report after protests began, it was two months before he could safely travel to his farms in Dipilto. “Road blocks were put up around major cities and police would put you in jail if they saw you on the street. From April to September, it was chaos,” Bendaña says. “The United States and European community have helped a lot, having conversations with the Nicaraguan government. But even then, I still can’t display my country’s flag. If I do, I will be put in jail.” As of July 2018, human rights group Asociacion Nicaraguense Pro Derechos Humanos put the death count of the protests at 448. Bendaña estimates 700 people have been arrested, with half of them still detained. In order to avoid arrest, Bendaña says protests have taken to “express protesting”. “They protest in one area for an hour or so, then before cops come in, they take off. They go to another city or neighbourhood, do same thing for about half an hour, and run to another place,” Bendaña says. “This new form of protesting is part of why we have been seeing lower levels of violence recently.” While violence has de-escalated, it has already had large ramifications for the Nicaraguan coffee industry. Only a week before protests began, the Alliance for Coffee Excellence (ACE) completed judging of the 2018 Nicaragua Cup of Excellence (COE) in Matagalpa. The following political turmoil forced the not-for-profit organisation to immediately export award-winning lots to the United States in June 2018. ACE Executive Director Darrin Daniel says the situation put undue pressure on Nicaraguan coffee producers. “We had to have all of the award-winning lots driven to the coast overnight because there were so many barricades put up during the days,” Daniel tells GCR. “Farmers were not paid as fast as they should have been because we had to ship the coffee to the US and then again to the rest of the world. “The producers were very upset. I think a lot of buyers were panicked, so we didn’t experience a very strong auction that year.” Daniel says issues with exporting crops were not unique to COE participants, and may have hurt other coffee producers. “I’ve spoken to other exporters and importers who had trouble getting shipments out of the country last year. The delays were at their worst during the peak of the season – May to July – when most coffees are shipped out of Nicaragua,” Daniel says. “Banks are not giving out loans because they consider it too much of a risk due to the instability of the country… Producers have to take what little they have saved up and invest right now. Many are paying workers with crops, because they just don’t have money.”
– Carlos Alberto Bendaña, President of the Specialty Coffee Association of Nicaragua Bendaña says road blocks seemed to have stopped for the time being, with protestors and the government coming to the conclusion they are mutually detrimental. “Within the next few months, I don’t foresee Nicaragua having another problem with roadblocks. The government will not allow it. They will kill you if you try,” he says. “Also, Nicaraguans are concerned about the economic situation and know the only way of getting any money into the country is to export products. We’re getting the products for exportation – sugar, coffee, meat, and cattle – out of here as soon as possible.” Despite this, and due to fears of a reprise, the ACE announced the cancellation of the 2019 Nicaragua COE. Daniel says he could not risk the safety of his employees. “Our head judges spend as much as three weeks at origin doing pre-selection. We were concerned about their welfare, especially considering how we’re coming up on the anniversary of last year’s violence,” he says. “If we had held last year’s event just one or two weeks later, we probably wouldn’t have been able to get our people out of the country. “We even looked at conducting the COE at our headquarters in the US, but if there is another uprising, we could have a problem getting the coffee out of the country.” On top of these concerns, the ACE and ACEN struggled to find funding for the COE to take place. “The COE relies heavily on the support of government bodies in many countries. We’re a small not-for-profit. Financially, we can’t run the program and pay for all of the expenses ourselves,” Daniel says. Though the Nicaraguan government has supported the COE in previous years, Bendaña says it has become less willing to assist the private sector, and farmers cannot cover the costs. “Producers have to give a commission of the coffee we export to a government-run organisation for ‘promotion’,” Bendaña says. “Since the government is not helping out the private sector, they said they’re not going to pay for the COE anymore. “That fund has accumulated to about US$21 million a year. We could be using this money to hold the COE or attend more fairs around the world, things we should be doing to promote our crops.” Daniel says though the 2019 Nicaragua COE had to be cancelled, it is only a temporary suspension. “I would very much like to see us come back in 2020. Nicaragua is one of the countries that most needs the COE. Unfortunately, the country doesn’t receive some of the prices you see in Guatemala or other countries,” he says. Bendaña adds the COE is particularly beneficial for smaller producers, who don’t have access to the internet or ability to travel to sell their crops. “The COE is the only opportunity they have to sell their good quality coffee at a better price,” he says. “That extra money improves their life, production, productivity, and helps send kids to school and university. “Then, once they sell their coffee to COE, roasters can go directly through them to buy future crops. This helps them maintain a sustainable profit.” Unfortunately, the aftermath of the political crisis for coffee farmers goes beyond the cancelled COE. Bendaña says due to continued uncertainty, banks are unwilling to provide producers with the credit needed to hire workers and transport their coffee to ports. “Banks are not giving out loans because they consider it too much of a risk due to the instability of the country,” he says. “Producers have to take what little they have saved up and invest right now. Many are paying workers with crops, because they just don’t have money.” A lack of finance is also putting the health of Nicaragua’s coffee crops at risk. While many origin countries face the threat of new strands of coffee leaf rust, Bendaña says Nicaragua is particularly vulnerable to the pest. “Nicaragua has struggled with rust for the past few years,” he says. “It has been getting worse for the past few months and I think it will get worse throughout the year. A lot of farmers are abandoning their farms and leaving them to fester, or they’re not applying fungicide because they can’t buy it.” Coffee farmers’ financial hardships have not come exclusively from within the country. Falling coffee prices have placed pressure on many origin countries, and Nicaragua is no exception. “Prices have been low for the past three or four years. The cost of production in Nicaragua has been around US$140 per quintal (100 pounds). If you’re selling your coffee at a price of US$100 – it’s actually US$96 right now – you are losing US$40 per 100 pounds,” Bendaña says. “This is not a recent problem either. We’ve been struggling with low prices for years. You can take a risk one year and make it up the next, but it doesn’t work so many years in a row.”
Bendaña says the low coffee price situation in Nicaragua is set to worsen, with production costs set to increase in 2019. “In March, the government passed a new law raising taxes by 15 per cent on industrial businesses, including coffee production. The cost of production, which was US$140 per quintal last year, is now more than US$160. There’s no way producers can continue to be sustainable in the market,” he says. “Hopefully, there will be a change in the government and political rules that are going to take out that tax raise.” A key demand of Nicaraguan protesters is for an early election to be called for 2020, with international bodies providing oversight. Ortega’s third consecutive five-year term began in 2016. Just weeks prior to the election, the Nicaraguan Supreme Court ousted opposition leader Eduardo Montealegre in favour of the pro-Ortega Pedro Reyes Vallejos who had sued for control of the party. International critics, including the Catholic church, condemned the move, saying it essentially led to a one-party election. “Things will change as soon as the President confirms there will be an election next year. Everyone will have a different attitude,” Bendaña says. “I don’t think we’ll even have to wait until we have another party in power to have a change. It will happen as soon as we hear it’s possible.” As for the coffee industry, Bendaña asks the community to lay a hand by increasing its purchase of Nicaraguan coffee and pay higher prices so producers can palliate the crisis. “In the northern parts of the country, coffee is the main product and many communities live 100 per cent off it. If the coffee industry is not well, these communities won’t be either,” he says. “Selling more coffee will allow us to generate more revenue, contribute to the community, and invest in the future.” Global Coffee Report has launched a LinkedIn Showcase page. Follow HERE for up-to-date news and analysis of the global coffee industry.