Loan Program Stirs Hope for Poor Mexican Coffee Growers
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Loan Program Stirs Hope for Poor Mexican Coffee Growers
U.S.-based nonprofit 'green' fund uses innovative strategy
to get vital cash to organic co-op.
Los Angeles Times
November 11, 2000
By James F. Smith, Times Staff Writer
LOS NARANJOS ESQUIPULAS, Mexico--The peasants of the La
Trinidad organic coffee cooperative who farm the steep hills
of this tiny village in Oaxaca state face the same problem
as most small businesses in poor countries: They need loans
to boost production, but banks aren't interested in
dirt-poor peasants with no credit history.
Enter William Fulbright Foote, once a Lehman Bros.
investment banker who roamed Latin America handling
billion-dollar deals. He now runs EcoLogic Enterprise
Ventures Inc., a nonprofit "green" loan fund for small rural
businesses that encourage biodiversity. It is backed largely
by private U.S. philanthropic groups and "socially
With the help of a California importer, Foote and the
growers devised a way to use the coffee crop itself as
collateral for an initial $40,250 loan approved Oct. 26. The
cash will not only let the growers avoid flogging their crop
in advance for poor prices, but will let them make small
investments toward much-needed productivity gains.
It's the kind of financing for small business that
President-elect Vicente Fox would like to see more of. Fox
is banking on small business as the key to 7% annual
economic growth--and as a tool to spread opportunities to
Mexico's poorest, remotest regions.
The coffee co-op's dilemma is typical of small operators.
Jorge Cuevas, 27-year-old manager of the co-op's export arm,
Rainforest Trading Co., said the co-op needed cash each year
to finance the organic growers' pre-harvest costs.
The company also needed financing for the small
coffee-processing plant it is building on the outskirts of
the state capital, Oaxaca city. The plant will process
coffee for export to U.S. buyers such as Sustainable Harvest
Coffee Co. in Emeryville, Calif. But nobody was rushing to
lend Cuevas money.
Pondering the coffee cooperative's dilemma, Foote and Cuevas
thought they saw a solution. But a meeting with the growers
was required first.
After a perilous ride up a mountain track in an old truck,
Foote was presented to Lazaro Jacinto Perez, secretary of
the coffee growers, and several dozen curious co-op members
who had trudged in from the surrounding fields. The farmers
and their wives, many wearing brightly embroidered Zapotec
Indian blouses, gathered under the portico of the simple
village hall for the meeting.
Foote later tramped through the fields and inspected the
head-high coffee plants, which grow on a sheer 70% grade and
under the shade of wild banana and spice trees, to satisfy
himself that the co-op was sound.
The shade-grown coffee from this verdant part of Mexico is
among the country's finest, U.S. importers agree. Named
Pluma Hidalgo after a nearby village, it commands a ready
The farmers have been exporting organic coffee since 1995,
but most years they have run short of money to plan for the
next harvest and to make simple investments that would raise
their meager output per acre.
Cuevas struggled to come up with the capital needed to give
each co-op member a $100 advance twice a year, money
intended to get them to the harvest without having to sell
their crop in advance or borrow from loan sharks.
At best, the farmers earn the most modest of livings, as
little as $600 a year per grower. More than 90% of coffee
growers in Mexico work plots of less than five acres. And
the world coffee price is at record lows, about $75 per
132-pound bag, the standard trading measure.
Cuevas said the chief problem is obvious but not easy to
resolve: Productivity per grower is just one-third that of
comparable coffee plantations in Costa Rica.
"Our real bottle-neck is in the field," he said. "We need
more production from the growers."
After the 230 co-op members stopped using chemicals and
fertilizers entirely in recent years to be certified as
organic growers, production fell somewhat.
"It's like a drunk who stops drinking," said farmer Justino
Juarez. "You shake for a while until you get stronger."
Organic coffee production is now climbing in Mexico, up from
just 27,000 bags in 1994 to 126,000 last year. And organic
beans command a 30% premium over non-organic coffee.
Organic coffee still makes up less than 5% of Mexico's total
coffee exports, but the potential market is considered
enormous. Foote noted that specialty coffees rose to $6.2
billion in sales last year in the United States alone.
To keep their organic certification, the farmers' daily
workload has shot up. Fields need to be cleared of weeds
twice a year, and all the work is manual because the fields,
on the southern slopes of the Sierra Madre, are far too
steep and delicate for machinery.
The money Foote will provide is intended partly to improve
"To improve our harvest, we need to replace old plants and
we also need to grow more trees to give better shade,"
grower Jose Juarez Martinez said.
Juarez Martinez has already replaced 200 plants on his lush
four-acre patch. He has painstakingly shaped mini-dams
around each plant to catch rainwater, which has helped make
his bushes heavy with berries ahead of the
Foote, grandson of the late Arkansas Sen. William Fulbright,
sees in such operations precisely the kind of growth
opportunities that the new Mexican administration wants to
"There is a capital gap," Foote said. "There is $100 million
in socially responsible venture capital sloshing around
Latin America, ready to be invested in environmentally
friendly projects. [But] nobody is making the $10,000 to
Foote's EcoLogic, based in Cambridge, Mass., aims for that
niche. It has lent money to cocoa farmers in Costa Rica,
spice growers in Guatemala and coffee farmers in Chiapas.
Cuevas and Foote came up with a triangular solution for the
La Trinidad co-op: The California buyer, Sustainable Harvest
Coffee, would make payments for coffee deliveries not to the
co-op, but directly to Foote's fund. In this way, the
growers would pay off the first year's loan installment of
$40,250. If the arrangement works, the revolving loan could
grow to $75,000 by the third and final year of the deal. The
cost is not cheap: The interest rate is 14%.
David Griswold, founder of Sustainable Harvest, said
supporting the Oaxacan project ensures him a steady supply
of some of Mexico's best coffee. And he said it also helps
meet a crucial need.
"Farmers are really at the mercy of the banks--if they're
that lucky--and if not, the coyotes," the name given to
those who pay fire-sale prices to cash-desperate farmers.
For a rural organic cooperative, the payback from such
financing is dramatic, Foote said.
"The community keeps its forests intact; they are exporting
a labor-intensive, eco-friendly product; and they are doing
it profitably for the first time because of the rise of
environmentally conscious consumers in the U.S. who are
willing to pay more for these products."
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The Dan Clore Necronomicon Page:
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night of Sun-chan and Yong-grub (Parinishpanna),
-- The Book of Dzyan.