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Loan Program Stirs Hope for Poor Mexican Coffee Growers

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  • Clore Daniel C
    News for Anarchists & Activists: http://www.egroups.com/group/smygo Loan Program Stirs Hope for Poor Mexican Coffee Growers Agriculture U.S.-based nonprofit
    Message 1 of 1 , Dec 1, 2000
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      News for Anarchists & Activists:
      http://www.egroups.com/group/smygo

      Loan Program Stirs Hope for Poor Mexican Coffee Growers
      Agriculture

      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
      responsible" investors.

      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
      export market.

      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
      output.

      "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
      November-to-February harvest.

      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
      exploit.

      "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
      $200,000 loans."

      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."

      --
      ---------------------------------------------------
      Dan Clore

      The Website of Lord We├┐rdgliffe:
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      Dharmakaya ceased; Tgenchang not become; Barnang
      and Ssa in Ngovonyidj; alone Tho-og Yinsin in
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      &c., &c.,"
      -- The Book of Dzyan.
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