Accord reached on coffee crisis

Nicaragua Network Hotline, 30 April 2002

The Nicaraguan government, banks and coffee growers reached an agreement intended to solve the coffee crisis, which has resulted from the high debts that the coffee producers have with the banks and the low price for coffee on the worlds commodities market. A Presidential Commission which included Vice-President Jose Rizo, Economy Minister Eduardo Montealegre, Central Bank President Mario Alonso, Agriculture Minister Augusto Navarro, among others, was created to resolve this crisis.

Vice-President Rizo stated that they had agreed on a series of measures with which they hoped to integrally and permanently solve the crisis in the coffee sector.

The first phase of the agreement includes immediate measures for restructuring coffee farmers debt, under special terms and preferential interest rates. The second phase pushes for competitive change in the coffee sector to promote more productivity, better quality, and better marketing. These measures should be implemented in the short, medium and long term to open special niches in the international market. The whole project should be ready at most within four months. Moreover, the government will promote crop diversification in coffee-growing regions in order to avoid future crises due to low international prices for coffee.

Farmers with less than five acres of coffee will have up to 20 years to pay their debts, no interest charges, rather they will be charged only for inflation. If, after selling his or her harvest, the small grower still has debts, then the government, through the Rural Credit Fund, will set up a meeting with the creditors to negotiate terms for the repayment of the remaining debt. No foreclosures will be carried out during the process of negotiation. Once that phase concludes, the government will notify small farmers of the date for formalizing their payment agreement. Additionally, the government will give the small grower technical assistance for improving crops, as well as for processing, marketing and crop diversification.

For medium and large growers, the solution agreed upon stipulates that they will be able to negotiate with creditors the repayment of their debt over up to 15 years, with a grace period of up to 10 years, and an interest rate of 10 percent or even lower, including bank interest and extra commissions. The agreement includes a clause for accelerated payments when coffee prices exceed a predetermined amount, as well as certain financial measures which will allow coffee farmers to increase their payment capacity, and recover their creditworthy status.

Freddy Torres, President of the Nicaraguan Coffee Producers Union (UNCAFENIC), stated There is finally a President who takes into consideration the coffee sector of the economy, and by reactivating this sector, he is reactivating the economy.