Drinking coffee as an act for peace in times of polarization
Nicaragua is once again extremely polarized. It is enough to compare different posts on our nica-update to see diametrically opposed views of the ongoing crisis. We post them not to imply that each perspective is equally true, but rather to recognize that important segments of the population hold contradictory views of what is happening and its underlying causes. Even more important are its implications for the future governability of Nicaragua –for any government to be sustainable, it will need to find a way to incorporate the interests of those holding the opposing viewpoint, no matter how “mistaken” they may be judged to be. We certainly learned this lesson at the end of the “contra war” in the early 1990s.
To contribute to the development of this understanding of the conflict, our close ally in Nicaragua, Augsburg University´s Center for Global Education and Experience, has developed an online course that delves into those two perspectives. The Crisis in Nicaragua: U.S. Destabilization or a Democratic Movement?
For our part, given that our major focus for the last few years has been accompanying Nicaraguan cooperatives, we have redoubled our efforts to support their economic and social enterprises in spite of the risks in these times of crisis, because we see them as potential oases of peace. Cooperatives generally have members of different political and religious perspectives who come together to achieve economic and social benefits for their members. By nature, they have to negotiate the accomplishment of common goals with members from different viewpoints.
Furthermore, the history of Nicaragua is full of examples where political violence starting in urban areas ends up claiming many more rural lives, as both sides recruit peasants by offering to meet their historic demands when they come to power. But consistently, after the conflicts end, while a few might end up benefitting, the effective political power of the peasantry remains largely unchanged, in spite of the many promises.
We see our contribution in this context to be helping cooperatives be successful economic and social enterprises in these difficult times. Because when successful, they contribute to the sustainability and stability of their territories, and thus lessen the attractiveness of purveyors of violence.
The problem is that because of increased country risk, credit to the countryside from both banks and microcredit organizations has largely dried up. No access to credit severely cripples the ability of cooperatives to play this role in their communities.
Since 1997, WPF has lent $3.7 million dollars directly to cooperatives and grassroots rural organizations, and has lent another $7.5 million to national microcredit institutions founded to support the rural sector. Even though these numbers show we are a small overall player, we intentionally set out to lend to groups that had never before managed a loan, precisely to help them establish a credit history, and thus open up other sources of credit to them. As a result, a number of cooperatives, and one now very large rural microcredit organization, have “graduated” to the point where they have “outgrown” the amounts we can provide, and now receive much larger amounts from a variety of lenders.
But as a small, private foundation (i.e. one that does not receive donations from the public), we cannot survive very long if those loans are not repaid. Correspondingly we have an overall loan loss rate of only 3.59% in this same period.
Even in this time of crisis, WPF has made loans to grassroots cooperatives worth just under $168,000 in this 2018-19 coffee cycle. But the risks only increase with this next coffee cycle, as economists point out Nicaragua now faces macroeconomic instability. Economic actors continue to send dollars outside the country, and international reserves continue falling. Specifically, this raises the specter that even though we make loans to grassroots coffee cooperatives, and they are able to export their coffee, once the payment for their coffee enters the country, the government may not allow those dollars to leave, thus making payment impossible.
The only way around this problem is to “triangulate” the loans, i.e. include the international buyers in the loan contract, where the buyers, once they have received the coffee, agree to transfer the amount of the loan and interest directly to WPF´s account in the US, sending the remainder to the account of the cooperative. That way the cooperative does not lose access to an international lender for not being able to make a transfer of dollars to the US.
We have already used this mechanism with a number of cooperatives. But given the new risks, we realize it has to be required for all our loans. The problem is in this last coffee cycle the number of contracts between cooperatives and international buyers actually dropped precipitously, while the number of contracts with “local buyers” increased to a similar degree. This strategy would not work with local buyers, because their payment to us would still have to overcome the hurdle of sending dollars outside the country during a possible ban.
Yet our research has shown that these local buyers are actually exporting all the coffee they buy. Given the uncertainty, it appears that previous direct international buyers are working through these intermediaries to source their coffee. This means that in this time of crisis, cooperatives are getting even less value for their coffee, as these intermediaries take a chunk of the money that previously went directly to them. Just when cooperatives need to be supported to promote local stability, they are even more hobbled by the new buying methodology.
WPF for some time now has been working with a team that accompanies some 50 cooperatives. Even before the crisis our team had been working with the cooperatives on issues of internal organizational effectiveness, equity, transparency, and effective member participation.
Now as a contribution to peace, we are willing to continue lending to these cooperatives, in spite of the risks. We want to form an alliance with coffee and cacao buyers interested in making a concrete and real contribution to peace in the countryside by buying directly from grassroots producer cooperatives. This is particularly important for this next coffee cycle.
We would not expect buyers to buy anything less than quality coffee, and the cooperatives we work with, in addition to providing the normal samples required by buyers, could also provide them with abundant information about their members, as many of them have done internal surveys, and even facilitated their member families developing their own “Family Investment Plans”.
Such an alliance would provide quality coffee to buyers, and would provide important income to coffee producers, thus enabling them to be oases for peace in their territory. In this sense, drinking coffee coming from such an alliance would effectively be an act for peace in Nicaragua.
Buyers and roasters interested in contributing to peace in this way in Nicaragua can contact us at email@example.com. We would also appreciate support from any readers in helping us make contacts with coffee buyers and roasters.