Profiles

El Salvador: A federation for the future

Tiny El Salvador was once the fourth-largest coffee producer, but then the perfect storm swept through. Local actors talk renovation, unification, and the Federation.

Looking at the International Coffee Organisation’s (ICO) historical production figures for El Salvador, one might wonder what happened to the small country whose coffee industry once produced millions of bags of coffee a year, making the 21,000-square-kilometre country the fourth-largest producer globally throughout the 1970s. By the 1990s, El Salvador still averaged about 2.4 million bags per year, but this current harvest is expected below 900,000 60-kilogram bags.

Talking to experts in the local industry and listening to the stories of local actors paints a history that runs parallel to the highs and lows of production numbers – from boom times to corruption to C market fluctuations to coffee leaf rust, known as “la roya”. While the same can be said for many other coffee-producing countries, El Salvador seems to have been hit the hardest.

“At one point coffee was a very lucrative, very important product for the country and at one point we were truly the reference for the international coffee industry,” says Emilio López Díaz, a sixth-generation Salvadoran coffee producer who’s been involved in the domestic and global coffee industries in various capacities for the past 20 years.

“Unfortunately, whether we were big or whether we had dropped to like the 50th producer, coffee has always been very politicised.”

Introduced in the 19th century, coffee quickly became the major export product as the government shifted its attention toward the lucrative bourgeoning industry. In a matter of time, the industry fell under the control of an oligarchy, with the majority of coffee plantations concentrated among a small share of landowners thanks to liberal land reform.

By the 1930s, coffee represented more than 90 per cent of the country’s exports. And even after a bumpy period that included two world wars and a global recession, El Salvador remained at the top. It was after the civil war of the 1980s that land changed hands again. Agrarian reform reversed the previous land reform and broke up many of El Salvador’s large estates. Although that land was redistributed among plantation workers, the government maintained control, with no single farmer permitted to own more than 245 hectares. Today, the reform is still intact, with more than 90 per cent of production supplied by smallholders with fewer than 20 hectares of land.

The agrarian reform, followed by a period of nationalisation, disrupted the industry’s preexisting structure and efficiency, and nearly “broke trade of coffee in general,” López Díaz tells Global Coffee Report. “But even then, coffee was still very lucrative through 2000.” In 2001, however, the global price of coffee fell to only US$0.43 per pound. That year El Salvador’s production dropped more than 34 per cent, according to ICO data.

“Because the price dropped so aggressively between 1997 and 2001, the entire Salvadoran economy crashed and both producers and miller-exporters defaulted on their debts with the banks,” explains Juan Francisco De Sola, CEO of El Salvador’s largest exporter, Unex, and chair of the local exporter’s union, Abecafé. Although the government refinanced those debts into a 25-year trust with low interest, it meant producers were inextricably tied to the banks.

The crisis caused a domino affect within the industry. “We lost interest among all of the actors,” López Díaz says. “Most producers went bankrupt, so we lost productivity, and we lost support from the government and from the financial sector.”

In addition to the political and economic struggles over the decades, López Díaz says El Salvador’s coffee industry also suffers from a lack of unification, something he and De Sola are working hard to address with a current initiative. So when the 2013 la roya epidemic hit, the industry found its true breaking point.

“From the agrarian reform and nationalisation to the price crisis to an unsupportive government and a divided sector, there had never been so many abandoned farms,” López Díaz says. “La roya hit at the pinnacle of the worst time in the coffee industry in our country.”

He estimates that only 3 per cent of coffee trees planted at that time were a rust-resistant variety, with the majority being Bourbon and Pacas, so the industry didn’t stand a chance against the epidemic that ravaged Central and South America. In the 2014 harvest season, El Salvador’s production plummeted nearly 60 per cent to only 515,000 60-kilogram bags, according to the ICO. Given everything stacked against it, the industry has struggled to recover, with annual production hovering between 500,000 and 750,000 bags in the years since – a far cry from the multimillions only two decades earlier.

Although various private and public efforts launched over recent years have helped boost production about 7.5 per cent per year on average since 2014, none have been effective enough to push production back into the seven digits.

In 2016, the Ministry of Agriculture launched a fungicide and giveaway program, with a plan of distributing 20 million rust-resistant plants to smallholder farmers during 2019.

And at the end of 2017, the government signed a political pact, proposing $100 million to renovate 70,000 hectares with rust-resistant varieties during the next eight years, according to the latest US Department of Agriculture’s Foreign Agricultural Service (FAS) annual Gain Report. However, the report states “the main problems with the plant giveaways are that most seedlings are not certified and there is no funding made available to provide the necessary upkeep until the plants reach production age”.

Local experts quickly confirmed the report’s claim, citing the plants’ weak genetic backgrounds and a lack of supplementary financial and agronomical support. “There were no controls on the nurseries, there were no controls on the handout of the plants, and there were no controls on the management of those farms,” López laments. “I would [guess] there aren’t 200,000 of those trees standing right now.”

Since those efforts, World Coffee Research has established its Central American headquarters in El Salvador where it was already conducting multiple research projects and running a seven-hectare research farm near Santa Ana, El Salvador. Although the headquarters will lead research and projects for the greater region, many will help where the Salvadoran government’s efforts fell short, including a coffee breeding program, nursery trainings for plant health and genetic purity, and on-farm varietal trials with field days for local producers.

These efforts can help support the more comprehensive farm renovation that El Salvador needs. Most of the country’s coffee trees are not resistant to la roya and have surpassed their productive age, according to the FAS Gain report, and so “approximately 30 million good-quality, rust-resistant plants are needed per year for a period of 10 years to completely renovate the national coffee area”.

The local chapter of International Women’s Coffee Association (IWCA) has been working with local female producers, who make up an estimated 34 per cent in El Salvador, to replant farms impacted by rust and improve coffee production, says Maria Botto, President of the local chapter and former member of the IWCA Global Board of Directors.

“We plan capacity building from seed to cup, so last year we were doing a lot of our agricultural courses: using biofertiliser, restoring soils, new ways of processing, ensuring quality.”

Just this summer, IWCA El Salvador launched a two-part project with the Holland-Salvadoran Chamber of Commerce – its founder is a Salvadoran woman living in the Netherlands who wants to give back to her native country – that will also focus in part on soil conservation and restoration.

Another aspect of the industry that needs renovated is the broken supply chain. The lack of unity and collaboration among the local actors across the sector that López mentioned previously is what he sees as the local industry’s biggest problem. El Salvador has seven different associations representing each link of the supply chain, as well as the IWCA, but they each operate in isolation. As such, he says, the sector lacks a unifying voice or one representing body.

“If we would have been united with common interests and if we would have had a single voice among the actors in the sector, we would have had leverage and the power to somehow prevent all this from happening,” López Díaz tells GCR. “I would say we as a sector are the most broken, divided sector in this country.”

So five years ago, he and De Sola decided to find a solution to the problem by forming an organisation that would bring those seven associations together, be their unifying voice, and act as a counterpart to the government with representation from each link in the supply chain, explains De Sola. “El Salvador needs an organisation that does science, research, development, and technology transfer.”

Although it’s early days, they are optimistic about what “The Federación” can do for the industry and that their new government seems to be on board thus far – both with the plan for the new organisation specifically and with improving the Salvadoran coffee sector in general.

“El Salvador’s government has to be key in this, [so] the good thing now is that we have a new government,” De Sola points out, “and the messaging that they’ve been giving us has been very positive and indicates that they want to reactivate the coffee sector.”

Images: World Coffee Research

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