i Acknowledgements The authors would like to acknowledge the assistance provided by TechnoServe (TNS) and Lutheran World Relief (LWR) during the planning stage and posterior implementation of field data collection in the project’s countries of interest, as well as Rikolto staff in Ecuador. Special thanks go to Luisa Arredondo (TNS) for the guidance during the whole process. We appreciate the time key informants dedicated to our interviews and are grateful for this. Without your valuable contribution, this work would have not been possible. Disclaimer The opinions and comments in this document do not necessarily reflect the opinion of the International Center for Tropical Agriculture, TechnoServe or Lutheran World Relief. Any errors are solely our fault. About the authors Jennifer Wiegel, Lorena Gómez, Carolina González and Byron Reyes work at the International Center for Tropical Agriculture (CIAT). Luisa Claros is a visiting researcher at the International Center for Tropical Agriculture. Martha del Río is a PhD student at the Liebniz Centre for Agricultural Landscape Research (ZALF). Juan Fernando Gutiérrez works as an independent consultant. Derly Sanchez works at Universidad del Rosario Corresponding author: Jennifer Wiegel; j.wiegel@cgiar.org This publication should be cited as: Wiegel, Jennifer; del Río, Martha; Gutiérrez, Juan Fernando; Claros, Luisa; Sánchez, Derly; Gómez, Lorena; González, Carolina; Reyes, Byron. (2020). Coffee and Cacao Market Systems in the Americas: Opportunities for Supporting Renovation and Rehabilitation. International Center for Tropical Agriculture (CIAT). Cali, Colombia. Permanent link to cite or share this item: https://hdl.handle.net/10568/108108 Consulta la versión en español: https://hdl.handle.net/10568/108109 This work is licensed under a Creative Commons Attribution 4.0 International License. The document may be copied, adapted, and distributed, as long as credit is properly given and a link to the license is provided, indicating if any changes have been made. ii EXECUTIVE SUMMARY The Maximizing Opportunities in Coffee and Cacao in the Americas (MOCCA) project is a five-year initiative funded by the United States Department of Agriculture (USDA) and implemented by a consortium led by TechnoServe, in collaboration with Lutheran World Relief, the Initiative for Smallholder Finance, and World Coffee Research. This regional initiative will improve the livelihoods of 120,000 farmers in the coffee and cocoa sectors in Ecuador, El Salvador, Guatemala, Honduras, Nicaragua and Peru (henceforth MOCCA countries) through increased productivity and trade. MOCCA will help farmers to rehabilitate and to renovate (R&R) their coffee and cacao plantations by providing training on climate resilient agricultural practices, increasing availability of high-quality planting material and facilitating access to credit. MOCCA will also engage market system actors across the coffee and cacao sectors in the six countries to strengthen research, to link farmers to higher value markets, and to improve coordination within the sectors nationally and regionally. MOCCA’s implementation strategy combines activities targeted at directly impacting beneficiary farmers with activities targeted at effecting changes at the system level within the country specific coffee and cacao market systems. By targeting activities at the systems level, MOCCA will sustainably drive behavior change among key market actors to improve the long-term performance of the system in terms of how it serves small and medium coffee and cacao farmers. Given the complexity of MOCCA’s design, the impact evaluation will evaluate outcomes at two levels - 1) at the market system level to assess changes in the behavior of key market system actors and 2) at the farmer level to assess changes in the benefits provided to farmers within the market system. The evaluation seeks to provide evidence of how specific project activities lead to system level changes that have a positive impact on farmers along the hypothesized causal chain. Systemic change is an intermediate outcome that contributes to the ultimate goal of inclusive economic growth and increased incomes for farmers. This report describes the results of the first part of the baseline evaluation, at the market systems level, which will be used by the MOCCA team to inform the Program's strategy. The farmer level baseline data will be collected during 2020 and is not presented here. Baseline information on research capacity and dissemination of research results will be obtained during the second quarter of FY 2020, as will baseline information on nurseries. This assessment used qualitative methods, including semi-structured interviews and focus groups with actors from different positions within the sector in order to build a robust image of how each system is currently functioning at the national level. The focus was on identifying current actors and understanding their current behavior within the system vis-a-vis other actors, and vis-a-vis farmers. Following MOCCA’s Theory of Change, we focused on behaviors related to provision of services to farmers including technical assistance, genetic material, finance and research, with particular emphasis on these services as they relate to rehabilitation and renovation (R&R). Three hundred different actors were engaged as informants across the eleven sectors studied (5 countries for coffee, 6 countries for cacao). Key findings The main findings of the market level assessment are described by country in the Country Snapshots contained in this report in order to guide MOCCA’s strategy and monitoring of results in each country- specific market system where they engage. We use market maps to visually represent the baseline situation in each context. These assessments include important information on key stakeholders, sector dynamics, structure and governance, even a description of market sub-systems by class of product. Findings also include key entry points by country for MOCCA interventions to promote system level iii changes. In essence, we completed 11 different sector specific assessments, using a common methodology. In addition to country level findings, we conducted a regional analysis of key similarities and differences across sectors, to identify opportunities for MOCCA to work regionally in promoting system level changes, either by working with actors or platforms that operate across countries or across sectors, or by learning from more advanced sectors to inform work in less advanced sectors. In this regard, we highlight the following findings: 1. Public sector involvement and investment is greater in Ecuador and Peru than in Central American countries. 2. Coffee sector actors have much stronger political power and ties to government than cacao sector actors across all countries, except for Ecuador (not evaluated since MOCCA is not planning on intervening in the Ecuadorian coffee market system). Coffee sectors are much more mature and actors within the sector have been in the business for a long time, whereas for cacao the sectors have many new actors across all six countries constituting more emergent sectors. 3. In coffee, Honduras and Peru have much stronger regulations and public policies supporting the sector than Guatemala, El Salvador and Nicaragua. 4. In cacao, Peru and Ecuador are very dynamic market systems with a lot of competition among actors. Nicaragua and Honduras, by contrast, each have a single buyer of fermented cacao that seems to dominate the sector, as well as a strong market system for unfermented cacao. Guatemala and El Salvador are largely cacao importers, mostly from Nicaragua and Honduras, so those market systems are directly connected. 5. Intermediaries play an important role in the market systems in Peru, Ecuador, Honduras and Nicaragua for both coffee and cacao, and for coffee in Guatemala. Their role is much smaller in El Salvador, and in Honduras and Nicaragua for fermented cacao. 6. Honduras and Guatemala have strong national commodity institutes that play an important role in governance of the sector. For cacao, Peru and Honduras have functioning multi-stakeholder platforms that also have a strong role in sector governance. The remaining sectors have much more fragmented governance structures and therefore less cohesion. 7. The cacao sectors in Honduras, Nicaragua, El Salvador and parts of Peru, along with the coffee sector in El Salvador have large public/donor investments, which influence how the market system operates. Private sector investment, on the other hand, drives the market systems in cacao for Ecuador and Guatemala and in coffee for Honduras, Peru, Guatemala and Nicaragua. 8. Coffee sectors are more in need of traditional R&R, due to old plantations, than the cacao sectors in the region. Several cacao sectors, including Honduras, El Salvador, Nicaragua and some regions of Peru are dominated by relatively new cacao plantations. In these sectors the dominant need is for support of new farmers in plantation management, including pruning, helping farmers new to cacao maintain healthy plantations from the start to optimize productivity. In addition, grafting needs are important in cacao, which is a form of rehabilitation. 9. R&R is a recognized priority by the government in coffee in El Salvador, Guatemala, Honduras and Peru and for cacao in Peru and Ecuador. As a result, these governments are providing R&R specific support in the form of plants, credit, and technical assistance. We also systematically assessed the strength of four key support systems important to R&R and therefore to MOCCA’s theory of change. The results of that assessment are presented below in Table ES-1. iv Absent (Red) - the support service does not exist for the target sector. This means that no (or practically no) sector-specific services were identified in the assessment. Limited (Yellow) - we found some evidence of the support service being provided to the sector but the provision is limited in terms of the number of providers, capacity and infrastructure, geographical or topical coverage, farmer access, or is lacking regulation. Present (Green) - we found evidence of the service being provided to the sector including multiple providers, existing capacity and infrastructure, availability of service across multiple regions or topics, apparent receipt of service by farmers, and appropriate regulation in place or in process. Green does not mean that all farmers receive services, that all parts of the country are covered, nor that the service meets farmers needs or is of high quality. Table ES-1. Baseline status of support services for coffee and cacao market systems in MOCCA countries COFFEE CACAO ECUADOR Technical Assistance NA Research Genetic Material Financial Services EL SALVADOR Technical Assistance Research Genetic Material Financial Services GUATEMALA Technical Assistance Research Genetic Material Financial Services HONDURAS Technical Assistance Research Genetic Material Financial Services NICARAGUA Technical Assistance Research Genetic Material Financial Services PERU Technical Assistance Research Genetic Material Financial Services v TABLE OF CONTENTS 1. Introduction ............................................................................................................................................. 1 2. How we conducted the study .................................................................................................................. 5 3. Country Snapshots ................................................................................................................................... 7 How to read the Country Snapshots ..................................................................................................... 8 Ecuador .......................................................................................................................................... 10 Peru ................................................................................................................................................ 20 Guatemala ...................................................................................................................................... 40 El Salvador ...................................................................................................................................... 59 Honduras ........................................................................................................................................ 79 Nicaragua ..................................................................................................................................... 101 4. Opportunities to strengthen the market system supporting R&R in MOCCA countries and sectors . 122 Similarities and differences across sectors that may inform MOCCA strategies ............................. 122 Similarities and differences in support services across MOCCA countries and sectors ................... 125 Regional initiatives of relevance to MOCCA: .................................................................................... 126 5. Concluding remarks ............................................................................................................................. 131 6. Works Cited .......................................................................................................................................... 133 7. Annexes ................................................................................................................................................ 135 Annex 1. Detailed description of methodology used for the market systems baseline ................... 135 Annex 2. Data sources for Country Snapshot Tables ........................................................................ 139 vi LIST OF TABLES Table 1. Key informants by country and sector .......................................................................................... 6 Table 2. Ecuador Facts and Figures ............................................................................................................. 10 Table 3. Cacao in Ecuador ........................................................................................................................... 10 Table 4. Peru Facts and Figures .................................................................................................................. 20 Table 5. Cacao in Peru ................................................................................................................................. 20 Table 6. Coffee in Peru ................................................................................................................................ 30 Table 7. Guatemala Facts and Figures ........................................................................................................ 40 Table 8. Cacao in Guatemala ...................................................................................................................... 40 Table 9. Coffee in Guatemala ...................................................................................................................... 50 Table 10. El Salvador Facts and Figures ...................................................................................................... 59 Table 11. Cacao in El Salvador..................................................................................................................... 59 Table 12. Coffee in El Salvador .................................................................................................................... 69 Table 13. Honduras Facts and Figures ........................................................................................................ 79 Table 14. Cacao in Honduras ...................................................................................................................... 79 Table 15. Coffee in Honduras ...................................................................................................................... 90 Table 16. Nicaragua Facts and Figures ...................................................................................................... 101 Table 17. Cacao in Nicaragua .................................................................................................................... 101 Table 18. Coffee in Nicaragua ................................................................................................................... 112 Table 19. Similarities and Differences across sectors ............................................................................... 123 Table 20. Baseline status of support services for coffee and cacao market systems ............................... 126 Table 21. Selected relevant initiatives or actors in the coffee and cacao sectors in MOCCA countries .. 127 Table A 1. Detailed list of key informants by country, sector and type of actor ...................................... 138 Table A 2. Sources used for tables included in the country snapshots .................................................... 139 vii LIST OF FIGURES Figure 1 Core market system for cacao in Ecuador .................................................................................... 13 Figure 2 Market system for technical assistance for cacao in Ecuador ...................................................... 14 Figure 3 Market system for research for cacao in Ecuador ........................................................................ 15 Figure 4 Market system for genetic material for cacao in Ecuador ............................................................ 16 Figure 5 Market system for financial services for cacao in Ecuador ........................................................... 17 Figure 6 Core market system for cacao in Peru .......................................................................................... 23 Figure 7 Market system for technical assistance for cacao in Peru ............................................................ 24 Figure 8 Market system for research for cacao in Peru .............................................................................. 25 Figure 9 Market system for genetic material for cacao in Peru ................................................................. 26 Figure 10 Market system for financial services for cacao in Peru .............................................................. 27 Figure 11 Core market system for coffee in Peru ....................................................................................... 33 Figure 12: Market system for technical assistance for coffee in Peru ........................................................ 34 Figure 13 Market system for research for coffee in Peru ........................................................................... 35 Figure 14 Market system for genetic material for coffee in Peru............................................................... 36 Figure 15 Market system for financial services for coffee in Peru ............................................................. 37 Figure 16 Core market system for cacao in Guatemala .............................................................................. 43 Figure 17 Market system for technical assistance for cacao in Guatemala ............................................... 44 Figure 18 Market system for research for cacao in Guatemala ................................................................. 45 Figure 19 Market system for genetic material for cacao in Guatemala ..................................................... 46 Figure 20 Market system for financial services for cacao in Guatemala .................................................... 47 Figure 21 Core market system for coffee in Guatemala ............................................................................. 52 Figure 22 Market system for technical assistance for coffee in Guatemala............................................... 53 Figure 23 Market system for research for coffee in Guatemala ................................................................. 54 Figure 24 Market system for genetic material for coffee in Guatemala .................................................... 55 Figure 25 Market system for financial services for coffee in Guatemala ................................................... 56 Figure 26 Core market system for cacao in El Salvador .............................................................................. 62 Figure 27 Market system for technical assistance for cacao in El Salvador ............................................... 63 Figure 28 Market system for research for cacao in El Salvador.................................................................. 64 Figure 29 Market system for genetic material for cacao in El Salvador ..................................................... 65 Figure 30 Market system for financial services for cacao in El Salvador .................................................... 66 Figure 31 Core market system for coffee in El Salvador ............................................................................. 72 Figure 32 Market system for technical assistance for coffee in El Salvador ............................................... 73 Figure 33 Market system for research in coffee in El Salvador .................................................................. 74 Figure 34 Market system for genetic material for coffee in El Salvador .................................................... 75 Figure 35 Market system for financial services for coffee in El Salvador ................................................... 76 Figure 36 Core market system for cacao in Honduras .............................................................................. 83 Figure 37 Market system for technical assistance for cacao in Honduras ................................................. 84 Figure 38 Market system for research for cacao in Honduras.................................................................... 85 Figure 39 Market system for genetic material for cacao in Honduras ....................................................... 86 Figure 40 Market system for financial services for cacao in Honduras ...................................................... 87 Figure 41 Core market system for coffee in Honduras ............................................................................... 94 Figure 42 Market system for technical assistance for coffee in Honduras ................................................. 95 Figure 43 Market system for research in Honduras ................................................................................... 96 Figure 44 Market system for genetic material for coffee in Honduras ...................................................... 97 Figure 45 Market system for financial services for coffee in Honduras ..................................................... 98 viii Figure 46 Core market system for cacao in Nicaragua ............................................................................. 105 Figure 47 Market system for technical assistance for cacao in Nicaragua ............................................... 106 Figure 48 Market system for research in cacao in Nicaragua ................................................................... 107 Figure 49 Market system for genetic material for cacao in Nicaragua ..................................................... 108 Figure 50 Market system for financial services for cacao in Nicaragua.................................................... 109 Figure 51 Core market system for coffee in Nicaragua ............................................................................ 115 Figure 52 Market system for technical assistance for coffee in Nicaragua .............................................. 116 Figure 53 Market system for research for coffee in Nicaragua ................................................................ 117 Figure 54 Market system for genetic material for coffee in Nicaragua .................................................... 118 Figure 55 Market system for financial services for coffee in Nicaragua ................................................... 119 ix ACRONYMS ACEN Asociación de Cafés Especiales de Nicaragua ADEC Asociación de Exportadores de Café AGEXPORT Asociación de Exportadores de Guatemala AMACACAO Mesoamerican Association of Fine Cacao and Chocolate ANACAFE Asociación Nacional de Café, Guatemala ANECACAO Asociación Nacional de Exportadores de Cacao Industrializados de Ecuador APEN Asociación de Productores y Exportadores de Nicaragua APPCACAO Asociación Peruana de Productores de Cacao APROCAFA Asociación de Productores de Cacao de Ecuador BANECUADOR Banco de Ecuador BANRURAL Banco de Desarrollo Rural BCIE Banco Centroamericano de Integración Económica BFA Banco de Fomento Agropecuario CAC Council of Central American Agricultural Ministries gcf CAF-Development Bank of Latin America CAFENICA Asociación de Cooperativas de Pequeños Productores de Café de Nicaragua CATIE Centro Agronómico Tropical de Investigación y Enseñanza CATIE The Tropical Agricultural Research and Higher Education Center CBI Centre for the Promotion of Imports from Developing Countries Cd Cadmium CENFROCAFE Cooperativa de Servicios Múltiples CENFROCAFE CENTA National Agricultural Research Institute, El Salvador CGIAR Consultative Group for International Agricultural Research CIAT International Center for Tropical Agriculture CIRAD La Recherche Agronomique pour le Développement CITE Centro de Innovación Tecnológica COAGRICSAL Cooperativa Agrícola Cafetalera San Antonio COEX Comercial Exportadora COMSA Café Orgánico Marcala CONATRADEC Comisión Nacional Para la Transformación y Desarrollo de la Caficultura, Nicaragua CONCYTEC Consejo Nacional de Ciencia, Tecnología e Innovación Tecnológica CRC Cocoa Research Center CRIA Programa de Consorcios Regionales de Investigación Agropecuaria DEVIDA Comisión Nacional para el Desarrollo y Vida sin Drogas ESCACAO Sociedad Cooperativa de Productores de Cacao de El Salvador ESPOL Escuela Superior Politécnica del Litoral, Ecuador EU European Union EXCAN Asociación de Exportadores de Café de Nicaragua FDL Fondo de Desarrollo Local, Nicaragua FEDECOCAGUA Federación de Cooperativas Agrícolas de Productores de Café de Guatemala FEDECOVERA Federación de Cooperativas de las Verapaces FHIA Fundación Hondureña de Investigación Agrícola GAP Good Agricultural Practices GCF Green Climate Fund HRNS Hans R. Neumann Stiftung x ICCO International Cocoa Organization ICO International Coffee Organization ICT Instituto de Cultivos Tropicales IDB Inter-American Development Bank IHCAFE Instituto Hondureño del Café IICA Instituto Interamericano de Cooperación para la Agricultura IILA Instituto Italo Latinoamericano INACAL Instituto Nacional de Calidad INIA Instituto Nacional de Innovación Agraria, Perú INIAP National Agricultural Research Institute, Ecuador INSIVUMEH Instituto Nacional de Sismología, Vulcanología, Meteorología e Hidrología de Guatemala INTA National Agricultural Research Institute, Nicaragua ISF Initiative for Smallholder Finance ISIC Instituto Salvadoreño de Investigaciones de Café LAC Latin America and The Caribbean LWR Lutheran World Relief MAGAP Ministerio de Agricultura, Ganadería, Acuacultura y Pesca MARENA Ministerio del Ambiente y los Recursos Naturales, Nicaragua MEFCCA Ministerio de la Economía Familiar, Comunitaria, Cooperativa y Asociativa, Nicaragua MIFIC Ministerio de Fomento, Industria y Comercio, Nicaragua MINAGRI Ministerio de Agricultura y Riego, Peru MINECO Ministerio de Economía MNCETUR Ministerio de Comercio Exterior y Turismo MOCCA Maximizing Opportunities for Coffee & Cacao in the Americas project NCIs National Commodity Institutes PACA Central American Agricultural Policy PNIA Programa Nacional de Innovación Agraria PROCAGICA Programa Centroamericano de Gestión Integral de la Royal del Café PROMECAFE Programa Cooperativo Regional para el Desarrollo Tecnológico y Modernización de la Caficultura PROMPERU Comisión de Promoción del Perú para la Exportación y el Turismo RACCN Región Autónoma Costa Caribe Norte, Nicaragua R&R Renovation & Rehabilitation SAG Secretaría de Agricultura y Ganadería, Honduras SCAA Specialty Coffee Association of America SENASA Servicio Nacional de Sanidad Agraria SICACAO Comité del Cacao de Centroamérica y República Dominicana SINATEC Sistema Nacional de Asistencia Técnica para el Sector Cacaotero SNIAF Sistema Nacional de Innovación Agropecuaria Forestal TA Technical Assistance TNS TechnoServe UNA Universidad Nacional Agraria, Nicaragua UNDP United Nations Development Programme UNEX Unión de productores, beneficiadores y exportadores de café, El Salvador UNOCACE Unión de Organizaciones Campesinas Cacaoteras del Ecuador USAID United States Agency for International Development USDA FAS United States Department of Agriculture Foreign Agricultural Service WB World Bank xi WCF World Cocoa Foundation WCR World Coffee Research 1 1. Introduction The Maximizing Opportunities for Coffee and Cacao in the Americas (MOCCA) project seeks to help farmers overcome barriers that limit their capacity to renovate and rehabilitate (R&R) their coffee and cacao plants by increasing their productivity while improving their marketing capacity, incomes and livelihoods (1). TechnoServe is leading the Consortium, and also leading coffee activities, while Lutheran World Relief leads activities in cacao market systems. Other members of the Consortium include the Initiative for Smallholder Finance and World Coffee Research. The project will implement cacao activities in Ecuador, El Salvador, Guatemala, Honduras, Nicaragua and Peru, and coffee activities in all countries with the exception of Ecuador. 1 The International Center for Tropical Agriculture (CIAT) is leading the MOCCA project baseline assessment and evaluation. The evaluation will focus on project impact at two major levels: the market systems level to test systemic changes in the coffee and cacao market systems, and the farmer level to evaluate the effect among beneficiary households. CIAT’s evaluation methodology will use a mix of qualitative and quantitative approaches that draw from monitoring, household survey, focus groups, and key informant data. The market systems level baseline assessment, described in this document, was carried out in 2019 and provides an assessment of the country specific cacao and coffee market systems including supporting functions, identifying stakeholders and their behavior within the market system in which MOCCA will operate in each country. The report also includes recommendations on how MOCCA might engage in these market systems to achieve its desired results. The farmer level baseline assessment will be carried out in 2020 and will collect data on indicators that will be reported to USDA and that require baseline quantitative data (e.g., farmer yields, areas under need of R&R, agronomy practices implemented by potential beneficiaries). The main objective of this report is to present the results of the first part of the baseline evaluation, at the market systems level. This assessment reflects the current market system from the perspective of different market actors. Information on how the current system benefits farmers will be collected in the farmer level assessment. This report is organized in five sections. After this brief introduction, section two describes the methodology used for the market system level baseline evaluation. The third section includes country snapshots (i.e., country specific assessments and recommendations) for the countries and sectors of interest. Section four provides an analysis of opportunities to strengthen the market system supporting R&R from a regional or cross-country perspective. The last section presents concluding remarks about the market systems’ baseline analysis. 1 From now on, we refer to these as MOCCA countries. 2 MOCCA’s Theory of Change for Renovation and Rehabilitation MOCCA’s theory of change proposes that if farmers understand the benefits of R&R, possess the knowledge and skills to carry out R&R, and have access to high-quality inputs and affordable financing, they will implement low-cost R&R practices. This will allow an increase in their profitability and catalyze a cycle of R&R investments that will lead to a more secure and sustainable supply of coffee and cacao for U.S. and other regional and international markets (2). To achieve this, MOCCA will implement a market systems development (MSD) approach through seven major activities: 1) increase farmer knowledge and skills through training, 2) facilitate buyer-seller relationships, 3) facilitate research and disseminate findings, 4) develop agro-dealers and/or other input suppliers, 5) facilitate agricultural lending, 6) develop capacity of trade associations, and 7) build capacity of regional platforms. Although the exact definition of renovation and rehabilitation (R&R) varies slightly depending on the source and crop, in general, renovation refers to the addition of planting material in the farm through replanting either by adding plants within an existing plantation or removing old plants and replacing the whole plot with new plants; and rehabilitation refers to improving the productivity of existing trees through pruning, grafting, stumping and other related techniques. Both practices aim to increase crop productivity ( (3), (4), (5), (6)). One variant for cacao, that is not commonly practiced in coffee, includes grafting new varieties onto existing cacao plants that are unproductive or to change the genetics of the cacao produced. The main implications of the differences between renovation and rehabilitation vary by the actor involved. For farmers, renovating their trees means longer periods of negative cash flows (called the “valley of death”) while new trees grow, but once the trees become productive, their yields (hence payoff) may be much higher than farmers who rehabilitate (3), thus making it a long term investment. Ideally, renovation requires the availability of new planting material, whereas for rehabilitation (unless grafting new clones onto existing cacao plants), this may not be necessary. Farmers who have decided to renovate their plantations have the opportunity to decide on whether to plant different genetic material, change planting densities, or change associated trees, which provides an important opportunity to introduce changes into their planting system that have long- term impacts on productivity. The investment required is also different. Renovation requires a higher initial investment and longer recovery period. USAID (6) estimated for coffee that $5,000/ha are required to renovate as compared to $1,350/ha to rehabilitate. Thus, farmers and lenders face more financial exposure in the short term when renovating than when rehabilitating trees. For lenders and governments who implement R&R programs that include financing, the debt recovery period may be longer for farmers who wish to renovate trees, as compared to those who rehabilitate. Financially speaking, there is no one-size-fits-all approach (3). Several authors ( (3), (5), (6)) provide information about challenges to R&R. One of them (3) classifies challenges into two categories: those related to the underlying project viability and those related to investor-vs-project expectations mismatch. Renovation presents an opportunity to introduce new genetic material, change planting densities, or change associated trees, all of which have an effect on long-term crop productivity 3 Challenges related to underlying project viability arise along the supply chain, starting with the availability of the fundamental components (e.g., genetic planting material if replanting or grafting, training/technical assistance, inputs, financing) needed for R&R and how these are delivered to users (i.e., farmers). On the demand side, these authors suggest that R&R should be an attractive investment for farmers (who may need alternative investment options, like gradual implementation, for example). On the supply side, one must consider cost-effective ways for implementing R&R (for example, some implementers prefer to work with farmer groups because of the potential for collateral, reduced cost to reach more farmers, etc.). Also, on the supply side, availability of finance is a challenge, as some providers may not consider R&R with smallholder farmers an attractive investment due to potential (and real) risks associated with it. Some potential solutions include working with farmer groups (e.g., some collateral may exist) orwith farmers with strong business plans and good financial records, providing blended finance (non-return seeker with return seeker capital), or considering options to reduce these risks (e.g., shared loss guarantees, crop insurance, specialty markets long-term contracts). One additional challenge relates to the inherent problem of moral hazard: side selling by farmers. Side selling becomes an issue if the farmer receives the loan from their buyer, or if the lender has an agreement with a buyer in which repayments are triangulated. Some solutions for side selling include providing enough incentives for farmers not to engage in this (for example, premiums for sales coming from R&R plots, or building direct relationships with farmers to gain their loyalty), or to factor in this into project design using historical data (i.e., assume this will happen and ensure economic returns despite this). Challenges related to the investor-vs-project expectations mismatch have to do with the long-term nature and complexity of R&R. Until recently, there was a lack of sufficient evidence on whether and how R&R works (and MOCCA will be a step in closing this gap), necessary to increase investment so R&R can be scaled up to achieve greater impact. Further, implementing R&R may require long grace periods (with potential solutions already explained above) and identifying tailored technical and financial solutions for lenders and farmers, as there are no recipes for success that work in all contexts. Although the challenges are many, recent analysis suggests that innovations (and learning) have made investing in R&R a viable option, if certain factors (e.g., financing, planting material, technical assistance) are available and affordable, facilitating R&R at scale, hence increasing the benefits to farmers and other actors along the value chain. Dalberg & IDH (3) estimated that in 2013, the serviceable R&R market was 0.6 and 1.1 million hectares for coffee and cacao, respectively, yet only a small fraction was funded. This shows the potential for growth in R&R. More than 50 countries in the tropics produce coffee, and an estimated 125 million people depend on it for their livelihoods in Latin America, Africa and Asia (7). At the global level, coffee trade is very dynamic, its price and supply are volatile and its demand has constantly increased (8). The coffee volumes in the global market are sensible to climatic, social and sanitary factors. Usually, the international price quickly changes when supply is affected, especially in some of the production giants like Brazil (for example, the coffee supply from Latin America between 2010 and 2013 was severely reduced because of leaf rust, causing an increase in the international price due to reduced supply from this region). Recent data (9) suggest that although the outlook is positive for production and trade, it does not look so good for price, which is at its lowest point since 2006. Although all these factors should be considered during R&R implementation, its potential benefits within MOCCA countries could be significant. If successful, in these countries, R&R could potentially contribute to an increase in yields in the range of 30% in Guatemala to 100% in El Salvador, and the national coffee supply could potentially increase by 5-10% in Nicaragua to 10-40% in Peru (10). 4 In the case of cacao, although it originated in the tropical forests of South America and was originally grown in that region, the crop is currently cultivated in almost all tropical regions of the Americas, Africa, Asia and Oceania ( (11), (12)). The crop generates export revenues, employment and income for some 5- 6 million farmers ( (12), (13)) and contributes to the livelihoods of 40-50 million people (including farmers), as it is an important ingredient in the confectionary and food and beverage industries, and more recently, in the pharmaceutical and cosmetic industries (12). Despite the importance of cocoa processing, unprocessed cocoa beans are the main product (90%) traded in international markets, which leave the incomes of cacao-dependent families to be determined by changes in the international price and currency exchange rates (14). Farmers capture approximately only 7% of the total value added to 1 ton of cocoa beans sold ( (12), (13)). Although it is estimated that demand will grow 2-3% annually in the coming years (14) since current demand has not been satisfied (11), unless productivity increases, it will be challenging to meet this new demand. While there is not a comprehensive study on R&R related to cacao in the MOCCA countries, Dalberg & IDH (3) suggest that in West Africa, yields could increase from 500 kg/ha to 1-1.45 MT/ha (depending on whether trees are rehabilitated or renovated, respectively), suggesting a potential yield increase of 100-190%. If this could be achieved in MOCCA countries, the benefits to farmers and the sector in general could be considerable. 5 2. How we conducted the study Following Market Systems (15) (16) (17) approaches to assessing the current situation at the level of the market system, this study used qualitative methods, including semi-structured interviews and focus groups with actors from different positions within the sector. The focus was on identifying current actors and understanding their current behavior within the system vis-a-vis other actors, and vis-a-vis farmers, as well as their current attitudes. Following MOCCA’s Theory of Change, we focused on behaviors related to provision of services to farmers including technical assistance, genetic material, finance and research, with particular emphasis on these services as they relate to rehabilitation and renovation (R&R). Interviews, focus groups, and participant observation during field work were all focused on eliciting information and perspectives on the market system from actors differently positioned within that system in order to build a robust image of how the system is currently functioning. In this sense, interviews were not mainly about collecting data on the interviewees’ institution, but about collecting data from that actor on the system as a whole. For actors specifically identified in MOCCA’s theory of change, we also included information on their current behavior in domains related to areas of behavior change targeted in the project. Box 1 shows the actor categories that were included for each country. Focus groups were used where the universe of actors in that category was relatively large, in order to include a more diverse perspective. The market systems analysis was implemented in five main stages: 1. Identification of market system actor types of interest; 2. Development of interview and focus group questions; 3. Identification and prioritization of market system actors by category for each sector and country; 4. Field data collection for each sector and country; and 5. Analysis of data for construction of market maps. Each of these stages are described in greater detail in Annex 1. Around 300 actors and over 400 individuals provided information for this analysis across the six MOCCA countries (Table 1). Data was collected for coffee and cacao sectors in all countries between April and June, 2019. Key Informant Actor Categories Interviews: MOCCA Partners Anchor Firms Other Buyers/Intermediaries National Commodity Institutes Public Institutions Research Institutions Development Organizations Roasters or Chocolate makers Donors/Development Banks Inputs Suppliers Financial Institutions Nurseries/Seed or Budwood Suppliers Focus groups: Technical Assistance Providers Farmer Organizations 6 Table 1. Key informants by country and sector ACTORS2 Peru Honduras El Salvador Guatemala Nicaragua Ecuador Total Coffee Cacao Coffee Cacao Coffee Cacao Coffee Cacao Coffee Cacao Cacao Coffee Cacao Interviews 43 33 24 24 29 25 24 19 27 26 23 147 150 Focus Groups: Technical Assistance Providers 1 (4)3 3 (4) 4 (6) 3 (4) 6 (7) 5 (7) 2 (4) 8 (12) 9 (9) 6 (8) 4 (5) 22(30) 29(40) Focus Groups: Farmer Organizations NA4 NA 6 (8) 4 (8) 6 (10) 6 (10) 6 (19) 6 (7) 8 (11) 6 (7) 4 (8) 26(48) 26(40) Total 44(47) 36(37) 34(38) 31(36) 41(46) 36(42) 32(47) 33(38) 44(47) 38(41) 31(36) 195 (225) 205 (230) Based on interviews, desk review, and available data, market maps were developed for each sector showing three kinds of information – the market chain actors, rules and regulations, and support functions (15). Market systems for four priority supporting systems identified in MOCCAs theory of change were also mapped using the Market System doughnut to identify key rules and regulations as well as supporting functions influencing that supporting market system. Supporting market systems for Technical Assistance, Finance, Genetic Material and Research, with emphasis on Rehabilitation and Renovation, were mapped and key actors identified. Finally, Country Snapshots (country specific assessments) were completed for each sector based on the Market System Maps, Maps of Supporting Market Systems, and key country and sector data. 2 Actors are institutions not individuals. Interviews were attended by up to 7 individuals from a single institution so actual numbers of individual informants are higher. Some actors were prioritized for both sectors and so there is some duplication of actors within countries across sectors. 3 Values are number of organizations and in parentheses are the number of individuals participating. 4 Focus groups with farmer organizations were not organized in Peru due to logistical difficulties. 7 3. Country Snapshots5 5 Data sources used in the tables in this section are in Table A 2. 8 How to read the Country Snapshots The country snapshots are a description of the baseline situation of the core market systems for coffee and cacao in MOCCA countries at the national level based on the rapid appraisals carried out in each country. The snapshots are based on all information gathered during the study including interviews, focus groups and desk research. The level of detail presented is to some degree a reflection of the complexity and maturity of the sector in each country. We would not expect the market system for a new crop, in a small sector, in a small country, to necessarily be as developed as that for a historical crop, in a large sector, in a large country. While the narrative sections of the snapshots are relatively self-explanatory, and follow a regular order in terms of content, we will outline here how to read the different tables and figures as they are rich with information. The tables and figures are described below in the order in which they appear in the country snapshots. Table: Country Facts and Figures - provides very general statistics on the country to contextualize the analysis and comparison across countries. Figure: Map - The country map at the beginning of each snapshot uses shading to show the major coffee and cocoa producing areas of the country by department/province including geographic overlaps (i.e., departments/provinces where both crops are produced). Table: Cacao or Coffee in Country - provides high level national statistics on the sector to provide the reader with a basic contextualization of the different cases, for example the size of the sector and relative economic importance for the country. Data sources are described in Table A 2. We used sources for which similar data was available across countries. In some cases, particularly for Guatemala cacao data, we were unable to find consistent data across official sources. Figure: The Market Map (Core Market System for Cacao or Coffee in Country) – The Market Map has three parts. The center shows the market chain and its principal competing channels. The market chain is the chain of economic actors (players) who own a product as it moves from primary producers to consumers. The arrows represent the flow of money, from left to right, as the product is purchased from one actor by another. Where possible, we have mapped this for different qualities of coffee/cacao and added numbers of actors or market share where available. This section helps to understand chain structure and to think about systemic efficiency. The top shows the rules and business environment including policies and institutions (influencers) that shape the market system. These are organized from left to right based on the year in which they became an influence on the market system, with the most recent on the left and the oldest on the right. This section helps identify policies or institutions that are influencing how the chain works. The bottom shows the services, for example business and extension services, that support the market chains operation at any point along the chain. These are organized as much as possible based on actors or part of the chain for which they provide a service, with services on the far right most relating to production and those on the far left most relating to exports. This section helps identify key services or missing services and link services with users within the chain. 9 Figure: Key Supporting Market Systems – These market system doughnut diagrams unpack some of the supporting functions for the coffee and cocoa market systems identified as areas for intervention in MOCCAs Theory of Change, including technical assistance, research, genetic material and financial services. The doughnut is a simplified Market Map where the center shows a generic supply and demand function for the support service of interest. The top of the doughnut shows the services that support the provision of the core service and the bottom of the doughnut shows the rules that shape the provision of the core service. Where this service or regulating function is predominantly associated with a single or few actors, and space permits, they are named. Using technical assistance as an example: Technical assistance provided to farmers is at the center of the diagram, and described briefly in the text underneath the diagram in terms of who provides the service, who pays for the service, the nature of the service, and the key supporting functions and regulations. In the top of the diagram we have listed supporting functions identified that enable technical assistance to be provided to farmers including training of extension agents, funding of technical assistance, production of content, research, etc. In the bottom of the diagram we have listed all of the rules, regulations, institutions that influence how technical assistance is provided to farmers, for example an entity that certifies technical assistance providers or dictates content or the methodology used to provide technical assistance to farmers. 10 Ecuador CACAO IN ECUADOR Ecuador is the most important cacao origin for fine and flavor cacao, providing 63% of that market globally (18). Most recipes for specialty chocolates among the larger manufacturers include some amount of Ecuadorian cacao. Ecuador has seen increases in production over the past decade due to private sector-driven efforts to expand production of cacao variety CCN-516 and the mechanization of larger farms, converting from banana to cacao. However, the country still has low yields compared with other countries in the region. Today Ecuador produces two categories of cacao – CCN-51, 20-30% of production, not considered to be fine flavor, used for cocoa-based products and fillers, and Ecuador Nacional, 70-80% of production, considered to be fine flavor cacao, used for chocolates. The expansion of CCN-51 without a clear system for ensuring separation of the two types of cocoa through harvest and post-harvest is affecting the overall quality and reputation of Ecuadorian cocoa due to mixing. The government has had uneven involvement in the sector. During 2012-2014 the Ministry of Agriculture (MAGAP) rehabilitated cacao plantations on 55,000 farms through fertilization, pruning of cacao and shade trees under the Gran Minga del Cacao. Since then, the government has been relatively absent from the sector until 2018 when the Plan de Mejora Competitiva del Cacao was developed and elevated to policy through a presidential decree in 2019. The program will be managed by the new Ministry of Production. 6 CCN51 is a hybrid cacao variety developed in Ecuador that is high yielding and disease resistant but of poor flavor. Table 2. Ecuador Facts and Figures Population (rural) 16.6 million (36%) Farmers 842,882 GDP por capita 6213.5 USD HDI Rank 86 (high) Poverty (rural) 23% (35%) Table 3. Cacao in Ecuador PRODUCTION Cacao farmers, # 120,000 Associated farmers, % 10 - 20% Area harvested, Ha 467,327 Production, MT 205,955 Global rank among producing countries 7th (1st for fine and flavor cacao) Yields, MT/Ha 0.44 Climate risk n.d. EXPORTS Exports, MT (beans) 250,894 (91%) Exports, USD 726 million % of all export value 4% Principal markets USA 24% Netherlands 13% Malaysia 10% Mexico 9% India 7% Export Price Beans (USD/MT) 2,737 Quality (ICCO Annex classification) 75% fine and flavor Certifications nd CONSUMPTION Imports, MT (beans) 68 (44%) Imports/Exports, volume 0% 11 There is no national entity that represents cacao farmers or coordinates the sector. The numbers of farmers associated with farmer organizations is low (10 to 20%) and organizations are weak. This leads to a high level of intermediation, complicating traceability and quality management along the chain, leading to lower prices than could otherwise be obtained given the underlying genetics and reputation of Ecuadorian cacao. Large farms (haciendas) are organized under Asociación de Productores de Cacao de Ecuador (APROCAFA), providing support for production and marketing of CCN-51 and technological innovations on large farms that often trickle down to smaller farmers nearby, promoting innovation in the small farm sector as well. Exporters are well organized in Asociación Nacional de Exportadores de Cacao Industrializados de Ecuador (ANECACAO), which plays an active role in the sector. Current trends and concerns in the sector include the EU regulations surrounding cadmium; the new role the government will take given recent renewed interest; and how to better manage quality to allow for traceability and separation of CCN-51 and Nacional along the chain, like the DR Sanchez and fermented cacao. EU concerns about deforestation free commodities, particularly near the Amazon, could emerge. RENOVATION AND REHABILITATION IN CACAO IN ECUADOR R&R are particularly important for Nacional plantations which are on average older and in need of renovation if supply and quality is to be maintained, given Ecuador’s reputation as a source of fine flavor cacao. This is evidenced in the very low average yields which for Nacional type cacaos are even lower. The government claims to have pruned 101 thousand hectares of cacao by 2014, resulting in yield increases in 20157. The program, La Gran Minga del Cacao, focused on pruning for regular maintenance or rehabilitation, but many plants remain unproductive and needed to be renovated. Fertilization, pruning, and shade management are all important, but renovation of areas will also be necessary to keep production volumes up and increase productivity and profitability. Focus group participants emphasized the need to focus on the establishment of new plantations, instead of grafting new material onto older plants. Many R&R activities in the past have been financed by government or donors, not farmers, so there is still a need to develop profitable models for R&R in Ecuador for farmers and for buyers. CORE MARKET SYSTEM FOR CACAO IN ECUADOR All cocoa exported from Ecuador is fermented, so the market system divides across ordinary vs certified, CCN-51 vs Nacional, and then some fine and very fine flavor cocoa for niche markets. Despite being the number one origin for fine and flavor cocoa, there is not a huge volume of cocoa going to very high price niche markets. Around 10% is sold as certified cocoa and an even smaller percent as fine or premium cocoa. Much of the CCN-51 comes from larger farms, while small-organized farmers are producing fine flavor cocoa for export. A large proportion of cacao comes from small and medium unassociated farmers who largely sell cacao Nacional to intermediaries in route to multinational or national traders/exporters for the ordinary fine flavor cacao market. Associated farmers largely produce certified cacao Nacional to sell through their associations to second tier farmer organizations who export to international specialty buyers or sell to in- country traders. Large farmers or haciendas most often sell certified and ordinary cacao to international buyers. Major actors in the sector include farmer organizations, haciendas, exporters, chocolate makers, INIAP and ANECACAO. The government is also taking an increasingly active role. 7 https://www.agricultura.gob.ec/productividad-rendimientos-cacao/ 12 Key support functions for the market system include research, genetic material production, regulation and provision, and technical assistance. Finance is also present through government financial institutions and savings and loans cooperatives. 13 Figure 1 Core market system for cacao in Ecuador 14 KEY SUPPORTING MARKET SYSTEMS Figure 2 Market system for technical assistance for cacao in Ecuador Technical assistance (TA) for cacao farmers in Ecuador is largely provided by or funded through the government i.e. Ministerio de Agricultura y Ganadería, Plan de Mejora Competitiva del Cacao y Derivados (PMC). Traders provide TA funded through commercial margins largely for certifications. Farmer organizations provide TA for their members through commercial margins and certification premiums. Based on our focus groups, most extension agents are university trained agronomists with over ten years of experience, each providing technical assistance to just over 100 farmers per year through continuous training curriculum. R&R is not a specific focus of technical assistance except among some farmer organizations. Inputs suppliers were also identified as an important source of TA for farmers. TA for farmers is supported by training for TA providers through university degrees in agronomy and visits and courses with National Agricultural Research Institute (INIAP). Government and donors fund TA provided by many different actors. Certifiers provide technical inputs to TA as a part of certification requirements which make their way into TA content. There are also a number of initiatives supporting farmer organizations particularly organizational strengthening for improved service delivery. Some methodological and technical references in the country include Farmer Field Schools and ANECACAO. 15 The sector is not directly regulated, but regulations related to the mandate of INIAP in TA and training extension workers, to higher education including higher education curriculum, and possibly the current Plan de Mejora Competitiva del Cacao in specifying national priorities have an impact on how extension agents are trained and the provision of technical assistance to farmers. Figure 3 Market system for research for cacao in Ecuador Research is carried out mainly by INIAP and the Escuela Superior Politécnica del Litoral (ESPOL) in Guayaquil. Current research topics include hybrids, quality and traceability, and cadmium, including sources of contamination and mitigation strategies. INIAP has good research infrastructure at their research station in Pichilingue including quality and sensorial analysis equipment. There is good human capacity for cacao research in the country. Funding comes largely from public funds including the National Secretariat of Higher Education, Science, Technology and Innovation (SENESCYT), university funds and international research collaborations. Funding is unstable and limits the research agenda to short-term issues. Research is disseminated through publications, lectures and training courses, with no single outlet for cacao research in the country. The private sector and haciendas could play a more active role in research, but their priorities may diverge from those of small farmers or government. Supporting functions include training of researchers at universities, the prioritization of cadmium research by government, private sector and donors, and biotechnology capacity. Funding from SENESCYT plus student theses contribute valuable resources to support cacao research. 16 Research is not heavily regulated, but a few entities establish priorities and determine allocation of resources. SENESCYT is the public entity charged with promoting research and innovation, including managing funds for research, scholarships and technology transfer. Both INIAP and SENSESCYT form part of the National System for Innovation in Agriculture and Forestry (SNIAF), a structure that could be used to better coordinate and promote cacao research. Finally, the Competitiveness Plan for the sector establishes priorities around which sector investments will be aligned. Figure 4 Market system for genetic material for cacao in Ecuador Genetic material for cacao is available in Ecuador and there are registered nurseries and large farms that produce seedlings alongside more informal seed and seedling production. In addition to farmer purchases, state projects have supported the production and distribution of large quantities of plants. Seeds and budwood are commercialized. Seed is mostly used as rootstock and seedlings are grafted. The offer of CCN-51 genetic material is larger and more organized/formalized than that for Nacional cacao. Supporting functions include the AGROCALIDAD registration system, including a network of identified suppliers of different genetic material. The development of new varieties by INIAP supports innovation in genetic material, and phytosanitary supervision supports dissemination of best practices and a system for identifying quality providers of genetic material. Government projects support access by mass producing and distributing plants, contributing to the creation of a demand for commercial providers. 17 AGROCALIDAD registers nurseries and provides permits to commercialize genetic material. INIAP certifies the genetic quality of the material being sold and applies more to clonal gardens. This process takes three to four years. Many of the nurseries registered by AGROCALIDAD are not certified by INIAP. There are a number of laws that govern the production, commercialization and certification of genetic material in Ecuador, with procedures summarized in the two manuals mentioned in the diagram above. Figure 5 Market system for financial services for cacao in Ecuador Financial services for cacao in Ecuador are provided through public and private financial institutions as well as farmer and financial cooperatives. Banecuador and BNF in coordination with MAGAP lend to small and medium farmers. Banecuador offers credit for many different activities in cacao, including renovation and rehabilitation with up to 7 years for repayment with a 3-year grace period, though there seem to be challenges in accessing this credit. Total credit to the sector from public institutions in 2017 was $32 million (19), but it is unclear what percentage was for production. Savings and Loan Cooperatives (Jardin Azuayo, Juventud Ecuatoriana Progresista Ltda) also serve to provide farmers with credit. Overall, most credit for farmers is short term credit. An important support function is played by second tier lenders and financial intermediaries that bridge the gap to farmers. Private banks (Banco de Lojas, Banco del Pacífico) lend to the sector, mostly to farmer organizations and larger entities ($11 million in 2017). Social impact lenders such as Oiko also lend 18 commercial credit to farmers’ organizations which allows farmer organizations to provide forward payment to farmers. Rural Savings and Loan institutions help channel finance to farmers. Contracts or stable relationships with buyers are important collateral for credit, even if short term. Rules governing financial services for cocoa farmers are of three types – first those that govern financial institutions particularly public development banks; second informal rules that govern informal lending between farmers and their buyers; and third those that govern public priorities in the sector such as the competitiveness plan. RELEVANT INITIATIVES IN THE SECTOR • Plan de Mejora Competitiva del Cacao y Derivados (PMC), 2018-2030, $600 million, Ministry of Production: This plan was developed with financial support from the EU, under the coordination of Secretaría Técnica de Planificación y Desarrollo (SENPLADES) and approved in June 2018. In June 2019, this plan was elevated through a presidential decree and will be coordinated by the Ministry of Production. The plan proposes, over 11 years, to improve quality and efficiency, duplicate production, increase proportions of cacao that is sold as certified or fine flavor, and increase exports of finished products such as chocolate. The plan also proposes to mobilize 600 million dollars in new public and private investment for the sector and strengthen farmer organizations. • PROAMAZONIA, 2017-2021, $80 million, UNDP: $40 million grant from Green Climate Fund (GCF), 40 million co financing in country to stop deforestation in the Amazon by intensifying and technifying production systems for cacao, among other crops. The project is managed by UNDP, together with the Ministries of Environment and Agriculture. The project will promote Good Agricultural Practices (GAPs) in cacao. ENTRY POINTS FOR MOCCA • Quality management system – Support development of quality standards and management system that helps to segregate CCN-51 from fine flavor cacao varieties i.e. Nacional to maintain reputation as origin for large volumes of consistent fine flavor cacao while also supporting growth of CCN-51 quality cacao as a second quality offering. The introduction of traceability and basic flavor criteria into the standards used to buy and sell cacao will not only position the country but will also increase opportunities for upgrading based on quality, bringing transparency to that process. This is recognized as an issue already in country. Possible partners: INIAP, Guittard Chocolates, Bioversity, Ministry of Production, Traders. • Innovations in high tech production for small farmers or Nacional production – Take advantage of the technological innovations occurring on larger farms to drive innovations that support improved productivity and efficiency on smaller farms or for fine flavor cacao. This includes inputs, propagation, equipment, mechanization, service provision models, and microleasing8. Small and medium farmers near larger haciendas are already paying attention to how to mimic their advances, but this could be more intentional. Possible partners: Haciendas such as Hacienda La Victoria, APROCAFA, larger traders, cooperatives, service/inputs providers serving the haciendas looking to widen their market, INIAP. • Representation of small and medium sized farmers – This is a large gap in the sector and it is urgent that a structure emerges to represent the interests of these farmers through collective action. The 8 Microleasing is a financial innovation that allows farmers to access small equipment by leasing it from the provider instead of outright purchasing. 19 current government seems to recognize this need and could be an ally, connecting this to the Plan de Mejora Competitiva del Cacao and the multi stakeholder platforms created under the Proyecto de Reactivación de Café y Cacao, which could benefit from broader representation. Possible partners: Ministry of Production, larger farmer organizations such as Fortaleza del Valle and Unión de Organizaciones Campesinas Cacaoteras de Ecuador (UNOCACE). • Strengthening the national research system through Cadmium – Use cadmium as a topic that unites interests within the country and across the region, to strengthen a national research network connecting government, academia, traders, chocolate makers, ASOCAFA, ANECACAO and farmer organizations. Use the topic to build partnerships through joint research and structured dissemination to next users. Use the opportunity to strengthen collaboration with other countries in the region, strengthening the leadership of Ecuador and the advocacy capacity of the fine flavor/LAC block of the International Cocoa Organization (ICCO). Possible partners: INIAP, ESPOL, Sistema Nacional de Innovación Agraria members, ANECACAO, APROCAFA, regionally CIAT/Bioversity through regional research platform on cadmium and through Desira project, Cocoa Research Center (CRC), ICCO. 20 Peru CACAO IN PERU Peru is the second most important origin for fine and flavor cacao, after Ecuador. Yet Peru distinguishes itself from Ecuador on several fronts – it has higher yields, higher prices and a higher growth rate. Peru also has greater genetic diversity of cacao including commercially exploited materials such as Piura white and Chuncho, as well as many other still to be explored. Peru is also the world’s largest producer of organic cacao. Peru has significant production of CCN-51 cacao variety, introduced in 2002 as an alternative to coca; by 2011 Ministerio de Agricultura y Riego (MINAGRI) estimated that it accounted for over half of national cacao production (11). More recent efforts have introduced international fine flavor clones instead of CCN- 51. Production of cacao in Peru has more than doubled since 2011 due to increases in area planted as a result of heavy investments by USAID, the Peruvian government and other donors to introduce cacao as an alternative crop in coca producing areas (11). Almost half of the current production area in Peru can be attributed to alternative development projects such as Alianza Cacao Perú. As a result, a large percentage of Peruvian cacao plantations are young, contributing to the higher average yields. The cacao processing sector, which in 2000 processed almost 100% of exported cacao, has not kept up (11). In 2010, cacao exports in beans were just below the bean equivalent of exports in processed cacao such as butter, powder and paste. By 2016, bean exports had increased over 500% while exports of processed products have increased by 50-65% ( (11), (20)). Europe is by far the most important export market, and so the sector is organizing around EU cadmium (Cd) regulations as well as the expected demand for deforestation free cacao from the EU (see EC Communication on Stepping up EU Action to Protect and Restore the World’s Forests, July 2019). Table 4. Peru Facts and Figures Population (rural) 32.2 million (21%) Farmers 2,199,243 GDP por capita 12,237 USD HDI Rank 89 (high) Poverty (rural) 22% (46%) Table 5. Cacao in Peru PRODUCTION Cacao farmers, # 90,000 Associated farmers, % 35% Area harvested, Ha 145,169 Production, MT 121,825 Global rank among producing countries 8th Yields, MT/Ha 0.839 Climate risk nd EXPORTS Exports, MT (beans) 76.715 (81%) Exports, USD 278 million % of all export value 0.6% Principal markets Netherlands 31% Belgium 18% USA 9% Canada 8% Italy 6% Export Price Beans (USD/MT) 3,257 Quality (ICCO Annex classification) 75% fine and flavor Certifications Organic, FT CONSUMPTION Imports, MT (beans) 5,465 (25%) Imports/Exports, volume 7% 21 MINAGRI coordinates at the national level a cacao working group and the coordinator is well known within the sector and internationally. The platform is managed jointly by MINAGRI, Asociación Peruana de Productores de Cacao (APPCACAO) (producers) and the Cámara Peruana de Café y Cacao (industry). There are also regional expressions of the platform in production regions with local actors. Technical assistance and support are in the hands of regional governments except the functions of Servicio Nacional de Sanidad Agraria (SENASA) and Instituto Nacional de Innovación Agraria (INIA) with regards to certification of genetic material and seedlings. Priorities include sensory standards to improve quality management and differentiation of cacao; cadmium research to inform compliance with EU regulations; improved information and capacity around genetic material selection and multiplication for different regions; development of a national cacao plan following the ICCO global agenda, with support from UNDP; and reaching unorganized farmers, who still represent the majority in the sector and are not represented by APPCACAO. Several government initiatives provide investments in cacao including Programa Nacional de Inovación Agraria (PNIA), AGROIDEAS, Comisión Nacional para el Desarrollo y Vida sin Drogas (DEVIDA), Agrobanco, Agroperú, Ministerio de Comercio Exterior y Turismo del Perú (MINCETUR) and the regional governments. Multinational traders have entered and grown within Peru over the past decade and today dominate the sector together with national firms. The top five exporters in Peru accounted for 72% of exports in 2015 (11) while 13 farmer cooperatives and associations together accounted for just 19% of exports. In general, exporters feel there are opportunities to grow in the cacao sector in Peru, to work on differentiated cacaos. Farmer organization are relatively new and transparent as compared to the coffee sector. APPCACAO represents organized cacao farmers (30,000 farmers in 25 organizations), so around 30% of all farmers, and plays a strong role in advocacy for farmers within the sector. The organization is relatively strong and well respected within the sector and by its constituents. The Cámara de Café y Cacao brings together major players from the private sector and is a small but well-regarded organization. Both sit with MINAGRI to support the development of the National Cacao Plan, underway with support from the UNDP Green Commodities program, following the example of the coffee sector. Alianza Cacao Perú, a USAID funded initiative started in 2012 to support alternative development in coca growing areas through introduction and support for cacao has done an impressive job bringing actors together to support development of the sector. In particular, Alianza Cacao has been very successful in engaging private sector actors ranging from processors, traders, inputs suppliers and financial institutions in creative models for improving farmer access to different services needed to support cacao production. Alianza Cacao Perú has also developed technical content and training for extension agents and farmers that has helped to homogenize and disseminate best practices for cacao production and processing. Current trends and concerns in the sector center around strengthening farmer organizations to improve quality of cacao, generating information and management options related to Cd, building capacity for sensorial analysis, and establishing a research network. Debate is ongoing about what genetic material should be promoted and whether CCN-51 should be among them. RENOVATION AND REHABILITATION IN CACAO IN PERU The issue of R&R is different for two different zone types in Peru. First are the traditional cacao producing regions where plantations are older, less dense and largely in need of renovation. In these areas there is interest in conserving existing genetic biodiversity, with sought after flavors. There is a large network of 22 clonal gardens in different regions of the country and within different institutions but work has still to be done on identifying, characterizing and multiplying promising materials for different agroecological zones. The second group are the areas where cacao has been introduced, relatively recently, as an alternative crop to coca. In these areas, plantations are much younger (under 10 years), much more compact (over 1,000 plants per Ha), and farmers are provided access to planting material, finance and technical assistance, including post-harvest and marketing support. Many of these have introduced the highly productive CCN-51, as well as international fine flavor clones in polyclonal arrangements, so in some sense, the production models are different. Piura, with is production of white cacao, is a particular example where farmers are expanding areas under production of a special type of cacao adapted to the dry low region along the coast for very specialty markets. Given the genetic diversity of cacao in Peru there is interest in developing strategies that support in situ conservation of this genetic diversity on farms. TechnoServe and others have worked on techniques for rehabilitation. The TAPS method, which successfully synchronized fertilization and pruning, was widely disseminated by TechnoServe and by others under different names. This experience could be a starting point for MOCCA. CORE MARKET SYSTEM FOR CACAO IN PERU Over half of Peruvian cacao is sold as conventional fermented cacao. This cacao is largely exported by multinational firms in the form of beans, or by national firms who may also process before exporting. The majority of this cacao is purchased from intermediaries who purchase the cacao from farmers who are not associated. A second important category of cacao is certified cacao, which is largely produced by farmers who sell through associations to large cooperatives who export the cacao. Some of this cacao is also purchased by multinational firms from associations for export. There is a small amount of Peruvian cacao that is sold at differentiated prices based on flavor and is largely exported through the larger cooperatives, or transformed into fine chocolate by national chocolate firms. There are a number of rules relevant for the sector including access to finance, sector governance, quality standards, certifications and government programs. Support services include subsidized technical assistance and seedling distribution, as well as growing research on Cd related issues. In areas where DEVIDA works, there are also important support services in terms of general rural infrastructure improvements including roads and services. 23 Figure 6 Core market system for cacao in Peru 24 KEY SUPPORTING MARKET SYSTEMS Technical assistance for cacao farmers in Peru is provided largely by NGOs, exporters, and farmer organizations, as well as government through DEVIDA, Agencias Agrarias or municipalities. Alianza Cacao Perú has 60 technical assistance agents, the largest group in the country. TA provided by NGOs is funded by international donors and focused on productivity, plantation design including agroforestry models, as well as fertilization and post-harvest processing and quality. Some large exporters have 10-15 technicians focused mainly on certified clients and certification requirements as well as productivity and funded through commercial margins, clients or certification premiums. Farmer organizations are also important providers of technical assistance to farmers, focusing on certification and productivity and funded through donor funds, Peruvian government competitive funds, and certification premiums. Supporting functions include training of TA providers, research, certifications, and innovation systems which all provide technical inputs to TA for farmers. Funding for technical assistance from third parties (i.e. not the provider nor the farmer) is another key support function. Most technicians receive training on cacao as part of their formal education as agronomists, and this is complemented by on the job training, courses, and research outputs from La Molina, Instituto de Cultivos Tropicales (ICT) and INIA. Alianza Cacao has trained many TA providers. Figure 7 Market system for technical assistance for cacao in Peru 25 Technical assistance is loosely coordinated by priorities established in national strategies and content developed by Alianza Cacao. The broad network and funding size of Alianza Cacao has given it a hegemonic role within the sector, at least for the region where they work. Figure 8 Market system for research for cacao in Peru Research in cacao in Peru is mainly carried out by the Universidad Nacional Agraria La Molina, the ICT, INIA, and Bioversity. La Molina and ICT are most recognized for cacao research. INIA has the public mandate and experiment stations, but not the expertise nor recognition. Yara and other inputs suppliers also carry out research. Research in cacao is largely funded through public and donor funds, with some private sector investment i.e. Yara. Research is currently focused on cadmium, genetic material and quality. R&R is not a specific topic. Research is disseminated through presentations, trainings and public events. Regional universities and CITEs play an important role in innovation and dissemination locally. The Center for Innovation in Cacao is an interesting collaborative initiative recognized and funded nationally, with national and international collaborators. Supporting functions include regional innovation centers which serve to disseminate and validate research findings regionally; student theses at all levels; funding for research from the state and donors; engagement in regional and international research platforms such as that recently formed for Cadmium. Natural genetic diversity was also mentioned as a supporting function providing opportunities for genetic research other countries do not have, and attracting international research collaborations. 26 Research is regulated by a series of laws related to the national system for science, innovation and technology and the National Agricultural Innovation System, led by INIA. These laws assign mandates and resources to specific institutions to coordinate and promote research in different topical areas. The national competitiveness strategy and the national cacao working group establish research priorities that are then taken up by donors. Cadmium in particular has been a focus of research funding and work. Figure 9 Market system for genetic material for cacao in Peru Genetic material – Seeds, budwood and seedlings are produced by farmers, formal and informal commercial nurseries, farmers organizations, Agencias Agrarias, and development initiatives. In newer cacao regions, large initiatives like Alianza Cacao Perú and DEVIDA are major funders of the production and distribution of cacao genetic material, particularly budwood from international clones (ICS95, ICS39, TSH565, CCN-51), which they have georeferenced. Alianza Cacao Perú has focused on fine flavor materials and grafting by farmers. Farmers in traditional production areas often select their own seed or budwood from supertrees, especially for specific types of cacao (i.e. Piura white, Chuncho or Amazonas). Commercial nurseries sell to projects or larger farmers and farmer organizations and regional Agencias Agrarias often receive funding from PNIA. Supporting functions for the production of cacao genetic material for farmers include regional collections/clonal gardens, demonstration plots with polyclonal arrangements, georeferencing, as well as 27 funding from development initiatives. All of these contribute to availability of materials for planting. The genetic diversity of cacao in Peru also supports differentiation, breeding and in situ conservation. Regulations exist to certify seeds, budwood, nurseries and nursery managers, but they are not regularly applied. SENASA certifies nurseries in terms of production practices and phytosanitary measures, but their coverage is limited. INIA is legally responsible for certification of nursery managers (also APPCACAO) and genetic material including seeds and budwood, but cacao seed has yet to be certified in Peru. The traceability systems implemented for example by Alianza Cacao Perú for the international clones they have distributed makes an important contribution to establishing a national system for certified budwood. Figure 10 Market system for financial services for cacao in Peru Financial services for cacao farmers are provided through three main channels. 1. Microfinance organizations, especially those services affiliated with farmer organizations such as the Cooperativa de Ahorro y Crédito (CAC) Norandino or CAC Cristo de Bagazán; 2. From the government through AGROBANCO often in alliance with projects or inputs suppliers (AGROBANCO suspended operations for the past year but anticipate that with the new law support for small farmers will expand); and 3. Social impact investors who lend to cooperatives, largely commercial credit or for infrastructure. The first two offer products that could be used for R&R. Funding for microfinance organizations come from social lenders, commercial lenders and member savings and therefore limit possibilities for long term financial products for farmers. Public sector financing has greater flexibility in this regard, and the government 28 seems committed to providing financial services to the agricultural sector, but it will take a while to restructure. Social impact investors loaning to cooperatives are focused on commercial credit that when transferred to farmers mostly support cash flow for regular cacao management practices. Support services include the funding mechanisms for microfinance and farmer organizations that are based in production regions and lend to farmers such as second tier lenders. Technical assistance and inputs provision are other important support services that could be more tightly integrated. Rules and incentives for second tier lenders and those related to capture and use of member savings place limitations on how those resources can be offered to farmers in terms of funding amounts, interest rates/costs, and term limits. Regulations related to farmer debt relief, restructuring of AGROBANCO, and national strategy for the sector have an impact on public financial resources available for the sector. RELEVANT INITIATIVES IN THE SECTOR • Alianza Cacao Peru, Phase II, 2016-2021, $75 million Palladium: This project targets 20 thousand cacao farmers in San Martin, Huánuco and Ucayali, in support of the Peruvian government’s alternative development program to transition coca farmers to licit crops. The project works through partnerships, largely with the private sector, to deliver technical assistance, finance, improved quality management and market access. Their approach is very similar to that proposed by MOCCA and they are a dominant player in the sector. Their collaborative approach can serve as a model for other countries and sectors. • National Cacao Strategy Development, 2019-2020, UNDP and MINAGRI: Following the experience with developing the national action plan for coffee, the UNDP Green Commodities program plans to carry out a similar process (in 2019) to align actors in the cocoa sector around a common strategy. This process will engage the national cacao working group and provides an opportunity to expand representation and strengthen the structure in support of the national plan that emerges. • Norandino Agricultural Cooperative’s cacao processing plant in Piura, 2019, $7million: In May, Norandino inaugurated a processing plant to add value before exporting. The plant can process 4,000 MT of cacao a year, and they anticipate selling services to other cooperatives in Peru and in the region. Norandino already manages a processing plant for coffee and panela and successfully processes and sells its services. ENTRY POINTS FOR MOCCA • Cadmium research network connected to technical assistance and market access information networks - Multiple players, including INIA, have come together under a working group coordinated by MINAGRI around cadmium including work on soils, genetic material, management practices, market access, quality standards and others. This working group can be an opportunity to support a national research system, strengthen the role of INIA in the cacao sector, and connect research to dissemination networks to next users. Possible partners: MINAGRI, TechnoServe/USDA Cacao Seguro, Bioversity, INIA, Swisscontact, CIAT, Ecom, La Molina. • Carve out a complementary niche to Alianza Cacao – Alianza Cacao is a dominant player, a much larger and longer standing investment, and is working one way or another with almost every other relevant player at the national level. It will be important to explore with USAID and Alianza Cacao how MOCCA should complement the work of Alianza Cacao geographically or thematically. One possibility that is in line with MOCCA’s work plan, is to focus more directly on the longer standing cacao producing regions and on more differentiated cacaos, partnering with NORANDINO to add value 29 where possible and improve overall quality management and differentiation. Another complementarity could be work in the Vraem which is a region of interest for the US where Alianza Cacao is not currently active. It will also be important to take advantage of advances made by Alianza Cacao and extend these where possible to the MOCCA regions, as well as to collaborate in national level market system interventions. Possible partners: Palladium, USAID • Collaborate with UNDP on national cacao strategy development with MINAGRI – UNDP has expressed their plans to engage in a national process to develop a strategy for cacao, similar to that developed for coffee. This is an early opportunity for MOCCA to identify together with other actors desired system level changes and strategies for interventions that may then become part of a plan that others will contribute to implementing. Possible partners: UNDP Green Commodities program, MINAGRI, Cámara Peruana de Café y Cacao, APPCACAO. • Support system for improved genetic material – The regulatory infrastructure exists for certification of genetic material, nurseries and nursery operators. Farmer organizations could be natural partners with whom to build capacity for production of seeds, budwood or seedlings either as a business or as a provider to cooperatives and their associates. In some cases, it could make sense to collaborate across coffee and cacao on this. 30 COFFEE IN PERU Peru is an important coffee origin for commercial grade Arabica coffee and one of the lead producers of organic and fair-trade organic coffee globally. Buyers also see Peru as a source for sustainable coffee from small farmers. The majority of coffee farmers in Peru are small and medium, many in remote areas. Twenty-five to thirty percent of farmers are associated with a few relatively large second tier cooperatives which serve as their primary marketing channel, much of this Fair Trade certified. As a strategy, Peru is trying to differentiate their coffee as sustainable and there is increasing use of cupping scores to determine buying and price all the way down to farmers. Honduras and Colombia can be seen as competitors and references in terms of how the sector could evolve. The government has given increasing importance to the sector since the coffee rust crisis in 2012/2013, first with the national renovation plan and financial assistance through Agrobanco (2014-2018), and now under the national plan for the sector, developed with support from UNDP, and a new law to strengthen Agrobanco. DEVIDA, the Peruvian program to eradicate illicit crops, continues to channel large investments in specific regions into coffee (30% of total) as an alternative to coca. Exports are dominated by around ten exporters who all source a majority of coffee through intermediaries, including major national and multinational firms. Multinationals entered Peru about a decade ago and have been increasingly growing their market share, overtaking national firms as a group in 2016. The sector is very competitive and margins are tight. Traders seek to differentiate but the lack of transparency and coordination within the sector make it difficult. Buying and selling commercial grade coffee does not allow for much reinvestment in supply chains. Governance is fragmented, with no single entity representing the sector. MINAGRI and the Consejo Nacional del Café led the recent process for developing the national action plan for the coffee sector. The Junta Nacional del Café represents organized farmers, just 25% of farmers, with more importance in the central region. Currently they are weak as an institution, have minimal funds, and many find it difficult to work with them. The Junta also represents Peru in Programa Cooperativo Regional para el Desarrollo Tecnológico y Modernización de la Caficultura (PROMECAFE), though there are conversations about whether a different entity should play that role. The Cámara Peruana del Café y Cacao represents exporters and also has a relatively small operational capacity. The Junta, Cámara and MINAGRI together form the Consejo but the Consejo as such does not have an operational structure nor decision-making authority. The obvious gap is the representation of 75% of unassociated farmers, and other parts of the Table 6. Coffee in Peru PRODUCTION Coffee farmers, # 223,482 Associated farmers, % 25% Area harvested, Ha 423,545 Production, MT 346,466 Global rank among producing countries 9th Yields, MT/Ha 0.818 % of area needing R&R 52% R and R potential 100%+ Climate risk 6% EXPORTS Exports (green beans), MT 239,747 (100%) Exports, USD 759 million % of all export value 2% Principal markets USA 27% Germany 25% Belgium 10% Sweden 5% Canada 4% Export Price (USD/MT) 3,160 Quality 2% specialty Certifications Organic, FT, FTO CONSUMPTION Imports, MT (green) 5,229 (0.4%) Imports/Exports, volume 2% 31 value chain. While MINAGRI is present through SENASA and Agroideas, other branches of government have important investments in coffee and coffee production areas with no clear mechanism to coordinate. These include DEVIDA, the Ministry of Production with CITEs (innovation platforms) and Instituto Nacional de Calidad (INACAL) (quality standards), regional governments with Mesas Técnicas Regionales and Agencias Agrarias, and Comisión de Promoción del Perú para la Exportación y el Turismo (PROMPERU) (export promotion). The new plan proposes the creation of a National Coffee Institute similar to that of Honduras or Colombia to improve coordination. Current trends and concerns in the sector include governance, the lack of work on resistant genetic material in country, current low prices, certifications, the financial issues of some representative cooperatives, and the public financial sector once again being bailed out of trouble. Given Peru’s importance as a source for organic and fair-trade coffee, particularly for Europe, there are important recent concerns surrounding compliance with these certifications. The recent detection of glyphosate in shipments of organic coffee from Perú has raised alarms and has put in question the reputation of Perú as an origin for organic coffee. As a result, organic coffee from Peru will be under scrutiny and compliance will need to be much stricter, particularly for Europe which has much lower tolerance on agrochemicals. Buyers and producers will need to adapt. For Fair Trade certifications, there are concerns about intermediaries and other buyers organizing groups of farmers to access fair trade certifications, seen as unfair competition with cooperatives and a questionable way to comply with the certification standards. Buying combos – the practice of buying lots that combine purchase of certified FT, Organic and other – is another practice of concern for cooperatives in particular. As supply of certified coffee exceeds demand, buyers are able to negotiate with cooperatives to purchase a lot of certified coffee where they pay certification premiums on a part of the lot based on their needs, but the cooperative must sell them an additional quantity of certified coffee as conventional coffee to complete the sale. While buyers are unable to resell as certified the coffee they buy as commercial (even though it is certified), they are able to obtain a high-quality product at a lower price. Cooperatives feel they have no choice but to negotiate on these terms, but many have concerns about the effect of this practice on transparency along the chain, and the capture of benefits by farmers from these certifications. RENOVATION AND REHABILITATION IN COFFEE IN PERU R&R remain a persistent need, particularly renovation with rust resistant varieties (currently 70% is Typica). According to (10) over 50% of land requires renovation or rehabilitation, with renovation being a particular need given predominantly old trees, and the impact of the rust outbreak in 2012 to 2014. Government figures (21) report 69% of land affected, with 19% severely affected. The government responded with a national renovation plan and reports having renovated almost half of the severely affected areas at a cost of $3,273/Ha. Yet sixty-two percent of this was in Junín alone. Credit was provided at concessional rates but repayment and access to new capital continues to be a challenge, as well as access for small farmers. Sixty five percent of the new areas were Catimor. USAID (10) suggest that R&R could double yields for smallholder farmers, so the potential returns are large. Clear technical orientation is missing in terms of how R&R should be carried out. Different technical assistance providers recommend different pruning techniques as well as varieties. Focus group participants cited farmers who had introduced resistant varieties who now wanted to change back to traditional varieties in a double investment. This creates confusion in the sector, particularly in the absence of a reference technical organization. Honduras is a reference example for many. Some of the larger cooperatives and exporters are supporting introduction and dissemination of resistant varieties 32 from Central America, such as Marsellesa or Parainema, or other genetic material of interest to a specific buyer. CORE MARKET SYSTEM FOR COFFEE IN PERU Over 80% of Peruvian coffee is commercial grade coffee, produced largely by small and medium farmers who are unassociated. These farmers sell their coffee to national and multinational traders through intermediaries to the international market. Coffee may change hands several times before reaching an exporter. Certified coffee (10%) is predominantly organic and fair trade, produced mainly by farmers organized in associations who are in turn organized in cooperatives. Most of this coffee is through a few large cooperatives. Often cooperatives collaborate to share services such as processing, transport, or export, with Norandino being an important service provider. CENFROCAFE has just invested in their own facility in Jaen. Traders and some cooperatives also buy and sell gourmet coffee, but the volumes are small (2%) (8). Only 5% of Peruvian coffee is consumed domestically and 75% of that consumption is low quality instant coffee. Major regulations that have had impact on the sector recently include the National Plan for Renovation on distribution of seedlings, adapted varieties and credit; the recent law to strengthen Agrobanco in support of the sector; and certifications, especially the two main ones, fair trade and organic. The National Coffee Plan was a process with broad participation and MINAGRI has launched a National Coffee Program aligned to it. There are several regulations in place regarding genetic material but at the level of smaller nurseries they do not seem to have much impact on what or how coffee seedlings are produced. These smaller nurseries operate on reputation, selling to clients who trust the quality of their plants and are not concerned about certified materials. Support services for coffee, particularly in the traditional production zones are well developed including inputs, credit for cooperatives, and promotion of Peruvian coffee in the global market. Cupping labs, belonging to farmer organizations, exporters, and a growing number of intermediaries, are an important support function for quality and price differentiation in coffee transactions as well as to build capacity and transparency around quality as a means for accessing better prices. Major gaps include long term credit, a more coordinated technical assistance, and research. There is also an opportunity to improve organic inputs supply. Many cooperatives have moved into this space out of necessity but solid technical support and research could support these efforts. 33 Figure 11 Core market system for coffee in Peru 34 KEY SUPPORTING MARKET SYSTEMS Figure 12: Market system for technical assistance for coffee in Peru Technical assistance for farmers is provided by public, NGO and private extension networks, including traders, cooperatives, financial institutions and inputs providers. TA is largely funded by government and donors to improve incomes in rural areas and promote alternative crops to coca. Traders invest in technical assistance, often building TA into their procurement strategy integrated with certifications. Farmer organizations have important TA networks, also linked to certification verifications, and access government funding for TA and investments (Agroideas, PNIA, CITEs). Inputs providers also include TA in their services. There is a recognized need to harmonize messages to farmers, particularly for R&R and varietals. Focus group participants recognized a lack of reference technical content/manuals for training farmers. SENASA through its IPM farmer field schools disseminates content that could be built on. Support functions include content generated and disseminated by SENASA and certifiers; training of TA providers through formal academic training (mostly in regional agricultural universities) and on the job training; and financing of TA for farmers. Exchange visits are an important source of information. Research support function is missing, especially for organic management practices. TA providers feel isolated in terms of access to reference information with even limited access to internet on the job. 35 TA is not regulated directly, but regulations related to coffee norms such as quality, certifications, and sustainability standards form the basis for TA content. A recent effort supported by Solidaridad, the Cámara Peruana de Café y Cacao, and Sustainable Commodity Assistance Network (SCAN) produced three documents on climate smart coffee. Figure 13 Market system for research for coffee in Peru Research is carried out by national and regional universities, INIA, and international research centers. There is no specialized coffee research institute, with few researchers specialized in coffee. For INIA, coffee is not a specific research area but a crop under their agricultural export crops program; their expertise is in other crops. WCR, in partnership with the Junta Nacional del Café, has established varietal and agronomic trials in Peru as part of global trials. National and regional universities have carried out research on genetic resistance to and biological control of leaf rust, and post-harvest. International Centre for Research in Agroforestry (ICRAF), CIAT and others have done work on climate change and mitigation strategies for the sector. Funding for research in coffee comes from government, donors, universities, and some private sector. Some funding for international centers is obtained from international donor and private sector funds. CITEs and CONCYTEC (government) fund research but the funds are small, short term, and not coffee specific. Several cooperatives are engaged in validation of varieties and organic production technologies and could benefit from collaboration with research institutions. 36 Support functions include grants for research from CONCYTEC, laboratory infrastructure at universities and INIA; and international research collaborations. Training for researchers, dedicated human resources, long term research funding, broader international collaboration and field research infrastructure all need strengthening. Regulations related to CITEs and CONCYTEC establish how funds for research and innovation can be accessed for coffee. The inclusion of coffee under INIAs research agenda for agricultural export crops establishes INIAs mandate. Figure 14 Market system for genetic material for coffee in Peru Genetic material for planting is largely produced on farm by farmers with their own seeds or seeds obtained informally from others. Locally, there are farmers recognized as seed producers based on reputation, though they are not necessarily certified. SENASA has a list of certified nurseries, with some of the largest in the Selva Central region. The National Renovation Plan, DEVIDA, and other government and donor initiatives have supported small commercial nurseries, or cooperatives to produce seedlings including funding from PNIA and Agroideas. Cooperatives visited distribute seedlings with two cotyledon leaves to facilitate transport (no soil), and mostly provide service for new varieties that farmers do not already have, including imported materials. Ecom has imported seed and mass-produced resistant varieties from Central America and also facilitated purchases by cooperatives and others. 37 Support functions include SENASA nursery monitoring and registration to promote best practices and identification of quality seedlings; demonstration plots established by projects, cooperatives and private sector to showcase varieties in different regions; and development projects that facilitate access to quality seedlings and incentivize commercial nurseries. National research on varieties is a gap that WCR is beginning to fill, including availability of diverse genetic material in country. The regulatory framework exists for certification of nurseries (SENASA) and nursery operators (INIA). Regulations were revised in 2013 to facilitate the production and commercialization of high-quality, non- certified, coffee seed and seedlings. In the absence of a demand for certified genetic material, these regulations are not the basis for most genetic material transactions in the country. Figure 15 Market system for financial services for coffee in Peru Financial services are provided by three main types of providers. Credit unions (i.e. CAC Norandino), municipal savings banks and agricultural cooperatives that have established financial services for members Cooperativa de Servicios Múltiples CENFROCAFE (i.e. CENFROCAFE) have developed some longer-term products but with limited coverage. The government has provided credit specifically for R&R to farmers most heavily affected by leaf rust, through AGROPERU and other funds administered by Agrobanco as part of the National Renovation Plan. Agrobanco is in the process of restructuring which limits services currently. Social lenders (Oiko, Rabobank, Root, Alterfin) are very present in Peru but lend to cooperatives, mostly commercial credit and some infrastructure yet there may be potential to expand 38 their contributions to R&R financing. Finally, traders and intermediaries provide credit to farmers for harvest activities, sometimes inputs, in exchange for coffee sales. Funding for credit to farmers comes from public funds, social lenders/second tier lenders, credit union savings and working capital of traders and intermediaries. The sector baseline carried out by UNDP identified financial services as deficient and access limited (21). Supporting functions include second tier lenders from government, social lenders and commercial banks; purchase contracts that help cooperatives leverage credit; member savings at credit unions; technical assistance; and credit bureaus. Regulations include laws that regulate financial institutions including rural credit unions, insurance systems and Agrobanco. The low relative country risk and laws related to movement of resources also facilitate lending, in addition to the strong long-term presence of social lenders with foreign capital. Government commitments to renovation in the coffee sector also influence the provision of credit. RELEVANT INITIATIVES IN THE SECTOR • Plan Nacional de Renovación de Café, ongoing, MINAGRI/Agrobanco: This program will continue to support renovation of coffee plantations through credit and will be an important source of funding for seedling production. Agroideas and PNIA are other important mechanisms to fund small investments in coffee. This will likely tie into efforts by MINAGRI to implement the Plan Nacional de Acción del Café 2018-2030. • Programa SeCompetitivo Phase II, 2018-2022, $12 million, Helvetas: This program will work with the Consejo Nacional de Competitividad y Formalización to improve competitiveness in four sectors, including coffee. 2.6 million will be invested through UNIDO to develop National Quality Standards for coffee and cocoa. The program will also have a regional focus on Piura and San Martin, which may or may not overlap with MOCCA. • Comisión Nacional para el Desarrollo y Vida sin Drogas (DEVIDA): DEVIDA is the government agency that promotes alternative development in coca producing areas. Coffee has been one of the most important alternative crops promoted, with 30% of DEVIDA projects currently supporting coffee. Activities include technical assistance, production and distribution of plants, infrastructure, small business support, among others. For certain regions of the country, they represent an important investment in the sector that overlaps with several of MOCCA activities like TA and genetic material. • Alianza Café: Coffee Alliance for Excellence, 2018-2023, TechnoServe: This project is partnering with private sector actors to improve technical assistance, productivity and market access. There is a strong focus on R&R and differentiation of coffee for international markets as well as an important effort to improve content and delivery of technical assistance. Lessons learned and networks built can offer complementarities for MOCCA, especially as this is led by TNS. It will be important to align efforts around market level interventions. ENTRY POINTS FOR MOCCA • Standardizing technical assistance content particularly for R&R – There are many actors supporting R&R through finance, technical assistance, and genetic material. The combined impact of these investments could be larger if messages could be harmonized and synergies created between the different investments to promote appropriate rehabilitation techniques, high quality seed and seedlings, appropriate varieties, and supportive financial products. Possible partners: DEVIDA, AGROBANCO/MFIs, Alianza Café, JNC, traders. 39 • Governance – The recently developed Plan Nacional de Acción del Café Peruano outlines deficiencies and strategies for strengthening governance and representation in the sector at the regional and national level. This can be a starting point for MOCCA for Activity 6, national capacity building. • Research – The Peruvian coffee sector is too large to not have an institution that is somewhat specialized in coffee. WCR presence in the country and with MOCCA should help strengthen market actors who can perform this function moving forward, especially around varietal trials and crop management. Universities like La Molina or INIA are potential national institutions with research capacity and mandates that could be explored, in the absence of a specialized institute. • Organic inputs – As an important origin for organic coffee, there is an opportunity to collaborate with the private sector and government around organic inputs to improve productivity of coffee, for both organic and potentially conventional systems. The leaf rust outbreak has heightened awareness of the importance of plant nutrition. In the absence of a strong research sector providing orientation around organic fertilization, many of the cooperatives who specialize in organic production have engaged in their own research and the production of organic inputs for their members. This network could be capitalized on to provide better technical justification for organic management practices including cost benefit analyses. Possible partners: Cooperatives i.e. CENFROCAFE, Keurig, organic inputs suppliers, certifiers, INIA. • Specialty coffees – There seems to be increasing interest among actors all along the value chain in accessing markets based on cupping scores as a way to differentiate and capture new value. Currently, price is based on parchment to green bean yield and many intermediaries evaluate a sample to determine price. Some are beginning to use cupping scores. Traders are also interested in coffees with a higher margin but currently source much of their specialty coffee from cooperatives given the challenges of sourcing through intermediaries. Moving to cupping scores as a determinant of price may open new market opportunities, and drive better post-harvest management, but will also require building capacity and traceability systems. Possible partners: Helvetas/SECompetitivo, Ecom and specialty traders. 40 Guatemala CACAO IN GUATEMALA Guatemala is principally a cacao importing country with a strong internal demand, traditionally consumed in drinks made from unfermented cacao. This has led to domestic prices that are higher than international prices, absorbing 95% of domestic production and drawing cacao from neighboring Honduras and Nicaragua. The long tradition of cacao production and consumption in Guatemala, tied to Mayan traditions, combined with the sizeable affluent consumer population and large numbers of tourists each year has supported the development of a thriving specialty chocolate (and other cacao products) sector domestically, which has also begun to engage in exports of finished products. The interesting genetics and cultural history of cacao in Guatemala as well as the longstanding tradition of production in certain regions and the predominance of small farmers make Guatemala an interesting origin for bean to bar chocolate makers. The work of Cacao Verapaz, as well as the Cacao and Chocolate commission of Asociación de Exportadores de Guatemala (AGEXPORT), , along with international awards for cacao and chocolate and recent successful application for inclusion of Guatemala in the ICCO list of fine and flavor origins have helped increase visibility of Guatemala as an interesting origin for small volumes of cacao. To date about 5% of its production is exported. The government, mainly Ministerio de Agricultura, Ganadería y Alimentación (MAGA) and Ministerio de Economía (MINECO), have supported the cacao sector through identifying it as a priority value chain, signaling to 9 Data for Guatemala varies greatly on almost all variables even across official sources so we have placed here what we consider the most reasonable estimates. This data should be used VERY cautiously. Table 7. Guatemala Facts and Figures Population (rural) 16,9 million (48%) Farmers 819,162 GDP por capita 7,424 USD HDI Rank 127 (Medium) Poverty (rural) 59% (76%) Table 8. Cacao in Guatemala9 PRODUCTION Cacao farmers, # 9,172 Associated farmers, % 60% Area harvested, Ha 4,354 Production, MT 1314 Global rank among producing countries 31 Yields, MT/Ha <0.3 Climate risk 7% EXPORTS Exports, MT (beans) 73 (90%) Exports, USD 0.3 million % of all export value <1% Principal markets USA 26% El Salvador 16% Honduras 13% Spain 11% Netherlands 10% Export Price Beans (USD/MT) 4924 Quality (ICCO Annex classification) 50% fine and flavor Certifications Organic CONSUMPTION Imports, MT (beans) 1,636 (>95%) Imports/Exports, volume 2,241% 41 donors and international cooperation their interest in channeling investments. MAGA also recently led, together with IICA and USAID, a national strategy development process for the sector, ending in a national strategy for the development of the cacao value chain focused on specialty cacao for export to high value markets, similar to the approach taken in the coffee sector. An effort was made in the strategy process to consolidate information relevant to the sector, but there are still gaps in information and data for the sector. Beyond supporting national strategy development, the government has little to no direct investments in the sector and very little capacity or technical expertise within either MAGA or ICTA to support cacao, and current priorities have focused on food crops over export crops for public sector investment. Three key private sector actors emerge as potential anchor firms, or gateways for small farmers to access export markets – Federación de Cooperativas de las Verapaces (FEDECOVERA), a second tier farmer organization with strong capacity for processing, exporting and marketing 8 different products, including cacao, with ties to 31,000 small farmers (majority not producing cacao); Fundación de Laguna Lachúa (FUNDALACHUA), another second tier farmer organization that brings together 335 cacao farmers; and Cacao Verapaz, an exporter working with six farmer associations and two estates to source high quality cacao for niche markets in the Verapaz region. As volumes and reputation of exports grow, this landscape will surely evolve. The domestic private sector is also quite large, given domestic consumption, with a mix of specialty and industrial oriented firms of all sizes that could offer opportunities for shared value with farmers. FEDECOVERA already sells to the domestic market. In Guatemala, there is no entity for the cocoa sector similar to for example Asociación Nacional de Café (ANACAFE) for the coffee sector. There are however a national and two regional working groups established under Consejo Nacional de Desarrollo Agropecuario (CONADEA)/MAGA with a formal governance structure. These two groups correspond to the two main production regions of the country which are quite different in terms of the cultural, agroecological and socioeconomic conditions for cacao production, though yields are similarly low (22). There is also a private sector commission that operates under AGEXPORT bringing together private sector actors in cocoa and chocolate (Comité de Cacao y Chocolate). There is no formal connection between these different working groups, and farmer representation is weak. FEDECOVERA brings together over 60 cooperatives and associations, but of diverse crops, not just cacao. Current trends and concerns in the sector include the lack of research and research capacity, and technical capacity in general within Guatemalan institutions, particularly the public sector. Another major focus has been around positioning Guatemala in the fine and flavor cacao markets with fruitful results in terms of international milestones and recognition (CoEx, ICCO Annex C). Productivity is also a major concern given older plantations and traditional management practices in existing cacao producing regions. Finally, post-harvest processing is another important bottleneck as quality fermentation is the key to high quality cacao, but the process is best managed in collective infrastructure (8 fermentation centers in cooperatives were identified in 2016, all but FUNDALACHUA focused on the national market), requiring increased levels of coordination and investment among farmers in order to access differentiated markets. 42 RENOVATION AND REHABILITATION IN CACAO IN GUATEMALA Renovation and rehabilitation of cacao plantations in Guatemala is an important need but will also be challenging. Farmers in general in Guatemala have extremely small farm sizes, and their cocoa areas are similarly small. In addition, most cocoa areas consist of a number of trees scattered within a plot that are harvested (300 trees/Ha). Increasing productivity will require restructuring, and therefore in most cases replanting cocoa areas to be more compact and therefore productive, in addition to ensuring genetic potential for productivity. Renovating areas with farmers of such small plot sizes can mean a significant reduction of production and income in the medium term, and total per farmer plot sizes will still remain small, maybe too small to be cost efficient (this is a question that emerged in the focus group discussions, not a conclusion). Several recent initiatives have supported establishment of new cacao areas to expand production, linked to agroforestry systems and biodiversity conservation. Other considerations mentioned in focus groups and interviews are that many cacao producers come from indigenous communities, with high levels of poverty, low levels of formal education, limited access to credit and other services, and with longstanding traditions vis a vis cacao production and consumption. On the other hand, Guatemala has one of the most technologically advanced agricultural sectors in the region with strong private sector partners in inputs, even organic inputs, and seedling production. Pilones de Antigua specializes in mass production of tree seedlings and produced 3 million cacao seedlings in the prior 12 months in the region (no data for just Guatemala). They can be a powerful ally for production of genetic material for renovation or new plantations. CORE MARKET SYSTEM FOR CACAO IN GUATEMALA The majority (85-95%) of cacao produced in Guatemala is ordinary cacao purchased by intermediaries and sold to the national processing industry for the production largely of cocoa based drinks and other processed products. Much of this cacao, along with some of what enters from Nicaragua and Honduras pass through the major wholesale market for cacao in Guatemala, El Presidente. International buyers purchase certified cacao through farmers organizations such as FUNDALACHUA, who in turn buys from farmer associations who buy from their members. International buyers of fine flavor cacao buy mostly from Cacao Verapaz who buys from farmer associations or large farms in the Verapaz area. High end artisanal chocolate makers in Guatemala buy directly from either farmer organizations or farmers, some larger private farms. Given the low volumes, the market system for exported cacao is relatively simple. Some regulations exist that set priorities for the sector, and the domestic market demand and price dynamics is another important regulator for transactions as it much more dominant than the export market. Support functions in Guatemala include identification, characterization and mass production of cacao seedlings, research and innovation at a very local level particularly on post-harvest practices; technical assistance and sector coordination. There is also strong support for farmer organizations to build business capacity. Financial services exist but do not seem to be widely used by farmers. 43 Figure 16 Core market system for cacao in Guatemala 44 KEY SUPPORTING MARKET SYSTEMS Figure 17 Market system for technical assistance for cacao in Guatemala Technical assistance for cacao farmers in Guatemala is provided largely by farmer organizations and NGOs and paid for by development grants. Cacao expertise is low in Guatemala. R&R is not a prominent part of TA, and TA agents support multiple crops. A few organizations i.e. Fundasistemas have accumulated experience in cacao. Efforts are being made to build the capacity of farmer organizations to provide TA, as well as to stabilize the rural extension function of MAGA. Instituto de Ciencia y Tecnología Agrícola (ICTA) does not work in cacao, focusing on priority food crops. Lingual, cultural and agroecological diversity across cacao regions is a challenge for developing technical content, materials, and human resources. TA is funded by donor funds channeled through international NGOs including Solidaridad, Heifer and LWR who often work closely with local NGOs or farmer organizations to support TA for farmers. MAGA also co funds TA provided by local NGOs. Supporting functions for cacao TA are weak, but include some research and innovation efforts, training for TA providers on cacao (CATIE is a reference) and rural extension (USDA/Counterpart), strong farmer organizations with experience in service provision to members, and NGOs mobilizing resources for TA. Cacao Verapaz is an asset for TA in post-harvest management. 45 TA in Guatemala for cacao is not regulated. A strategic plan (2015) establish priorities for the sector, but without clear implementation mechanisms. Priorities relevant to cacao are also established in the national agricultural plan, national fruit sector policies, and in forest protection and restauration plans and policies given the importance of biological reserves. All have implications for TA content in cacao. Figure 18 Market system for research for cacao in Guatemala Cacao research in Guatemala has been limited given the relatively small size of the sector. There are neither researchers nor research institutions that specialize in cacao. Public sector (ICTA) priorities are on food crops, though existing expertise and infrastructure could be used to support cacao research. Instituto Interamericano de Cooperación para la Agricultura (IICA) and FAO are both leading initiatives to support research and innovation in cacao, particularly at the sub national level. The CRIA (IICA/USDA) project has funded three regional universities (Rafael Landivar, Centro Universitario de Oriente (CUNORI), ITMES) to carry out 10 short term (<7 months), small (<$20k) research projects on cacao in the Verapaz region together with farmer organizations including socioeconomic studies, fermentation, and processing. FAO is promoting pruning, diseases and genetic material through their innovation platform. The private sector, through Maya Kakaw and Pilones de Antigua have done genetic characterization and plant propagation with support from CATIE to select 10 local clones for evaluation in experimental plots. Cacao research in Guatemala in general is short term, dispersed, and isolated from international research networks. Research is funded by donors (USDA, EU) and private sector (Maya Kakaw). 46 Supporting functions include the work of IICA and FAO to engage local actors in cacao research and to integrate research, innovation and extension systems at the national and local levels. The coordination function of MAGA through CONADEA also support establishment of sector priorities and a vehicle for dissemination of results. CATIE courses serve to disseminate research results from beyond Guatemala. Regulations that influence the sector include those that establish the mandate and priorities of ICTA, MAGA, and those related to the public sector role and funds for research and innovation under SENACYT and associated entities which specifies agriculture as a priority area for technological innovation. Figure 19 Market system for genetic material for cacao in Guatemala Genetic material for cacao in Guatemala is largely produced by farmers using locally available materials. There is a mix of local and international materials. A few initiatives over the past decade have introduced international clones on a small scale in different regions of the country as part of agroforestry systems to generate income, funded by donor funds (CATIE, others). Pilones has the capacity to produce on contract large volumes of plants. There seem to be very few public or private programs distributing cacao seedlings, so those sold are a commercial arrangement between the farmer and the nursery. Universidad del Valle and Centro Universitario de SuroOccidente (CUNSUROC) have done work on characterization of local materials and Universidad de San Carlos de Guatemala (USAC), Choice Humanitarian and several others including farmer organizations have budwood gardens and/or experience with nurseries. Maya Kakaw and Pilones de Antigua both have their own clonal gardens. 47 Supporting functions for cacao genetic material provision include past and ongoing studies of local genetic material, establishment of clonal gardens with local and international materials of known origin, and existing capacity for plant production at scale (Pilones), and on a local level through nurseries and farmer organizations. There is no certification process for cacao genetic materials, just an authorization to engage in the sale of genetic material (VISAR/MAGA), without certifying origin or quality. Documentation of existing materials and traceability will offer possibilities for differentiation in the market. Figure 20 Market system for financial services for cacao in Guatemala Financial services for cacao farmers are an important support function that is missing in the cacao sector, as identified by this assessment and in the sector strategic plan (22). Financial services in general for agriculture and rural areas are provided through BANRURAL (Crédito Amigo Productor), as well as savings and loans cooperatives, agricultural cooperatives, and similar. Most offer short term credits. The following organizations were mentioned as possible providers of financial services in cacao – Fundación para el Desarrollo Empresarial Agricola (FUNDEA), GENESIS, FUNDALACHUA, ShareGuatemala, and from the public sector MINECO and BANRURAL. None was mentioned as specifically providing credit for cacao, more that they provided credit for farmers or farmer organizations and could be convinced to expand into cacao. Social lenders are present in Guatemala but were not mentioned as providing credit for cacao. 48 Support functions are largely the experiences and capacities and support functions of institutions to facilitate rural or agricultural lending in general. Experience with credit for the coffee sector or other agroforestry systems should facilitate development of products for cacao, but it takes work for lenders to enter into a new commodity. Of course, the difficult situation of the coffee sector with current prices may also disincentivize lending for other agroforestry crops. Stable trading relationships such as those with Cacao Verapaz should also serve to support credit applications, including relationships with national buyers. Priorities established for the sector in the strategic plan can be used to leverage public support for financial services in cacao, within the confines of regulations that govern the activities of potential lenders including cooperatives, financial institutions, and trusts. RELEVANT INITIATIVES IN THE SECTOR • Plan Estratégico de la Agrocadena de Cacao de Guatemala, 2016-2025: This strategy was developed over two years (2014-2016) under the leadership of CONADEA/MAGA, and with support from IICA and USAID. The document consolidates information from diverse sources and documents the results of a SWOT analysis for the sector, while also outlining strategic directions, actions and indicators to improve sector competitiveness focused around positioning Guatemala to capture higher prices for cacao in international specialty markets building on its genetic diversity and cultural history linked to cacao. One important outcome was to structure two regional working groups with participation of public, private, NGO and farmer representatives for each of the two main geographical cacao producing regions. • Cooperativa Maya Kakaw is a recent, private effort to promote Guatemalan cacaos based on local fine and flavor cacao genetics and Mayan heritage. Current membership is around 30 members with approximately 400Has of cacao. Members must be producers with at least 7 Has of cacao. Maya Kakaw have hired CATIE to characterize local materials including their intercompatibility to design clonal arrangements for new plantations to ensure productivity and quality. • Cacao Verapaz, 2014 to present: Cacao Verapaz is a specialty cacao exporter that works with farmer organizations in the Alta Verapaz area of Guatemala to identify, develop and market cacaos with special flavors and special stories. Cacao Verapaz collaborates with farmers organizations, and other NGOs in the region to strengthen the capacity of farmer organizations for producing and fermenting high quality cacao and to link their cacao to specialty chocolate companies in the US and Europe. Cacao Verapaz is also concerned with making cacao production profitable for farmers and works to monitor and maximize social impacts of their commercial operations in Mayan communities in Guatemala and Belize. Several NGOs are present in the region and collaborate including Heifer, Solidaridad, and LWR each with different small-scale initiatives. ENTRY POINTS FOR MOCCA • Strengthening a national innovation system for cacao – Take advantage of the momentum and complement investments of FAO under CDAIS and IICA/USDA under CRIA to strengthen a national research and innovation system linked to extension. An important contribution MOCCA could make is to connect research in Guatemala to international research to improve research design and build capacity for research through collaboration with international experts, recognizing that there are very few, if any, research scientists in Guatemala with experience in cacao. Both of these initiatives are focused on subregions within Guatemala which limits engagement to locally based actors, in isolation 49 from the larger research community working on cacao in the region. Possible partners: FAO, IICA, CATIE, Bioversity, CIAT, Maya Kakaw. • Sector governance through regional working groups – Under the umbrella of the national strategy, two working groups were formally constituted to engage actors in each of the cacao producing regions in Guatemala. MOCCA can strengthen governance in the sector by connecting work in either of the sub regions to these working groups, aligning MOCCA objectives to that of the national plan. In addition, MOCCA should support national level convenings under CONADEA to bring together private sector (AGEXPORT, chocolate makers, exporters), public sector (MAGA, MINECO), academic sector (U San Carlos, U del Valle), and farmers organizations large. Supporting national level cacao forums for information sharing is a strategy that LWR has implemented successfully in other emergent sectors i.e. El Salvador as a way to get actors engaging with each other in a low risk space, and to begin to homogenize the information we have about the sector through engagement with recognized international experts. Possible partners: CONADEA, MINECO, AGEXPORT, FEDECOVERA • Building a quality differentiation strategy from seed to consumer – Building on initiatives underway and interest in developing an export sector around local genetic characteristics, MOCCA could support the efforts of Cacao Verapaz, Maya Kakaw, and others to develop the support systems needed to produce, process and market differentiated cacaos. This could include characterization and evaluation of local materials, capacity building for nurseries and budwood gardens to produce traceable materials and support farmers to document the varieties they have planted, renovation models and plantation design, support for differentiated post-harvest processing and marketing to specialty chocolate makers (Cacao Verapaz is already doing this). This could focus on the Verapaz sub region and possibly connect efforts with MARN related to biodiversity conservation targets. Possible partners: Bioversity, CATIE, Maya Kakaw, MAGA/ICTA/VISAR, USDA, cooperatives, nurseries, GIZ. • Strengthen capacity of TA providers – Given geographical remoteness of cacao production areas, including linguistic and cultural diversity, technical assistance will be a challenge. Locally based actors will need to be enabled to achieve sustainable results and these local actors need to be connected to national research and extension networks that provide access to new information and innovation. Counterpart International is currently implementing a USDA funded project with two relevant components – the first related to building the capacity of farmer organizations to provide technical assistance, and the second related to training and certification of rural extension agents to reactivate the national extension service. MOCCA can join forces, ensuring cacao farmer organizations are trained and extension agents working in cacao have the methodological tools to support innovation in cacao production systems. MOCCA could also contribute with cacao specific content, particularly around R&R. Climate information for cocoa farmers could also be incorporated, building on ongoing efforts by MAGA/Instituto Nacional de Sismología, Vulcanología, Meteorología e Hidrología de Guatemala (INSIVUMEH)/CIAT to improve the quality and use of agroclimatic data for extension and on farm decision making. Possible partners: Counterpart, MAGA, cooperatives, regional universities. 50 COFFEE IN GUATEMALA Guatemala is considered to have some of the finest coffees in the world, mainly due to the high altitudes at which coffee is grown. Guatemala also has a diversity of coffee flavors due to the diversity of climates, varietals, and soils. This can be seen in the relatively high export prices Guatemala receives for their coffee. High costs of production as compared to other countries represents an important challenge for Guatemala moving forward. The vast majority of farmers (97%) are small farmers, and most are associated with groups. Exporters in Guatemala are a mix of national and transnational firms as well as cooperatives. Transnational firms dominate, sourcing largely through intermediaries. Over the years, exporters have invested in their own wet mills in order to source some of their coffee directly from farmers as most farmers sell cherries. Several large federations of cooperatives (FEDECOCAGUA, FEDECOVERA, Asociación de Cooperación al Desarrollo Integral de Huhuetenango (ACODIHUE), Manos Campesinas, others) commercialize large volumes of coffee, often certified, directly to international markets or through exporters. Exporters, including cooperatives that export, are organized under ADEC, an association of coffee exporters that does not seem very active, as well as under AGEXPORT’s Committee for Specialty Coffee. Around 70% of coffee in Guatemala passes through the hands of intermediaries who are responsible for wet milling, a critical step in post-harvest quality management. There is general consensus among exporters is that improving vertical integration between harvest and dry parchment coffee will have positive effects on quality, capturing value that is currently lost. ANACAFE is the secretariat of the Coffee Policy Council, made up of different government ministries and presided by the Minister of Agriculture. In this sense, ANACAFE responds to the government, yet the board of ANACAFE is made up of representatives of coffee farmer organizations. While ANACAFE is responsible for export permits and promotion of Guatemalan coffee in international markets, it does not have representation of the industry in its structure. Core funding for ANACAFE comes from a tax on exports that is tied to price, so as an institution their budget is vulnerable to coffee price fluctuations. Within the country, ANACAFE is a reference for research and extension in coffee, and public institutions pretty much leave coffee to ANACAFE, with ICTA and MAGA having very little to do with the sector. ANACAFE has done important work in marketing Guatemalan coffees, most recently having defined and characterized eight distinct coffee producing regions of Guatemala in terms of their distinct flavor profiles. Table 9. Coffee in Guatemala PRODUCTION Coffee farmers, # 122,000 Associated farmers, % 70% Area harvested, Ha 278,232 Production, MT 245,441 Global rank among producing countries 11 Yields, MT/Ha 0.882 % of area needing R&R 70% R and R potential 35+% Climate risk 8% EXPORTS Exports (green beans), MT 181,016 (99%) Exports, USD 679 million % of all export value 5% Principal markets USA 38% Japan 18% Canada 12% Belgium 7% Italy 4% Export Price (USD/MT) 3,737 Quality nd Certifications nd CONSUMPTION Imports, MT (green) 1,646 (0.2%) Imports/Exports, volume 1% 51 Hot topics in the sector center include genetic material, post-harvest management and technical assistance. There is a lack of certified or high-quality seedlings, and there is a need for better information on what varieties to use not by region but by attitude, given the landscape in Guatemala. The loss of quality related to Guatemala’s marketing system which relies on intermediaries to carry out wet milling off farm continues to be a concern and many initiatives promote shorter chains between harvest and dry parchment stages for more control and increased incentives to manage quality. Research and extension continue to be weak and research is not disseminated efficiently through extension networks. RENOVATION AND REHABILITATION IN COFFEE IN GUATEMALA Guatemala was hard hit by the leaf rust crisis, particularly in the west, with estimates that 20% of coffee was lost and 70% is in need of renovation. Given the agroecological diversity in Guatemala, there is a need to segregate recommendations and strategies for R&R. For example, in higher regions rehabilitation may be the best option, where plants may respond and production can be recovered much quicker. In other regions, particularly lower areas, renovation is clearly needed. Recommendations for varieties to plant, and provision of seedlings also needs to vary by geographical area, particularly altitude. Many suggest that rust resistant varieties should be prioritized in areas below an altitude of 1200 meters. Renovation is particularly challenging in the Guatemalan context as almost all farmers are small farmers, and plot sizes are typically small, such that renovating a sizeable area means a significant reduction in income. One system several organizations have promoted in Guatemala is renovating 10% of the farm per year. A main focus of R&R programs has been helping farmers access trees, which represents 20-50% of the investment, but there is concern that programs should also be able to support fertilization and crop maintenance to ensure the investment in plants is not lost for lack of care. Starbucks, through partner exporters in Guatemala, has been implementing its One bag, One tree initiative, distributing exclusively Marsellesa variety. Unfortunately, these efforts have not been coordinated with ANACAFE. Farmers appreciate the donation of plants that are resistant to leaf rust, but some would prefer receiving plants of traditional varieties that have a good price. Poor prices, farmers claim, are the reason why no one does R&R. Farmer organizations play an important role in R&R for their members by providing plants, inputs and technical assistance, as well as recommending varieties based on market and local experience. CORE MARKET SYSTEM FOR COFFEE IN GUATEMALA Over 90% of Guatemalan coffee exports come from small farmers who constitute 97% of farmers (10). The majority of this coffee is purchased by exporters who source over 70% from intermediaries or wet mills, who buy in cherry form from farmers. Several exporters have invested in wet mills but only process a very small part of their coffee (<10%). An important portion is also exported directly by large federations of cooperatives who purchase the coffee in parchment from member cooperatives who in turn buy in cherries from individual farmer members. The other 50% of production comes from medium and large farmers who constitute just 3% of farmers. Much of this coffee is purchased directly by international buyers or exporters in parchment, as medium and larger farmers have processing facilities on farm. Some large and medium farmers particularly also sell to intermediaries and wet mills. Guatemala has several policy instruments that support the sector, including the Coffee Law, financial instruments to support the sector, and several regulations recognizing the importance of the sector including several denominations of origin. ANACAFE provides much of the support functions to the sector, but with limited resources. Export promotion is a service well developed, while financial services and genetic material are areas that are far from responding to the needs of the sector. 52 Figure 21 Core market system for coffee in Guatemala 53 KEY SUPPORTING MARKET SYSTEMS Figure 22 Market system for technical assistance for coffee in Guatemala Technical assistance for coffee farmers in Guatemala is provided by ANACAFE, NGOs, exporters, and farmer organizations. ANACAFE offers courses, including on renovation and rehabilitation, as well as individual consultations. There is a collection of manuals and other technical documents available on the website. They also promote Coffee Rural Training Centers (CERCAFE), centered around an experimental farmers’ plot. Unfortunately, they do not reach most small farmers. Most multinational exporters have some type of sustainability program i.e. Volcafe Way, through which they provide technical assistance to farmers, often funded by roasters i.e. Starbucks, or commercial margins. The large federations often manage donor funds and commercial funds which allow them to provide technical assistance to farmers through their affiliates. NGOs provide TA on a range of topics and with differing methodologies. TA is paid for by donor funds, commercial margins, and coffee taxes. ANACAFE’s courses for technicians, manuals, pest monitoring and extension methodologies constitute an important support function for technical assistance, harmonizing technical content. Research carried out by different actors generates new information to incorporate into extension materials. Certifications also provide content and a vehicle (through inspectors) for TA. 54 Rules that influence TA include the technical guidelines and TA methodologies promoted by ANACAFE, exporters, and others that shape content and delivery of TA within the country. The coffee tax to fund ANACAFE (50% is TA) is also important as ANACAFE’s TA budget fluctuates with prices and productivity. Figure 23 Market system for research for coffee in Guatemala ANACAFE, WCR and IICA/ Programa Centroamericano de Gestión Integral de la Roya del Café (PROCAGICA) are the most recognized research actors, particularly for work on genetics, aligned with the WCR agenda. The Universities of San Carlos and del Valle also carry out coffee research. HRNS and CIAT work on climate smart coffee management practices, as does CIRAD, but this work seems less known. Funding for research comes from coffee taxes, public university funds, donor funds and some private sector contributions through WCR. Leaf rust, climate and genetics are the main research topics underway. ANACAFE has research capacity in terms of human resources and infrastructure, international research partnerships, and a funding base to carry forth a medium-term research agenda, though some say capacity has diminished in recent years. Dissemination of research happens routinely through annual coffee events organized by ANACAFE, as well as through courses ANACAFE gives for extension agents. Links to the international research community including research institutions from other countries in the region through PROMECAFE, infrastructure including field plots, and basic research and breeding pipelines to keep crop improvement advancing given large time lags in breeding for coffee. The connection to extension through ANACAFE supports dissemination of research results. 55 The autonomous nature and funding stream of ANACAFE means that very few regulations influence their research. International genetic resources exchange agreements as well as the coffee tax regulation that funds ANACAFE research were identified. Figure 24 Market system for genetic material for coffee in Guatemala Genetic material - While many farmers continue to produce their own seedlings, there is growing capacity within the country for mass production (Pilones de Antigua) and more sophisticated production i.e. grafting onto Robusta rootstock, though these have yet to be accessible to small farmers. Local commercial nurseries also exist, mostly offering traditional catuai and caturra varieties, as well as seedlings with robusta rootstock, produced with varying levels of best practices applied. Farmer organizations and exporters (under the Starbucks program) also engage in seedling production and distribution for their members/suppliers. Funding comes from farmers, development donors, roasters, and farmer organizations. In line with Guatemala’s emphasis on quality coffee which for Guatemalan “coffee regions” also includes varietals, there is increasing interest in traceability and certification of genetic material. Given the diversity of altitudes across regions, it will be important to develop a regionally based seedling system that ensures availability of the preferred variety in the corresponding region. 56 Support functions for genetic material include research on breeding and varietal adaptation to different regions, technologies for multiplication of genetic materials, and local seed availability. A continuing concern is how to ensure farmers plant genetically pure and healthy plants, to ensure long term productivity of their plantations. WCR has been working on guidelines and a verification system for nurseries in hopes of achieving better results than the MAGA/VISAR led system for regulating nurseries. Recommendations by high profile R&R projects, such as PROCAGICA, as well as WCR’s nursery best practices have an influence on seedling production and transactions for farmer organizations and commercial nurseries respectively. Figure 25 Market system for financial services for coffee in Guatemala The main financial services for coffee farmers, particularly small farmers, is provided by intermediaries as short-term credit for harvest or inputs, paid off with the harvest. BANRURAL manages two trusts for the coffee sector, one for general financial support including renovation, and one specially for small farmers to improve productivity, which includes investment, renovation and nurseries. Unfortunately, they are unable to take on new credits. Microfinance institutions and rural savings and loans cooperatives also provide financial services at higher interest rates. IDB is piloting a new mechanism through MiCoope, using guarantees from Guateinvierte, and insurance through Columna to strengthen services from financial cooperatives. Counterpart is also working with MiCoope to expand financial services to cooperatives. Funding for financial services comes from public funds in the form of trusts, from 57 multilateral loans (IDB, International Fund for Agricultural Development (IFAD)), from social lenders (Oiko Credit, Root Capital) and second tier financial institutions that lend to farmer organizations and credit unions, and donor funds (USDA). Support services include technical assistance as some requirements include use of ANACAFE recommended varieties, trust funds and other kinds of loan guarantees to facilitate access to credit for coffee farmers, and long-term contracts with buyers to leverage credit. Insurance is a new support function in the sector, under trial. Financial services for coffee, especially for renovation are regulated by the different legal structures of the coffee and agricultural sector trust funds, regulations of financial institutions including non-regulated (OPD) category, and second tier lenders. RELEVANT INITIATIVES IN THE SECTOR • USAID FtF Coffee Value Chain Project, 2017-2022, $4.3 million, FEDECOCAGUA, NCBA/CLUSA: This project seeks to benefit 15,000 coffee farmers in Quiché, Huehuetenango and San Marcos. The project will focus on strengthening cooperatives, market access for specialty coffee and recuperation of low productivity coffee farms through climate resilient agricultural practices. A particular focus will be on building the capacity of farmer organizations to provide technical assistance as well as support renovation of coffee farms, new varieties and coffee leaf rust management. • Competitividad y Financiamiento de la Caficultura en Guatemala, 2016, $12millones, ANACAFE/BID FOMIN: This Project will be managed by ANACAFE, together with a financial institution (MICOOPE), an insurance provider (Columna), and a trust managed by MAGA to support access to finance (Guateinvierte). The project is also focused on access to finance, better risk management, and climate resilience. The project is focused on the regions of Huehuetenango, San Marcos, Alta Verapaz and Chiquimula. • Food for Progress, 2016-2021, $18million, Counterpart International: Through this project, and its precursor, Counterpart has been working with MAGA, ANACAFE and others to build out a national extension service by creating Rural Development Learning Centers (CADERs), to improve quality and access to technical assistance for small farmers. The project is not exclusively focused on coffee, but has a strong focus on strengthening cooperatives and is being implemented in Huehuetenango, Quetzaltenango, San Marcos, and Quiché. • Alliance for Resilient Coffee, 2016-2020, HRNS: This initiative works in Guatemala, Honduras and Uganda to bring together research institutions and other organizations working in the sector to bring together information on climate change and coffee to improve the evidence base to guide decision making on investments. Part of the project includes climate monitoring and evaluation of practices on farms to evaluate specific climate smart practices for coffee. This is being carried out in the Trifinio region of Guatemala with and builds on longer term trial plots HRNS has had in the region. HRNS collaborates with WCR, CIAT, SFL and others on this initiative, and have developed and continue to use and improve curriculum and decision tools coffee and climate under a corporate initiative of the Foundation. As they work globally, the program brings together learning and experiences from Latin America, Africa and Asia. The regional coordinator for the project is based in Guatemala City. ENTRY POINTS FOR MOCCA • Capturing and sharing value lost in processing – Take advantage of exporter interest and market potential for high quality coffee to explore innovations to change how coffee is managed between 58 harvest and dry parchment stage. This could include innovation in infrastructure or services closer to farmers, or work with intermediaries to improve processes and traceability. If value currently lost can be captured, this value should help pay for the investments needed to improve coffee. Quality and traceability are increasingly important for specialty markets and Guatemala’s reputation positions it well to grow in this market segment. • Financial services for market system actors who can provide those services to farmers – Given the limited offer of financial services to farmers from financial institutions, and the incentives exporters and intermediaries have to forward cash to farmers to ‘guarantee’ product delivery, MOCCA could explore a. what financial products for buyers could be developed that would allow them to broaden the scope of their lending to farmers, or b. what institutions do farmers currently engage with i.e. savings and loans cooperatives that could be supported to increase their offer in coffee. • ANACAFE as technical assistance reference – Recognizing that ANACAFE cannot reach all farmers, and that many other actors are providing technical assistance, MOCCA could work with ANACAFE to play a more strategic role vis a vis other TA providers in developing high quality guidelines, training, and training material. For example, with R&R, the Starbucks program implemented by several exporters never engaged with ANACAFE to discuss what kind of varieties they would plant in what areas. Having clear, high quality, respected information motivates uptake by TA providers. 59 El Salvador CACAO IN EL SALVADOR El Salvador is principally a cacao importing country, importing four times what they produce. Cacao is widely consumed in the country, mostly unfermented cacao, in drinks, and El Salvador also produces cacao-based products produced from imported cacao powder or butter. Before 2014, there were under 300 Ha of cacao in the country, and over 200 were on a single large farm. Since 2014, Alianza Cacao, a $25 million-dollar investment promoted by Howard Buffet, has sought to turn El Salvador into a cacao producing country by establishing new cacao areas with 3,600 new cacao farmers. Alianza Cacao is a consortium led by CRS, along with LWR, CLUSA El Salvador and Caritas. An earlier initiative in 2009 formed Sociedad Cooperativa de Productores de Cacao de El Salvador (ESCACAO), a group of medium sized producers focused on cacao production for fine flavor markets. Externally, El Salvador is not viewed as an exporting country given the low volumes, criteria that was used to deny inclusion of El Salvador in the ICCO Annex C. However, the Buffett initiative has made noise in the sector and generated curiosity on the part of chocolate makers around what kinds of cacaos may be discovered in El Salvador, particularly given its historical importance as the site of cacao domestication (not origin) and the leading producer of cacao during colonial times. Samples of unique cacaos from El Salvador shown at the Salon du Chocolat and the awarding of one of 17 Cocoa of Excellence Awards in a global competition in 2017 have raised the countries profile as a potential origin, though buyers are waiting to see if sufficient volumes can be achieved. From its beginning, the government has supported the initiative, framing it as a celebration of El Salvador’s Mayan roots and a climate friendly crop that could be substituted for coffee in low altitude areas. The government has developed a research effort to characterize and release local genetic material through Table 10. El Salvador Facts and Figures Population (rural) 6.4 million (33%) Farmers 395,588 GDP por capita 7,292 USD HDI Rank 121 (Medium) Poverty (rural) 29% (38%) Table 11. Cacao in El Salvador PRODUCTION Cacao farmers, # 3,965 Associated farmers, % Nd Area harvested, Ha 800 Production, MT 357 Global rank among producing countries 42 Yields, MT/Ha 0.446 Climate risk 34% EXPORTS Exports, MT (beans) 54 (17%) Exports,'000 USD 143 % of all export value <1% Principal markets USA 74% Guatemala 13% Honduras 9% Nicaragua 4% Export Price Beans (USD/MT) 4,222 Quality (ICCO Annex classification) N/A Certifications nd CONSUMPTION Imports, MT (beans) 1,285 (68%) Imports/Exports, volume 2380% 60 National Agricultural Research Institute (CENTA), have declared a national cacao day, and are in the process of reviewing a proposal for a law to promote the sector that includes the creation of a national cacao institution. The level of support and attention from public sector actors has been great given the overall insignificance of the sector in terms of economic importance and numbers of farmers involved. The private sector actors most involved in cacao are those that produce cacao-based products for sale on the domestic and Central American market, mostly using imported unfermented cacao from Nicaragua and Honduras. A second segment are the large network of small businesses that also buy unfermented cacao to make homemade tablilla, sold to make cacao-based drinks served in typical restaurants across the country. Most of these actors have been at the margin of the current developments in the sector as they demand low quality cacao products at prices competitive with those of imports. ESCACAO, an association of medium sized cacao producers and chocolate makers, along with La Carrera farm are the two actors that have been actively engaged in processing and marketing of the growing Salvadoran fermented cacao sector. Importers are a key actor that should be engaged to support development of the sector and positioning within the region. Alianza Cacao supported the Mesa Nacional de Cacao, a multi-actor working group to discuss issues relevant to the sector. Initially they discussed genetic material and technical assistance proposals of the Alianza Cacao, and more recently were involved in the writing of the proposed legislation to support the sector. The Mesa is an ad hoc working group with voluntary membership. Under the proposed legislation, however, an entity would be created similar to the Consejo Salvadoreño del Café to support development of the sector and dialogue with the government. Current debates in the sector center on genetic material, the viability of cacao areas established under Alianza Cacao, cacao marketing strategy, and the potential contribution of cacao to national reforestation and land restauration targets. There are two camps on genetic material, one that supports exclusive promotion of local materials for their adaptation to local conditions and potentially differentiated quality, and a second that proposes to use international clones with known productivity and quality to ensure profitability of cacao plantations. Related to this is the debate about how El Salvador should position itself in international markets, balancing between productivity and a differentiated quality. Alianza Cacao has established more than 2,500 Ha of new cacao plantations in different areas of the country with unexperienced cacao farmers with limited resources. Many are concerned with the viability of these plantations and on the one hand do not want to abandon farmers, but on the other are concerned that the cacao that has been planted may not turn out to be as profitable as initially promised. Water is a major limiting factor and investing in irrigation increases costs significantly, for example. Most areas have been planted by seed with the expectation of grafting clones in the field, but it is unclear how successful this will be. And finally, there is great interest in cacao for its contributions to environmental and climate priorities, but it is unclear whether the crop will be profitable enough for farmers to maintain the tree cover it could generate. RENOVATION AND REHABILITATION IN CACAO IN EL SALVADOR Given how young the sector is (most farmers still waiting for their first harvest), traditional R&R is not a current topic of concern for the sector. There is however a great deal of interest in consolidating recommendations for how new plantations should be established and how pruning should be managed. El Salvador then represents an opportunity to establish crop management practices that ensure optimum productivity as part of the regular routine. For example, MOCCA could focus on newly established areas i.e. replacing missing plants to ensure optimum plant density, grafting appropriate genetic material on 61 new or unproductive plants, managing pruning for optimum health and productivity, management of plant nutrition and propagation of genetic materials in order to incorporate R&R into the crop management cycle from the beginning. Investments made now in ensuring new plantations are well designed and genetic material selection, seedling production and technical assistance are carried out appropriately will be an investment in the future of the sector, particularly as farmers are new and therefore open to suggestion. La Carrera, the largest oldest farm in the country, has renovated approximately 60 Has over the past four years using local materials from their own farm. They have also rehabilitated much of the farm. This experience can serve as inputs to future renovation and rehabilitation practices if well documented. CORE MARKET SYSTEM FOR CACAO IN EL SALVADOR The main market for Salvadoran cacao is the domestic market for tablilla. Tablilla is mostly made by small businesses who procure unfermented cacao in local markets or from intermediaries in wholesale markets that import cacao from Honduras and Nicaragua. Unfermented cacao procured from within El Salvador is purchased through intermediaries from very small farmers. La Carrera is the largest cacao farm in the country with just over 150 Ha. They have invested in processing infrastructure to process and market their own cacao and are also buying cacao from nearby farmers. This constitutes another channel, by which fermented cacao is exported. ESCACAO has also established a large fermentation facility funded through Alianza Cacao and are beginning to process cacao for their members (40-60 medium cacao farmers). Several cooperatives, all very new, have also been equipped with fermentation facilities by Alianza Cacao and are collectively processing cacao for sale to exporters and niche markets within El Salvador. With the increase in production of fermented cacao, Salvadoran higher end chocolate makers are exploring possibilities to source their cacao within the country, though price competitivity and volumes as compared to sourcing in Honduras or Nicaragua remain an issue. As the new production comes on line, and with investments already made with development funds in infrastructure for processing, and marketing, there is an opportunity to have an important impact on the evolution of the sector at least for the next decade in terms of small farmer participation and benefits. Support systems and regulations are in the formation so it is also an interesting time to engage particularly around technical assistance, inputs, and genetic material provision, as well as how the sector becomes connected to international research networks for technical inputs. Investments will also need to be made in the development of financial products for cacao, building on experiences from coffee, positive and negative. 62 Figure 26 Core market system for cacao in El Salvador 63 KEY SUPPORTING MARKET SYSTEMS Figure 27 Market system for technical assistance for cacao in El Salvador Technical assistance has been largely provided by three NGOs funded under Alianza Cacao – LWR, Caritas and CLUSA El Salvador. CENTA also provides some TA funded by public funds and donors (USDA, IILA), mostly in response to requests from farmers. Most TA providers have just a few years of experience with cacao, and have learned from their peers (also new to the crop), through reading, trial and error, visits from international experts, and for some exchange visits to other countries. The majority rely on prior experience in coffee or fruits and training as agronomists. TA approaches largely use group FFS methodologies and training is continuous, following the evolution of the new cacao plantations farmers are establishing i.e. year 1 focus on nurseries, year 2 establishment, etc. TA supported by Alianza Cacao has had a strong focus on establishing new areas to meet project targets, and a focus on associated crops, including food crops and vegetables, to support income generation during initial years. Supporting functions for TA include informal and formal training opportunities for TA providers including national and regional cacao events, the internet, and materials such as Cacao Móvil. Technical collaborations and exchange visits are important sources of content, particularly experts from INIAP Mexico, WCF, Colombia and Peru. Research on genetic material, climate and costs inform TA provision. 64 There are no formal regulations of TA but Alianza Cacao has an important influence due to its size and number of TA providers. Coffee is an important reference crop for farmers and extension agents in thinking about TA, and the Mesa Nacional de Cacao has served at times as a filter for technical materials on cacao to be used in the country. Figure 28 Market system for research for cacao in El Salvador Research in cacao in El Salvador is limited to theses at Centro de Investigación y Desarrollo en Salud (CENSALUD)/UES on characteristics of local cacaos and post-harvest processing, and CENTA’s work evaluating local clones. The University of El Salvador has also done some work on cacao but apparently disconnected from others. Research infrastructure specifically for cacao is limited but growing i.e. clonal gardens and laboratories. Researchers are new to cacao, but a few have specialized/focused on cacao in the past few years. Research to date has been funded by donor projects (Alianza Cacao, USDA, IILA) and public funds (CENTA, UES). The current investments should be used to generate evidence that guides future investments including varieties, plantation design, associated crops, costs, and quality. The genetic diversity in the country provides an opportunity for in situ conservation with support from Bioversity International. Support functions for research include donor funding, CENTA genetic collections and infrastructure as well as that of UES, and bilateral technical cooperation agreements with INIAP and CATIE for technical backstopping for research in cacao. Thesis students at UES/CENSALUD have been important in generating 65 information and studies on cacao. The investments made by Alianza Cacao provide a potential laboratory for research on many topics. Rules or regulations that directly influence research in cacao in El Salvador were not identified, beyond the particular interests of the institutions carrying out the research. Figure 29 Market system for genetic material for cacao in El Salvador Genetic material includes seeds, largely produced by La Carrera or by farmers themselves, and budwood from clonal gardens established by CENTA and Alianza Cacao. Commercial nurseries and municipal nurseries also produce seedlings. La Carrera and ESCACAO sell grafted seedlings with traceable genetic material to farmers and others. The majority of plants are produced in collective nurseries funded by Alianza Cacao and the plants are distributed free of charge to farmers. The majority of seedlings distributed by Alianza Cacao are rootstock from La Carrera and only now is budwood being distributed to graft international clones onto the plants in the field. CEL, the state energy company, also distributes cacao plants to farmers as part of their reforestation mandate. There are no certified seed or budwood producers nor nurseries. Some materials were not introduced legally which complicates registration. Support functions for genetic material production have been ramped up in El Salvador over the past 5 years by Alianza Cacao, driving demand for seed, seedlings and budwood, and investing in TA and 66 infrastructure. A collaborative effort has been made to identify and characterize supertrees, CENTA has begun evaluating materials, and Alianza Cacao, ESCACAO, La Carrera and others are evaluating international clones, all generating valuable information for selection of genetic materials. Finally, CATIE and FHIA collections have been important contributors to the availability of materials in El Salvador. Regulations for the certification, propagation and commercialization of genetic materials in general apply to cacao though they are not yet widely used. The preferences of Alianza Cacao, CENTA and discussions in the Mesa Nacional de Cacao have normative functions that influence decisions at the national and local level about what materials to plant. Figure 30 Market system for financial services for cacao in El Salvador Financial services for cacao is rare in El Salvador. The Banco de Fomento Agropecuario (BFA) offers most of its coffee products for cacao as well but has very few cacao clients. CRS was promoting community savings groups to provide credit in cacao but we do not know how much resources were leveraged. With support from CLUSA to complete the application process, just two cacao farmers were able to obtain credit. The coffee sector will be an important reference for farmers and financial service providers as some farmers may have credit histories with coffee and financial institutions may have financial products that can be adapted. 67 Support functions include the work of projects and NGOs to incentivize financial institutions to provide credit to cacao farmers as well as TA for cacao production to ensure plots are well managed. Technical assistance from projects will be a facilitating factor for farmers to access credit. Experience of financial institutions with lines of credit for coffee provide an initial reference for the development of products for cacao, and the proposed legislation also establishes conditions for improving credit for the cacao sector. There are not cacao specific regulations, but rules that govern the sector include experience and especially credit history in the coffee sector which could limit access to credit for some cacao farmers transitioning from coffee. The national policy under development will also likely influence at least public sector investments to provide financial inclusion for farmers in the cacao sector. RELEVANT INITIATIVES IN THE SECTOR • Alianza Cacao, 2014-2024, $34.7 million, CRS: Alianza Cacao, a consortium between CRS, LWR and CLUSA El Salvador, was responsible in its first phase, 2014-2019 for the aggressive introduction of cacao with small farmers in many regions of the country, increasing by almost tenfold the number of hectares and farmers of cacao in El Salvador. Alianza Cacao is responsible for the existence of such a broad base of small cacao farmers and numerous initiatives at the national level to develop technical assistance, marketing, and research strategies. The project will continue with a second phase with less resources than Phase I but it will still be the single largest cacao investment in El Salvador over the next 5 years. • Desarrollo tecnológico y fortalecimiento de la base productiva y agroindustrial para la cacaocultura con enfoque agroecológico en el Salvador, 2016-2018, $2.2million, USDA/CENTA: This project equipped CENTA with laboratories to support research in cacao including microbiology, food technology, biotechnology and plant pathology. The project also released three cacao varieties based on local criollo materials evaluated for their potential productivity, and patented an ancestral chocolate. While this project has concluded, CENTA continues the work with the local clones and other areas of work in cacao. • Rehabilitación cadena del cacao de calidad Centroamérica y Caribe, 2018-2020, 1.2 million euros, IILA: This is a regional initiative but with physical presence in El Salvador. The project focuses on supporting farmers to use high quality genetic material, good post-harvest, chocolate making and marketing practices in order to access better prices for small farmers from their cacao. ENTRY POINTS FOR MOCCA • The domestic market – El Salvador imports four times as much cacao as it currently produces, largely washed cacao from neighboring Honduras and Nicaragua. El Salvador also imports processed cacao for industry. These both represent potential market opportunities for Salvadoran cacao, but price points need to be considered. One opportunity is to link producers to local Tablilla producers which may offer better prices though for possibly smaller volumes. MOCCA should also be able to piggy back on the boom in El Salvador around specialty coffee for the domestic market and explore introducing cacao-based drinks into coffee shops as well as supporting the development of gourmet cacao-based products for the domestic market including drinks and chocolate. Possible partners: CONAMYPE, importers, processing industries i.e. Melher and Shaws, Alianza Cacao, IILA, ESCACAO. • Cacao genetic diversity for the dry corridor – The agroclimatic conditions under which cacao grows in El Salvador are different from the major production zones in the rest of Central America. El Salvador also has potential genetic diversity adapted to those conditions left over from colonial times. There is an important opportunity in El Salvador to study the existing genetic diversity for its potential to 68 produce in drier, hotter climates. Developing these genetics and associated production practices will be important to the future of cacao in El Salvador, but could also make an important contribution to the rest of the region. CENTA and UES have mapped many of these materials and CENTA has already established trial plots with some of the materials. This could include sensorial characterization of these materials. Support from Bioversity and/or CATIE to identify, conserve and explore the potential of these materials may be of global interest and aligns well with GOES priorities on conserving local varieties. Possible partners: CENTA, UES/CENSALUD, Bioversity/CACAONET, Heirloom Cacao Initiative, Guittard Chocolates, CATIE, CIAT/Future Seeds Genebank, WCF. • Getting cacao propagation right – if Alianza Cacao will continue to produce and distribute seedlings in this new phase, there would be an opportunity to consolidate lessons learned and investments in genetic material infrastructure, in collaboration with CENTA, to build out a national seed and budwood system for cacao ensuring traceability of the materials introduced and collected, clarifying recommendations on propagation methods, providing better guidance to support selection of materials for planting, and further strengthening the capacity of nursery operators to produce high quality plants. The focus would also be on getting ready for transition to a market driven seed system by the end of MOCCA. Possible partners: Alianza Cacao, CENTA, Organismo Internacional Regional de Sanidad Agropecuaria (OIRSA), DVSA, CATIE, nurseries, ESCACAO, La Carrera. • National Commodity Institute – given the legislation under discussion that includes the creation of a national entity to coordinate the sector, there is an opportunity for MOCCA to support the emergence of this entity bringing lessons learned from other countries and the coffee sector to ensure the emergence of a structure for the sector that maximizes benefits to small farmers. Possible partners: Alianza Cacao, Mesa Nacional de Cacao, Ministerio de Agricultura y Ganadería (MAG), ESCACAO, CENTA. • Positioning El Salvador with Bean to Bar chocolate makers – Given the relatively higher production costs (i.e. land, labor) in El Salvador as compared to neighboring countries, the low volumes of production, and the need for cacao to generate attractive livelihood options to retain farmers, it will be difficult for El Salvadoran cacao to compete on commercial cacao prices. If we can follow El Salvador’s experience with differentiated coffees, combined with the genetic diversity and rich cultural heritage around cacao, there may be a niche that could be opened for Salvadoran cacao at differentiated prices. LWR’s Cocoa Flavor Map is a model that can be built upon to achieve this. Possible partners: ESCACAO, Salvadoran Export Promotion entity, Cacao of Excellence, Northwest Chocolate Festival, Zoto, IILA, Alianza Cacao. 69 COFFEE IN EL SALVADOR The coffee sector in El Salvador is comparatively small, dominated by large farms, and struggling to reemerge over the past 15 years from heavy indebtedness and low productivity. The sector has historically been driven by exporters who buy coffee from farmers in cherries. On the one hand, this practice allows for the standardization of quality control post-harvest, but on the other, it concentrates power and benefits in the hands of processor/exporters, not farmers, particularly small farmers. El Salvador did not recover well from the 2001 coffee crisis and was hit hard again by the 2012/2014 leaf rust crisis. Public emergency funds were mobilized at both times to save the sector, which is still heavily indebted. Around 80% of exports by volume come from large farms, who are about 20% of producers. El Salvador is a small specialty coffee origin known for high quality coffees with truly special characteristics such as single estate, or even single variety offerings that are difficult to find elsewhere. Just over 50% of exports sell at differentiated prices, mostly based on quality, not necessarily certifications. The other 50% is commercial grade coffee with 11% being low grade (23). Due to the large number of small coffee farmers as well as the importance of coffee forest cover for overall tree cover in El Salvador given its location along all of the major mountain/volcano ranges, the government has continued to prioritize the coffee sector for investment to meet targets for rural poverty reduction and environmental conservation including climate commitments. By 2010 Fundación Salvadoreña para Investigaciones del Café (PROCAFE), an important coffee institution in El Salvador for research and training, had pretty well disappeared. While the Consejo Salvadoreno del Café has survived, their role is limited to exports and sector statistics. After the 2012 coffee leaf rust crisis, the government created CENTA Café to respond to the need for renovation in the sector. This program has mostly focused on production and distribution of seedlings, and technical assistance to farmers. The government has also played a large role in finance for the sector, creating trusts, emergency support, renegotiating repayment, subsidizing credit and refinancing, among other measures. Development cooperation, particularly from the US and development banks such as Banco Centroamericano de Integración Económica (BCIE) and IDB, have also invested in the sector funding technical assistance, research, credit, and supporting renovation and market access. The shared concern is that if coffee does not remain a viable livelihood option, the tree cover sustained by coffee plantations in El Salvador will be lost, with devastating impacts for water, climate, erosion and other ecosystem services. While the private sector recognizes the efforts the government has made to invest in the sector, they criticize the quality of plants distributed and technical assistance provided which they believe will severely limit the impact of those investments. Table 12. Coffee in El Salvador PRODUCTION Coffee farmers, # 23,751 Associated farmers, % nd Area harvested, Ha 128,035 Production, MT 39,460 Global rank among producing countries 17 Yields, MT/Ha 0.308 % of area needing R&R 24% R and R potential 100+% Climate risk 27% EXPORTS Exports (green beans), MT 29,402 (100%) Exports, USD 109 million % of all export value 2% Principal markets USA 44% Japan 13% Germany 8% England 7% Belgium 5% Export Price (USD/MT) 3,726 Quality 51% differentiated Certifications Sustainable CONSUMPTION Imports, MT, (green) 6,386 (18%) Imports/Exports, volume 22% 70 Three large exporters (Ecom, Fundación Comercial Exportadora (COEX), Unión de Exportadoras (UNEX)), plus three large cooperatives (Cuzcachapa, La Majada, Sociedad Cooperativa de Cafeteros de Ciudad Barrios (CAFECIBA)) dominate the coffee industry in El Salvador from harvest to export. All play a role in access for farmers to technical assistance, plants for renovation and financing whether that be through their own resources or channeling resources from development cooperation or the government. The exporters in particular are criticized by government and small farmers for not transferring the benefits of commercial transactions back to farmers. Conversion rates for coffee berries to dry beans are not standardized and it is felt that buyers take advantage of farmers in establishing prices. The Consejo Salvadoreno del Café, funded through a levy on exports, brings together representation from different actors within the sector but their capacity to act or mobilize within the sector is limited. Asociación Salvadoreña de Beneficiadores y Exportadores de Café (ABECAFE) brings together exporters and represents the interests of this sector, while Asociación Cafetalera Salvadoreña (ACAFESAL) represents farmers and Unión de Cooperativas Productoras de Café (UCAFES) represents cooperatives. All three sit on the Consejo and the Mesa Nacional de Café coordinated by the government. Major concerns within the sector include the heavy indebtedness, further complicated by the current low prices; the lack of a strong institution to lead the sector including absence of any research institution; the quality of the renovation supported by the government, particularly genetic material used and the fact that many farmers used plants to repopulate old plantations instead of renovating complete areas; the challenges posed by climate change, particularly for lower elevation areas where smaller farmers are concentrated; and the possible environmental crisis that could ensue should unproductive coffee areas be converted to annual crops. At the same time, there is an increasing effervescence around specialty coffees with innovative approaches to differentiating coffee for the export and internal markets. Single origin, single estate, single variety are some of the novel origin coffees El Salvador has to offer. Internally, participation in Cup of Excellence events, barista trainings and competitions are on the rise, along with an increase in coffee shops and consumption of quality coffee. RENOVATION AND REHABILITATION IN COFFEE IN EL SALVADOR In response to the leaf rust crisis, several initiatives including the government CENTA Café, a USDA funded project implemented by NCBA CLUSA, and the Starbucks One Pound, One Tree initiative implemented by exporters, among others, have supported the production and distribution of coffee seedlings. Most have promoted rust resistant varieties that also require different management practices, particularly fertilization. The government alone has distributed almost 48million plants since 2014. While large plantations tend to renovate or rehabilitate areas periodically, smaller farmers tend to replace unproductive plants within existing coffee plots, with plants produced with seed from their farm. Recepa, or Stumping, is the most common pruning technique used for rehabilitating plantations. Other techniques such as agobio are used but are no longer recommended. Farmer organizations play an important role in production of seedlings, inputs provision, TA and even credit for farmers to support R&R. Several concerns were raised, particularly in the focus groups with extension agents and farmers organizations, around these initiatives. One concern is that the bulk of plants distributed by the government were procured from registered nurseries but without certification of genetic material, so while the sanitary and health aspects of the plants were monitored, there was inadequate control of the genetics in the plants distributed. This is further compounded by the fact that most farmers do not renovate plots on their farm but they tend to replace unproductive trees. This means that the end result of most of these renovation efforts is to further diversify the varietal mix found in farmers plots. This not only complicates processing and quality, it also complicates management both in terms of the needs for 71 fertilization, but also for R&R itself. Farmers and technicians explained that for traditional varieties like borbon, bending trees to stimulate new growth is a common practice. Newer varieties, however, are not as flexible. So along with new varieties, also come new R&R techniques, and if each plot is a mix of different varieties and ages, this is complicated even further. Different initiatives also distributed or promoted different varieties and different R&R techniques, creating confusion among farmers about what advice to follow. Some farmers are already switching back to traditional materials to ensure quality and price, making a double investment. CORE MARKET SYSTEM FOR COFFEE IN EL SALVADOR The market system for coffee in El Salvador is comprised of small and large farmers, some organized in cooperatives, who mostly sell their coffee cherries to processors who also export. This is the principal route for commercial grade and certified coffee. Farmers who are members of one of the three large cooperatives sell their coffee also in cherries to the cooperative who handles post-harvest processing and exports to international markets. Smaller farmers, associated with smaller cooperatives, also collectively process and sell their coffee to exporters (not processors) who in turn export to international markets. While a few exporters specialize in the specialty market, all players are moving into that market with processor/exporters such as Ecom or UNEX increasing interest in single origin, estate, micro lots or other differentiating characteristics to improve sale margins. In El Salvador one can envision three distinct market systems, one in which large farms or estates, located in higher altitudes, sell certified or differentiated coffees directly or through processors/exporters for specialty markets with interesting price differentials. In a second channel, small farmers, located in lower altitude areas more vulnerable to climate change, sell commercial grade coffee to processors/exporters. A third, smaller category, are farmer cooperatives who process their own coffee and sell to either commercial or differentiated markets through exporters, on the domestic market, or by exporting directly. The major suite of regulations is related to government initiatives designed to respond to the financial crisis in the sector. Support functions including technical assistance, finance and production of seedlings are in place but are fragmented with different providers serving different target groups with different objectives. Huge uncertainty, particularly within the small farm sector, related to prices, profitability, productivity, renovation and dependence on public investments distort market signals, making it difficult to assess returns to investment in coffee versus other livelihood options. 72 Figure 31 Core market system for coffee in El Salvador 73 KEY SUPPORTING MARKET SYSTEMS Figure 32 Market system for technical assistance for coffee in El Salvador Technical assistance for coffee farmers in El Salvador is provided by four main categories of actors. CENTA Café provides TA to around 3300 small and medium farmers in need of renovation. The service is paid for by public funds via loan. The major focus is on provision of seedlings for renovation complemented with Farmer Field Schools that meet up to three times a month. Exporters provide TA to their clients funded through coffee sales and partnerships with buyers i.e. Starbucks. Larger clients can receive farm specific management plans, and smaller clients, largely those with loans from the exporter, receive TA oriented towards ensuring loan repayment through harvest. Methods include field days, FFS and farm visits. NGOs provide technical assistance funded through donor funds focused on seedling production and fertilization. Cooperatives provide technical assistance as funding permits. Support functions for TA include training for TA providers through higher education in agronomy which includes coffee content and training courses offered by employers. Funding for TA from donors and government as well as exporters is an important support function. Research on varieties and agronomic practices contribute new content for TA. CENTA and NGOs have produced training materials that support TA for coffee. Linking loans to TA also supports service provision. 74 The only regulation mentioned as influencing TA is the inclusion of training for extension officers in the government 5-year plan which should ensure investment in human resources in coffee. Figure 33 Market system for research in coffee in El Salvador Research in coffee in El Salvador is carried out by CENTA Café, WCR, and The Borlaug Institute. CENTA is relatively new to coffee (2012) and carries out research with public funds on pests and diseases, agronomic practices, and genetic characterization. WCR does research as part of regional and global trials to evaluate varieties and agronomic practices. Research sites across different countries are funded by industry members of WCR and by development cooperation funds. The Borlaug Institute carries out research to evaluate rust resistant varieties funded by US government. WCR and the Borlaug Institute coordinate with local partners, especially to access sites to install the research trials. CENTA research is connected to dissemination through technical assistance provided by CENTA but formal dissemination networks for coffee research beyond the direct networks of each research institution are not well defined and there is no single entity that coordinates across research. Funding is ad hoc and does not respond to nationally determined priorities. Support systems for research include partnerships with international research institutions and PROMECAFE plays an important role. WCR has an experimental farm and a network of experimental plots that could be taken advantage of to advance the national research agenda, in addition to WCRs global research agenda. This is also true for the Borlaug Institute and both are creating capacity of farmer 75 collaborators to monitor and take data in plots. Supporting engagement of national researchers with these initiatives can contribute to research capacity in-country. Regulations relevant to the sector were not identified. Public sector research in El Salvador is influenced by government priorities. WCR global research guidelines influence the agenda of WCR in El Salvador. Figure 34 Market system for genetic material for coffee in El Salvador Genetic material - Most farmers produce plants on their farms with their own seeds, or seeds purchased from PROCAFE or other farmers. Over the past five years there have been several large initiatives distributing coffee plants. CENTA has worked to distribute seed and to train seed producers and nursery operators. Genetic material was verified for 18 seed producers, but there is not a way to certify these seeds under current regulations. There are at least 150 commercial nurseries, some formally associated. Seedlings are paid for and delivered to farmers through initiatives to support renovation including CENTA- Café, exporters/ Starbucks, and NGOs. CENTA Café uses public bids and selected nurseries are supervised by DSVA and OIRSA to ensure good genetic material and healthy plants are distributed. Despite this supervision, there is a great deal of criticism about the quality of seed used and the quality of plant delivered. Cuzcatleco was the variety most distributed. NGOs (CLUSA El Salvador, TNS) have worked to build the capacity of smaller nurseries for low cost production of coffee plants. Under the Starbucks program One tree for every bag, exporters import marsellesa seed from Nicaragua and produce plants at nurseries in El Salvador to be distributed to farmers, funded by Starbucks from coffee profits. 76 Support functions for genetic material include research to evaluate local and international varieties; government inspection and verification systems in nurseries; support from R&R programs for production and distribution, and capacity building for nursery managers. In addition to regulations governing seeds and nurseries, the requirements CENTA uses to procure plants from nurseries as well as the requirements for farmers to access subsidized plants are having an important influence on how plants are produced and how they are distributed. Figure 35 Market system for financial services for coffee in El Salvador Financial services for coffee farmers in El Salvador come from two main sources. The government has worked since 2000 to develop a diverse offering of financial products for the coffee sector, including for harvest, processing, renovation, etc. through direct funds and trusts (fideicomiso). Banco de Desarrollo de El Salvador (BANDESAL) is the second-tier public bank that manages these funds and Banco Hipotecario and Banco de Fomento Agropecuario (BFA) are the main banks that lend to farmers and cooperatives. Access by small farmers to these funds has been limited as many are indebted or otherwise not bankable. To overcome these challenges, coffee cooperatives have also been authorized to manage funds in support of their members with four playing this role to date. The second source of financing is provided by buyers to their clients usually to support harvest costs and is repaid with harvest. Some inputs suppliers also provide inputs on credit, but these are suspended in the context of the current crisis. 77 Supporting functions for financial services include several trusts, guarantee and other public funds supporting the sector. Financial education and technical assistance for coffee farmers also support farmers to manage their loans responsibly. Credit lines for second tier funders so they can lend to coffee farmers and financing mechanisms supported by development projects. Since the coffee crisis in 2000, the government of El Salvador has implemented a series of regulations to create and modify different financial instruments in the service of the coffee sector. Two regulations of interest are the special conditions to allow coffee cooperatives to intermediate financial services for farmers and the rules that govern loans from exporters and processors as they relate to the potential for market system players to provide financial services to farmers. RELEVANT INITIATIVES IN THE SECTOR • Café Resiliente en Centroamérica, $5 million, 2015-2020, The Borlaug Institute/USAID: This project is centered around the validation of rust resistant coffee varieties and climate smart coffee management practices. While it is not a large project, many actors in the sector consider it to be a high impact project. • New operations, IDB and IDB Invest, 2020-2025, 100+ million, CENTA/MAG and exporters: The IDB is currently working with the Government of El Salvador to design a loan (Valoración de Servicios Ecosistémicos de la Franja Cafetalera) to reactivate the coffee sector including renovation of coffee as well as conversion to other agroforestry systems. This will be a large operation with an expected contribution of 45million from the Green Climate Fund. IDB Invest, the private sector window of the IDB, is also developing a new operation (Caficultura climáticamente inteligente en El Salvador) with the three major exporters to support renovation of large coffee plantations. • Programa de Renovación Cafetalera de Alta Productividad, Sostenible y Resiliente en El Salvador, $86 million, 2018-2022, MAG/BCIE: In 2019 the National Assembly approved a loan from BCIE to renovate coffee plantations. This large initiative to be managed by the public sector will continue CENTA Café activities under the current renovation plan including distribution of rust resistant coffee varieties, access to credit, innovation, technical assistance, and marketing. ENTRY POINTS FOR MOCCA • Complement ongoing public and private sector investments in renovation – Since 2014, at least 30,000 Ha10, almost 25% of total coffee area, have been renovated in El Salvador. Public and private investments in renovating new areas will continue over the next few years. There is a huge need, and opportunity to support these new areas as they come into production including technical assistance and access to inputs to ensure plants and plots develop a healthy productive structure, as well as market access including post-harvest management, quality and marketing models. • Support development of a differentiated national strategy to address the coffee crisis – In El Salvador, not all coffee areas are created equal, and altitude is a major determining factor for future climate impact and even current profitability of coffee farms. For new areas, MOCCA could help to organize recommendations on planting material, agroforestry arrangements, climate smart production practices, and alternative crops by altitudinal zone based on recent studies by CIAT and others on the future impacts of climate on coffee production in El Salvador. IDB, MAG, CENTA, Ministerio de Medio Ambiente y Recursos Naturales (MARN) and CIAT have already begun this work 10 Calculation based on reported numbers of plants distributed by CENTA and others. 78 and WCR, the Borlaug Institute and CENTA have already begun work on varietal resilience. Bringing this together could help improve recommendations for investments, financial services, technical assistance, seedling production, even post-harvest processing recommendations for areas with distinct coffee potential or challenges within the country. Cacao has been seen as an alternative to coffee and this work could cross crops to understand where and under what conditions cocoa is an alternative and where additional alternatives need to be identified. This exercise would be of use and interest to the private sector as well. This should also consider national climate commitments and how climate subsidies should be used to drive market-based solutions in the sector. There is already one large GCF project underway in the country and another is under development. • Strengthen the market system for seeds and seedlings – Given the number of commercial nurseries and the volumes of purchases of seedlings for distribution through public, private and NGO programs, there is an opportunity to work with those who are procuring seedlings to promote best practices or specific genetic materials, and with nurseries to build capacity and support systems. Public sector investments in plant distribution under the loan from BCIE and private sector investments under the Starbucks plant distribution program will continue for the near future. This provides an opportunity to use these investments to drive changes in the sector and ensure quality of new coffee plantations as well as cost effective models for seedling production. • Explore market niches for small farmers – El Salvador is becoming known as an origin with a diverse offering of coffee attributes. Yet much of this innovation and capturing of value added is happening at the level of larger estates. MOCCA should explore opportunities for small farmers to engage in high end coffee niches for the international and domestic markets, not just certifications. The specialty coffee and barista boom, as well as the increased interest from exporters in El Salvador should provide opportunities for experimentation. 79 Honduras CACAO IN HONDURAS The majority of Honduran cacao is sold to the Central American market as unfermented cacao, yet a growing percentage is being fermented and exported to Europe and the USA. Similar to Nicaragua, the Honduran cacao sector is re-emerging after the price and monilia crisis in the late 90s. Driven by the presence of Chocolats Halba in the northern part of Honduras, the sector has reoriented itself towards fermented cacao, fine and flavor genetic material, and organic production in search of higher prices. Imports are still very low, as are yields, but there have been important recent and ongoing investments to renovate, rehabilitate and expand cacao plantations, with a focus on the fine and flavor market, so areas planted and volumes should increase significantly over the next few years. The presence of Chocolats Halba plus awards won at Cocoa of Excellence in 2015 have helped build Honduras’ reputation in the fine and flavor cacao world. The government has given increasing importance to cacao over the years and while they have very little in the way of experts, activities or programs, they have done an important job, under Programa Nacional de Desarrollo Agroalimentario (PRONAGRO) with funding from USDA and COSUDE, at coordinating the sector, promoting dialogue among actors and jointly developing agreements and policy instruments to support the sector including certification of genetic material, organic production standards, fiscal challenges, land titling issues and others. The traditional private sector has been dominated by just three key intermediaries who export large volumes of cacao to El Salvador and Guatemala. Since about 2007 there have been small initiatives with buyers to develop production of fine flavor cacao, beginning with Xoco, and Table 13. Honduras Facts and Figures Population (rural) 9,3 million (42% rural) Farmers 270,632 GDP por capita 4,542 USD HDI Rank 133 (medium) Poverty (rural) 62% (nd) Table 14. Cacao in Honduras PRODUCTION Cacao farmers, # 3700 Associated farmers, % 50% Area harvested, Ha 1,933 Production, MT 751 Global rank among producing countries 35th Yields, MT/Ha 0.389 Climate risk 12% EXPORTS Exports, MT (beans) 600 (96%) Exports, USD 1,5 million % of all export value <1% Principal markets El Salvador 32% Guatemala 26% Switzerland 24% USA 12% Netherlands 5% Export Price Beans (USD/MT) 2,457 Quality (ICCO Annex classification) 50% fine and flavor Certifications Organic, FT CONSUMPTION Imports, MT, (beans) 157 (9%) Imports/Exports, volume 26% 80 since 2009 Chocolats Halba has been engaged with the sector supporting supply development for their chocolate operations in Switzerland. Together with Asociación de Productores de Cacao de Honduras (APROCACAHO), Fundación para el Desarrollo Empresarial Rural (FUNDER), Fundación Hondureña de Investigación Agrícola (FHIA) and others, and important funding from COSUDE under PROCACAHO, Chocolats Halba has steadily grown their supply of cacao from Honduras, driving important changes in production as well as post-harvest management that have risen awareness about cacao market opportunities. Good King Cocoa has now established suppliers from Honduras, along with others i.e. Cacao Fino y Maderables. At least four processing facilities for making chocolate and other products have been established over the past five years, including one owned by a farmer organization, even as Chocolates del Caribe closed its large processing plant in Honduras. Dinant, a company known in the region in several crops for production and outgrower schemes for processing for the regional market has established 200Ha of cacao with plans to reach 1000Ha plus 1000 more from outgrowers for processing in Honduras. Many in the sector, particularly Honduran private sector actors, would like to see the sector evolve towards more value added in-country and the growth in PYMEs and brands producing cacao-based products has proliferated over the past five years. The cacao sector in Honduras may be the most well organized in the region. APROCACAHO has played a strong role organizing and advocating for small farmers and has recently formed Federación Nacional de Productores de Cacao de Honduras (FENAPROCACAHO) to strengthen this function. SAG has played a strong role bringing the sector together under the Comité Nacional de la Cadena de Cacao coordinated by PRONAGRO, and they are now on their third agreement to improve competitiveness within the sector11 (24), negotiated with participation of a broad representation of actors. A formal system was created to coordinate technical assistance for the sector, Sistema Nacional de Asistencia Técnica para el Sector Cacaotero (SINATEC). FHIA has played an important role in research and technical support for the sector for production, genetic material and post-harvest/quality. The level of cohesiveness and engagement between actors is notable. Major concerns in the sector include productivity, genetic material, market diversification, the sustainability of technical assistance and new cacao production zones. There is general consensus that renovation of existing plantations and new, well planted areas are needed in order to improve productivity, but there is great debate still about what genetic material should be used and what the financial tradeoffs are between productivity and quality. A bigger concern is to ensure traceability of genetic material to ensure that new or renovated plantations are of known genetic material that will be productive, through increasing regulation of seedling providers. A tension exists between those who would like to diversify buyers, and add value in-country, and the recognition that Chocolats Halba has invested in the sector and needs to recover that investment. This is complicated by differentials with local market prices that do not seem to justify the additional cost of post-harvest processing and certifications. Technical assistance, along with many services for the sector have been heavily subsidized by development grants and there are serious doubts about how this will be sustained in the future or what unhealthy distortions are being created today. Finally, cacao production is being promoted in several areas that have not been commercial production areas including la Mosquitia, Olancho and El Paraiso. Farmers in these areas have no prior knowledge of the crop making technical assistance a critical support function for these areas that the sector needs to maintain post projects. 11 Acuerdo Marco Para la Competitividad de la Cadena Agrolimentaria del Rubro de Cacao Entre La Secretaría de Estado en los Despachos de Agricultura y Ganadería, y el Sector Privado (2019 – 2022) 81 RENOVATION AND REHABILITATION IN CACAO IN HONDURAS The focus within the sector since late 2000s has been on reactivating production, so much of the focus has been on supporting renovation of genetic material either through new plantations or grafting new genetic material onto old trees. Several projects have established new areas using different polyclonal and agroforestry system designs. So, while there are still areas to be renovated or rehabilitated, there are also significant newly planted, renovated or rehabilitated areas. The Mesa Nacional recently estimated 6875Ha of cacao, 3000Ha of which are newly planted areas,12 (24) quite a jump from the official figures from 2017 in the table above. It will be important to monitor the established plantations to ensure replacement of unproductive or missing plants and to assess the productivity of the genetic materials and combinations introduced. Farmers with support or technical assistance from projects are either renovating areas by lot, or are introducing new plants into the older plantations and then removing older trees as the new trees grow. The latter system allows for more continuity of production but complicates the establishment of the new plantation following spacing guidelines as older plants get in the way. Some projects are providing donated plants or subsidized plants, such as CAHOVA, and FUNDER under PROCACAHO provides credit for acquiring plants. Most projects are acquiring their plants from farmer organizations that have budwood gardens and nursery infrastructure. Seeds come from farmers, but the grafted material comes from budwood originally from the collections in FHIA or Centro Universitario Regional del Litoral Atlántico (CURLA), and CATIE materials introduced. Farmer organizations play an important role in access to plants and support for R&R. Farmers who are not supported by a project continue producing their own nurseries by seed and using sub optimal planting densities. They often renovate by replacing old trees within an existing plantation. Focus group participants commented on the marked difference between farmers associated with organizations receiving support from development projects and farmers not associated with this kind of support in terms of whether they plant by seed or grafted seedling, planting densities and associated trees. A relatively common form of rehabilitation in Honduras promoted by projects has been to graft older forastero plantations with budwood from trinitario varieties. In this way they achieve a change in the genetics of their plantation while avoiding many of the costs associated with establishing a new plantation. Some farmers also identify unproductive plants and graft new material onto those. Farmer organizations play an important role in supporting associated farmers in R&R through provision of genetic material, TA focused on R&R, and provision of inputs, in addition to commercializing cacao. CORE MARKET SYSTEM FOR CACAO IN HONDURAS There are two main market channels for cacao in Honduras, quite differentiated with regards to participating actors, types of cacao, and types of farmers, with of course some crossover between the two. The first channel starts with intermediaries who export cacao within Central America, dominated by three major intermediaries (Marvin Handal, Miguel Reyes, Fredy Ayala). They buy their cacao from local intermediaries or directly from individual farmers. Intermediaries transport, dry and clean the cacao. The second dominant channel is Chocolats Halba, who buys mostly certified, fermented cacao from farmer cooperatives who ferment cacao purchased from their associates. At the request of the cooperatives, Chocolats Halba began buying all of their suppliers’ cacao, and then on-selling the commercial grade cacao 12 See Acuerdo Marco for more details. An important effort to collect sector data was made in putting together the document. 82 to the large intermediaries. There is a small amount of specialty cacao that is purchased either through cooperatives or directly from farmers where relationships have been built i.e. COAGRICSAL or Xoco, and there is a small amount of cacao that stays on the domestic market. There are quite a number of sector specific agreements or regulations, giving increasing importance over time to the sector. The most important include the framework agreements for sector competitiveness developed in the context of the Comité Nacional de la Cadena de Cacao since 2010, and the more recent (since 2016) regulations related to use and commercialization of genetic material. Certifications are another important norm, especially organic and more recently fair trade. Support services are quite developed, but are mostly a function of investments and activism on the part of projects in the sector. Technical assistance, genetic material provision, financial services, inputs, coordination are all present to a greater or lesser extent due to project provided incentives. 83 Figure 36 Core market system for cacao in Honduras 84 KEY SUPPORTING MARKET SYSTEMS Figure 37 Market system for technical assistance for cacao in Honduras Technical assistance is provided by farmer organizations, and international (Helvetas, Heifer, AeA) and national (FUNDER, CASM) NGOs, all with funding from international donors (COSUDE, EU, IDB). Buyers support TA for post-harvest quality management. TA is provided through farmer organizations where they exist, hiring TA providers to work within the cooperatives. The FFS methodology is widely used, based on guides developed by CATIE PCC, together with Cacao Móvil app content. While this is dominant in the northern part of the country, it is unclear how much it has permeated new cacao areas. Renovation with new genetic material, grafting, clone combinations, and pruning are important parts of TA content. Organic practices and nutrition are gaps. Honduras has strong systems for training TA providers including academic training (CURLA, UNAH), courses, materials, visits and research outputs (FHIA), and training materials for farmers and extension agents, mentioned above, which help to harmonize methodologies and content. Digital technologies, including WhatsApp groups are important for the dissemination of information. A sustainable funding model for TA is missing, as has been largely funded by donors. SINATEC is a working group that helps harmonize TA in cacao across TA providers and between providers and consumers of the service to ensure content is evidence based and relevant to the sector. SINATEC 85 both regulates TA in terms of content and approach, but also supports TA by coordinating the sub sector. SINATEC can be a strong ally for developing and disseminating R&R content. Figure 38 Market system for research for cacao in Honduras Research in cacao in Honduras is largely carried out by FHIA and regional universities, along with some NGOs (Helvetas, Rikolto, WCF) with funding from donors (COSUDE, EU) and FHIA own funds. FHIA has by far the largest research infrastructure, having done research for several decades, including an international germplasm collection, a long-term agroforestry trial and more recently laboratories for research on post-harvest and quality. FHIA also has trained cacao researchers. Research results, however, are not always disseminated in farmer friendly form and FHIA engagement depends on donor funds. Regional universities (CURLA, UNAG) have just begun to engage in research with small amounts of university funding. Cacao nutrition, performance of genetic material in different regions, and organic production are research gaps. Support services include collaborations with international research centers including CATIE and WCF, and universities in Switzerland are important. The connection within the cacao research sector in Honduras and with cacao research regionally needs to be strengthened as well as the diversification of actors engaged in research. 86 The Framework Agreement for sector competitiveness outlines research priorities for the country and SINATEC plays a role of prioritizing topics and as an entry point for international research entities wanting to engage the sector. Figure 39 Market system for genetic material for cacao in Honduras Genetic material for small farmers connected to development projects, is provided by NGOs or farmer organizations and subsidized by donor funds. FHIA and Asesoría y Servicios en Producción Agroindustrial (ASEPRA) have the largest capacity for producing plants. ASEPRA was formed to provide specialized services including provision of seeds, seedlings and grafting services. Cooperatives have also been supported since 2007 (CATIE PCC) to manage budwood gardens and produce plants for distribution to farmers. Most associated farmers get their plants from their cooperative. Based on a 2016 regulation, SENASA is working to register genetic material providers for cacao. Twenty-two budwood gardens were identified; only FHIA has completed the process documenting the origin of the materials. Fourteen nurseries have been certified. Despite increasing awareness of the importance of grafted plants, many farmers, not supported by development initiatives, continue to plant by seeds given the significantly lower cost (1/3 of the cost) Support services include a network of trained grafters, budwood gardens registered by SENASA, and certification of best practices/competencies for nurseries, nursery managers and grafters. Different 87 financial models are available to help farmers purchase plants and the research on characterization and intercompatibility of genetic materials and polyclonal arrangements help guide selection of materials. General as well as cacao specific regulations exist to support traceability and quality in seed, budwood and seedling providers and they are starting to be applied. Figure 40 Market system for financial services for cacao in Honduras The formal financial system in Honduras does not offer financial services to cacao farmers given their characteristics and that of the crop which is little known, long term and not particularly profitable. Many cacao farmers do not have land titles that can serve as guarantees. PROCACAHO, through an agreement between FUNDER, Cajas Rurales and several financial institutions (Banrural, Atlántida, FINCA, Cooperativa Ceibeña, Chorotega), has created lines of credit in cacao. Farmers with guarantees borrow in the commercial bank while farmers with no guarantees can borrow through a Caja Rural with which they are associated. They currently have 70 million Lempiras in 2,500 active loans, an average of around $1,000. Repayment starts after 2.5 years. Credit products include establishment of new areas, maintenance costs, commercialization, even purchase of infrastructure and land. Support functions for financial services in cacao include the intermediation of FUNDER (under PROCACAHO) with different financial instruments and institutions to establish an offering of financial 88 products for the sector. Land titling is also being supported by PROCACAHO through INA, the competent entity, to be used as collateral to facilitate access to finance. Rules influencing the provision of financial services include those of second tier lenders, the law that governs financial institutions and in particular rural savings and loans cooperatives, the regulations of the PROCACAHO credit fund, and the National Financial Inclusion Strategy of the government. RELEVANT INITIATIVES IN THE SECTOR • Programa de Mejoramiento de Ingresos y Empleos para familias productoras de Cacao PROCACAHO, Café Resiliente en Centroamérica, $11.6 million, 2015-2021, FUNDER, APROCACAHO, COSUDE, Chocolats Halba: This Project is now in its second phase, and will focus on strengthening farmer organization under FENAPROCACAHO to ensure farmers’ voice in policies related to the sector; technical assistance to improve productivity, and organizational/business strengthening for cooperatives to strengthen market access and value added. This program focuses on approximately 2,000 cacao farmers in the northern region including Cortés, Atlántida and Colón in terms of impact, but the project is also aligning with and supporting the development of the sector nationally including farmer advocacy in policy and marketing relations and multi stakeholder engagement to improve chain competitiveness and benefits for small farmers. Production of organic cacao will be an important component. This has included topics of access to finance, promotion of quality and exports, even land titles and fiscal challenges. • Fortaleciendo la Cadena de Valor de Cacao de Calidad en el Departamento de Olancho, 5.4 million, 2017-2021, Helvetas, Rikolto, Chocolats Halba, EU: With funding from the EU, this project will work with farmers associated with APROSACAO to improve productivity and quality, increase cacao areas, and build sustainable production and business models for greater inclusion in the cacao value chain in Olancho. Focus will be on organic cacao and other certifications. • COAGRICSAL Chocolate plant: Cooperativa Agrícola Cafetalera San Antonio Limitada (COAGRICSAL) is a large and well-established coffee cooperative which has been slowly growing in cacao, supporting establishment of new areas with members, fermentation facilities, and most recently, 2019, have inaugurated a chocolate making plant. The infrastructures COAGRICSAL has for post-harvest processing and transformation of cacao to value added products, even for cacao tourism, is an asset to the sector. COAGRICSAL is exporting directly cacao to at least two buyers with very specific quality demands. They will also need to see how their new chocolate facility becomes sustainable financially and helps to capture value from buyers. There will be important opportunities to learn from COAGRICSAL’s experiences. They were part of the Mapa de Sabores but have not used the protocols since, and were also part of the initiative to produce small grain cacao beans for snacks and continue to export to Good King Cocoa as well. They have developed a brand and a diversity of offerings for their cocoa based products. • Various other cacao projects – Progresa/Swisscontact, PRONAGRO/USDA, PRAWANKA/AEA, CAHOVA/SOCODEVI, Chocolate para todos/Heifer, DICTA/KOLFACI, CONECTA+/MIAMBIENTE, Cacao Fino y Maderables de Honduras, FHIA, BID: Many projects are intervening in different geographical and thematic areas of the cacao value chain and it will be important to engage where possible to support a shared vision of the systemic change needed in the sector. ENTRY POINTS FOR MOCCA • NCI for cacao – Given how structured the cacao sector is currently, the level of support from donors that includes support for governance, and the recent creation of FENAPROCACAHO, there is an 89 opportunity for MOCCA to support the emerging sector governance structures. The current governance has a heavy weight of development cooperation, representation of organized farmers, especially from the north, and the private sector is Chocolats Halba. Non associated farmers, estimated to be half of cocoa farmers, other buyers, and connections with other cacao producing regions are possibly areas to strengthen. The existence of IHCAFE and associated institutions provides an opportunity for learning across sectors, despite the huge difference in scope between the two sectors. • Financial products for cacao – Funder has seemingly developed a diverse set of financial products and is successfully applying them with both commercial banks and community savings and loans associations, obviously with important incentives provided by the project. This is an interesting opportunity to understand how these different financial products work and what would be required to sustain these services post project, and begin creating the conditions to sustain that. This could also provide lessons learned for other MOCCA countries. • Strengthening research and dissemination – While FHIA is a huge asset, and has dominated the research landscape in Honduras, there is an opportunity to connect the sector (and FHIA) to additional research actors and vice versa. The level of organization, particularly the existence of SINATEC, provides a platform for prioritization of research needs, dissemination of research results, and even incorporation of new knowledge into extension programs. The current level of activity in cacao in the country offers an exciting platform and partners with whom to engage with on research, making it attractive to the research community. At the same time, the lack of awareness, access to and use of global research on cacao provides an opportunity to bring new knowledge to the table. 90 COFFEE IN HONDURAS Honduras is the sixth largest coffee exporter globally by volume and is the largest coffee producer in Central America. The vast majority of coffee is produced by small farmers. Honduras is known as an origin for large volumes of favorably priced commercial coffee. While strides have been made in improving quality, and some very good coffees are produced in Honduras, the past reputation as an unreliable quality origin remains strong, and as a result Honduran coffee is priced below the market. Productivity and overall export volumes have increased considerably over the past decade due to coordinated efforts between the government and the national coffee institute, IHCAFE, to renovate and rehabilitate an important part of national coffee area. At least 201.000 Ha had been renovated with rust resistant varieties such as Lempira and IHCAFE-90 by 2015 in a relatively quick response to the coffee leaf rust crisis. The coffee sector in Honduras is highly structured, since 2000 when the National Coffee Commission, the National Coffee Institute, and the Coffee Fund were created. The Commission is responsible for development of policy for the sector, and is presided by the Ministry of Agriculture. IHCAFE is responsible for implementing policies, particularly in technical assistance and research, and the Fondo Cafetalero invests in rural infrastructure, particularly roads, in coffee producing areas. IHCAFE is governed by representatives of farmers organizations, including cooperatives, representing approximately 90% of all coffee farmers, representatives of exporters, roasters, and intermediaries. All of these actors, including farmers, register with IHCAFE. Investments in the sector are funded through taxes and retentions on exports. One important fund is the coffee trust which is managed by IHCAFE to facilitate access to finance for farmers. All coffee farmers are expected to register with IHCAFE, and nine dollars per bag of coffee are retained from farmers payment, deposited by exporters and reimbursed to farmers unless they have outstanding debts, in which case the retentions go to debt repayment. Despite this, some farmers are not registered and do not collect their retentions. IHCAFE has done important work supporting the sector as a reference for technical information, development and dissemination of coffee varieties, promotion of quality, and advocacy for the sector within Honduras i.e. with the president’s office, and externally. Technical assistance falls short of demand due to the sheer number of coffee farmers. As a complement to the convening spaces within the institutional structure of the sector, a new platform has been established in Honduras, called the Platform for Sustainable Coffee, which has been formed under the umbrella of the Global Coffee Platform with local support from Solidaridad and Rainforest Alliance. The objectives of the sector align well with MOCCA goals. Table 15. Coffee in Honduras PRODUCTION Coffee farmers, # 100,000 Associated farmers, % 40% Area harvested, Ha 505,115 Production, MT 475,042 Global rank among producing countries 5th Yields, MT/Ha 0.940 % of area needing R&R 62% R and R potential 45+% Climate risk 17% EXPORTS Exports (green beans), MT 310,074 (100%) Exports, USD 859 million % of all export value 9% Principal markets Germany 28% USA 22% Belgium 9% Italy 7% France 5% Export Price, USD/MT 2,770 Quality 19% differentiated Certifications FTO, Organic, UTZ CONSUMPTION Imports, MT (green) 2,733 (<1%) Imports/Exports, volume 1% 91 The private sector is dominated by exporters and intermediaries. Exporters include national firms such as Compañía Hondureña del Café, the number one exporter, and as a group they are responsible for around 40% of exports; and multinational firms i.e. Olam and Neumann, who account for around 50% of exports. Both work through intermediaries to source the bulk of their coffee, with relatively little control over processing post-harvest as exporters generally buy parchment coffee in different stages of drying. Intermediaries are divided into two groups, registered and not registered. Larger intermediaries tend to be affiliated with AHICAFE, have permits to operate and retain coffee taxes on purchases from farmers. A second group are generally smaller, field-based intermediaries who are not registered and generally work as a buying agent for more formal intermediaries. Exporters are increasingly seeking to improve quality management in their chains as a way to increase price and commercial margins. Many have done this by buying directly from small groups of farmers and overseeing wet milling and drying processes, often combining certifications with these groups. Alliances with NGOs, or access to public or donor funds have been important in being able to offer the services required to establish these kinds of buying systems with small farmers. Honduran coffee is traded as other milds and got a boost when production in other origins was low, including Colombia. Major challenges in the sector include genetic material, particularly as previously resistant varieties seem to be more susceptible, access to long term financial services by smallholders, anxieties over international prices both the persistent low pricing of Honduran coffee in international markets that many consider unjustified as well as the current low price crisis, and tensions over the quality of services provided by IHCAFE for the level of funds received. Several actors expressed concern regarding the retention system and the incentives it creates along the chain for different actors to capture those retentions. Another concern is the challenges the intermediary segment of the chain pose to traceability and quality as lots are often mixed by intermediaries to improve for example a poor lot by mixing with better lot bringing down the overall quality. Some regions face major challenges for drying coffee appropriately. In recent years, a priority for the private sector has been to promote quality among producers and buyers and events such as Cup of Excellence, regional contests and local fairs have become part of the activities to promote the sector. Farmers are increasingly aware of cupping scores and interested in their use to achieve better prices, but there is still a long way to go in developing a consistent quality management system in the country that transparently rewards quality with price. Another growing concern is labor availability in rural areas. The role of intermediaries is another concern in the sector, with some considering their role to be negative, capturing margins that should go to farmers and ruining the quality of Honduran coffee, while others recognize their large contributions and valuable role in linking farmers to exporters. Intermediaries are also interested in upgrading, building out their infrastructure for processing and exporting and entering differentiated markets, following some of the large domestic exporters who got their start as intermediaries. RENOVATION AND REHABILITATION IN COFFEE IN HONDURAS Honduras coffee plantations are relatively young, as approximately 40% of area harvested has been planted in the last 15 years and efforts are ongoing (25). R&R needs in Honduras are related to older trees and the remaining impacts of the 2012 coffee leaf rust outbreak which affected approximately 25% of coffee areas. Climate change is another driver of R&R, particularly in the central region, requiring changes to varieties and associated agroforestry system (10). IHCAFE-90 and Lempira are popular varieties that were widely disseminated, but are showing susceptibility to leaf rust, potentially requiring a change to new varieties, but the alternatives are not clear, particularly as coffee breeding research at IHCAFE has been reduced over the past years, limited to dissemination of seeds for existing varieties. 92 For farmers, the major limitation to renovation is the ability to tolerate income losses in between removal of older plants and new production. Thus, renovation is more challenging for smaller farmers with less income. Farmers perceive little support from municipal and the central government, and many do not feel much support from IHCAFE nor do they understand completely the retention system and benefits they should receive as coffee farmers. Renovation tends to happen by lot, and where financing and technical assistance is available, farmers may renovate up to 50% of their area in a single year. Labor availability is another consideration, in addition to finance, for renovation decisions. Rehabilitation or ongoing maintenance of plantations is a major challenge as farmers invest when they have resources to do so, producing cycles of underinvestment with low prices, followed by poor harvests the following year due to lack of investment in fertilizers, pruning, etc. Younger plantations that tend to be more productive can go unattended, then farmers struggle to recover the plantations when yields are heavily affected. In the current low-price scenario, combined with the political and economic tensions in the country as a whole, rural areas have seen farmers migrate, abandoning farms. Fertilizer companies, cooperatives, and NGOs working in the sector anticipate a large reduction in investments in coffee farms this year which may accumulate as rehabilitation needs in the future. Technical information on renovation and rehabilitation techniques is well documented in Honduras based on local conditions by IHCAFE. It is even a reference for other countries in the region. But the information could be better disseminated to farmers as extension agents observe that farmers tend to use traditional management approaches, with insufficient pruning as compared to what is recommended in technical guidelines. CORE MARKET SYSTEM FOR COFFEE IN HONDURAS Over 75% of Honduran coffee is exported as conventional coffee, produced largely by small farmers (91% of farmers). Conventional coffee is exported by domestic and multinational exporters, who buy mostly from registered intermediaries who buy from local intermediaries or directly from farmers. Coffee is wet milled on farm or in the community with a farmer who has a wet mill and either sells the service or acts as an intermediary, buying the coffee. Coffee may change hands several times before reaching an exporter and intermediaries may provide milling, drying and transport services along the way. Larger farmers also tend to sell through intermediaries, and often intermediaries themselves are larger farmers. A second channel for conventional coffee, largely supported by alliances between exporters and NGOs, is through direct buying by exporters from loosely organized groups of farmers who coordinate post-harvest practices and pick up dates and volumes with exporters. This channel has emerged in response to the concern of NGOs for farmers receiving a better price for their coffee, cutting intermediaries margins out of the chain, and on the other hand out of the interest of exporters in direct sourcing as a way to access better quality coffee that they can market at better margins. This is a growing model and often builds on existing community structures such as rural credit cooperatives (cajas rurales). There are important dynamics in how the market system works in different regions of the country, for example west vs south east, that are worth examining. In the west there is much more engagement of international buyers, better quality, and less dominance of intermediaries as compared to the southeastern region. Differentiated coffee represents 25% of the Honduran market, mostly certified coffee, predominately UTZ, Rainforest, Organic and Fairtrade. This segment of the market is largely supplied by large producer cooperatives, with Café Orgánico Marcala (COMSA) being an example. Cooperatives buy from member farmers and tend to coordinate post-harvest processing to achieve quality standards demanded by differentiated markets. These cooperatives increasingly use cupping scores as a price differentiation tool and some are sourcing from nonmember farmers, acting as anchor firms. Some certified coffee is also 93 sourced through exporters from cooperatives. Certified coffee in Honduras has steadily grown over the past several years and has served as an instrument to introduce standards and traceability into the system to counteract the negative quality reputation and low price the sector has. The domestic market is relatively small and sourced largely by large farmers and intermediaries. There is a small but growing demand for quality coffee through coffee shops, with Expresso Americano leading that movement. Honduras as several regulations surrounding buying and selling of coffee, largely centered around improving transparency in the retentions system. Support services are relatively well-developed including inputs, finance, representation and advocacy for the sector, technical assistance, research even rural infrastructure, though how well these serve small farmers is variable. Inputs is particularly well developed in the sector with coffee specific products, even region-specific coffee formulations, large involvement of coffee farmers organizations in inputs procurement, and several examples of creative models for facilitating access to inputs on credit or using inputs to ensure credit is appropriately invested, triangulations with buyers, financial institutions, inputs providers, cooperatives and every combination thereof. Coffee is an important market for inputs providers and they orient themselves to the sector, and therefore are important allies. 94 Figure 41 Core market system for coffee in Honduras 95 KEY SUPPORTING MARKET SYSTEMS Figure 42 Market system for technical assistance for coffee in Honduras Technical assistance for coffee farmers in Honduras is largely provided through donor funded projects including development banks, particularly in the western region, implemented by NGOs. TA is also provided by IHCAFE and funded by coffee taxes. While IHCAFE offers TA to all affiliates, the reality is that their capacity is limited. IHCAFE has tried to fill this gap by developing technical materials, training TA providers, collaborating with NGOs, and more recently exploring ICT tools to reach larger audiences. TA is also provided by exporters and cooperatives through commercial margins, certification premiums, and donor funds. Some exporters have established affiliates to provide TA (Coffee Planet, CoHONDUCAFE). The focus of TA is quality and productivity. There is strong technical capacity and infrastructure in Honduras to support TA to farmers, but many farmers still lack access. Support functions include coffee taxes to ensure stable budget for TA through IHCAFE. Research is an important support function connected to extension through IHCAFE. Academic and professional training is well developed (universities, IHCAFE, ESCAFE, NGOs). TA providers have strong professional networks from which to source information. Road infrastructure also supports TA provision. Farmer organizations, including rural savings and loans cooperatives, facilitate TA provision by facilitating access to farmers. 96 Regulations include those related to the mandate of IHCAFE, but more important are coffee manuals and methodologies as well as certification standards that influence technical content of TA provided. FFS is a common methodology with NGOs, but exporters and some NGOs also use proprietary content and methods as part of their business model vis a vis clients. Figure 43 Market system for research in Honduras Research is carried out by IHCAFE, universities, NGOs, international research centers, exporters and inputs suppliers. Funding comes from IHCAFE, public universities, private sector, and donors. IHCAFE has infrastructure for research, but has a hard time retaining researchers. Research is focused on agronomy, quality/post-harvest, climate, soil, fertility, and breeding. IHCAFE is well connected with international initiatives and is a clear focal point for coffee research in Honduras, though it is unclear how systematically research outputs are incorporated into TA content. UNAH does research on breeding techniques but long term research is limited; Zamorano on coffee processing; WCR on varieties and agronomy; CIRAD on epidemiology and agroforestry with CATIE also looking at R&R; CIAT has done research on climate change together with HRNS who also has research plots in the Trifinio region; CRS works on soil and water conservation; and inputs suppliers and exporters work on fertility. Quite a bit of research is happening that could be better integrated into a national, even regional research agenda. Support functions for research in Honduras include international research collaborations to access scientific expertise. CIRAD, WCR and CATIE are important long-term collaborations. The PROMECAFE 97 network is important for collaboration with peer organizations, and international networks. The IHCAFE- UNAH agreement helped access breeding capacity for work on coffee. The sector is not regulated in any particular way, but the coffee taxes establish funding mechanisms for research under IHCAFE, and sector priorities and pressure from coffee constituents influence to some degree the research agenda. Figure 44 Market system for genetic material for coffee in Honduras Genetic material - IHCAFE’s capacity to produce seed at commercial levels is limited. Most seed is sourced through informal networks or farmers own selection. Most farmers produce their own plants, working collectively where there are donor funds to do so (i.e. through a cooperative). Many small nurseries are farmers who have specialized in the production of plants who source seeds from their own farms, other farms, IHCAFE, and even from other countries. These nurseries sell to medium sized farmers and NGOs who distribute plants to farmers. Technical assistance consistently includes content on producing coffee seedlings. Three main support functions contribute to the provision of genetic materials to farmers. The first is the availability of improved genetic material, which includes the introduction of new materials from other countries as well as the breeding pipeline of IHCAFE. The second is formal and informal seed producers, including the introduction of seeds from other countries that ensure availability of seeds for farmers and 98 nurseries. Finally, capacity building for seed and seedling production through training, support, as well as regulations and manuals that specify best practices. IHCAFE, CERTISEM and SENASA all play roles in certifying seed, seed producers and nurseries under national seed regulations and policies which provide for the certification of seeds, nurseries and nursery managers. Despite the existing regulation, the market for certified seeds or seedlings remains small. Figure 45 Market system for financial services for coffee in Honduras Financial services are provided by commercial financial institutions, microfinance (MFIs), cajas rurales, cooperatives, exporters, inputs suppliers, and intermediaries. Commercial banks mainly reach farmers via loans to exporters and intermediaries who provide short term loans to farmers for harvest costs, though some, like Banco de Occidente have sizeable coffee portfolios. MFIs channel funds from social lenders for short term loans to farmers (two years). Regulated MFIs can access members savings which can be used to offer credit for R&R. Other lenders active in the coffee sector include ODEF, BANPROVI, CACIL, BANCAFE, PILARH, y BANRURAL. The number of FIs is notable in a coffee town in Honduras. Cajas rurales play an important role for smaller farmers by intermediating funds, generally providing smaller loans. Cooperatives, with funds from social impact investors or own funds, and inputs providers with loans from banks are also important sources of credit. IHCAFE has been instrumental in facilitating access to finance with the price retentions and the trusts, as well as negotiating support with the government. There are many creative models for financing coffee in Honduras including alliances between inputs 99 suppliers and commercial banks using purchase data to evaluate loans. FUNDER is an NGO with extensive experience in financial service, especially with cajas rurales and private sector actors. Support services include TA, inputs, second tier lenders and rural financial institutions/infrastructure. REDMICROH plays an important role in knowledge management within the sector and assessing and lobbying for sector priorities. Will be important to watch the effects of 2019 low prices. Several regulations are important, in particular those that limit loan terms as this limits their ability to lend for R&R (within REDMICROH, most funders term limits are 3 years so R&R is impossible). RELEVANT INITIATIVES IN THE SECTOR • Neumann Foundation/International Coffee Partners, 2014 to present, multiple initiatives funded by private sector and donors, approx. 3000 farmers: The Neumann coffee group, together with other partners under the ICP, has been working in the Trifinio region of Western Honduras with strong private sector engagement. The focus of this work has been on building climate resilience along the value chain, particularly at production by evaluating and disseminating climate smart production practices, and promoting decision-making based on evidence such as soil analyses or climate information to guide improved productivity. These initiatives have also supported direct marketing, quality improvement, and work with youth, and have been coordinated with farmers organizations. This work has included the USAID funded Alliance for Resilient Coffee, the Neumann Foundations Coffee and Climate initiative, Generaciones, as well as the ICP initiative and partnerships with financial institutions and research centers. • Alliance for the Dry Corridor, USAID and GAFSP, 2015-2020, $70million: Alliance for the Dry Corridor is a multi-donor initiative to improve economic opportunities for rural communities in western Honduras where coffee is an important livelihood strategy. Several projects have been funded with important investments in coffee and implemented by a range of NGOs including FINTRAC, SwissContact and CARE, among others under PROSASUR and ACCESO projects, both with important investment in coffee productivity, infrastructure, quality and market access. • CoHonducafe Coffee Alliance, USAID, 2018-2022, $4.3 million: Honducafé, the largest coffee exporter in Honduras will partner with JDE, one of the largest coffee brokers globally, to strengthen capacity for private sector provision of technical assistance to farmers in their supply chain. • TechnoServe MAS+, USDA, 2017-2022, $16million: TechnoServe is on the third five-year phase of a 15-year presence in the coffee sector in Honduras with USDA funding. The accumulated knowledge and networks in the sector are invaluable to the success of MOCCA. The current phase will reach 22,000 coffee farmers in the southern part of the country. The project goal of increasing productivity, plus the approach focused on TA, farmer organizations, market access, financing, weather resilient solutions are similar to that of MOCCA such that lessons learned from MAS can inform MOCCA strategy in Honduras and synergies can be created across the two efforts. • Other relevant initiatives include SwissContact Progresa, EU, 2017-2019; and CARE PROLEMPA, GAC, 2017-2022, $12million; Sustainable Coffee Platform Honduras, Global Coffee Platform/Solidaridad/Rainforest Alliance. ENTRY POINTS FOR MOCCA • Improving base price for Honduran coffee – Honduras has been classified as a low-quality origin, and so the base price for negotiation starts low, despite efforts to improve quality and claims that there 100 is no objective evidence to support this practice by buyers. This base price affects most other prices as they are generally established by a plus above market price. The lack of transparency, or different interpretations of the reasons for this pricing generate certain disincentives in the sector to invest in improving quality if no improvement in price is seen. Developing a collective understanding of how the Honduras price is established and what can be done collectively to improve that price could provide a systems entry point for MOCCA that may result in interventions strengthen promotion of Honduran coffee internationally, improvement of quality management and evaluation systems internally, among others. Internally there is also a sense of lack of transparency in how price is determined and a lack of objectivity or consistency in cupping evaluations that generate distrust, especially for farmers who are scored low. A shift in this base price would have a sector wide impact, as well as improving incentives for quality. Possible partners: IHCAFE, AHDECAFE, Volcafé, Honduran Coffee Quality Institute, large cooperatives. • Strengthening the technical role of IHCAFE – While IHCAFE receives and manages funds from farmers (through export taxes) to provide technical inputs to the sector including research, training and technical assistance, their current model and resources fall short of the demands of over 100,000 coffee farmers. Investments by others in the sector, particularly NGOs with donor funds, and private sector with commercial funds are sizeable, rivaling IHCAFE in numbers of technicians, farmers attended, and benefits provided. There is room to improve how IHCAFE engages with and coordinates these different efforts towards a national strategy, providing technical oversight and a favorable operating environment. IHCAFE should better structure their offering and support to other TA providers, extending in this way their reach to farmers. This needs to be balanced with some level of direct engagement or visibility to farmers who consider they are paying for IHCAFE services. An example in the case of genetic material would be to focus on providing seed for seed producers and supporting the efforts of seed suppliers and nurseries instead of trying to serve the direct needs of farmers for genetic material. Coffee institutes in other countries will be useful references. Possible partners: IHCAFE and affiliated associations, CRS, SwissContact, CONACAFE, PROMECAFE. • Private sector models for upgrading commercial relationships with small farmers – there are several interesting experiences in commercial upgrading with national and international exporters in Honduras that offer interesting opportunities for learning what works, with what kinds of incentives, to transfer what kinds of benefits, and what are the business models that can ensure these benefits long term. These include Volcafé, Honducafé, Neumann, COMSA, OLAM, among others. This could be a learning opportunity to share out across MOCCA countries. Possible partners: Volcafé, Honducafé, Coffee Planet, Neumann, GMCR. • Intermediaries and quality – Given the large role intermediaries play in sourcing coffee for exporters, in providing services to farmers, in the final quality of the coffee exporters receive, and the level of organization and formalization in Honduras, there is an interesting opportunity to explore behavior change incentives for intermediaries towards improved management of quality and traceability as well as towards improved services to farmers. The IDH study on the potential for intermediaries to contribute to sustainability in coffee value chains may be an interesting reference to inform thinking in Honduras, though Honduras is not part of the study. 101 Nicaragua CACAO IN NICARAGUA Nicaragua’s cacao is approximately 65% washed (unfermented) cacao for the Central American market and 35% fermented cacao for export, mostly to Germany. Total production volumes are just 3% of Ecuador’s production, making the country virtually irrelevant for cacao markets globally. Yet innovations in quality and flavor and the establishment of more than four large (2,000+ Ha) farms over the past 6 years have put Nicaragua on the map. Despite low productivity, innovations such as Ingemann’s (previously Xoco) fine flavor cacaos based on carefully selected clones as well as the work of some cooperatives in partnership with buyers and experts to improve quality management from harvest through drying has led to Nicaragua winning several international Cocoa of Excellence and International Chocolate Award prizes, generating interest among the fine and flavor chocolate makers. The establishment of large farms by Ritter Sport, Bean and Company, and Cacao Oro starting in 2014 have also called attention to Nicaragua as an origin that will soon have more interesting volumes to offer, in addition to quality. Negative impacts of climate change in the coffee sector, along with studies that showed in 2012 declining suitability for coffee in many areas of the country have also driven expansion of cacao areas and entry of new players, namely strong coffee cooperatives like SOPPEXCCA who bring market skills from the coffee sector (exports, quality management, differentiated markets) to the cacao sector. Areas harvested are projected to double and exports to triple between 2017 to 2022 (26). Since 2010, the government of Nicaragua has given increasing attention and support to the cacao sector Table 16. Nicaragua Facts and Figures Population (rural) 6,2 million (42% rural) Farmers 261,321 GDP por capita 5,321 USD HDI Rank 124 (medium) Poverty (rural) 25% (50%) Table 17. Cacao in Nicaragua PRODUCTION Cacao farmers, # 11,000 Associated farmers % 40-50% Area harvested, Ha 9,907 Production, MT 6,600 Global rank among producing countries 25th Yields, MT/Ha 0.666 Climate risk 12% EXPORTS Exports, MT (beans) 1,872 (100%) Exports, U$ 5.2 million % of all export value 0.1 Principal markets Guatemala 49% Germany 28% El Salvador 20% USA 2% Denmark 1% Export Price Beans (USD/MT) 2,765 Quality (ICCO Annex classification) 100% fine and flavor Certifications UTZ, Organic, FT CONSUMPTION Imports, MT (beans) 166 (0%) Imports as a percent of exports 9% 102 starting with a policy developed in 2012, joining of the ICCO in 2013, soliciting inclusion in the ICCO list of fine and flavor cacao origins in 2016, and reactivating the governments involvement in research and extension with large projects funded by Swiss Development Cooperation (SDC) and by IFAD (after a long absence following the decline of cacao production after the 1998 Hurricane Mitch, monilial infestation and low prices). In January 2018, the government began a consultative process to develop a national strategy for the sector together with the private sector. Dialogue has since been suspended but the government continues to develop the strategy and to give priority to cacao in agriculture sector investments (for example it figures strongly in the current U$75million Green Climate Fund proposal under development). Ritter has been the dominant private sector actor for the past two decades, topping the list of exporters for cacao. Ritter is largely responsible for the strong and high-quality fermented cacao sector, having supported over the years numerous cooperatives to implement infrastructure and fermentation protocols for cacao. Ritter has also supported farmers to produce certified cacao, including organic, UTZ and FLO and consistently paid above market prices for Nicaraguan fermented cacao. Over the past 10 years, Ingemann, a Danish firm, as well as several cooperatives (CACAONICA, La Campesina) have emerged and begun exporting themselves, and Ecom has made important investments in the sector in order to grow their operations in cacao in Nicaragua. Prices within Nicaragua have been higher than international market prices due to the strong demand for Nicaraguan cacao in Central America, as well as the high prices Ritter pays for cacao. This, combined with relatively low and slow growing volumes has made it difficult for others to enter the market and compete. A few large intermediaries also move volumes of cacao to buyers from El Salvador and Guatemala, out of the wholesale markets in Matagalpa, a major production zone. There have been several efforts to create a national coordinating entity for the sector. A national cacao roundtable functioned until around 2012, but without farmer representation. Cámara Nicaragüense de Cacaoteros (CANICACAO), representing cacao farmer organizations, was formed around 2016 with heavy support from NGOs working in the sector, but it became inactive when funding for staffing ran out in 2018. Asociación de Productores y Exportadores de Nicaragua (APEN), established in 2015 a Sectoral Commission for Cacao with diverse value chain actors to represent the sector and to promote dialogue and consensus around policies and initiatives to support the sector. This platform has been very active with broad participation from actors across the sector (except for public sector after 2018 crisis). A national entity that represents cacao farmers and their interests remains a gap in the system in general. Current trends and concerns in the sector include issues related to productivity, profitability, genetic material and the structure of the market. Yields in Nicaragua are relatively low, largely related to low plant densities and high numbers of un productive plants in cacao plantations that can be linked to the use of seeds instead of grafting to establish new trees. There is growing awareness among the development community of the importance of genetic material selection for long term productivity of cacao plantations and increasingly more organized efforts to establish suppliers of verifiable genetic material. The major obstacle is having a certificate of origin to request certification. As almost no one in the country has this for either cacao or coffee, Instituto de Protección y Sanidad Agropecuaria (IPSA) is working to provide alternatives. CATIE supported introduction and establishment of clonal gardens with registered international clones before 2012 and work is being done to recover these investments. Profitability is a major concern, particularly as most cacao farmers in Nicaragua farm other crops first, so cacao must compete favorably if they are to specialize. Evidence is increasingly showing that without income from associated agroforestry species or other on farm income, cacao becomes unprofitable, so much emphasis recently has been on the associated cropping systems with cacao. Market diversification 103 beyond Ritter, as well as how the structure of the market may change as the larger plantations come online are important concerns as is the impact recent fiscal reforms are having on the sector particularly through increases in the cost of inputs and taxes on cooperatives. Finally, another concern is the need for shared governance in a time when the political context makes it difficult for different sectors to come to the table together. RENOVATION AND REHABILITATION IN CACAO IN NICARAGUA R&R is of high importance in the sector, in recognition of the low yields, low plant density, and low number of productive plants. Cacao has been heavily promoted over the past decade through a series of investments by the US, German and Swiss governments but the resulting plantations are far from their productive potential. Extension agents consider that only 20% of farmers implement R&R practices and the reasons are a mix of lack of investment funds, priority in other crops, and lack of knowledge. Greater understanding of the importance of genetic compatibility among trees for yields is just beginning to disseminate widely and there are still strong debates about whether propagation should be by seed or grafting with arguments on both sides. Similarly, there are still debates around what kind of material should be planted including whether the country should focus on flavor or should promote CCN51. Climate adaptation is a growing concern in the sector as well as a growing opportunity to attract funds into the sector through diverse kinds of climate financing. This is relevant to R&R as the focus has been on plantation design, associated trees, and nutrition, all relevant to R&R. WCF, Rikolto, APEN, CIAT and others have been collaborating in development of adaptation strategies and practices for the sector and government institutions, including MARENA, increasingly frame their future projects and funding opportunities for the sector in terms of climate. The regulation exists to certify genetic material, but to date no one has used it as no varieties, not even the one recently released by INTA, have been registered with IPSA. The CATIE PCC project built capacity and infrastructure in terms of clonal gardens and grafting with key farmer organizations who still manage those genetic banks today. CORE MARKET SYSTEM FOR CACAO IN NICARAGUA Just over half of Nicaraguan cacao is produced by small farmers and washed, before selling to intermediaries who eventually sell it to intermediaries in El Salvador or Guatemala. There is a growing domestic processing sector. On the one hand, you have chocolate makers like Momotombo buying fine flavor cacao for finished chocolates, and on the other hand you have processors like Café Soluble who process cacao for drinks and other processed foods. A second major flow is fermented certified cacao that is purchased by Ritter Sport for export to Germany. This cacao is purchased from cooperatives with a long history of collaboration where Ritter has provided support and technical assistance for post-harvest and for certifications. Cooperatives buy cacao from their members with the pulp and collectively ferment and dry the cacao to Ritter specifications. A third flow is the fine flavor cacao produced by farmers supplying Ingemann, or by farmer cooperatives who are exporting to fine chocolate makers. It is this segment that has gained attention in the past few years due to several international recognitions and buyer interest from these small fine flavor buyers has increased. The sector is not heavily regulated, with much of the rules coming from a. buyers i.e. Ritter and Guanuca; b. certifiers, and c. market quality standards, which vary by buyer. The major support functions that are present include technical assistance, largely provided over the past decade by donor funds implemented 104 by NGOs in collaboration with private sector, promotion of Nicaraguan cacao internationally through government and NGO efforts; and sector knowledge management through national cacao forums and other sector wide events. Large plantations and projects delivering seedlings have generated a demand for mass production of genetic material. Ecom particularly, as well as Transplanta, have driven innovation in technologies for mass multiplication of genetic materials for planting in the laboratory and through innovative grafting methods. Inputs and finance are incipient support systems, along with research. 105 Figure 46 Core market system for cacao in Nicaragua 106 KEY SUPPORTING MARKET SYSTEMS Figure 47 Market system for technical assistance for cacao in Nicaragua Technical assistance is provided by a mix of extension agents and lead farmers hired by government, NGOs, cooperatives and buyers. TA is provided in groups and FFS, demonstration plots, and Cacao Móvil are important technical and methodological inputs. Government TA is funded through IFAD loans and, until recently, by donors (COSUDE). NGOs and cooperatives (many) have been funded by donors and a few through commercial margins/certifications. Buyers (Ritter Sport, Ingemann, Ecom) provide TA as part of their commercial business, for certifications or through donors including multilateral banks. R&R content focuses around assessment and replacement of unproductive plants but there is still difference of opinion around appropriate propagation methods, genetic material, and agroforestry designs. Post- harvest, farm diagnostics and increasingly climate (Ingemann, WCF, Rikolto, CIAT) are important topics. Most TA providers are trained on the job, on the internet or through courses (formal education for agronomists does not include much on cacao). Several diploma courses have been offered through INATEC as well as CATIE/national universities. Technical materials and tools are also available to support TA. Almost all TA providers in our focus group work in coffee and cacao. Funding for TA made available by donors has been an important support function as well as some research that has fed into TA. 107 As UTZ certification has expanded, those standards have influenced TA content in the sector. TA providers have also had to adapt content based on strong local traditions around cacao production, particularly the dominance of production from seed in some areas. Figure 48 Market system for research in cacao in Nicaragua Research in Nicaragua in cacao is largely limited to INTA’s work on characterization of genetic material. There is some work on agroforestry systems, climate change and post-harvest processing. There are few scientists in the country working currently on cacao research, though there are good connections to international research networks. Ecom in collaboration with CIRAD has done work on propagation methods, which is now in dissemination phase. Ingemann has ongoing work on biochemical processes in fermentation with the University of Copenhagen. UNA has some MSc theses on agroecology and soils. Rikolto, WCF and CIAT are collaborating on research related to climate change. Nicafrance, affiliated with Ecom and CIRAD, is interested in beginning research in cacao. Ritter and others with large plantations are also interested in doing research on their farms to improve agronomic practices with a particular interest in fertility management. Research is disseminated to next users largely through public events, visits, publications and the internet, but not well connected to TA. Not all research is public. 108 Support functions include infrastructure (available germplasm, existing farmer plots and large farms, laboratories at universities and private sector), small funds for research (APEN, Rikolto, WCF), and international collaborations (CIRAD, ICCO, CATIE, others). Coordination and dissemination functions are missing. There are not particular rules that seem to influence cacao research in Nicaragua. Figure 49 Market system for genetic material for cacao in Nicaragua Genetic material - Seeds for cacao are provided by INTA at El Recreo, by farmers from their own farms or from supertrees found in different production regions, and by a growing number of other sources. Budwood is produced on at least ten clonal gardens, including: INTA’s large collection at El Rama; gardens established by cooperatives with support from CATIE in the late 2000s; additional gardens established by cooperatives with support from many sources; and buyers who have established their own clonal gardens for propagation for their own farms and commercial production. Seedlings are produced by farmers, cooperatives, and large commercial nurseries (Ecom/EXPASA and Mercon/Transplanta) linked to buyers. Initially these served internal demands of cooperatives or the companies, but now they supply large plantations, government projects, as well as smaller development projects. While many farmers, particularly in traditional cacao producing areas, continue to plant cacao from seed, the use of international clones and propagation by grafting is increasing, along with the offer of good quality seedlings. Most small farmers access high quality seedlings through cooperatives or NGOs subsidized by development funds. 109 The identification of elite trees in different regions, the geographical spread of clonal gardens, techniques for propagation of cacao plants at small and large scale, research on varieties by INTA, as well as distribution networks among providers all support availability of genetic material for farmers. A certification process for propagation of cacao genetic material was developed in 2014 but has yet to be applied given the absence of certificates of origin for most genetic material already in the country, and the lack of registered varieties. INTA is the only certified supplier of genetic material for cacao. Figure 50 Market system for financial services for cacao in Nicaragua Financial services for cacao farmers in Nicaragua are limited and most farmers do not have access to credit for cacao. A few microfinance institutions (FDL, FUNDESER) have small cacao portfolios, based on experience in the coffee sector. Cooperatives such as SOPPEXCCA have financial products for cacao including new areas and will provide lessons for R&R financing in cacao. Commercial banks (LaFise) are interested but do not have enough information to build out products and their requirements will likely exclude small farmers. Buyers and intermediaries do not seem to be an important source of credit for cacao. Social lenders such as Root Capital are just beginning to support cacao cooperatives with commercial credit, but cacao cooperatives are much less credit-ready than coffee cooperatives. Funding 110 for credit comes from second tier government bank Banco Produzcamos, development banks (IDB), and other second tier lenders for cooperatives or MFIs. Support services available for coffee can be leveraged for cacao. Climate funds provide a preferential window for cacao and IDB and BCIE are already working on proposals to leverage these funds for financial services in cacao. Financial services to cooperatives, including capacity building to manage credit is an important support service. In the current context, cooperatives are better positioned to reach their members with financial services than commercial banks or microfinance institutions. This is particularly true given the sociopolitical situation of the country has raised risk ratings, and the low coffee prices are having a negative impact on the supply of credit to the agricultural sector. Regulations that affect the terms of financial services including national laws as well as rules that govern interest rates and terms of loans to MFIs, cooperatives, and climate funds affect services for farmers. RELEVANT INITIATIVES IN THE SECTOR • PROCACAO, 2015-2021, approx. U$6million, ONUDI, MEFCCA, APENN: This project has been supporting renovation and establishment of cacao plantations, technical assistance and credit in the RACCN mining triangle. Organización de las Naciones Unidas para el Desarrollo Industrial (ONUDI) leads implementation in the mining triangle, in coordination with Ministerio de la Economía Familiar, Comunitaria, Cooperativa y Asociativa (MEFCCA) and farmer cooperatives in the region. APENN implements a component of the project to create a sector wide national commission to bring different actors together to prioritize policies and programs for the sector and improve Nicaragua’s competitiveness. • ADAPTA, 2016-2020, $2.6 million, INGEMANN, ChristianAid, Humboldt, BID, NDF: This project seeks to build climate resilience in the cocoa sector by collecting and analyzing information on climate and its effects on cacao plantations in different agroclimatic zones in order to generate improved recommendations and decision support information for cacao farmers. • Bioclima, 2020-2027, $100 million grant and loan, FAO, MARENA, BCIE, Green Climate Fund: This approved concept note proposes to contribute to meeting Nicaragua’s climate commitments by slowing deforestation around major natural reserves on the Caribbean side of Nicaragua. The project proposes to do so, in part, by supporting the development of profitable cacao agroforestry production systems in the buffer zones of the reserves as a way to stabilize the population, improve livelihoods, and reduce the need for illegal deforestation. ENTRY POINTS FOR MOCCA • Climate resilient cacao – Take advantage of the diversity of activities centered around climate resilience and cacao, including R&R, to establish a research agenda and dissemination network. This could include Ingemann investments under ADAPTA in improving weather information for cocoa farmers, WCF/Rikolto/CIAT work on climate impacts and adaptation practices, and Rikolto/WCF work with local partners to monitor demo plots of cacao agroforestry systems with novel system designs to generate evidence for different production systems including productivity and profitability to better inform new investments. Possible partners: Ingemann/Adapta, WCF, Rikolto, CIAT, cooperatives. • Consolidating Nicaragua’s position as a fine and flavor origin – Great strides have been made in demonstrating that Nicaraguan cooperatives are capable of producing very high-quality cacaos of different flavor profiles (see results of recent Cocoa of Excellence and International Chocolate Awards). Ritter Sport aside, the volumes of Nicaraguan cacao that is sold at a price differential is very 111 low. As the larger plantations come on board over the next few years and dominate exports from Nicaragua, there is an opportunity and a challenge. The opportunity is to use this momentum to interest buyers who come for those volumes but may also pick up some of the smaller more differentiated cacaos from small farmers as well or to use the larger plantations as a vehicle for market access. The challenge is that their production will quickly redefine Nicaragua’s reputation as a cacao exporting country and smaller farmers and cooperatives will become much smaller players in that landscape. There are solid lessons learned and networks in the industry established by LWR, Ingemann, Ritter, and associated cooperatives about quality management and differentiated markets, but capacity still needs to be built for taking this to the scale required to have a long term beneficial impact on the small holder sector as a whole, as opposed to one off purchases after a prize is won. LWR’s proposed quality standards work under MOCCA with Bioversity is a part of this. The Cocoa Flavor Map is another important contribution which needs to be more widely shared within the sector. Sector governance and small farmer representation – As larger plantations come to define the sector in terms of export volumes, it will be important to establish a strong sector governance that ensures regulations that benefit small and large cacao farmers, and not one at the expense of the other. Working with APEN to strengthen the National Cacao Commission and integrating the larger plantations into this will be one important strategy. The strong network of cooperatives throughout the country could serve as the base to construct representation within the sector. 112 COFFEE IN NICARAGUA Nicaragua is a coffee origin known for small farmers and the activism of its cooperatives, but without a clear quality distinction as an origin, like for example Guatemala. Nicaragua is similar in flavor to other countries in the region, and is a cheap source of coffee for blends. There is a large diversity of production conditions and potential flavors, but these micro regions or flavor profiles have not been well developed. Since the coffee leaf rust crisis in 2012 and 2013, exporters have heavily promoted hybrids and other resistant varieties for renovation efforts. Others are promoting and testing a huge diversity of varieties including ones with good flavor profiles. Renovation efforts have not been coordinated, resulting in a huge diversity of varieties being planted, changing flavor profiles. This, in addition to the current political situation has made roasters shy away from Nicaragua as an origin, particularly with the lack of any coordinated effort within the country to direct the sector out of crisis. Around the year 2000, Unión Nicaragüense de Cafetaleros (UNICAFE), the Nicaraguan coffee institute, was dissolved and nothing took its place. On paper INTA was to fill the void but with no technical capacity or research infrastructure in coffee to work with. In 2012 with the coffee leaf rust crisis, the government responded to pressure stepping up work by INTA and other public institutions in coffee and creating a National Plan to Transform the Coffee Sector and creating CONATRADEC to administer a trust funded by an export tax, using interest to implement activities and using the trust funds as guarantees to leverage access to finance for the sector. To date the impacts of the fund have been minimal and are a source of contention. IPSA has been active over the past several years in monitoring pests and diseases in coffee to provide an early warning system and in developing a system for certified seed and nurseries for coffee. INTA has stepped up research on varietal trials, pest control and agronomic practices. MIFIC contributes through export statistics and facilitation. Public institutions engaged in the sector come together in a National Coffee working group and have been developing a national coffee sector plan that still must be consulted widely within the sector. The private sector in coffee in Nicaragua is dominated by Mercon, Ecom and more recently Olam who move the bulk of commercial coffee, with the support of a large network of intermediaries from field to large city. Cooperatives are also important exporters, exporting much of the certified coffee. Finally, there are a number of private exporters that export coffee either for importers in consumption countries or for larger farmers who seek to direct export their coffee. Coffee is sold almost exclusively in parchment, with most farmers wet milling on farm. There is also an important processing facility for instant coffee Table 18. Coffee in Nicaragua PRODUCTION Coffee farmers, # 45,000 Associated farmers, % 20% Area harvested, Ha 146,545 Production, MT 128,111 Global rank among producing countries 12th Yields, MT/Ha 0.874 % of area needing R&R 44% R and R potential 35% Climate risk 9% EXPORTS Exports (green beans), MT 122,198(97%) Exports, USD 397 million % of all export value 8% Principal markets USA 51% Venezuela 7% Belgium 6% Germany 5% Canada 5% Export Price (USD/MT) 3,280 Quality nd Certifications UTZ/RFA, Organic, FT CONSUMPTION Imports, MT, (green) 1,292 (9%) Imports/Exports, volume 1% 113 that also sells services to firms like Nestle for the Central America coffee, and a small robusta coffee initiative in lower altitude areas of the country. The coffee sector in Nicaragua lacks a strong coordination function. CONATRADEC was created with representation of different sector groups, but private sector has abandoned the Commission and others are ambivalent. Asociación de Cafés Especiales de Nicaragua (ACEN) coordinates among actors around specialty coffee, but represents larger farmers, while EXCAN brings together exporters. Asociación de Cooperativas de Pequeños Productores de Café de Nicaragua (CAFENICA) brings together a large part of organized farmers, which is still a minority of all coffee farmers and does advocacy on behalf of small farmers and cooperatives in international forums i.e. with fair trade, Specialty Coffee Association of America (SCAA), and others. Exporters operate individually, and the different sector representatives do not come together regularly to dialogue and coordinate sector development. In 2017, Rikolto, together with UTZ and ANCN, brought together over 25 organizations including exporters and NGOs working in the sector to form NICAFES, the Nicaraguan Platform for Sustainable Coffee as a space for precompetitive exchange and collaboration in support of the sustainable development of the sector. Major concerns within the sector revolve around recent political crisis, associated policy changes, and the effect on investment and cooperation with the sector. Inputs prices have increased as a result of fiscal reforms. Financial services have been cut off given general political and economic uncertainty in the country, translating into financial risk for investors. This combined with low prices over the past few years when the sector was trying to emerge from the leaf rust crisis, culminating in lows in coffee prices in 2019 that some compared with the coffee price crisis of 2001 that had coffee families take to the streets to demand support to cover basic consumption needs. Other issues of concern in the sector from before the political and price crisis include the lack of coordinated efforts to position Nicaraguan coffee in international markets, particularly specialty markets, the lack of scientific research since the dissolution of UNICAFE in the late 2000s leaving the sector behind technologically as compared to neighboring countries, and the timid or slow movement by government to fill the void in research, technical assistance and sector coordination over the past decade and a half. The major concrete effort was the creation of CONATRADEC and a fund based on export taxes to serve as a guarantee to facilitate finance for the sector. To date, however, they have been relatively unsuccessful in establishing a trust to facilitate finance. RENOVATION AND REHABILITATION IN COFFEE IN NICARAGUA The major challenges of R&R in Nicaragua are the lack of a coordinated technical approach to R&R including varieties, plantation design, pruning techniques and the reduction of financing and willingness to take on debt within the sector given the current political crisis and low prices. Despite the impacts of the coffee leaf rust crisis of 2013/2014, compounding already low productivity of coffee plantations in Nicaragua, there was no large scale, coordinated support and investment from either public or private sector for renovation of plantations, as occurred in most other countries in the region. In Nicaragua there were a collection of isolated responses supported by development cooperation, cooperatives, and some private sector actors. PROCAGICA was an important effort to coordinate technical approaches in this regard but was relatively focalized in its geographical coverage. The development in 2012 and 2013 of the Programa Nacional de Transformación y Desarrollo de la Caficultura and the creation of the CONATRADEC fund was an effort to support renovation in the sector but they have not had impact in the sector, much less on R&R and the funds continue to accumulate without being used to support transformation in the sector. 114 CAFENICA, and other farmer organizations have taken important actions to promote R&R including establishment of evaluation plots for different varieties in different regions to provide farmers access to information and plots where they can observe different varieties, and important work on nutrition management for coffee plantations to improve success of R&R efforts and as a strategy to reduce the impact of pests and diseases. Aldea Global, SOPPEXCCA and others have developed financial products for R&R for their members, with a focus on renovation, with funding from development cooperation donors and banks. This has included introduction of new varieties such as Marsellesa and Parainema in coordination with PROCAGICA. Some cooperatives have used their own funds to invest in purchase of hybrids i.e. Marsellesa but they have concerns about is adaptation to higher elevations and low input production systems. PROCAGICA has also promoted pruning techniques for rehabilitation based on experiences of IHCAFE in Honduras. An initial private sector response with medium and large farmers, was to introduce hybrids and grafted plants with high technological packages, though this model is being revised currently to reduce for example planting density. Olam and Mercon have opened lines of credit to fund renovation and rehabilitation for suppliers. There are no large R&R programs funded by exporters, but some have opened lines of credit for suppliers to finance rehabilitation. The loans are short term. The majority of farmers however, do not have access to this kind of support and continue to do R&R by repopulating existing plantations and pruning of older plants, ending up with plantations that are not uniform in productivity or quality. Rehabilitation is done on a plant by plant basis, to avoid the investment of renovation. Most farmers who renovate do so with their own resources, using seeds from their own farm or nearby farms that have good productivity, often taking cues from medium and large farmers in their area. CORE MARKET SYSTEM FOR COFFEE IN NICARAGUA Nicaragua commercializes two main categories of coffee, commercial and certified, with a small segment of specialty or gourmet coffee. Commercial grade coffee is largely purchase through multinational exporters who buy from a network of affiliated intermediaries and independent intermediaries largely from small and medium farmers who dominate the sector. A second channel for commercial coffee is through cooperatives who export directly. These cooperatives buy from small farmers, either directly or through first tier cooperatives. Certified coffee is largely purchased through first or second tier cooperatives who by from associated farmers. A good example is Aldea Global who exports coffee under several different certifications. Multinationals are growing their volumes of certified coffee coming mainly from larger farmers. Gourmet coffee tends to come either from cooperatives or independent farmers and is largely exported through specialized exporters, often working in collaboration with a specialized importer, for example Falcon Coffees, or a roaster. A small amount of coffee stays on the domestic market. Support services for the coffee sector are available but not integrated. Nicaragua has some very innovative work being done in research, genetic material provision, and finance but the work is not well connected across the sector and therefore impacts are limited. Sector coordination and promotion of Nicaragua as a coffee origin is limited. 115 Figure 51 Core market system for coffee in Nicaragua 116 KEY SUPPORTING MARKET SYSTEMS Technical assistance is provided by four main channels. Exporters provide TA to their suppliers, often tied to credit or certifications and funded through commercial margins, complemented by development funds when available, particularly from development banks. Farmer organizations, with development funding but also by the cooperatives themselves through certification premiums provide TA to their members. CAFENICA and associated cooperatives have developed a highly coordinated technical assistance delivery mechanism that connects technical expertise through CAFENICA to extension agents (50) in member cooperatives (10) and community extension agents (250) who receive stipends from the base level cooperatives. This network makes use of ICTs to generate and disseminate technical information creating shared technical approaches across the different cooperatives. CAFENICA is effective at linking regional expertise i.e. PROCAGICA and other research outputs to their TA network. The government, funded by development loans or public funds, provides technical assistance through MEFCCA extension agents and through INTAs network of model farms. NGOs, international and local, also provide TA to farmers using diverse methods, content and strategies. Support services for TA include formal/academic and informal training for TA providers, production of technical content and materials to support TA, training and incentives for farmer trainers, research outputs, and funding for TA from donors, certifications, and others. Figure 52 Market system for technical assistance for coffee in Nicaragua 117 Formal regulations were not identified but CAFENICA materials, PROCAGICA content and the content of the UNAN certificate course for coffee extension agents were mentioned as references for TA content. Figure 53 Market system for research for coffee in Nicaragua Coffee research in Nicaragua is carried out by the public sector (INTA), farmers organizations (CAFENICA and affiliates), and the private sector (Nicafrance Foundation). Nicafrance, in collaboration with ECOM, CIRAD, Cafetalera Nicafrance, and WCR, carries out multiple research contracts (40 different trials for over 5 different clients in 2018) for breeding, characterization, climate change adaptation, quality analysis, and agroforestry systems, which has given birth to new varieties such as marsellesa, novel propagation protocols for mass production of plants, among others. Much of this research is for proprietary use. Mercon has done research with inputs providers on nutrition and also participates in the WCR trials. In the absence of a national research institution, Nicafrance has been the country partner for several global coffee research initiatives and as a result has built up strong research capacity. INTA is building capacity for research and has done work on management of broca, varieties and diversification. INTA works in alliance with farmer organizations (PRODECOOP) to access field sites, and through model farms which support dissemination of results to farmers. CAFENICA, with funding from donors, does applied research on varieties, plantation designs, diversification, nutrition and soil management and the research is connected to dissemination through member cooperatives. CIRAD, in collaboration with CATIE, had 10 students working on theses research in northern Nicaragua before April 2018. The political situation has made it difficult to attract researchers and students back. 118 Support functions include international collaborations to engage in scientific research and private-private alliances to fund and carry out research. There are no regulations visible in the sector. EU, through H2020, currently funds some of the research of CIRAD and Nicafrance and is an important source of funding for collaboration with EU academia. Figure 54 Market system for genetic material for coffee in Nicaragua Genetic material - Most farmers in Nicaragua produce their own coffee plants (95%) using seeds from their own or nearby farms that have different varieties or specialize in seed production. Major renovation efforts, therefore, have distributed plants to farmers on credit or subsidized in order to introduce new genetic materials. Farmer organizations produce plants when funding is available to distribute to their members. Many are introducing rust resistant varieties and seedlings of arabica grafted onto robusta rootstock. Large exporters (Ecom and Mercon) have gotten into the business of plant production at large scale with high-tech production facilities in response to the demand from larger farmer clients for high quality genetic material, and to support their renovation efforts. Between the two firms, they have capacity for 7 million plants and have supplied large government projects as well as their clients. NGOs, in particular TNS, have supported the development of small commercial nurseries promoting certification under IPSA. A major challenge has been obtaining the certificate of origin for the genetic material as well as the commercial viability of the nurseries given costs of production and farmer willingness to pay vs 119 produce their own plants. IPSA has begun importing certified seeds of registered varieties in order to establish a certificate of origin to create a certified source for nurseries. INTA and IPSA are also working to register new materials. Genetic material is paid for by farmers, government, development banks, donors, farmer organizations, exporters, and roasters. Support functions include research on varieties, long term credit, subsidized plants for farmers, TA, commercial seed and seedling suppliers, and the incipient certification system for seeds and nurseries. Figure 55 Market system for financial services for coffee in Nicaragua Financial services - The two main sources of credit for farmers are exporters or intermediaries, and farmer organizations, and is consists of short-term credit for harvest activities, to be repaid with harvest. This credit is possible through cooperatives, from social lenders (Root Capital and Oiko Credit), and through exporters from commercial (LaFise) and development (IFC) banks. While still on a much smaller scale, financial products for farmers from MFIs and farmer organizations have evolved over the last decade. FUNDESER and FDL (MFIs) have developed several coffee specific products including for renovation and new plantations and have grown their coffee portfolio. Some cooperatives have also greatly expanded and diversified credit services to include renovation (Aldea Global is a good example). Commercial banks manage environmental funds, but have been unsuccessful in connecting them to the sector. Exporters (e.g., CISA, Olam) have also developed financial services to include renovation and seedlings. The government’s Banco de Fomento de la Producción provides funds to financial institutions to invest in the 120 sector. CONATRADEC was created to facilitate finance for the sector but has not yet been effective. The political situation combined with coffee prices have elevated the risk rating for lending and availability of financing has greatly decreased over the past 12 months, resulting in closings of MFI branch offices. Support functions that facilitate finance to farmers include the production and distribution of plants, TA networks to monitor repayment, capacity of cooperatives to intermediate finance, long term buying relationships at all levels, and creative alliances between actors. While credit bureaus exist, the nature of credit in the sector means coffee farmers are able to double commit harvest guarantees. Regulations include those that regulate formal and informal financial services. International credit risk ratings for Nicaragua and for the coffee sector, plus the media, have an important influence at the current moment on the offer of credit for farmers through financial institutions. RELEVANT INITIATIVES IN THE SECTOR • Fundación Nicafrance, various research projects: Nicafrance Foundation, created in 2015, in collaboration with private sector, international research institutions and donors managed 40 different research trials in the past year, several as the Nicaragua site for global multi-site research programs. These include research on carbon in-setting in coffee; development of financial and technological models for coffee renovation; climate change impacts on coffee trees, cupping quality, pest and disease resistance and the mitigating effects of associated trees; evaluation of coffee varieties; quality, and others. Nicafrance carries out scientific research, collaborates closely with CIRAD, Ecom, WCR and others and is the Nicaragua implementer for the WCR multi-site variety trials and CIRAD-led BREEDCAFS. It has also become an important hub for researchers. • NICADAPTA, 2014-2020, $37 million, IFAD, MEFCCA, INTA, IPSA and others: Programa de Apoyo a la Adaptación al Cambio Climático Mediante la Producción de Café y Cacao de Pequeños Productores en Zonas Agroclimáticas Aptas (NICADAPTA) is a five year project funded by IFAD to the government of Nicaragua to help small farmers improve benefits from the coffee and cocoa value chains by promoting climate adaptation practices including distribution of improved varieties and agroforestry systems, and strengthen farmer organizations and market linkages. The project has supported rural infrastructure and nurseries, and demonstration plots on farms to validate practices, in addition to technical assistance and work to establish certified genetic material through IPSA, still in process. This project has also supported INTA engagement in research in coffee, particularly in evaluation of varieties. • Cosecha Azul, 2014-present, CRS: Cosecha Azul is a regional project led by CRS focused on restoration of water resources in coffee growing areas. The project is funded by IDB/SAFE platform and Keurig Green Mountain and works in Honduras, Nicaragua and El Salvador. This works builds on over a decade of work by CRS under multiple projects in Nicaragua around soil and water conservation in coffee plantations with important investments in renovation and rehabilitation. The project connects with CRS ASA project and together are generating useful evidence on the impacts of climate smart and conservation agriculture practices in coffee plantations with small farmers including soil and fertility management. • PROCAGICA, 2016-2020, $15 million, IICA, CATIE, EU: This regional project, housed in IICA in Nicaragua, has made important contributions to renovation of coffee plantations including high quality technical assistance, tools, inputs and varieties to support the implementation of diverse agroforestry models for coffee renovation. These experimental plots, led by CATIE, will generate important evidence on productivity, cost effectiveness, quality and other characteristics of different coffee plantation designs that can inform larger scale renovation efforts. PROCAGICA is also working 121 on the development of ICT tools to disseminate early warning alerts for pests and diseases as well as to conduct rapid vulnerability assessments on farm to guide adaptation plans. ENTRY POINTS FOR MOCCA • Build on PROCAGICA to harmonize technical criteria and messages around renovation and varietals – There are many different voices providing orientation to farmers about what they should do to renovate their coffee plantations, sometimes contradicting or just using different language. This can be paralyzing, and produces a diversity of responses as a sector. Building on PROCAGICA and experiences of cooperatives, the private sector, plus those working on research, MOCCA could bring the sector together to harmonize messages to farmers about R&R to support technical assistance, seed and plant production, financial products and further research. Possible partners: CATIE, CAFENICA, WCR, Nicafrance, Mercon, Ecom, ACEN. • Establish a research for development platforms connecting international to national research actors – There is a great deal of research being done in the country that farmers and many others are not aware of. MOCCA could capitalize on this capacity and experience to build a national research platform, connected to international research networks and local dissemination networks. This could bring together CAFENICA, Nicafrance, CIRAD, CATIE, to share research findings and identify a shared research agenda as well as identify results ready for dissemination and channel them into technical assistance networks. This should ideally be convened by a research institution. Possible partners: CATIE, CIRAD, Nicafrance, CAFENICA, CIAT. • Access to finance in risky times – Access to finance, especially for R&R remains an important need in the sector. While there is experience with these kinds of financial products in the country, the current country and coffee sector situation has led to a drastic reduction of available finance due to high risks perceived by lenders and borrowers that has reduced both demand and supply. Creative models to support ongoing farmer investment in coffee during these risky times will be needed, possibly building on existing social networks such as cooperatives or other kinds of cooperative institutions that can be used to provide financial services. It will be important to ensure continued flow of funding to cooperatives and exporters to facilitate lending to farmers through their networks. Subsidized climate finance may be a source of support for the sector given the alignment between agroforestry systems and climate adaptation and mitigation goals. Possible partners: LaFise, BCIE, FDL, FUNDESER, social impact lenders to cooperatives, cooperatives i.e. Aldea Global. 122 4. Opportunities to strengthen the market system supporting R&R in MOCCA countries and sectors The scope of MOCCA as a cross country and cross sector project offers the opportunity to not just engage in each country and sector, but to engage across countries, or across sectors, exploring opportunities for systemic change at different levels that might have an impact in several countries or sectors at the same time. This also offers an interesting opportunity for cross sector and cross-country learning, leveraging positive experiences from one sector or country to guide interventions in another, and connecting actors across countries or sectors to support south-south learning and collaboration. Synergies may be found in similarities, while differences may pose opportunities for deeper understanding. In this section we will contribute to this in three ways. First, we will highlight some of the similarities and differences across countries and sectors to suggest ways to group countries in thinking about system changes. Second, we will identify possible regional entry points for MOCCA in supporting system changes that have an impact on project results areas. Third, we will identify regional initiatives and actors that may serve as allies in working regionally. Similarities and differences across sectors that may inform MOCCA strategies There are several structural similarities and differences between MOCCA countries and sectors that shape dynamics on the ground in patterned ways. Some of these differences may be the target of MOCCA interventions, for example the existence of a recognized coordinating entity for the sector, but the majority may not be so sensitive to change. Regardless, they should be considered as important differences at outset that MOCCA should take into consideration in designing implementation strategy, and changes in any of these will likely have impacts on the market system, independent of MOCCA. For example, if all of a sudden El Salvador becomes an important cacao exporter, this will provoke changes of its own right. We have outlined in the Table 19 below what we consider to be some of the most important similarities and differences that can be used to design supra national strategies, or strategies that can be applied in multiple countries to promote system changes. Similarities can also be used to identify places where systematic exchanges of information on strategy and approaches across country teams or system actors may create synergies, as they deal with potentially similar issues. Differences can provide opportunities to showcase for staff and market system actors alternative ways of doing that may provoke innovation, for example when a country with a weak governance structure can see how another with a strong governance structure operates and what can be achieved. 123 Table 19. Similarities and Differences across sectors Regional differences: Central America vs South America Ecuador and Peru are much larger economies and much larger coffee and cacao sectors than any of the Central American countries in MOCCA. As a result, there is much more public investment in the sectors as well as a greater concern for the new EU regulations (due to the important volumes of exports) around cadmium for cacao and deforestation for both coffee and cacao, particularly given the concern focused on the Amazon. Commodity related differences Coffee The coffee sector in all MOCCA countries but Ecuador is the dominant sector, as compared to cacao. In general, the coffee sector in all countries is more heavily regulated, has greater political power, and more developed support services. The coffee sectors are older, more mature with more stable relations between actors in the sector. There is also a lot more research carried out, more scientists and research institutions specialized in coffee as compared to cacao, and much more technical capacity and content in educational institutions. Countries are much more connected in coffee, thanks to 40 years of PROMECAFE, than in cacao. Farmers are much more organized and farmer organizations are stronger in coffee than cacao. Cacao The cacao sectors in comparison (except for Ecuador), have more emergent or new actors, and an evolving structure as volumes grow, attracting new players (this is somewhat true for Peru given the size of new cacao production areas). Country differences in coffee: larger vs. smaller coffee economies Large Peru, Honduras Peru and Honduras hang together as countries that are important to the global market for large volumes of commercial coffee, they have large numbers of farmers, and the sector is relatively important economically and politically in the country. As a result, support services for the sector are relatively more developed, and the sector is relatively more regulated and supported by public policies. Buyer strategies and priorities are also similar across these contexts where margins are relatively small, so volume is a driving force. Small Guatemala, El Salvador, Nicaragua Guatemala, El Salvador, and Nicaragua are all somewhat smaller coffee economies, and differentiation is a driving force, particularly for Guatemala and El Salvador. All of these three also have significant estate or large farm coffee operations focused on differentiated markets. Country differences in cacao: larger vs. smaller cacao economies vs. cacao importing economies Large Peru, Ecuador Peru and Ecuador have large and well recognized fine and flavor cacao export markets, ferment their cacao as a norm, and many large chocolate makers depend on supply from these countries for some of their regular recipes. The sectors are well developed, have been important for a while, and so are mature and somewhat stable in terms of actors, their relations, and governance within the sector. Small Honduras, Nicaragua Honduras and Nicaragua have much smaller cacao export economies, with a dual market system supplying two different export markets with two different kinds of cacao, unfermented for the Central American market and fermented for Europe, dominated in each case by a single chocolate maker. At the moment, prices across both markets are competitive. Investment in cacao is largely driven by public and donor funding in both countries, with those investments equaling 40 to 100% of export value annually. Import El Salvador, Guatemala El Salvador and Guatemala are import or domestic cacao economies. Both import more than they export to satisfy local consumption, largely of unfermented cacao, but both also have very small emerging fermented cacao sectors seeking differentiation in export markets based on unique national genetics/flavors and Mayan heritage. Both countries also have emerging fine chocolate processing sectors in response to their relatively larger affluent consumer base (as compared to Nicaragua and Honduras). 124 Differences in market chain actors: the role of intermediaries Large Peru, Ecuador, Honduras, Nicaragua Coffee: Guatemala In Peru and Ecuador for cacao, and Peru, Honduras, Guatemala, and Nicaragua, intermediaries as a group handle between 50 and 80% of production, with variation as to what activities they perform and how. This group can be further broken down between countries where intermediaries buy coffee as cherries or parchment, with intermediaries in Guatemala and El Salvador carrying out wet milling and drying while in Nicaragua, Honduras and Peru farmers sell coffee in parchment. This difference has important implications for quality management, infrastructure, as well as distribution of costs and benefits along the chain. Smaller El Salvador Fermented cacao: Honduras, Nicaragua In Honduras and Nicaragua for fermented cacao, and El Salvador for cacao and coffee, intermediaries have a much smaller role in the sector. Strength of NCI or coordination function in the sector Strong Coffee: Honduras, Guatemala Cacao: Peru, Honduras Honduras (IHCAFE), Guatemala (ANACAFE), Honduras (Mesa Nacional de Cacao, SAG), and Peru (APPCACAO, Cámara Peruana de Café y Cacao, MINAGRI) all have national entities (or groups of entities) that coordinate within the sector and are recognized by other actors in the sector for that role. In some cases, such as IHCAFE and ANACAFE, these are supported by strong legal frameworks including funding allocations. In others, such as Peru and Honduras for cacao, the legal framework is less strong but the coordination role is performed and respected. Weak El Salvador, Nicaragua Coffee: Peru Cacao: Ecuador, Guatemala These sectors have different kinds of structures or actors, some legally constituted, but not widely recognized within the sector either due to power disputes, ineffectiveness, or insufficient representation of all sectors. Potentially large distortions from public investments Cacao Peru, Honduras, Nicaragua, El Salvador Coffee El Salvador Public policies and investments are part of the market system and should be considered in thinking about system change. There are several sectors where the level of investment from public funding, domestic or international cooperation, is high enough that it is having an important impact on the current functioning of the system. These include the cacao sectors in Peru (especially in alternative development zones), Honduras, Nicaragua and El Salvador, and the coffee sector in El Salvador (due to repeated public investments to save the sector). Public investments are made to meet public policy priorities but when those priorities change and investments shift, the system undergoes important changes. R&R: Coffee vs. Cacao In general, due to the recent leaf rust crisis, the R&R need is more urgently felt in the coffee sector than in the cacao sector. In terms of technical capacity, knowledge and research on R&R, coffee is very much advanced as compared to cacao in that we know a lot more about what needs to be done, how and what the results will be, and many more people have been trained on coffee than cacao. R&R need in coffee has also been a hot topic of discussion since the coffee leaf rust crisis, so data on R&R in the coffee sector is available, while for cacao there is not comparable data. R&R: Priority for the government: Coffee El Salvador, Guatemala, Honduras, Peru Cacao Ecuador, Peru Within the coffee sector, governments of El Salvador, Guatemala, Honduras and Perú have made R&R a priority and Honduras has made the most advances in responding to the need. Within the cacao sector, governments of Ecuador and Peru have made R&R a priority. 125 Similarities and differences in support services across MOCCA countries and sectors MOCCA proposes to introduce changes in the target market systems related to support services for R&R. Below (Table 20) we provide an initial assessment, based on the market system analyses, of the baseline status at the national level of key support functions for the coffee and cocoa market systems in MOCCA countries. Red means absent, meaning that our assessment found that the support service does not seem to exist for the target sector. Yellow means that there is some evidence of the support service being provided in the sector but the provision is limited in terms of the number of providers, capacity and infrastructure, geographical or topical coverage, farmer access, or missing regulations. Green means that the service is present in the sector meaning that there are multiple providers, there is capacity and infrastructure available, the service is available across multiple regions or topics, that farmers seem to receive the service, and that appropriate regulation is in place or in process. Green does not mean that all farmers receive services nor that the service meets farmer needs or is of high quality. These classifications should be understood as relational and not absolute. Green, or present by no means is to say that there is nothing more to do, but that as compared to other services, countries and sectors, the service is relatively more developed. This assessment is qualitative, and based more on a supply side evaluation through interviews with market actors. It is not based on information from farmers as to whether they actually receive or benefit from any of these services. It will be interesting to revisit this table with the results from the farmer surveys. Similar to the table above, this table should be useful in identifying examples of countries or sectors with more developed functions that can serve as models for learning or to be replicated. Absent: Our assessment found that the support service does not seem to exist for the target sector. Limited: There is some evidence of the support service being provided in the sector but the provision is limited in terms of the number of providers, capacity and infrastructure, geographical or topical coverage, farmer access, or missing regulations. Present: The service is present in the sector meaning that there are multiple providers, there is capacity and infrastructure available, the service is available across multiple regions or topics, that farmers seem to receive the service, and that appropriate regulation is in place or in process. This does not mean that all farmers receive services nor that the service meets farmer needs or is of high quality. 126 Table 20. Baseline status of support services for coffee and cacao market systems COFFEE CACAO ECUADOR Technical Assistance NA Research Genetic Material Financial Services EL SALVADOR Technical Assistance Research Genetic Material Financial Services GUATEMALA Technical Assistance Research Genetic Material Financial Services HONDURAS Technical Assistance Research Genetic Material Financial Services NICARAGUA Technical Assistance Research Genetic Material Financial Services PERU Technical Assistance Research Genetic Material Financial Services Regional initiatives of relevance to MOCCA: Systems action requires coordination with other actors also working to influence the system. The coffee and cocoa space in Latin America is very large and diverse. Below (Table 21) we highlight some of the most relevant initiatives or actors for MOCCA to be aware of working at the regional level. We do not suggest MOCCA engage with all of these but be aware of their existence and engage as relevant in seeking to meet the targets of the project. Building alliances with other actors can help build on their investments, help ensure others will carry forward the agenda in different spaces and with complementary investments or at a minimum, we can avoid duplication and be aware of conflicting messages within the same space that may need to be reconciled to move things forward. Or it can serve to see where others are already investing in order to prioritize gaps for MOCCA investments. 127 Table 21. Selected relevant initiatives or actors in the coffee and cacao sectors in MOCCA countries Name Current scope of work CACAO Iniciativa Latinoamericana de Cacao (ILAC) Led by CAF, under development since 2016, but has brought countries in the region together around how to improve value added by positioning the region’s cacao and cacao-based products to access differentiated prices. Has included promotion of quality standards based on flavor, regional competitions, and other. Member countries participate, particularly Peru and Ecuador as well as an initiative in Mesoamerica focused more on climate resilience. In the meantime, are coordinating the Observatorio Latinoamericano de Cacao. ICCO Holds member meetings, Consultative Board Meetings, and global conferences every two years, plus generates sector statistics. Have working group on fine and flavor cacao that decides inclusion in Annex C, also working groups on research and other. Consultative Board is important space to understand sector trends and role of LAC. Is place where LAC countries have organized jointly around productivity, cadmium, fine and flavor distinctions, etc. There have been hot debates about whether countries in Africa or Asia should be allowed to be considered fine and flavor cacao producers and the objective basis for the classification has been questioned and was seen as a threat to LAC position in the market. Global conferences are important spaces for exchange, sector events, advocacy, other. Cadmium research network Strong south America focus but some participation from Central America. Coordinated in two events co organized by CIAT, INIAP, French cooperation, CIRAD, CRC, others. Set out agenda for cadmium research and plan to use shared protocols and agenda to advance research forward and ensure comparability across countries. AMACACAO Association of cacao producers and chocolate makers from Central American countries who created a brand, Cunakakaw, that can be used when all ingredients are cacao from Mesoamerica that comply with quality standards developed with support from Seguine Cacao and others with funding from CBI. Given the network structure, AMACACAO’s capacity to implement activities is limited but the work on quality and positioning of cacao from the region can be built upon. Knowledge management for climate smart cocoa in Central America project Rikolto/COSUDE, in collaboration with WCF, SICACACAO, CAC, CIAT and others leads a regional initiative to improve knowledge on climate smart cacao through dissemination of research results, establishment of agroforestry pilots, and other activities to improve information production and sharing within the region to improve resilience within the sector. This also includes development of a regional cacao strategy with the Central American Agricultural Ministers Council (CAC) aligned with the new Central American Agricultural Policy (PACA). World Cocoa Foundation (WCF), Climate Smart Cocoa WCF has been working in collaboration with CIAT, Rikolto and others in Africa and Central America to develop national sector plans and technical assistance curriculums to build climate resilience. This has included bringing sector actors together to discuss and develop strategies to address climate impacts in the sector to inform future investments. While WCF focus moving forward is Africa, this work can be capitalized 128 on by MOCCA in the Central America region. WCF also organizes global partnership events that are important spaces for private sector engagement, collective action and information sharing. Cocoa of Excellence and Salon du Chocolat, Bioversity These biannual events and competitions are an increasingly important way for producers and producing countries to gain visibility and attract specialty buyers. Cocoa of Excellence in collaboration with CRC and others is supporting the development of quality standards for use in evaluation of cacao quality at origin including flavor to improve transparency and communication around quality between producers and buyers. LWR has collaborated with these initiatives in the past and will continue this work under MOCCA. Bioversity has also supported a cocoa research event that may become a regular event. COFFEE International Coffee Organization (ICO) Similar to ICCO, space for countries to come together and space for advocacy. PROMECAFE has done some organizing to lobby as a block around issues of concern to LAC for example. World Coffee Research, several initiatives WCR, partner in MOCCA, is an important ally for several initiatives they run as well as for understanding private sector priorities and concerns. In particular the global varieties trial and the agronomic practices trials that have presence in all MOCCA countries should be platforms for generating information to be disseminated through technical assistance, as well as to build capacity for research and research collaborations in and between countries. BreedCaf, CIRAD CIRAD leads a H2020 EU funded research project focused on coffee breeding. They also do research on pests and diseases, climate mitigation, and other coffee related topics with a team of around 7 researchers based in Central America. PROMECAFE Also a MOCCA partner, PROMECAFE is collaborating with CAC on a regional coffee sector adaptation plan, collaborates with WCR, participates in ICO, and is connected to IICA so can serve as an important platform for information sharing, cross country collaboration, and advocacy regionally, globally and within countries. They organize two important sector events plus trainings that can be valuable spaces for sharing research and building collaborations or sharing lessons across countries. PROCAGICA Regional project managed by IICA with funding from the EU. Has established trial plots, built capacity and supported high quality renovation and rehabilitation. These experiences and capacity should be taken advantage of as examples and inputs to MOCCA strategies for R and R including training materials, etc. Global Coffee Platform and Sustainable Coffee Initiative Already mentioned in MOCCAs project design. A national platform is operating in Honduras and an aligned platform (NICAFES) was established in Nicaragua. 129 COFFEE AND CACAO CATIE, multiple initiatives CATIE is a research and higher education institution in Central America working in coffee and cacao for 75 and 70 years respectively. CATIE houses globally important publicly accessible genebank collections for coffee and cocoa. Most technical experts in coffee or cacao in the region have passed through CATIE at some point as part of their professional training. CATIE has staff present in all MOCCA countries, and connects research to development as they respond to the needs of ministers of agriculture in each member country. Currently about 35% of CATIE’s research portfolio is focused on coffee and cacao including breeding, propagation, agroforestry systems, pest and diseases, agronomy, and social and economic studies. CATIE collaborates on breeding and propagation for coffee and cacao with a range of global private sector actors. SAFE Platform, HIVOS/IDB The Save Platform oversees the development of projects for funding by the IDB with private sector actors from the coffee and cocoa sectors. The focus is on promoting innovations that can be scaled. MOCCA should be aware of what SAFE and partners are funding as inputs to potential innovations MOCCA may want to scale. There may also be possibilities for complementary investments or leverage of funds. Council of Central American Agricultural Ministries (CAC) While their operating structure is very small, and leadership by country changes every 6 months, the CAC is in the process of developing regional strategies for the coffee and cocoa sectors which will be approved by the ministers of member countries (Guatemala, El Salvador, Honduras and Nicaragua are MOCCA countries). These plans will establish priorities and give signals to member countries or regional investments so it is good to at least be aware and consider aligning MOCCA investments to the strategies showing how MOCCA contributes to its realization as appropriate. This will keep MOCCA visible for political authorities. CAMBIO II, BCIE BCIE is beginning implementation of a regional Green Climate Fund project focused on promoting adaptation in agriculture in the region through financial services for adaptation and technical assistance. They will work through financial institutions in each country. Collaboration with these entities around design of financial products, TA and helping clients in the coffee and cocoa sectors access them could be fruitful collaborations. Feed the Future Alliance for Resilient Supply Chains, Alliance for Resilient Coffee, and Climate Smart Cocoa, CIAT, HRNS, WCF There are three connected initiatives that have developed content and engagement among actors including research, private sector and financial sector around climate resilience in supply chains, investment portfolios and financial product design. Several information products have been created across the three projects including ICT tools that should be taken advantage of by MOCCA to support the weather resilient elements of the project and renovate coffee and cacao plantations to be climate proof. IDH R&R and Intermediaries IDH does quite a bit of work in coffee and cocoa, including some important work and convening around R&R and could be an important partner for MOCCA. They are planning a study of the potential to promote sustainability through intermediaries in the end of 2019 that could provide some useful insights for MOCCA countries where intermediaries are a prevalent actor. 130 While the majority of MOCCAs outputs will be delivered in a specific country and in a specific sector, there are many benefits to thinking regionally or thinking cross sector. Examining the differences and similarities across countries and sectors can help to identify where synergies may be more or less likely to contribute to project results, or where exchange of information and experience among staff or partners may be beneficial to help devise strategies that build on successes and failures of countries that have already been in the same situation. As implementation begins, it will also become clear that some desired changes transcend the sector or the country. Many of the anchor firms are global not local actors. Governments also do not act in a vacuum. It may be important for understanding or maybe effecting change to engage with actors and with issues at a regional or global level. It may be even more important as a strategy to engage actors from the different market systems at those different levels to support understanding as well as their capacity to engage and advocate in those spaces as relevant. MOCCA should engage, or support actors to engage locally, nationally and regionally, and actively work to connect across those levels in support of the changes MOCCA proposes to effect in each site. We have also identified other initiatives and actors working regionally to help MOCCA better understand the ecosystem within which they will implement the project at a regional level and we suggest for the different activities proposed by MOCCA that actions be considered at the local, national and regional level in designing interventions. 131 5. Concluding remarks Using qualitative primary baseline data from over 300 informants and secondary data from many sources, we provided national and agricultural information for the two crops of interest in the MOCCA countries, detailed the need for and challenges of R&R, illustrated the value chain for these sectors, identified existing support services for market systems, relevant initiatives, and suggested entry points for MOCCA. In this section, we conclude with a few remarks that we consider relevant for MOCCA’s implementation, that may also be relevant for other actors working in these sectors. For cocoa, we consider that in Ecuador and Peru, MOCCA could benefit from the current research around Cadmium, as there are established research networks that could make more effective some of MOCCA activities. Also, these countries have made more technological advances than the rest of the MOCCA countries on cacao production and the development of quality standards, so MOCCA not only can use this within these countries (i.e., farmers in other regions left behind), but also across countries. Some of the MOCCA countries are better organized than others, not only in the cacao sector, but also in the coffee sector. Thus, MOCCA could use the experiences from another sector (i.e., coffee) to find new alternatives for cocoa marketing, for example, promoting cocoa beverages in local specialty coffee markets in El Salvador. Because of the agro-ecological conditions where cacao is grown, a few Central American countries (El Salvador, Nicaragua) already have experience with production under adverse weather conditions, or may even possess genetic materials tolerant to drought and/or high temperatures. MOCCA could benefit from this, as it can incorporate some of these technologies and knowledge into the program within and across countries. Common to all countries are current efforts being made by many actors around cacao in topics like improving governance, quality standards, and regional and national organization. MOCCA should take advantage of these experiences and established networks or systems, so it complements these large initiatives to use resources more efficiently. Finally, related to the latter point, MOCCA could contribute to increase the representation of small and medium farmers in some national or regional platforms. For coffee, MOCCA entry points are more diverse than for cacao and vary greatly between countries. While trying to promote standardized technical assistance content, organic inputs and specialty coffees are entry points in Peru, trying to improve better base prices may be a priority in Honduras, for example. In many countries, strengthening current providers of technical assistance can be an entry point for MOCCA as it brings experiences that some of these may lack. National strategies are in place or in development in several countries (Peru, El Salvador and Nicaragua) and MOCCA should engage and support these in a way that creates a favorable environment for MOCCA outcomes 132 As with cacao, MOCCA should build on the experiences of the many initiatives in the different countries, to complement efforts and have a higher aggregate impact in the sector. Finding alternative financial schemes that can bring in non-traditional players is necessary and MOCCA can help in this topic. Finally, it could also complement recent investments made by governments and private sector in R&R by supporting these new areas as they come into production (for example, by providing technical assistance and access to inputs as well as markets). 133 6. Works Cited 1. TechnoServe. Maximizing Opportunities for Coffee & Cacao in the Americas (MOCCA) factsheet. 2019. 2. —. MOCCA Evaluation Plan. 2018. 3. Dalberg & IDH. A Review of the State of the Emerging R&R Market and Opportunities to Scale Investment. 2015. 4. RIAS & IDH. Rehabilitation & Renovation of crop trees in cocoa, coffee, palm oil. 2015. 5. RootCapital. Learning Report: The coffee farmer resilience initiative. Financing Farm Renovation: How to Build Resilience Using a Blend of Capital. Executive Summary. 2016. 6. USAID. Renovation & Rehabilitation for Resilient Coffee Farms: A Guidebook for Roasters, Traders and Supply Chain Partners. 2017a. 7. Krishnan, Sarada. Sustainable Coffee Production. Oxford Research Encyclopedia, Environmental Science. [Online] 2017. https://oxfordre.com/environmentalscience/view/10.1093/acrefore/9780199389414.001.0001/acrefor e-9780199389414-e-224?print=pdf. 8. Café & Clima. Estudio de mercado del café Peruano. Posición internacional y el segmento de café sostenibles. 2017. 9. USDA FAS. Coffee: World Markets and Trade. 2019. 10. USAID. Country Data Sheets for Coffee Renovation and Rehabilitation. 2017b. 11. MINAGRI. Estudio del CACAO en el Perú y en el Mundo. Un análisis de la producción y el comercio. 2016. 12. Gayi, Samuel and Tsowou, Komi. Cocoa industry: Integrating small farmers into the global value chain. 2016. 13. TechnoServe. Building a Sustainable and Competitive Cocoa Value Chain in Peru. A Case Study of the Economic Development Alliance Program for San Martín, Huánuco, and Ucayali 2010-2015. 2015. 14. SwissContact. Desarrollo de la cadena de valor del cacao. Transformando el cultivo de cacao en un negocio sostenible para pequeños agricultores. 2016. 15. The Springfield Centre. The Operational Guide for the Making Markets Work for the Poor (M4P) Approach. [Online] 2015. https://www.enterprise-development.org/wp- content/uploads/m4pguide2015.pdf. 16. Humphreys, J. Market systems approaches: a literature review. The BEAM Exchange. [Online] 2014. www.beamexchange.org. 17. The Beam Exchange. What is a Market System? [Online] 2019. https://beamexchange.org/market- systems/what-market-system/. 18. ANECACAO. [Online] 2019. http://www.anecacao.com/en/quienes-somos/cacao-nacional.html. 19. Corporación Financiera Nacional. Ficha Sectorial: Cacao y Chocolate. [Online] Febrero 2018. https://www.cfn.fin.ec/wp-content/uploads/2018/04/Ficha-Sectorial-Cacao.pdf. 20. FAOSTAT. FAOSTAT crop and trade data. [Online] 2019. http://www.fao.org/faostat/en/#data. 21. Díaz, Carlos y Willems, Meike. Línea de Base del Sector Café en el Perú. s.l. : Programa de las Naciones Unidas para el Desarrollo, 2017. 22. MAGA. Plan Estratégico de la Agrocadena de Cacao de Guatemala. 2016. 23. Consejo Salvadoreño del Café. Estadísticas Cafetalera al 30 de Junio de 2019. Informe Oficial. [Online] 2019. http://www.csc.gob.sv/estadisticas/. 24. Comité de Cadena de Cacao. Acuerdo Marco Para la Competitividad de la Cadena Agrolimentaria del Rubro de Cacao Entre La Secretaría de Estado en los Despachos de Agricultura y Ganadería, y el Sector Privado (2019 – 2022). San Pedro Sula : s.n., 2019. 134 25. IHCAFE. El Sector Café de Honduras: Avances, Institucionalidad y Desafíos. Presentation made at 7th Consultative Forum on Coffee Sector Finance--International Coffee Organization. 2017. 26. Strategy Working Group. Presentación de Avances: Plan de Acción de la Estrategia Nacional de Desarrollo de la Cacaocultura Nicaragüense. Managua : s.n., 2018. 135 7. Annexes Annex 1. Detailed description of methodology used for the market systems baseline The market systems analysis was implemented in five main stages: 1. Identification of market system actor types of interest; 2. Development of interview and focus group questions; 3. Identification and prioritization of market system actors by category for each sector and country; 4. Field data collection for each sector and country; and 5. Analysis of data for construction of market maps. Each of these stages are described in greater detail below. 1. Identification of market system actor types of interest – Based on the MOCCA Theory of Change we were able to identify specific actors whose behavior within the system, and within supporting systems, would need to change in order to produce the expected outcomes. These categories were discussed with the project implementation team to ensure we included all actor types they were likely to work with and hoped to influence in project implementation. Additionally, we considered complementary studies underway by MOCCA partners that were covering subsets of market actors to avoid duplication and ensure complementarity. We also identified categories of actors for which the universe was relatively large and therefore a focus group was more appropriate to generate the desired information. We arrived at the list of actor categories to be included in each country shown in the box. 2. Development of interview and focus group questions – Interviews were semi structured and we designed two separate interview guides, one for anchor firms13 and other buyers to explore their commercial relationships with farmers as they relate to MOCCA Activity 2,14 and a second interview guide for all other actors including follow up questions for each category of actor. For anchor firms and other buyers, the interview covered the history, structure and scope of the business, research engagement, perceptions of the market system including their role and the roles of others, their engagement with farmers, opportunities for improving their commercial relationships to the benefit of farmers, and their perceptions of market trends. For all other actors the interview covered the history, structure and scope of the entity, perceptions of the market system including their role and the roles of others, engagement with farmers, engagement in research, and their perceptions of market trends, as well as actor specific questions. It was important to limit the number of different interview guides to help interviewers more easily manage the questions and the flow of the interview (by not changing it up for every actor), thereby ensuring their focus on the conversation and on the types of information to be 13 Anchor firms are defined here as companies that reinvest in their supply chain and have a shared valued vision. Anchor firms can be national or multinational firms, or even farmer organizations. 14 See TechnoServe (2) for details about MOCCA activities. Key Informant Actor Categories Interviews: MOCCA Partners Anchor Firms Other Buyers/Intermediaries National Commodity Institutes Public Institutions Research Institutions Development Organizations Roasters or Chocolate makers Donors/Development Banks Inputs Suppliers Financial Institutions Nurseries/Seed or Budwood Suppliers Focus groups: Technical Assistance Providers Farmer Organizations 136 gathered. The actor specific questions served as follow up questions to ensure actor specific information had been gathered during the conversation. Focus groups were planned with extension agents and representatives of farmer organizations as the total number of actors in each category for each sector/country were large. Bringing together a group and engaging them in a focused group discussion based on their experience but reflective of their sector allowed us to form a more representative picture. Participants were selected from different kinds of organizations (representing institutional diversity), but were largely working in the same geographical region (due to logistical considerations). The focus groups with extension agents from different organizations were focused on three main topics – how R&R is carried out by farmers, how technical assistance is provided, and how extension agents acquire knowledge. Focus groups with representatives of farmer organizations were divided into two focused discussions of 1.5 hours each with a break in between. The first discussion focused on R&R and the role of farmer organizations and others in supporting farmers to carry out R&R. The second discussion explored market opportunities for farmers including their perceptions of the workings of the market and opportunities to increase farmer incomes in coffee or cocoa. Interview and focus group guides were tested in Peru, the first country visited, and adjusted before use in the other 5 countries. Modifications did not significantly change the instruments in terms of content, but they simplified and reorganized for a better flow and fit with the allotted time. The data collection instruments, strategy for selection and recruitment of informants, as well as interview and focus group protocols were developed with an eye to the protection of human subjects participating in the research. The research plan for the protection of human subjects along with all data collection instruments were submitted to the CIAT Institutional Review Board for the Protection of Human Subjects in Research, in line with CIAT’s Policy Protection of Human Subjects of Research, and approval was obtained before field work began. All subjects were informed before interviews or focus groups were begun that participation was voluntary, and verbal consent was obtained for participation in the study. 3. Identification and prioritization of market system actors by category for each sector and country - Based on the categories of actors to be interviewed, lists were created for each country based the literature (in particular recent value chain studies), inputs from MOCCA staff, and other existing lists available (for example online registries) of actors involved in the sector for each country and crop. This constituted our sampling frame for each sector. Individual actors were classified into one of the actor categories based on their nature and institutional mandate, even when they fulfilled multiple roles. A public research institution was classified as a public institution, not a research institution. An anchor firm that also sells genetic material was classified as an anchor firm, not a nursery. As interviews covered the multiple functions of all actors, we were not concerned about losing information about those secondary roles. In some cases, no actors were identified for a given category, most often National Commodity Institutions (NCI), and in others, an actor emerged as important without fitting into any particular category we had prioritized i.e. certifiers. Once the lists were populated, we sampled purposively from within each category to select the target number of informants based on importance, diversity, and relevance for MOCCA. Importance refers to the actor’s relative level of power or influence within the market system. We selected for diversity by including for example multinational and domestic firms. Finally, we elicited inputs from MOCCA country staff to incorporate their perspectives ensuring due attention to the market system actors prioritized by MOCCA for project interventions. 137 4. Field data collection for each sector and country – The in-country itinerary for each sector included two weeks of field work which consisted of approximately 7 days of interviews and 3-4 days of field visit to a region close to a production zone of importance which included both focus groups, visits to a farmer organization, a nursery, and possibly local inputs providers, intermediaries, financial institutions, and prioritized actors located in those production areas. Selected interviewees were sent email invitations for an interview along with information about MOCCA. They lasted between 1 and 2.5 hours and were often conducted with several (up to 7) representatives of the selected entity. Summaries of interviews were documented based on notes taken during the interview. Focus group participants were recruited by MOCCA staff from among prioritized actors in the production zone to be visited. Focus groups with extension agents lasted 2 to 2.5 hours, were held either in local offices or in a rented meeting rooms, with 4-10 participants from 2-9 different organizations who were provided with refreshments. Focus groups with representatives from farmer organizations lasted 3 to 3.5 hours, were held either at the office of a farmer organization or a rented meeting room, with 4 to 19 participants 1-8 different organizations who were provided with lunch and in some cases transport costs. For each country, one researcher was responsible for each sector. Where actors overlapped sectors, interviews were either assigned to one of the two researchers who collected information on both sectors and shared later, or were conducted together often with different individuals within the organization responsible for each of the sectors. The number of actors and individuals per category are described in Table A 1. 5. Analysis of data and construction of market maps – Based on interviews, desk review, and available data, country snapshots were developed for each sector, including market maps, maps of supporting market systems, and sector descriptions including sector data. Complementary data and desk review served to validate and complete market system information. Market maps for each sector show three kinds of information – the market chain actors, rules and regulations, and support functions (15). In the middle section the market maps show the chain of economic actors who own a product as it moves from primary producers to consumers or export, as well as their linkages for different grades of the product where relevant. At the far left are the actors just outside the country of origin, or the end market and at the far right are primary producers. In between are the actors who, from left to right, purchase the product along the chain to primary producers. Arrows indicate the flow of money to purchase the commodity (left to right), while in the opposite direction you can see the flow of the commodity itself (right to left). In the top section, the market maps show the rules and regulations, formal and informal, that shape the market system i.e. that influence in some way the transactions that take place between market chain actors. These are organized by dates when they became relevant and may relate to any transaction along the chain. On the bottom, the market map shows support services or functions and include the business and extension or other services that support the market chains operations. The support services shown are those most prominent in each sector. Market systems for four priority supporting systems identified in MOCCAs theory of change were also mapped using the Market System doughnut to identify key rules and regulations as well as supporting functions influencing that supporting market system. Supporting Market Systems for Technical Assistance, Finance, Genetic Material and Research, with emphasis on Rehabilitation and Renovation, were mapped and key actors identified. Finally, Country Snapshots were completed for each sector based on the Market System Maps, Maps of Supporting Market Systems, and key country and sector data. 138 Table A 1. Detailed list of key informants by country, sector and type of actor ACTORS15 (Target) Peru Honduras El Salvador Guatemala Nicaragua Ecuador Total INTERVIEWS Coffee Cacao Coffee Cacao Coffee Cacao Coffee Cacao Coffee Cacao Cacao Coffee Cacao MOCCA Staff (2) 4 2 4 3 2 2 3 1 2 3 1 15 12 Anchor Firms (2-3) 6 3 4 1 4 1 3 1 3 3 3 20 12 Other Buyers (1-2) 3 2 1 1 0 0 0 0 1 2 0 5 5 Roasters/Chocolate Makers (1) 0 1 0 0 2 2 1 2 1 1 1 4 7 National Commodity Institutes (1) 1 1 3 1 1 1 1 0 1 0 2 7 5 Farmer Organizations16 6 4 1 1 1 1 1 3 3 2 2 12 13 Public Institutions (2) 5 4 0 3 3 2 1 1 3 4 4 12 18 Research Institutions (1) 2 3 2 2 1 1 1 0 2 2 1 8 9 Input Suppliers (1) 3 2 2 2 2 1 0 3 3 2 1 10 11 Financial Institutions (2) 5 5 3 3 3 3 3 2 4 2 4 18 19 Genetic material providers (1) 1 1 1 1 2 5 2 1 1 0 1 7 9 Development organizations (2) 5 3 2 4 1 2 6 4 2 2 1 16 16 Donors/Development Banks (2) 2 1 0 1 5 3 1 1 0 2 0 8 8 Others17 0 1 1 1 2 1 1 0 1 1 2 5 6 FOCUS GROUPS18 Technical Assistance Providers (6-8 individuals) 1 (4)19 3 (4) 4 (6) 3 (4) 6 (7) 5 (7) 2 (4) 8 (12) 9 (9) 6 (8) 4 (5) 22 29 Farmer organizations (2-4 organizations) NA20 NA 6 (8) 4 (8) 6 (10) 6 (10) 6 (19) 6 (7) 8 (11) 6 (7) 4 (8) 26 26 15 Actors are institutions not individuals. Interviews were attended by up to 7 individuals from a single institution so actual numbers of individual informants are higher. Some actors were prioritized for both sectors and so there is some duplication of actors within countries across sectors. Some actors were present and prioritized in several countries i.e. some of the larger anchor firms. All else being equal, when possible we prioritized actors not previously interviewed in other countries. About 23% of actors interviewed discussed work in both coffee and cacao. 16 We did not originally intend to interview farmer organizations in each country given the focus groups with farmer organization. However, we found that in each country there were particularly influential farmer organizations worth interviewing, and that visiting at least one farmer organization provided complementary context for the focus group discussion and market system mapping. 17 Others include certifiers, exporters or mills, or sector associations. 18 While there is some overlap between actors participating in the focus groups and those interviewed, the majority are not duplicate organizations. 19 Values are number of organizations and in parentheses are the number of individuals participating. 20 Focus groups with farmer organizations were not organized in Peru due to logistical difficulties. 139 Annex 2. Data sources for Country Snapshot Tables Table A 2. Sources used for tables included in the country snapshots Data Source Country Facts and Figures Population (rural) Organización de las Naciones Unidas para la Alimentación – FAO. FAOSTAT 2019, online at http://www.fao.org/faostat/es/#data/OA Data for 2017 Farmers Ecuador: Instituto Nacional de Estadística y Censos (2000). III CENSO NACIONAL AGROPECUARIO. https://www.ecuadorencifras.gob.ec//documentos/webinec/Estadisticas_agro pecuarias/CNA/Tomo_CNA.pdf El Salvador: Ministerio de Economía (2009). IV CENSO AGROPECUARIO 2007- 2008, El Salvador, C.A. http://www.fao.org/fileadmin/templates/ess/ess_test_folder/World_Census_ Agriculture/Country_info_2010/Reports/ESV_SPA_RES.REP_2008.pdf Guatemala: Instituto Nacional de Estadística (2004). IV Censo Nacional Agropecuario, Guatemala. https://www.ine.gob.gt/sistema/uploads/2014/01/16/cv9H2R2CyhS1n0c1XfK qXVf4pLIxONTg.pdf Honduras: Instituto Nacional de Estadística (2008). https://www.ine.gob.hn/images/Productos%20ine/EAN/EAN%202007%20%20 2008/tenencia%20EAN%202007%20-%202008.pdf Censo 2007/2008 Nicaragua: Instituto Nacional de Información de Desarrollo (2011). IV Censo Nacional Agropecuario Nicaragua. http://www.inide.gob.ni/Cenagro/INFIVCENAGRO/IVCENAGROINFORME/asset s/basic-html/page14.html Perú: Instituto Nacional de Estadística e Informática (2014). CARACTERÍSTICAS SOCIOECONÓMICAS DEL PRODUCTOR AGROPECUARIO EN EL PERÚ, IV Censo Nacional Agropecuario 2012. https://www.inei.gob.pe/media/MenuRecursivo/publicaciones_digitales/Est/L ib1177/libro.pdf GDP per capita WDI World Bank (2019). Data online: https://data.worldbank.org/indicator/ny.gdp.pcap.cd Data for 2017 HDI Rank Data - Human Development Reports – UNDP (2019). Data, online at http://hdr.undp.org/en/data# Data for 2017 Poverty (rural) WDI World Bank (2019). Data online: https://datos.bancomundial.org/indicator/SI.POV.NAHC?view=chart Data for most recent years available as follows: Ecuador 2018 (2014); El Salvador 2017 (2014); Guatemala 2014; Honduras 2018; Nicaragua 2016 (2014); Peru 2017 (2014) 140 Cacao/Coffee in COUNTRY Cacao/coffee farmers, # For Cacao: Ecuador: Secretaría Nacional de Planificación y Desarrollo. 2019. Construcción de una Política Pública para el sector del Cacao y sus derivados. Mesa: Competitividad, productividad y empleo. Quito, 17 de Abril del 2019. Guatemala: Veco Mesoamérica. 2016. Situación actual de la cadena de valor del cacao en Guatemala. pág. 16. Nicaragua: MIFIC, 2018. Presentación de avances: Plan de Acción de la Estrategia Nacional de Desarrollo de la Cacaocultura Nicaraguense. Honduras: Pro Honduras. 2019. [en línea] http://www.prohonduras.hn/images/mosaicoexport/cacao.pdf 10 de junio del 2019. Perú: Ministerio de Agricultura y Riego. 2016. Estudio del CACAO en el Perú y en el Mundo, UN ANÁLISIS DE LA PRODUCCIÓN Y EL COMERCIO. Páginas 63 y 64. El Salvador: Veco Mesoamérica. 2016. Situación Actual de la Cadena de Valor del Cacao en El Salvador. Pág. 23. For Coffee: El Salvador: Consejo Salvadoreño del Café. 2019. Registro de Productores. Guatemala: Latin American Research Review 49(1). 2014. High-End Coffee and Smallholding Growers in Guatemala Perú: Ministerio de Agricultura y Riego. 2019. Situación actual del país Honduras: Instituto Nacional de Estadística Honduras. 2018. Encuesta Agrícola Nacional 2007 - 2008 Nicaragua: Instituto Nacional de Información de Desarrollo. 2012. IV Censo Nacional Agropecuario. INFORME FINAL. Associated farmers, % For Cacao: Guatemala: MINECO (2015). Análisis de la situación actual y diagnóstico de la cadena de cacao. Guatemala: October, 2015. Other countries: Key informant interviews For Coffee: Agencia de los Estados Unidos para el Desarrollo Internacional. 2017. Renovation & Rehabilitation for Resilient Coffee Farms: A Guidebook for Roasters, Traders and Supply Chain Partners. And Key informant interviews. Area harvested, Ha Organización de las Naciones Unidas para la Alimentación – FAO. FAOSTAT 2019, online at http://www.fao.org/faostat/es/#data/ Data for 2017 Production, MT Organización de las Naciones Unidas para la Alimentación – FAO. FAOSTAT 2019, online at http://www.fao.org/faostat/es/#data/ Data for 2017 Only for Guatemala: MINECO (2015). Análisis de la situación actual y diagnóstico de la cadena de cacao. Guatemala: October, 2015. Global rank among producing countries Organización de las Naciones Unidas para la Alimentación – FAO. FAOSTAT 2019 online at http://www.fao.org/faostat/es/#data/ Data for 2017, countries ranked by Production, MT 141 Only for Guatemala: Rank based on production data from MINECO. Yields, MT/Ha Organización de las Naciones Unidas para la Alimentación – FAO. FAOSTAT 2019, online at http://www.fao.org/faostat/es/#data/ Data for 2017, calculated as Production/Area harvested. Only for Guatemala: Calculated using production data from MINECO, 2015. % of area needing R&R ONLY FOR COFFEE Agencia de los Estados Unidos para el Desarrollo Internacional. 2017. Renovation & Rehabilitation for Resilient Coffee Farms: A Guidebook for Roasters, Traders and Supply Chain Partners. R and R potential ONLY FOR COFFEE Agencia de los Estados Unidos para el Desarrollo Internacional. 2017. Renovation & Rehabilitation for Resilient Coffee Farms: A Guidebook for Roasters, Traders and Supply Chain Partners. Climate risk Calculated as percent of currently suitable land requiring transformational adaptation by 2050 using data from: For Cacao: El Salvador, Guatemala, Honduras and Nicaragua: Bunn, Christian; Lundy, Mark; Castro-Llanos, Fabio, 2019, Replication Data for: The impact of climate change on cacao production in Central America and the Caribbean, https://doi.org/10.7910/DVN/QUKZTO, Harvard Dataverse, V2 For Coffee: El Salvador, Guatemala, Honduras and Nicaragua: Bunn, Christian; Lundy, Mark; Castro, Fabio, 2018, "Replication Data for: The impact of climate change on coffee production in Central America", https://doi.org/10.7910/DVN/9QUGUR , Harvard Dataverse, V1 Peru: Robiglio, V; Baca, M; Donovan, J; Bunn, C; Reyes, M; Gonzáles, D; Sánchez, C. 2017. Impacto del cambio climático sobre la cadena de valor del café en el Perú. ICRAF Oficina Regional para América Latina, Lima, Perú & CIAT Centro Internacional de Agricultura Tropical, Cali, Colombia. https://hdl.handle.net/10568/93345 Exports, MT (beans) Organización de las Naciones Unidas para la Alimentación – FAO. FAOSTAT 2019, online at http://www.fao.org/faostat/es/#data/ Data for 2016. Total cacao exports (cacao exports unprocessed/beans) Only for Guatemala: MAGA (2017). Agro en Cifras 2017. Exports,'000 USD Organización de las Naciones Unidas para la Alimentación – FAO. FAOSTAT 2019, online at http://www.fao.org/faostat/es/#data/ Data for 2016 Only for Guatemala: MAGA (2017). Agro en Cifras 2017 % of all export value Total export value: WDI World Bank (2019). Data online: https://datos.bancomundial.org/indicator/SI.POV.NAHC?view=chart Cacao export value: Organización de las Naciones Unidas para la Alimentación – FAO. FAOSTAT 2019, online at http://www.fao.org/faostat/es/#data/TP Data for 2016. Calculated as Value of all crop exports/Value of total exports Principal markets Organización de las Naciones Unidas para la Alimentación – FAO. FAOSTAT 2019, online at http://www.fao.org/faostat/es/#data/ Data on exporting partners from most recent year available as follows: Ecuador, El Salvador, Honduras, Peru: 2016 142 Guatemala and Nicaragua: 2015 Export Price Beans (USD/MT) Organización de las Naciones Unidas para la Alimentación – FAO. FAOSTAT 2019, online at http://www.fao.org/faostat/es/#data/ Data from 2016. Calculated as Exports,'000 USD/Exports, MT Quality CACAO (ICCO Annex classification) Based on classification in the ICCO Annex C of Fine and Flavor producing countries. Is based on expert assessment of quality potential not actually cacao sold at differentiated prices. https://www.icco.org/about- us/international-cocoa-agreements/cat_view/30-related-documents/215-fine- or-flavour-cocoa.html Quality COFFEE El Salvador: EXPORTACIONES DE CAFÉ POR CALIDAD 30 Junio 2019 AIP_ES. http://www.csc.gob.sv/estadisticas/ Peru: Boletín Estadístico: Café de Perú, Dic 2017 https://www.globalcoffeeplatform.org/assets/files/Resources/General- Information/Peru/Boletin-estadistico-camcafe-19-12-2017-vf1.pdf Honduras: Informe Estadístico Cosecha 2015-2016 IHCAFE, Junio 2017 https://www.ihcafe.hn/mdocs-posts/informe-estadistico-anual-2015-2016/ Certifications Key informant interviews, major certifications used. Imports, MT, (beans) Organización de las Naciones Unidas para la Alimentación – FAO. FAOSTAT 2019, online at http://www.fao.org/faostat/es/#data/ Data from 2016, Total imports (bean imports) Only for Guatemala: MAGA (2017) Agro en Cifras. Imports/Exports, volume Organización de las Naciones Unidas para la Alimentación – FAO. FAOSTAT 2019, online at http://www.fao.org/faostat/es/#data/ Data from 2016. Calculated as Imports, MT/ Exports, MT 143