The Republic of El Salvador was built on the coffee industry. Now that very industry is dying.
During its glory days, coffee brought economic growth, turning this small Central American nation into the world’s third-largest producer of coffee.
So when world coffee consumption is on the rise, why is the industry declining? With so many business opportunities available, how are they failing to have an effect? In short, why is Salvadoran coffee on the brink of collapse – and how can it be saved?
Salvadoran Coffee: A Brief History Lesson
To understand how this came to pass, first you’re going to need a little context.
El Salvador became the world’s third-largest coffee producer during the 1970s, and by the 1980s this industry sector was responsible for 50% of the nation’s GDP. Fortunes big and small were based on the ‘golden bean’, as it was called.
At that time, while economic growth increased, economic inequality reached new lows. The top five percent of the population received 38% percent of the total national income and under two percent owned more than half of the valuable agricultural land.
A 12-year civil war erupted in 1980, driving the country backwards drastically. Now, 24 years after the war ended, a stalled coffee industry is on its last legs. But is it just the war that’s preventing the Salvadoran industry from thriving?
Part of the Apaneca-Ilamatepec mountain range in Western El Salvador. Credit: Á. Castro.
Why is the Salvadoran Coffee Industry Struggling?
There are nationwide structural causes as to why the coffee industry has faded, as well as several industry-specific reasons. We’re going to have a look at ten of the most important factors.
1. Weak National Policy
Historically, El Salvador has lacked an integral set of public policies regarding economic, social, and environmental development in rural areas. And even after the war had ended, the economic model excluded agricultural industries as growth and development drivers.
The current government has recently implemented measures to support the coffee industry, such as donations of pest-resistant coffee plants, technical assistance, and pesticide control. Yet these reforms, while very welcome, are not enough to revive the industry.
2. Climate Change
Erratic weather patterns and phenomena such as ‘El Niño’ and ‘La Niña’ have become strong threats to agriculture.
They have caused shifts in the agricultural cycle, diminishing productivity and exposing crops to new, mutated versions of diseases like coffee rust. Farmers are still learning to adapt in order to limit the risks attached to climate change.
3. High Levels of Insecurity
El Salvador has a history of violence that can affect coffee farmers. In 2015 alone, nearly 6,500 people were murdered.
Thousands of businesses, both big and small, are extorted by criminal gangs that fight each other for territorial control. This even includes some rural areas, such as coffee farms. And some farms have even been abandoned as a result.
These coffee flowers release a jasmine-like scent. Credit: Á. Castro.
4. Fractured Land Ownership
A poorly implemented land reform in 1980 was undertaken to prevent civil war, reduce social tension, and bring about economic equality. Unfortunately, this failed.
Now, according to the governmental 2008 agricultural census, there are 16,995 coffee farmers; 52% of them own under 2.1 hectares. This highly fragmented land ownership structure makes it difficult to implement policies and reach economies of scale, despite the existence of cooperatives of different sizes.
5. Poor Access to Financing
Coffee production is a serious risk for lending institutions. And so, commercial private banks (about 90% of the entire banking system in El Salvador) do not lend to coffee farmers anymore. Very few government-owned banks do either – and if they do, it’s on undesirable terms.
What’s more, farmers carry long-term debt that will prevent them from making significant progress.
View of the Pacific Ocean and the Port of Acajutla from the Apaneca-Ilamatepec mountain range. Credit: Á. Castro.
6. Limited Business Understanding
Many producers struggle to manage their farms as productive and lucrative businesses. Some do not have a strict operating plan for their farms, and so their resources and income are either not invested in their farms or are invested inefficiently.
7. Old Coffee Plants and Older Coffee Farmers
There are also farmers who have been unable to renovate their plantations. This has resulted in an abundance of low-yielding old trees: in 2014, more than half of all coffee trees were at least 20 years old, and more than 90% were 11 years or older. And unfortunately, you can’t ask much of an old tree…
Moreover, coffee farmers themselves are often 50 years or older. This is because younger generations have found business opportunities in other sectors, or taken a job that is less risky than farming.
8. Living in the Past
El Salvador’s tragic history has played a part in its lack of modernisation. Many farmers continue with practices that are severely outdated. And that makes it hard to compete against producers from other countries, who are more likely to be comfortable with concepts such as permaculture and biotechnology.
Coffee pickers sorting beans in a farm located in the Apaneca-Ilamatepec mountain range. Credit: Á. Castro.
9. Fractured leadership
Once upon a time, coffee associations worked as a solid unit. Their opinions mattered as their decisions had major repercussions on public policy. But nowadays, various producers, milling and exporting groups, and other organisations are weakened, dispersed, and involved in internal squabbles. When will new leadership arise?
10. Labour Migration
Farm workers are most affected by the coffee value chain – even more than landowners. When work opportunities disappear, they are forced to migrate to urban areas to take other jobs, or even migrate illegally (mainly to the USA). This diminishes the available workforce for larger farms and increases poverty levels for all.
Coffee workers are greatly affected by the Salvadoran coffee industry’s current state. Credit: Á. Castro.
Looking Forward: Can Salvadoran Coffee Survive?
So is coffee in El Salvador doomed, along with the thousands of people depending on it? In short, no. Coffee has the potential to be the main driver of environmental, economic, and social sustainability in El Salvador. However, serious reforms in infrastructure are necessary for this to happen in the long term.
Many Salvadorans rely on the coffee industry and they have a lot to lose. This is why public policies should focus on improving productivity and creating a differentiation strategy that would allow producers to thrive in niche markets – and this is where specialty coffee should be a major focus.
Better business practices should also be implemented to reduce labour migration and improve conditions for workers.
We are already seeing positive effects, though, with the appearance of forward-thinking initiatives that aim to mitigate the effects of climate change. These include tackling coffee leaf rust, improving coffee genetics, and enabling access to direct trade.
It’s also worth noting that not everyone in the Salvadoran coffee chain has been affected in the same way. There are, of course, farmers and millers who have the financial means, the education, and the knowledge to thrive. However, they are rare and not representative of the entire coffee sector.
There is a lot more to be done. It will take time, effort, and financial resources, but that’s up to the stakeholders in the coffee industry.
Coffee in El Salvador will not only survive, it will thrive. Believe that.
Written by Á. Castro of Directo Caffé and edited by H. Paull.
All views within this opinion piece belong to the guest writer, and do not reflect Perfect Daily Grind’s stance. Perfect Daily Grind believes in furthering debate over topical issues within the industry, and so seeks to represent the views of all sides.
Perfect Daily Grind.