NICARAGUA: COFFEE IS CAPRICIOUS KING IN JINOTEGA

UNCLAS MANAGUA 000270 SIPDIS SENSITIVE SIPDIS DEPT FOR WHA/CEN E.O. 12958: N/A TAGS: ECON ELAB EAGR PGOV SOCI NU SUBJECT: NICARAGUA: COFFEE IS CAPRICIOUS KING IN JINOTEGA REF: A. MANAGUA 0124 ¶B. 04 MANAGUA 3534 ¶C. 04 MANAGUA 3065 ¶1. (U) Summary: The economy of the northern Nicaragua department of Jinotega is almost entirely dependent on one crop: coffee. The international price of coffee drives the fortunes of the region, and a poor transportation infrastructure inhibits the development of other industries. The shaky economy is plagued by considerable unemployment, which in turn has driven emigration to Costa Rica and the U.S. Without considerable support from the central government to improve road conditions, Jinotega will continue to face limited development potential. End Summary. ¶2. (U) Poloff and Political Assistant traveled to Jinotega department (pop. 170,000) on January 11 and 12 to discuss politics and the economy with local religious, business, and political leaders (reftel). We experienced first hand the bumpy, slow, slightly nauseating ride from Sebaco (reached from Managua on the relatively pristine Pan American Highway) to the highlands of Matagalpa -- then we endured the even bumpier, slower, definitively nauseating ride to Jinotega on a winding mountain road cratered like the surface of the moon. This narrow, crumbling highway is the main artery to and from the capital city and the route taken by coffee traders, farmers, ranchers, and a few intrepid tourists. Aside from coffee, the engine of the Jinotegan economy, the department exports hydroelectric power (though a lack of rural electrification is a major impediment to development), beef, grains, milk, and some vegetable products. The temperate, unspoiled highland climate and scenery beckon tourists, but this industry remains largely undeveloped aside from a few small hotels and guest houses. LOCAL ECONOMY DEPENDENT ON COFFEE - - - - - - - - - - - - - - - - - ¶3. (U) Everyone we spoke with stated unequivocally that coffee dominates the economy of the department, and the price of coffee determines whether the area suffers economic depression or enjoys a relative boom. Even in boom times, however, most coffee producers still struggle with debt and uncertainty. The members of the Jinotega Coffee Growers Association explained that Nicaragua produces 800,000-1,000,000 quintales (1 quintal = 100 pounds) of coffee every year, 75 percent from Jinotega. Of the 17,000 coffee producers in the department, 80 percent are considered small growers, with only 1-10 manzanas (1 manzana = 2.3 acres) of land under cultivation. 15 percent are medium producers with 10-50 manzanas, and only 5 percent are medium-large or large producers with over 50 manzanas of land. Association member Andres Altamirano opined that a coffee producer needs at least 20 manzanas to earn a "decent living" in a good year, obviously a small percentage of the total grower population. Association president Eduardo Rizo Lopez noted that international coffee prices had increased considerably in 2005, and Jinotegan growers earned approximately US$600 in profit for each manzana harvested. ¶4. (SBU) Despite the high prices in 2005, Rizo Lopez explained that many producers are still living on the edge and endure perennial problems that complicate harvesting coffee and getting the product to market. He complained that the local banks will only lend to growers at "usurious" rates of 14 percent or higher, making it impossible for most producers to obtain financing to upgrade, modernize or expand their plantations. Others struggle with debt when prices fall. Transportation presents another challenge -- as bad as the highway to Matagalpa is, the roads connecting Jinotega city to outlying areas are even worse, or nonexistent. Coffee producer and local APRE coordinator Jairo Fajardo told us that the price to transport coffee from Jinotega to nearby Matagalpa is the same cost as moving the coffee from Matagalpa to the distant Pacific port of Corinto for export. ¶5. (SBU) Rizo Lopez also mentioned the lack of laborers during harvest time. He claimed that growers offer salaries 50 percent higher than the minimum wage, plus meals, health care and "better treatment" than they can expect from a Costa Rican employer. However, the Costa Ricans are able to offer ten months of employment harvesting a variety of crops, versus only three months harvesting coffee in Jinotega. (Note: Major Jinotegan coffee producer Mario Lopez Rizo later informed us that he had "found enough" workers for the harvest by offering "fair pay." End Note.) GROWTH OF OTHER INDUSTRIES STRANGLED BY POOR INFRASTRUCTURE - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ¶6. (SBU) Jinotegans told us that growth in industries other than coffee is inhibited by a lack of suitable transportation infrastructure and a lack of support from the national government. Jairo Fajardo explained that Jinotega's climate offers the possibility for considerable agricultural development, and he has discussed with other coffee growers setting up a coffee tour. Jinotega Chamber of Commerce board member Evangelina Gutierrez reported that the Jinotega Development Council had submitted a number of tourism proposals to the Tourism Ministry, but never received any support. (Note: Five of the six members of the Jinotega Chamber of Commerce board of directors are women -- notable in a rural area known for machismo. End Note.) ¶7. (SBU) Reverend Mario Rayo, the pastor of a local Assembly of God church, told us that some international investors once planned to construct a maquila in Jinotega, but canceled their plans because of the bad roads. The Catholic bishop of Jinotega, Carlos Enrique Herrera, explained that the development of tourism and other industries is stunted by a lack of infrastructure -- the roads are terrible and the only landing area is a helicopter pad at a military base on the outskirts of the city. Herrera mentioned that Lake Apanas, a mountain lake 15 minutes from Jinotega surrounded by verdant hills and stocked with game fish, had been declared a protected area. ¶8. (SBU) After hearing about the lost potential of Lake Apanas from Monsignor Herrera, Poloff noticed a brochure for a development called "Apanas Lake Estates" in his hotel room. The developer, a U.S. citizen with other projects in different departments of Nicaragua, was not available, but Chamber of Commerce member Ligia Ruiz, a partner in the project, agreed to take Emboffs to the location. The site is completely undeveloped except for a ranch house, but affords beautiful views of Lake Apanas and the surrounding hills. Ruiz was unaware of the protected status of the area, or any other impediments to development. UNEMPLOYMENT FEEDS MIGRATION - - - - - - - - - - - - - - - ¶9. (U) The lack of economic diversification in Jinotega has resulted in considerable seasonal and permanent unemployment. Both Bishop Herrera and Reverend Rayo noted significant migration to Costa Rica, the United States, and elsewhere to escape unemployment and poverty. Rayo said that over 15 families from his congregation alone had left permanently for the U.S. and Costa Rica in recent years. He explained that remittances from emigrants "cover the essentials" for many impoverished families in Jinotega. COMMENT - - - - ¶10. (SBU) Jinotega's development potential remains largely untapped due to insufficient transportation infrastructure. Without greater accessibility, Jinotega simply cannot compete with other departments for agriculture, maquila, and tourist income. The lack of attention from the central government has generated considerable resentment in the population, especially against native son politicians who they hoped would support the department (reftel). Frustrated coffee growers and others initiated a road block in Sebaco last year to protest the poor conditions of the highways and carried petitions to the National Assembly in Managua (they were not received). Without some kind of response, politicians in Managua can expect more of the same from angry Jinotegans. TRIVELLI