The coffee harvest recently started in Nicaragua. However, President Ortega has plans to change the export dynamic after signing a memorandum of understanding (MOU) with China under their Belt and Road initiative.
The Belt and Road initiative is an umbrella term representing China’s strategic foreign policy investment programme, designed to extend Chinese influence in areas previously dominated by the West.
So what could this mean for Nicaraguan coffee?
Coffee is an essential commodity for the country, with a total GDP of about 12 billion dollars, from which 400 to 500 million dollars are generated annually from coffee.
More than 2.7 million 60-kilogram bags of green coffee were produced in Nicaragua in 2018, marking the highest output of the decade for the Central American country. However, the following year, in 2019, that number had dropped by approximately 2.9 per cent.
With the new harvest starting, there is optimism that 2022 could see production in the country increase to more than 2.7 million bags.
60% of Nicaragua’s exports go to the United States, mainly clothing, rolled tobacco, and agricultural products like sugar and coffee.
Yet Ortega has a strained relationship with the US, which he believes makes enormous profits from the country’s commodities while Nicaraguans struggle.
He believes that he can diversify Nicaraguan exports to include other markets and improve trading terms.
Under the agreement, cooperation will be made more accessible, cut red tape for Nicaraguan citizens doing business in China and for the Chinese doing business in Nicaragua.
Yet coffee is already a globally traded commodity, so we are left to speculate over the details. China’s Belt and Road initiative is notorious for having large sums of capital available to deploy on projects where they see a strategic advantage, as they have done throughout Africa.
The lack of maintenance of coffee plantations due to the limited access to credit and the impact of hurricanes ETA and IOTA during the MY 2020/2021 coffee harvest were the main drivers of the decline
USDA Coffee Annual report for 2021
Nicaragua could be tempted to tap into these funds to improve its infrastructure. They could do this via investment directly related to production or in support of logistics, such as transportation infrastructure, but they would be cautioned to read the small print in the contracts as some African countries have reported unhappiness with deals they have made.
