Coffee shops, farmers and a banker team up to save Latin American coffee

Wednesday, December 4, 2013

Coffee trees in Central and South America are in danger. They have always been vulnerable to a disease called leaf rust, or la roya in Spanish. But now a warmer, wetter climate is creating the worst outbreak in a generation.

Some 2 million people work in the coffee industry from Guatemala to Peru. Now, an estimated 400,000 of them are out of work. And, things could get worse.

Thousands of miles north in New England, some coffee shops and small bankers are working to make sure that doesn’t happen. They include people like Willy Foote with the non-profit investment firm Root Capital.

Foote traded in his power suit on Wall Street for jeans and a sweater vest in the 1990s to start Root Capital. Since then, his organization has loaned nearly a half billion dollars to small agricultural businesses throughout the developing world. He’s turned his attention to Central American coffee farmers battling leaf rust.

Foote isn’t your typical banker. When we met in his office in Cambridge, Mass., he wanted to play me a popular Latin American folk song about coffee on his guitar. Foote re-wrote the lyrics, and the song is now about the fungus impacting coffee, with lines in banker-speak.

“May the coffee rust die in the fields, thanks to a downpour of support and credits from buyers paying special premium prices,” said Foote, reading some of the lines.

As Foote was getting ready, I was thinking, this is going to be uncomfortable. I was wrong. It’s hard to believe that a song about a fungus and banking could actually be really engaging. [Listen to Foote sing by clicking the audio link above.]

Foote spends his days convincing wealthy donors to loan him money at low rates. Then, he loans that money back out at slightly higher rates, anywhere from 9 to 12 percent. Foote says his loans go to farmers operating in the so-called “missing middle.”

“They’re too large for microfinance, like the $300 loan to the street vendor, the shoe cobbler. And still too small, too risky, too remote for traditional banks,” he says.

Root Capital’s loans in Central America will be used to replace diseased coffee trees with a new, rust-resistant variety. The company recently made its first loan of $2 million to a farmer cooperative in Nicaragua.

Source: PRI - The World (link opens in a new window)

Categories
Agriculture, Entrepreneurship
Tags
agribusiness, impact investing