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### Viewing cable 06MANAGUA270, NICARAGUA: COFFEE IS CAPRICIOUS KING IN JINOTEGA

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06MANAGUA270 | 2006-02-03 23:40 | 2011-06-21 08:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Managua

`

    VZCZCXYZ0003
    RR RUEHWEB

    DE RUEHMU #0270/01 0342340
    ZNR UUUUU ZZH
    R 032340Z FEB 06
    FM AMEMBASSY MANAGUA
    TO RUEHC/SECSTATE WASHDC 5136
    INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

` `

    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

`