Will the Green Deal affect Nicaragua’s exports to the EU?

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By Marco Echevarria

At the regional level, there is concern about the impact of the entry into force of the European Green Pact regulation on exports of coffee, cocoa and livestock exports to the countries of the European Union (EU). However, in Nicaragua, although it sends to that market part of the coffee and cocoa it produces, the issue is not yet addressed. At least not publicly, or with small producers, who in the coming months could be the most affected by the new regulations.

According to the European Union (EUSR) Deforestation Regulation, since the end of 2024, on the EU market to market livestock (meat), cocoa, coffee, African palm, rubber, soybeans and wood, it will be necessary to demonstrate that these raw materials are free from deforestation and produced legally. The new regulations state that:

Free of deforestation: it will be raw materials produced on land that have not been subjected to deforestation after 31 December.

Legally produced: they will be those that comply with the country’s legislation, in this case Nicaragua, referring to the production of each of these raw materials.

According to the analysis: Can small farmers in Central America export coffee to the European Union?, published on the blog of the World Bank (WB), the new EU legislation aims to prevent commodity imports from contributing to deforestation; and warns that one of the most affected will be coffee, a key product in the exports of most Central American countries.

Coffee and cocoa between affected exports

In Nicaragua for centuries coffee was the star product of the export basket, but in the last decade, meat and gold competed for that position until they managed to move it to second place in a few years and to the third in others. Despite the displacement, coffee remains one of the country’s three main products of exports; and the EU market is the destination for about 35 per cent of each crop, which in recent years has been around 3 million quintals.

According to reports from the Nicaraguan Unique Foreign Trade Window (Vucen), formerly Cetrex, in the coffee harvest 2022-2023, about 1.1 million quintals equivalent to 36 percent of the total harvest, were sold in Belgium, Spain, Italy, Germany, Ireland, Estonia, Sweden, the Netherlands and Greece. On the other hand, although it occurs in less quantity, its main market is Germany and other countries of the European Union. In 2022, some 24,966 quintals were exported.

The article published by the World Bank (WB) explains that once new regulations enter into force, importers (buyers) of these products should submit a declaration including geolocation and product date, supplier identification and verifiable information that the products are free from deforestation and have been legally produced. He adds that importers are also expected to assess the risk of non-compliance and show evidence of risk mitigation measures.

Small producers with more difficulty

Although the analysis published on the WB’s blog is focused on the obstacles faced by coffee and cocoa produced in Guatemala and Honduras, to meet this new requirement, a leader of the export sector who, for fear of reprisals, considers that because of the similarity of the Nicaraguan production model, coffee and cocoa they will face the same problem.

According to the analysis, given the complex mechanisms behind deforestation, it is not easy to assess the extent to which coffee cultivation is a driver of deforestation. However, some recent analyses in neighbouring countries estimate that a minimum percentage of established areas of coffee and cocoa could be affected by the new measure.

However, the analysis warns that the challenge, however, lies in the process of due diligence on deforestation-zero requested by the EURD, which would be based on traceability and information systems difficult to obtain for a fragmented value chain. Fragmentation that is replicated in Nicaragua already 30 percent of the 180,219 apples of coffee plants reported in the IV National Agricultural Census (Cenagro, 2011), was in fewer small producers with less than 20 blocks.

You can also read: Regime closes the Cosep and all its cameras

No union organizations that support

Despite its noble objective, to date the EURD risks excluding poor and ill-equipped farmers from the EU market, who do not have the means to document their deforestation-free status, warns the analysis published on the WB’s blog. 

Another problem, according to the export leader, is that these new regulations were announced in 2021 and nine months after their entry into force, very little is known about them and the authorities are apparently doing nothing to guide exporters so that they can meet the new requirements.

In addition, it should be remembered that in the absence of business organizations, especially the Association of Producers and Exporters of Nicaragua (APEN) and the Association of Coffee Exporters of Nicaragua (Excan), which accompanied their partners in these processes, this becomes more complicated.

Both organizations suspended operations in March 2023, when the Ortega-Murillo regime cancelled the legal personality to the Superior Council of the Private Company (Cosep) and all the chambers that integrated it, including APEN and Excan.

Costa Rica meets export requirement

While Nicaragua is ignoring the issue, Costa Rica is moving forward to avoid obstacles to its exports from 2025. Two weeks ago he sent his first shipment of coffee with the certification that it was produced without causing deforestation.

This is a total of 275 bags, each with 69 kilos of CoopeTarrazú coffee. This coffee, the result of the work of about 69 producing people from the south of the country, guarantees that it has been harvested on Costa Rican farms that after December 2020 have not deforested in order to extend its agricultural border… In this way, Costa Rica shows that it will be able to fulfill the measure that Europe will require to enter its markets from 2025, says a note published on the website, an organization that helped the coffee growers reach that goal.

In addition, Gustavo Jiménez, executive director of the Costa Rican Coffee Institute (ICAFE), explained that in eight months and thanks to the institutionality and great commitment of the national coffee sector, the parameters of compliance required by the European Union(EU) were defined before the Green Pact.

What to do to maintain exports to the EU?

According to the analysis published on the World Bank blog, to meet this requirement, countries must make targeted investments, while public-private sector systems could reduce the burden of generating evidence for individual actors, and facilitate access to verifiable information on land use and deforestation.

They advise developing and managing national forest monitoring systems, tracking coffee-growing areas, and farm records that can provide reliable maps and real-time assessments of the deforestation scale, land use and location of coffee plots.  Lessons can be learned from other value chains that have developed measures to ensure traceability, the document says.

In addition, it warns that it will be fundamental to increase farmers’ connectivity through digital tools and communication from sectoral institutions. Producer organizations and cooperatives, formal intermediaries, and public sector entities can play a crucial role in centralization and knowledge and service distribution and in providing technical assistance to farmers.

The document concludes by ensuring that the importance of coffee for rural livelihoods and the opportunities presented by the European market motivate a closer look at possible responses to compliance with the EURD. So it is necessary to invest strategically, in digital innovation, capacity and human capital, to build a sustainable, inclusive and integrated coffee value chain in Central America. 

This article has been translated from the original which first appeared in La Prensan NI