Ecological Economics 33 2000 267 – 281
ANALYSIS
Is biodiversity-friendly coffee financially viable? An analysis of five different coffee production systems in western El
Salvador
Jose´ A. Gobbi
Center of Latin American Studies, The Uni6ersity of Kansas, Lawrence, KS
66045
, USA Received 26 February 1999; received in revised form 1 November 1999; accepted 1 November 1999
Abstract
The current trend for reducing shade cover in coffee plantations in northern Latin America has prompted concern among conservationists because of its potential implications for the loss of biodiversity. To help reverse such a trend,
a project has been launched to promote biodiversity-friendly cultural practices in coffee plantations and the marketing of certified ‘biodiversity-friendly’ coffee. This paper examines the financial feasibility of investing in the certification
criteria for a ‘biodiversity-friendly’ coffee in farms with different production systems in western El Salvador. Models were developed to estimate net present values and risks associated with the investment for five hypothetical, but
typical, coffee farms: 1 traditional polyculture; 2 commercial polyculture; 3 technified shade less than 1200 m elevation; 4 technified shade greater than 1200 m elevation; and 5 unshaded monoculture. To invest in the
‘biodiversity-friendly’ certification criteria was financially viable in all farms. The unshaded monoculture farm type was the most profitable case, and the farm under traditional polyculture was the only risk-free. Capital requirements
for the investment are low, though they increase as shade cover in the farm becomes reduced. Small, cash-poor farmers will need assistance to make the up-front expenditures required to have the farm certified. Incentives for
certified biodiversity-friendly coffee plantations such as tax relief, payment for environmental services, and soft credits could help make the investment more attractive. © 2000 Elsevier Science B.V. All rights reserved.
Keywords
:
Shade coffee production; Farm investment analysis; Biodiversity-friendly coffee; Agroforestry systems; El Salvador www.elsevier.comlocateecolecon
1. Introduction
Shade coffee plantations are potential areas for biodiversity conservation in northern Latin Amer-
ica Pimentel et al., 1992; Perfecto et al., 1996;
Present address: College of Natural Resources and Envi- ronment, 103 Black Hall, PO Box 116455, University of
Florida, Gainesville, FL 32611-6455, USA. Tel.: + 1-352- 3929230; fax: + 1-352-3929748.
E-mail address
:
jgobbiufl.edu J.A. Gobbi 0921-800900 - see front matter © 2000 Elsevier Science B.V. All rights reserved.
PII: S 0 9 2 1 - 8 0 0 9 9 9 0 0 1 4 7 - 0
Rice and Ward, 1996; Moguel and Toledo, 1999. Due to the structural and floristic complexity of
the shade trees, shade coffee plantations can re- semble the original forest and harbor relatively
high biodiversity Perfecto et al., 1996; Moguel and Toledo, 1999. Evidence suggests that shade
coffee plantations help preserve biodiversity and deserve protection Aguilar Ortı´z, 1980; Williams
Linera et al., 1995; Moguel and Toledo, 1996; Perfecto et al., 1996; Toledo and Moguel, 1996;
Wunderle and Latta, 1996; Greenberg et al., 1997; Perfecto et al., 1997; Moguel and Toledo, 1999.
In spite of their potential as refugia for biodi- versity, a trend is underway in northern Latin
America Colombia, Panama, Costa Rica, El Sal- vador, Guatemala, Nicaragua, Honduras, and
Mexico for coffee producers to convert from shade coffee plantations to reduced or non-shaded
coffee plantations. Initially, the transformation was a response to the appearance of coffee leaf
rust Hemileia 6astatrix in Brazil and Central America during the 1970s Perfecto et al., 1996.
The recent tendency, however, appears to be mo- tivated by higher coffee yields per hectare, since
yields of reduced or non-shade coffee plantations are frequently higher than those of shade coffee
plantations Perfecto et al., 1996; Rice and Ward, 1996. Recent estimates indicate that about 41
of the 2.7 million ha devoted to coffee production in northern Latin America have been converted to
reduced or non-shade coffee plantations Rice and Ward, 1996.
From the standpoint of conserving biodiversity, it is imperative to devise strategies to redirect the
ongoing trend toward the simplified shade indi- cated above to biologically more diverse shade.
Recently, a project has been launched in El Sal- vador
to conserve
biodiversity through
the maintenance and enhancement of habitats within
shade coffee plantations. Among the several ob- jectives associated with the project are the promo-
tion of biodiversity-friendly cultural practices and the development of a market for a certified ‘biodi-
versity-friendly’ coffee Oliver Komar, 1998, per- sonal
communication. Of
great interest
is whether the adoption of a certified ‘biodiversity-
friendly’ coffee production system may provide financial returns to act as an incentive to the
farmers to retain the forest cover or increase the density of shade trees in their coffee plantations.
To this end, this paper considers the financial viability of investing in the certification criteria of
a ‘biodiversity-friendly’ coffee under different pro- duction systems in western El Salvador. The ob-
jective of this study is to explore the effects of adopting the biodiversity-friendly certification
criteria on the financial performance of coffee plantations. Information generated through the
models is of potential interest not only to coffee farmers but also to government agencies in charge
of environmental matters and institutions related to the coffee sector. Policy issues of current inter-
est include the development of strategies to con- serve forest cover and biodiversity and to make
the coffee sector more environmentally sound. The results reported here can improve the back-
ground on which to base related policy decisions. Furthermore, given that throughout northern
Latin America coffee plantations share many of the features described in this study, this analysis
can provide some insights for adopting the biodi- versity-friendly certification criteria in other coun-
tries of the region as well.
2. Coffee production systems in El Salvador
