The Situation

The coffee rust (or “roya”) outbreak in Latin America in 2102 and 2013 was the worst incidence of this disease in four decades. By 2013, more than half of the coffee crop was infected and more than $1 billion in farmer revenue lost.

The Opportunity

In the course of the final negotiations for the Fund match, however, Root Capital met an unusual and unforeseeable obstacle. Though Root had been in discussion with the agency for months, only after approval of the grant, was Root informed that project activities in Nicaragua were not covered under the grant agreement for undisclosed reasons. That no agency aid could be spent in Nicaragua at that time, was information that the agency was prohibited from mentioning during the grant negotiations. With the project poised to start, only half funding was available for the largest coffee producer in the group. With this limitation, the impact of the Fund would be drastically reduced, which would also undercut the effectiveness of the Fund as an investment model for the coffee industry.

During project implementation, Root Capital received notice that activities in Nicaragua could commence; however, Honduras was now temporarily prohibited. Root was able to move some funds to address this smaller scale issue.

Open Road's Response

A grant for $95,000 from Open Road was used to match the contributions for Nicaragua invested by two private sector coffee purchasers. Between October 2013 and December 2014, The Fund disbursed $21 million in short-term credit to nearly 20 different coffee clients in Nicaragua and approved $3.5 million in long-term credit to two Nicaraguan clients.

As part of its Advisory Services, Root Capital provided 336 days of training to 20 coffee clients in Nicaragua between October 2013 to December 2014. An effective and lasting roya response must begin 3-6 months before the harvest; due to Open Road’s support, Root Capital was able to double the assistance it offered to vulnerable farmers in time to positively affect the fall harvest. More precise outcome data will be posted on the Open Road website after April.

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