Understanding the coffee and cacao market systems in Latin America

By Luisa María Claros and Jenny Wiegel

An analysis across six countries, taking a “snapshot” of the coffee and cacao market systems to understand them, compare them, and provide context for new investments from the MOCCA Project was the challenge we undertook in 2019. In this story, we share every step taken along this journey.

MOCCA is a 5-year initiative funded by the United States Department of Agriculture (USDA) and implemented by a consortium led by TechnoServe.

The diagnostic study, strategy, and actions of the project entitled Maximizing Opportunities in Coffee and Cacao in the Americas (MOCCA) are framed within the Market Systems Development approach (M4P ). The baseline study sought to capture both a “panoramic picture” of the market systems where it would take part and a “close-up” from the standpoint of the producers involved. Such “close-up” was registered through producer household surveys, while taking the “panoramic picture” – the main subject of this story – entailed a multidisciplinary team of researchers from CIAT interviewing different stakeholders from the coffee and cacao sectors in six Latin American countries, including El Salvador, Guatemala, Honduras, Nicaragua, Peru, and Ecuador (where we covered only cacao) between March and August 2019.

The Market Systems approach is widely known and used among donors and development agencies to design and implement programs and projects. This approach seeks to transform markets into functional and useful systems for smallholders and vulnerable populations or populations living in poverty. However, as expressed by Peter Beez in the foreword of the Operational Guide about M4P at the Swiss Agency for Development and Cooperation (SDC), “Market systems development remains a work in progress. It has enormous potential to increase the sustainability and impact of development interventions, but it requires that practitioners and policy-makers continue to learn from and build upon the lessons learned to date.” That is one of the main reasons we are sharing our experience in this blog.

TechnoServe is the MOCCA Consortium Leader and conducts the coffee program, while Lutheran World Relief leads the cacao program. On the other hand, WCR works in strengthening nurseries (the large ones), as well as in coffee research activities. ISF designs long-term sustainable financing mechanisms in the different countries.

The purpose of the diagnostic study was understanding the structure, dynamics, performance, and limitations of the coffee and cacao systems (each sector by country) incorporating the vision of all stakeholders involved in the main market system, and their interconnected or support market systems, through a national, regional, and intersectoral interpretation. The central focus of the analysis was understanding how these market systems help or hinder the actions required for the rehabilitation and renovation of coffee and cacao plantations in the aforementioned countries. With this key question in mid, we prioritized informants and topics of discussion.

The collection of primary information represented a major methodological challenge in terms of time, coverage, variety of stakeholders, countries, and the dynamics within value chains. The research gathered the voices of 297 stakeholders from Central and South America, which were triangulated with each other and with desk-based research. Figure 1 shows the steps we followed in each country and sector to understand the system.

Figure 1. Methodological steps for the diagnostic study at the market system level

Preparation for field work: analyzing secondary information, reviewing objectives, defining questions, and identifying key stakeholders

The diagnostic study had to be in accordance with the project’s theory of change. In the case of MOCCA, the interest lies in having smallholders increasing their profitability and productivity through the generation of systemic changes to allow access to knowledge, high-quality inputs, and financing for rehabilitation and renovation (R&R). Therefore, in this first stage, we focused on defining the categories of stakeholders relevant to the sectors, whose role or action could make a significant impact on the operation of the main or support market system to obtain the results foreseen by this theory of change. Some of the categories included:

“The analysis delved into stakeholder categories already included in the design of MOCCA (access to financing, genetic material suppliers, buyers, and others); therefore, the results of the analysis were useful to reconfirm the operational strategy developed by MOCCA”, Luisa Arredondo, Monitoring, Evaluation and Learning Director at TechnoServe.

Once the categories were established, we reviewed secondary information sources (documents, websites, social networks, and lists provided by the project team) and we created a list of stakeholders for each category. Considering the list was long and our time in the field was short, we prioritized stakeholders taking the following into account:

For instance, from the list of financial institutions, we selected one public bank, one private bank, and one microfinance entity; the three with the most significant portfolio (based on the amount of funding) for coffee (or cacao) among their peers. We designed semi-structured interviews for different stakeholders, as well as guides for focus groups of producers and extension workers, with the purpose of obtaining accurate information from the perspective of the stakeholder we were interacting with.


Field work: how we got organized to cover most stakeholders and the relevant perspectives in two weeks

For field visits, we had two teams, each of them was integrated by two researchers (one focusing on coffee, and the other one on cacao); they traveled on 2-week missions in each country, visiting two countries simultaneously (to address four of the six cases; the other two countries were addressed separately). The agenda was agreed upon with stakeholders through email and phone calls seeking to schedule appointments for the first two days with MOCCA partners and with stakeholders, such as public institutions, which could provide us with a broad picture of the context and could connect us with other stakeholders they considered key to our study. On site, the days passed with alternation of 1-to-2-hour interviews with each stakeholder, four interviews every day for seven days, and two to four days of field visits to nurseries, input providers, and producer cooperatives. Some setbacks in traveling to major production zones or the limited time of people engaged in the frantic operation of the coffee and cacao sector tested our team’s ability to adapt, but they did not prevent us from obtaining relevant information for the analysis.

Participants in the focus group of coffee producer associations. Intibucá, Honduras. May 2019.
Field visit to a coffee nursery. Jaén, Peru. March 2019.

Field work analysis: reviewing notes, preparing flow charts of the main and support market systems, and describing our findings

Based on the notes taken during the interviews, group focus discussions, and field observations, a qualitative data synthesis was carried out and presented in a document we call Country Notes. There, we recorded the findings related to topics of interest for the project, such as: major ongoing initiatives or in the design phase; issues; perceptions about stakeholders, the role of government, the role of the private sector; R&R; and description of support systems relevant to MOCCA.

After this, and based on our observations, we generated a map of the main market system (Figure 2), which contains the value chain in its core part (stakeholders involved in coffee/cacao trade and cash flows) in its main competing channels; information showing us how the chain operates and its systemic efficiency. On the upper part, we registered the standards, laws, and programs regulating the operation of the chain. On the lower part, we identified the services supporting the operation, information that would allows us to identify key services, or missing services in its operation.

In addition, each key support system for MOCCA was plotted separately: financial services (Figure 3), genetic material, research and technical assistance.

Figure 2. Main coffee market system in Nicaragua.
Figure 3. Support market system: financial services for the coffee sector in Nicaragua

The final report reflects all this information in the form of “country snapshots” in which we describe the situation of the coffee and cacao market systems, with visual support from the maps and general statistical information of the countries. In addition, it identifies market system entry points to strengthen the rehabilitation and renovation within the relevant sector. The full report also includes a comparative analysis at the regional level, which identifies similarities in the dynamics found in each country and the areas of the sector providing opportunities for horizontal learning or for interventions in multiple countries or sectors. It also helps visualizing possible synergies and collaborations to generate inclusive markets for coffee and cacao producers with limited opportunities.

You can become acquainted with the full report on this experience here. The analyses by country and sector are also available separately: Coffee in Nicaragua, Coffee in El Salvador, Coffee in Honduras, Coffee in Guatemala, and Coffee in Peru; Cacao in Nicaragua, Cacao in El Salvador, Cacao in Honduras, Cacao in Guatemala, Cacao in Peru, and Cacao in Ecuador. All these documents are also available in Spanish in the Spanish version of this blog. Learn more about MOCCA here.

The development of this story has been funded by PIM, in order to promote the use of the knowledge generated by the MOCCA project [which is funded by USDA and implemented by a consortium led by TechnoServe] beyond the scope of the project, as the results of MOCCA have the potential to also serve as guidance for investments in the coffee and cocoa sectors of several Latin American countries