Is biodiversity-friendly coffee financially viable? An analysis of five different coffee production systems in western El Salvador

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. (C) 2000 Elsevier Science B.V. All rights reserved.