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 norther n 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 cultur al practices in coffee plantations and the marketing of certified 'biodiver sity-friendly' coffee. This paper examines the financial feasibility of inv esting in the certification criteria for a 'biodiversity-friendly' coffee i n farms with different production systems in western El Salvador. Models we re developed to estimate net present values and risks associated with the i nvestment for five hypothetical, but typical, coffee farms: (1) traditional polyculture; (2) commercial polyculture; (3) technified shade less than 12 00 m elevation; (4) technified shade greater than 1200 m elevation; and (5) unshaded monoculture. To invest in the 'biodiversity-friendly' certificati on criteria was financially viable in all farms. The unshaded monoculture f arm type was the most profitable case, and the farm under traditional polyc ulture 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 s ervices, and soft credits could help make the investment more attractive. ( C) 2000 Elsevier Science B.V. All rights reserved.