Reactions to the Market

Regulation in the Process of Building Capabilities

“…62 Small and medium-sized producers are responsible for the bulk of dairy production. Overall, small producers (one to twenty head of cattle) account for 80 percent of the raw milk produced in Nicaragua; 63 73 percent of Nueva Guinea producers are small, with six to twelve head of cattle. 64 Production takes place in zones with difficult access, distant from market centers.…”

“…Coffee is one of the principal export crops and one of the most important rural activities in Nicaragua. 65 Of the 48,000 coffee farms in Nicaragua, 80 percent are micro-producers with less than 3.5 hectares of coffee and 90 percent are small holders with less than 10 hectares. 66 Most of these farms are located in areas with poor road access and insufficient electricity coverage; for example, only 36 percent of the population in the rural coffee-growing regions of the north has access to electricity, compared to 56 to 68 percent of the urban population.…”

“…In the 1990s, new commercial options developed with trade liberalization policies and the reestablishment of relations with countries that stopped trading with Nicaragua during the 1980s, opposing the Sandinista government. 73 In the case of the coffee cluster, however, producers faced a dramatic downturn in their socioeconomic situation in the mid-to late-1990s when international coffee prices plummeted. 74 Rural households engaged in coffee activities saw large socioeconomic declines, and small farm households were hit the most, even more than poor labor, which was also negatively affected.…”

“…75 In the case of dairy products, their perishable nature and the lack of crucial infrastructure throughout the dairy farming regions of Nicaragua meant that small producers were highly vulnerable to low prices received for their milk. 76 Producers in both clusters were dependent on private traders and processors that paid substantially below market prices for advance pre-harvest contracts, or for on-the-spot purchases that dominated these rural markets, in a context of limited financing and geographical isolation. 77 Both the dairy and coffee cases represent attempts to trade away from commodities or undifferentiated products as part of local strategies to confront their existing vulnerable market conditions and uncertainties.…”

“…Most of Nicaragua's milk products, estimates state 75 percent, were sold in the domestic market. 82 Locally, small producers were already struggling with drastic seasonal price fluctuations and unreliable payments from intermediaries or middlemen. Small dairy producers had constant income insecurity, resulting from particularly abundant production in the rainy season, lack of refrigeration tanks to store milk, product perishability, and isolated location; all of these factors combined to create high price volatility, drastic variation in producers' cash flow, and low-quality dairy products.…”