Get the App:
TechnoServe works with enterprising people in the developing world to build competitive farms, businesses and industries. Working in more than 40 countries across Africa, Latin America and Asia, TechnoServe assists thousands of businesses and improves the incomes of millions of people.
Chosen after a competitive global application process, these four PIMCO colleagues will serve as volunteer consultants in Nicaragua and Peru. From field visits to cost analysis, each PIMCO volunteer works alongside local farmers, helping create small businesses that are sustainable and transformative in their communities.
Position: Executive Vice President, Product Manager
Assignment: Develop an industry strategic plan for the coffee sector in order to design a large scale project to benefit El Salvador´s 20,000+ farmers to improve their short, medium, and long term income growth potential.
“The EEP represents a truly unique opportunity to help improve the quality of life for so many people in a significant and sustainable way, while also giving me invaluable experiences that will advance my professional and personal growth. I am incredibly excited for my project in Central America to begin!”
Position: Associate, FBG-Fund Statistics
Assignment: Develop a coffee sector industry strategic plan, which should include an analysis of the current situation, main problems affecting coffee sector growth, alternatives for positively impacting the sector and its farmers, and a cost-benefit analysis of each.
“I am looking forward to focusing my efforts on improving the lives of Central American coffee farmers. This is a once in a lifetime opportunity to face new challenges and promote sustainable change via economic empowerment.”
Position: Associate, Client Facing - Institutional Corporate
Assignment: Assess the viability and cost-effectiveness of implementing wet-milling in a region of Peru. Build operational and economic models for central wet mill processing for the coffee sector in Peru, that are sensitive to relevant assumptions.
“I am excited to represent PIMCO in helping to develop and grow sustainable businesses to improve communities in rural Peru. This transformative experience will help to shape my perspective as a global citizen.”
Position: Senior Associate, Client Facing - Germany/Austria
Assignment: Build a model based on how the economics of farmers would change with the presence of a central wet mill. Identify revenue and cost drivers for central wet mills, assess the viability of a central wet mill in a given location and propose a strategy for intervention.
“This is a unique opportunity to support communities in Peru through innovative and sustainable solutions that make family businesses grow. I look forward to collaborating with colleagues from PIMCO and TechnoServe as well as local farmers and entrepreneurs.”
Follow John, Scott, Jordan and Kai as they report from the field on their experiences and individual projects over the next two months.
Last week was spent conducting further interviews with coffee farmers around Tingo Maria as well as applying the data and information we have collected so far. The major cost driver arising for farmers, which use central wet mills, are additional transportation costs for the freshly picked coffee cherry, which are about five times heavier than the processed and dried coffee beans. The gains for the farmer are time savings which can be considerable during high season as the individual home processing and drying is time intensive.
Friday marked our last day in Tingo Maria and we had to say good-bye to the very welcoming and hospitable TNS staff in Tingo. Our second field travel, where we will get to know the San Martin region, has just started with a visit to the Asum community. This community of native Peruvians is preserving their cultural roots and language, but also has a progressive approach towards business opportunities. Its coffee association runs a central wet mill for coffee producers in the area. My impression was that this is mainly possible because of the organizational strengths of the community supported by relatively easy access for transportation.
This week we finished our field visits in Tingo Maria, worked from the office on our economic models and caught a flight to Tarapoto to continue our study of the feasibility of the wet mills.
On Thursday, we visited a farm near Rio Barranco that was probably the most beautiful coffee farm we have seen thus far. The river creates small streams of clear water running through the hillside of the family farm. The coffee farmers were also some of the most innovative and entrepreneurial that we had met in the Tingo Maria area. They installed tubes to carry their coffee cherry from the top of their farm to the bottom of the hill where they would complete the de-pulping and fermenting process - this innovation saved 30 minutes per trip down the hill! They used the waterpower from the streams to run the de-pulping machine and also to generate excess electricity for the family to use in the house. It was incredibly exciting to see the innovation of these farmers and I really appreciated the beauty of the landscape in this area.
On a homemade raft in the Rio Barranco region
Tarapoto is our second “home base” for our field interviews. Although we have only spent an afternoon there thus far, already, we are feeling at home. Although the city is hot and humid, it is more developed and has several appealing food and entertainment options. We will finish more field visits this week and then back to Lima for work on our final analysis and presentation.
Our first full week in El Salvador has concluded, and we have already interviewed 10 large organizations in the country’s coffee industry. To better understand the complexities associated with the sector, we met with the following types of organizations:
1. Coffee Associations/Organizations (public and private)
It’s becoming apparent that most parties agree on the issues facing the country. While a general passion for making improvements exists, there is little consensus as to which corrective actions should be taken to resolve the crisis.
After being in Central America for two weeks, I’ve started to realize that an effective strategy will need to be based on a foundation of both quantitative and qualitative analysis. Coming from a statistics related role at PIMCO, my initial thesis was that small farmers should diversify to other crops, such as cacao, to help mitigate volatility. From a quantitative perspective, diversification would help mitigate unsystematic risk, and could reduce the impact of unexpected leaf-rust outbreaks.
When analyzing the same strategy from a qualitative lens, other factors such as family tradition and market perception might suggest a different outcome. Although diversification makes sense in theory, farmers may be hesitant switch to cacao production if their family has farmed coffee for generations. Diversifying away from coffee may also cause El Salvador to lose its reputation as a high quality coffee-producing region, and would reduce the quality premium currently received by many farmers.
From the food to the volcanoes to the coffee farms (picture below), to the overwhelming kindness of the locals, I couldn’t be happier to be living in El Salvador. That being said, we have our work cut out for us over the coming weeks; the problems facing the coffee industry are extremely complicated, and will require a comprehensive solution that includes both qualitative and statistical analysis.
Week 2 represented our first week in San Salvador. It was a week full of meetings as we work to deepen our understanding of the domestic coffee sector. As you might imagine, it’s a complex industry. There are a lot of different players, each having different roles, incentives and perspectives.
This week we met with some of the leading coffee associations, cooperatives, exporters, banks and farmers.
Here we are learning about the different regions of coffee production in El Salvador. This is at the Consejo Salvadoreño del Cafe, an association that represents coffee farmers nationally.
Here we are visiting one of the larger cooperatives (a collection of farms, intended to create some economies of scale). You have to go into the mountains to visit coffee farms because the Arabica trees grow best at higher altitudes; in this case, about 1,200 meters, or 4,000 feet.
This picture was taken following meeting with a farmer (in green) who also runs a large export firm, Abecafe.
I continue to be amazed at how welcoming the people of El Salvador have been both in and out of work. And with respect to coffee, while each party has their own perspective, they all want to see the industry succeed. They have tremendous national pride and a keen awareness of the humanitarian impact the recent coffee crisis has had.
During this week our focus was on data gathering. We spoke to representatives of three cooperatives in the region. Two of them own central wet mills, but only one cooperative is actually operating central mills, and the third one considers central mills not to be attractive given the dispersed location of their farmers. This gave us insight into the local sentiment of important stakeholders regarding central mills and the operational and logistical issues of central wet mills. We also interviewed about 20 coffee farmers. We visited most of them at their (sometimes remote) fields.
To experience the broad diversity of farmers was a very interesting part of this data gathering process, from people just getting started in coffee production to entrepreneurs deepening their value chain by selling toasted and grinded coffee directly to clients as well as their own café latte ice-cream creations.
On Friday we are flying back to Lima and from there to our next field visit in Tarapoto.
This week we completed most of our interviews with farmers and co-operatives. We collected the majority of the information that we need to model the feasibility of implementing a central wet mill. It is difficult, though, to create one single model since the locations of farms are so varied depending on the region and the impact of the roya is dependent on altitude and variety of coffee plant.
We spoke with several co-operatives this past week and they had differing views of the benefits of central mills. The Naranjillo co-operative already has several functioning wet mills and is looking to implement more as they believe it increases efficiency and quality. The Divisoria co-operative is less keen on the centralized milling process and prefers the farmers to complete the milling individually.
This will be our last week in Tingo Maria as we venture to Tarapoto next week to see the work done by previous PIMCO volunteer consultants and to interview farmers and co-operatives working with currently functioning central wet mills. While I am excited to return to Lima and venture to Tarapoto, I will be sad to leave behind the kind and generous TechnoServe colleagues based in Tingo Maria.
Our first week was spent in TechnoServe’s Managua office, and was focused on reading existing strategic plans and meeting with various industry experts. Our initial thoughts are focused around access to capital as a means to increasing farm productivity, and volatility mitigation techniques via crop and varietal diversification. Another area of focus will include analyzing the characteristics of existing debt in the industry; any strategic plan will require capital, and identifying opportunities to restructure debt or access new lines of credit will be critical in an effective recommendation.
On Monday we flew to our new home, San Salvador, to begin collecting data and furthering our analysis of the sector. The coffee industry was once the biggest driver of El Salvador’s GDP, and was heavily intertwined with politics. While seated around the same table that was once used to hold meetings to decide El Salvador’s next president, we gained valuable insight from employees of the Coffee Association of El Salvador.
Similar to Managua, San Salvador welcomed us with an incredible amount of thunder and lightning. Though the rain can be a bit unpredictable, it’s the key ingredient that permits coffee plants to grow, and promotes a unique biodiversity in the region (such as the leaf-cutter ants in our hotel lobby seen below).
Week 1 was spent in TechnoServe's office in Managua, Nicaragua. Scott and I had a few meetings with local coffee professionals to help us get up to speed, and we did a lot of research on our own. The first meeting gave us an overview of coffee production in Central America overall. The second focused on agronomical microfinance. The third was with an exporter who also helps run the "Cup of Excellence," an international coffee tasting competition used to assess quality and final pricing.
All in all, it was a good way to lay a foundation for Week 2.
On Sunday evening, Scott, Ryan and I flew to El Salvador, which is the focus country of our project, to begin the next phase of data gathering, analysis and testing our hypotheses.
Our time in the capital city San Salvador will be split between meeting with local coffee experts and doing additional research on our own. For example, on our first day we met with the President of the Coffee Farmers Association of El Salvador to preliminarily discuss ways of mitigating the country's production challenges. We also had a presentation on challenges faced by domestic coffee farmers and (very high level) potential solutions, delivered by a local consultant at the El Salvador Chamber of Coffee.
Bottom line, we have our work cut out for us. The problems are severe and affect tens of thousands of people, but getting our hands on good data is challenging. However, the people in both countries have been absolutely friendly, inviting, helpful and hopeful that we can help, after so many years (and in the case of El Salvador, decades) of production declines in their coffee sector.
The EEP in Nicaragua/El Salvador has finally begun! PIMCO colleague Scott Argyres and I arrived to Managua on Saturday night (my bags made it one day later), which gave us a full day on Sunday to get settled in. The regional director at TechnoServe, Ryan Bathrick, was nice enough to personally pick us up, and he returned to our hotel Sunday morning to show us some of the local sights before staring work on Monday. So admittedly, this first blog entry (written on Monday) will be more cultural than project-focused, but that balance will soon reverse as we get deep into researching the daunting issues faced by El Salvador’s coffee farmers and other industry participants.
The first stop on our Sunday excursion was Laguna Apoyo, a geographically stunning crater lake. Laguna Apoyo reflects Nicaragua’s volcanic history – it was formed by an imploding volcano cone some 20,000 years ago. Today it is popular among both locals and tourists, just 40 minutes outside of Managua.
We then went to meet some of Ryan’s friends in Granada. One of them, Francisco (Frank) was very cordial and explained some key points of Granada’s history. Granada was the first European-founded city in the mainland Americas, by Spain in 1598. In the mid-1800s, the city (and country) was actually taken over by an American from Nashville – William Walker – who eventually proclaimed himself President of Nicaragua. Not surprisingly, this wasn’t well received in the region, and a Central American coalition forcibly removed Walker roughly a year later, but not until Walker had ordered the burning of much of the city, leaving a sign that read “Here was Managua.” After periods of restoration, Granada is now a very popular destination, offering some of the finest colonial-era architecture in the country.
From there, Ryan and Frank took our group for a little boat cruise of Lake Nicaragua, which is adjacent to Granada. It’s a massive lake, 19th largest in the world, and has hundreds of little islands that were created from volcanic eruptions. This picture, with nearby Volcano Mombacho in the background, looks calm. But 30 minutes later an absolutely torrential thunder storm blew in from across the lake. Yes, August is still the rainy season in Nicaragua!
Monday morning saw our first day in TechnoServe’s Managua office, pictured below. Between Ryan’s introductions and a morning staff meeting, we’ve now met everyone. All the people have been absolutely welcoming and helpful. The day for me and Scott consisted of continuing our research into El Salvador’s coffee industry and a 90 minute meeting with a coffee industry expert who laid out key challenges faced by the coffee farmers and his vision for the future. All signs point to this being a very multi-faceted problem with no apparent “low hanging fruit” solutions, but we’re eager to continue our research and bring a fresh perspective to the mix.
The coming week entails a lot more “get up to speed” research by me and Scott before we head to El Salvador on Sunday afternoon. I’m expecting continued advancement in our coffee knowledge and Spanish skills by this time next week!
Our first two days in Nicaragua have been incredible. I’ve been overwhelmed by the generosity and hospitality of both TechnoServe staff and locals alike. The landscape of the country is spectacular with volcanoes and green hillsides around every corner.
We spent our first weekend visiting the city of Granada, an old colonial city situated near Lake Nicaragua. The lake is known for 365 small islands (“Las Isletas”) that were formed during a volcanic eruption. Our trip was cut short by an unexpected thunderstorm, but we made sure to try some of the local cuisine before heading back to Managua.
Monday was our first day of work, and after meeting with a coffee industry expert, I couldn’t be more excited to start working on our project. The problems facing El Salvador’s coffee industry are severe, and the need for a timely solution is evident. Next week we will leave Managua for El Salvador, where we will begin conducting interviews with participants from all parts of the value chain (from the farmer to the exporter). I’m really looking forward to seeing firsthand how a small red fruit on a tree makes its way from the farm, to the futures market, and eventually to the cups of millions of people around the world.
Last week we discussed in more detail our project, which is to evaluate drivers of the economic viability of a centralized wet mill for coffee. Wet-milling consists of the first of several processing steps in coffee production that happens right after harvesting the coffee cherries; this includes de-pulping, fermentation, washing and drying the coffee beans. Jordan and I have prepared questionnaires for coffee farmers and operators running existing wet-mills. Many farmers in the region around Tingo Maria do not have access or do not use a central wet-mill, but process the coffee cherries at home or close to their fields.
On Thursday, we visited a fair just outside Lima, where we had the chance to taste locally manufactured food. TNS also had set-up a stand promoting chocolate producers from the San Martin region. We were told that the increasing local chocolate manufacturing has also increased local demand (despite the hot weather), which was no surprise to us as they taste great.
Friday morning Jordan and I flew out to Tingo Maria for our first field visits during the next two weeks. The climate here is tropical, humid and hot during the day, but it cools down during the night. The mountainous tropical forest around the town is scenic. After getting to know the office and most of the staff on Friday, we were invited to see the waterfalls close to ‘Tingo’ which are beautiful. On Saturday morning and on Monday we conducted our first interviews with farmers and plant operators. The TNS colleagues have been very helpful and supportive taking us to farms, fields and plants as well as explaining to us the details of the processes. The interaction with the farmers and operators was very interesting and insightful, as we have received a range of opinions on the topic and were able to filter out some data points for our analysis.
Coffee beans laid out for drying on the side of the road
We have completed our first week of work on the coffee project. So far, we have a draft of the condensed presentation from last year’s PIMCO volunteers and have completed nine (9) interviews with coffee producers and wet mill operators. We have also built preliminary versions of the economic models as we attempt to find data points to populate the constants in the models.
Last week, we spent our days in the Lima office where we did preparatory work and research for our interviews with producers, co-operative members and mill operators. While in the office, we were able to attend “El Feria de Hogar” which is an annual fair in the Chorillos district of Lima. The fair had some elements of an American fair (rides, lots of delicious junk food) but also some unique characteristics, like tents containing educational exhibits and Peruvian souvenirs. Also, some of the proceeds from the fair would be used for environmental protection and tree planting initiatives. We attended the fair because several of the chocolate producers that TechnoServe works with were present in a booth. They were raising awareness for and selling their chocolate product. (It is delicious!!)
On Friday, we flew into Tingo Maria on the one flight that travels between Lima and Tingo Maria each day. Tingo Maria is the small city in the Huanaco province where we will be based as we investigate the feasibility of a centralized wet mill. While Tingo Maria used to be considered the center of the “coca” drug trafficking business, in the past several years, it has become a hub of production of coffee and chocolate goods as well as a local eco-tourism destination. After getting settled into the office on Friday, we took a trip to see some beautiful waterfalls, “El velo de la novia.” These waterfalls form from the convergence of waters from the Amazonian hillside into the Amazon Basin.
Saturday, we began our work interviewing farmers in the region. We drove down a bumpy dirt road to meet with two coffee producers who work to pick the product off the coffee trees and then complete the de-pulping, cleaning and drying process at their individual farms. Coffee beans are actually found in the cherry fruit of the coffee trees and the pulpy fruit needs to be stripped away to reveal the beans, which then need to go through a fermentation process. This conversion from fruit to coffee bean is labor and time intensive, but with large distances and difficult terrain between the different coffee farms, it is difficult to establish a centralized milling facility in these areas.
We have met most of the TechnoServe employees based in Tingo Maria. Since the Tingo Maria office is new within the past year, much of the staff relocated from Tarapoto where the office was located previously. They have been incredibly kind and generous to show us around the city and some of the beautiful sites in the region. Although the town is more rustic, the scenery is absolutely beautiful and the people are incredibly open and compassionate. We have a busy week ahead, conducting interviews with producers and co-operative members in the area, as we continue to collect data from a large enough sample to create inputs for our economic models.
On Saturday night, I landed safe and sound in Lima after a long trip from Munich via Madrid.
On the first day, Sunday, Jordan and I explored the city by walking along the cliff that marks the south-western border of the city towards the Pacific. The grey cloudy sky you see on the picture has been characteristic of the weather that is surprisingly humid and fresh at the same time, but fortunately it has not been rainy.
The old city center is further inland and we took one of the newly introduced public busses there. As a marketing campaign, these buses are free on Sunday and therefore packed, which made the bus ride an experience by itself.
Today was our first day in the TechnoServe (TNS) office here in Lima. We were introduced to several consultants and staff. TNS is currently working on three main projects in Lima. In the north, TNS is working with a Swiss company on developing industries that aim to benefit from the growing international trade in the region. In central Peru, from the office in Tingo Maria, TNS operates to support the cocoa farmers as well as coffee farmers; the project is funded by USAID. We will fly to Tingo Maria for the field work part of our project on Friday and stay there for three weeks. The main task there will be to collect data by interviewing coffee farmers, managers of “cooperativas” and coffee traders. While TNS will help us get in touch with the interviewees, our challenge will be to actually connect with them and extract the data points needed for our analysis. This is a rather remote area of Peru which will have an adventurous flavor. Lastly, TNS is also running a project in cooperation with an international mining company that supports local companies and businesses to profit and take part in the economic growth through mining in southern Peru.
In the picture: The Gran Hotel Bolivar at Plaza San Martin in the city center, decorated with the Peruvian flag.
I have just finished the first day of work at the TechnoServe (TNS) office in Lima. We worked closely with Enrique, the TNS country director in Peru, to formulate a timeline for our projects while in-country. We determined that to begin, we would focus on research of the wet mill model inputs and outputs as well as create an outline of our hypothesis for the models. The assignments we are working on in Peru are quite different from those at PIMCO as we are navigating a process that has more potential paths to a conclusion and fewer pre-determined best practices.
Lima has been a great introduction to Peruvian culture. Kai and I landed late on Saturday, but on Sunday morning we headed out to explore. We have both visited Lima previously but took the opportunity to wander along the coast in Miraflores and also to visit the historic city center where the Plaza de Armas and Plaza San Martin are located. Lima has embraced the traditional cuisines of the regions of Peru and we were able to sample some food and drink from Gaston Acurio, one of the most famous Peruvian chefs. We tried some scallop crudo along with some traditional drinks made out of the celebrated Peruvian liquor, pisco.
This week at the TNS office, we will meet with a specialist who will explain some details of the differentiation between specialty coffee and commodity coffee. This will provide some background as we begin formulating our economic models. We also intend to work on finalizing a paper that distills an extensive project completed by previous PIMCO volunteers into a shortened summary version. On Friday, we depart Lima for Tingo Maria where we will conduct interviews with farmers and begin the analysis for our economic models.
This experience has certainly pushed the boundaries of my comfort level given the broader scope of the work on this project and the need to transition to speaking a foreign language. In terms of our work, Kai and I are collaborating on the different models and helping to focus each other on specific tasks that will ultimately result in a successful analysis. I am also focused on improving my Spanish skills, especially given our upcoming departure for Tingo Maria.
That is all from Lima. Next update: Tingo Maria!
The PIMCO Foundation|
650 Newport Center Drive|
Newport Beach, CA 92660|
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660, 800-387-4626. ©2014, PIMCO.
Are you sure you would like to leave?
You are currently running an old version of IE, please upgrade for better performance.