Are remittances disincentivising coffee farming in El Salvador?

coffee farming in el salvador
  • More than 1.5 million Salvadorans live abroad, according to the UN
  • Last year, migrants sent $7.5bn in remittances – making up a fifth of El Salvador’s GDP
  • Some believe it is disincentivising coffee farming; but others suggest it speaks of a wider problem

OVER THE last 70 years, El Salvador has been characterised by irregular patterns of northward migration.

According to the United Nations (UN), around 1.6 million Salvadorans lived abroad in 2019, with an estimated 80% living in the US. This is equivalent to a quarter of El Salvador’s total population.

Although the number of people living in El Salvador has continued to steadily grow since the 1950s, the UN predicts that it could peak within the next two decades.

Naturally, this is having an impact on Salvadoran coffee production. Many farm owners complain that they are unable to find sufficient workers to carry out essential tasks, while the tendency for younger generations to migrate is giving rise to an ageing workforce in rural areas.

However, the loss of manpower isn’t the only consequence of migration. Some believe that remittances – the money migrants send back to families in El Salvador – is removing the incentive to grow coffee altogether.

coffee farming in El Salvador

A blessing and a curse

In many rural areas where coffee is grown, farmers work long hours for low pay with few additional benefits such as retirement or medical coverage. As such, remittances provide a critical lifeline, particularly when coffee prices are low.

“Between 2000  and 2004, many families had to abandon their small coffee plots during the coffee price crisis because they were starving,” says Michael de Groot, a Latin America investment manager for Rabo Rural Fund.

For many families, remittances provide an opportunity to obtain a better standard of living.

In 2020, an estimated 23% of Salvadoran families lived on less than $5 a day. The average annual amount sent back per migrant, on the other hand, is $4,300.

As such, the Salvadoran government is often torn when it comes to discouraging irregular migration and promoting remittances for economic development.

Between 1980 and 2003, the IMF estimated that remittance inflows grew five-fold. Last year, migrants sent home a record $7.5 billion in remittances, comprising more than 17% of the country’s GDP – one of the highest ratios in the world, according to the World Bank.

This is compared to coffee, which brings in 8% of the total GDP and sustains an estimated 20,000 smallholder farmers.

However, the belief that remittances discourage coffee farming completely is shortsighted.

While it certainly eases the pressure, many see the payments as helping to finance the purchase of products, such as fertilisers, while promoting productivity by allowing farmers to reinvest the money into equipment and processing techniques.

Although additional income reduces the fear of becoming destitute, the image of idle farmers as a result is largely unfounded. What’s more, remittances are unevenly distributed. This means that while the average is $4,300 per migrant, not everyone receives such a high figure.

“Remittances to their families or dependence on kin depended much on how much was earned minus what they needed themselves, not a fixed amount,” Michael explains.

salvadoran coffee producers

Symptom of a wider problem

Entering the capital of San Salvador from the road leading to the international airport, there is a great monument representing all Salvadorans living abroad.

This serves as a glimpse into the importance of migration to Salvadoran society. And, indeed, there is no denying the fact that El Salvador has been one of the major beneficiaries of remittances over the last few decades.

That said, any problems remittances have given rise to regarding economic disincentives is a symptom of a much larger problem in coffee production.

Coffee farmers across Central America are grossly underpaid. In 2016, it was reported that Salvadoran pickers received just $4 per day during harvest seasons.

Smallholder farm owners don’t tend to fare much better, battling the combined effects of labour shortages and climate change-induced problems, such as wide-scale outbreaks of coffee leaf rust. The rising prices of fertilisers as a result of the conflict in Ukraine have further reduced profit margins.

This means that the majority of coffee producers struggle to not only reinvest in their farms, but support their family units. When the global price of coffee falls, it can even drive them below the poverty line, where they are unable to afford basic necessities, such as education and healthcare.

“Coffee producers have to take the price that is given to them by algorithms and speculations in the C market,” says Pedro Manga, a sustainability coordinator at Caravela Coffee. “They have to sell on those terms. But that’s not how normal businesses work.”

Therefore, it is not remittances that are disincentivising coffee farming; but rather, the entire system which keeps the more fortunate producers teetering above the poverty line, and the less fortunate below it.

It’s no wonder, then, that coffee-farming families are seeking opportunities outside of production. Remittances are just making it that little bit easier.

Producer & Roaster Forum (PRF) is the world’s largest coffee farmer-focused event in the world.

It connects producers with coffee industry professionals from around the world across two days of talks, workshops, cuppings, and networking opportunities.

Next year’s instalment will be held in El Salvador between March 16 and 17.

Find out more about how to get involved by visiting the official PRF website.