Nicaragua’s Coffee Crisis Worsens Extreme Poverty — World Bank Report Released

June 11, 2004

MANAGUA – Despite years ofdrought, the onset of a coffee crisis and thedevastation of Hurricane Mitch, overallpoverty in Nicaragua fell from 50.3% in1993 to 45.8% in 2001, according to theWorld Bank’s Nicaragua Poverty Assessment,released last week.But the macro-economic numbers offerlittle comfort to Nicaraguans living in ruralareas of the country – especially in the coffee-producing sector – where two out ofthree people live in poverty and more than25% of the population struggles to surviveon less than $1 a day, according to the report.“Nicaragua’s advances in povertyreduction over the past10 years are encouraging,but we also realizethere is much to bedone, particularly inimproving the conditionsof the poor inrural areas,” said AmparoBallivián, WorldBank Country Managerfor Nicaragua.THE report founda stark contrast in the livelihoods of urbanand rural societies, and that poverty reductionvaried substantially by region.For example, in the Pacific Rural area,poverty rates fell by 10% between 1998and 2001, with less significant reductionsreported in the Atlantic Rural, PacificUrban and Central Urban areas.Since 1998, poverty has increased inManagua by 1.7%, but the biggest increasein poverty was in the coffee-producing sector,which represents 23% of Nicaragua’srural population.Extreme poverty shot up 5.7% in thecoffee-dependent Central Rural region,while the incidence of poverty among“coffee households” increased by morethan 2% (and those numbers represent justthe first year of the coffee crisis). In contrast,overall rural households saw a 6%decline in poverty since 1998.THEWorld Bank report also found thatmost social indicators have not improved inthe last decade. A high teen-pregnancy rate,stagnant education efficiency indicators andinsufficient improvement in basic water andsanitation infrastructure all contribute to thegreater panorama of poverty in Nicaragua.Investment in productive infrastructurealso has stagnated since the early1990s, the report found. The result isdecreased access to electricity and a deteriorationof roads in rural areas, despiterecent efforts by the administration ofPresident Enrique Bolaños to invest inelectrification and brick road constructionin rural areas.The report alsowarns that some ofthe factors that contributedto the reductionin overallpoverty, such as internationalrelief aidfollowing HurricaneMitch, are not sustainable.“SUSTAININGNicaragua’s progress in poverty reductionwill require increased productivity,” saidFlorencia Castro-Leal, World Bank SeniorEconomist and author of the report. “Thereport outlines policy actions to boost productivity,including expanding the coverageand improving the quality of education,and increasing access to productiveand basic infrastructure and financial services.”The Nicaragua Poverty Assessmentreport suggests the government should prioritizematernal and child health servicesfor a broader base of families, especiallyreproductive health and prenatal care.The report also says expanded accessto social protection interventions linked tosituations of crisis can help protect the welfareof the poor, break the poverty trap, andreduce the vulnerability of the poor duringdifficult times.

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