BIOFIN and Cafecol developing new nature-positive businesses models in Mexico

The Biodiversity Finance Initiative (BIOFIN), of the United Nations Development Program (UNDP), has the objective of increasing and improving the efficiency of resource allocation for the conservation and sustainable use of biodiversity. In Mexico, the initiative has a finance solution plan that encompasses the private and public sectors at the federal and state levels, the financial sector, and the interaction between biodiversity and climate change.

For the private and social sector, BIOFIN has developed the Bioeconomy Strategy, a finance solution for conservation that promotes productive activities that depend on, and positively impact biodiversity. These business models are mainly found in the agricultural, forestry, fishing, and tourism sectors, and have at the core of their development the communities that safeguard Mexico’s natural capital.

To meet the demand for specialized financing, BIOFIN together with Nuup Mexico developed the Bioeconomy Acceleration Fund (FAB). This initiative finances and develops business capacities allowing them to save resources in their internal processes, improve their volume of operation, and access or consolidate in markets with high added value.

In 2020, the FAB invited thirteen companies to participate in a call for the promotion of finance solutions at the local level. Among those selected was Cafecol A.C., an organization that promotes diversified shade-grown coffee produced under agroecological practices as a complementary strategy to conserve cloud forests in Mexico, focusing its activities in the state of Veracruz.

In the upper part, a plot under agroforestry management owned by Jorge Müller. In the lower part, a coffee plantation without shade from another producer.

Cafecol originated in the National Institute of Ecology A.C. (INECOL) as a spinoff that emerged from a research-action project on the evaluation of biodiversity and environmental services of Mexican coffee plantations. Cafecol emerged as a civil association that, through its value chain program and its OIKOS Integral Quality® certification, based on quality, traceability, and transparency, promoted for more than 10 years the capitalization of the productive sector through good cultivation, harvesting, and process practices to access high-value national and international markets.

Cafecol has identified high-value market niches for coffee producers in Europe, Canada, Japan, and an important network of national roasters aligned with sustainability, quality, and fair payment to producers. However, one of the main problems of the model is the limited financial capacities of producers hindering them to participate in Cafecol’s quality program to take advantage of high-value markets. On the contrary, the extensive financial capacities of intermediaries in the conventional market, mainly for purchasing low-value cherry coffee, represent an easy solution for producers, even though the prices and benefits are very limited.

The Bioeconomy Acceleration Fund and Cafecol, have created a revolving fund that will finance the producers' harvests before the season, generating confidence, and increasing their participation in the program. The fund will ensure that sustainable coffee will be shielded against international market volatility. In addition, the element of revolving and co-responsibility of the collection fund will allow its sustainability over time and will increase the number of producers joining the program.

Such is the case of Jorge Müller, a producer from Totutla, Veracruz who produces shade-grown coffee under an agroecological approach that promotes forest conservation. He needs concessional financing to harvest, ferment, and dry the coffee and thus give it added value.

In Ixhuatlán del Café, also in Veracruz, Roberto and his family have been harvesting shade-grown coffee for generations. Recently, they joined Cafecol’s program. Since joining, they harvest high-quality coffee and have been pioneers in their community in the development of agroecological practices. Since then, other members of the community have joined.

Cafecol receives coffee samples at different stages of processing from producers and analyses them in the laboratory of the Biomimic Scientific and Technological Cluster, at INECOL in Xalapa. Through this process, it advises and issues recommendations for improvement in production and guides the producers to enhance crop and post-harvest management.

Another producer who works with Cafecol is Josias ltehua and his family, who live in Nuevo Progreso, a community in the Zongolica mountains. Since joining the program, they have managed to increase the quality of their production and access high value-added markets such as specialized roasters and specialty restaurants in Mexico City.

This is how the FAB supports the acceleration of bioeconomy companies and ventures, becoming a key instrument to cover the gap that exists in the market to finance these types of endeavors. Currently, the FAB is about to start its second phase and it is founding its objectives in innovation, impact, and ecosystem conservation.

To learn more about the FAB, its biodiversity criteria, and examples, you can visit the site: https://nuup.co/fab/