Caribbean & Central America - February 2025

Costa Rican coffee producers are set to suffer crop losses due to unseasonably heavy rains and labour shortages which have limited harvesting capacity, adding to long-term issues in the sector.

Attracting workers to harvest coffee has been an issue for producers for years. The vast majority of the work is carried out by migrants, typically seasonal labourers from neighbouring Nicaragua. However, a recent reform introduced by Nicaragua’s President Daniel Ortega and approved by lawmakers on 28 November has made it less attractive for people to cross the border for temporary work, with a new migration law imposing a fine of US$1,000 and up to six years in jail for people who enter or leave Nicaraguan territory irregularly. This affects the many seasonal labourers who use informal border crossings between the two nations.

While the two countries have an agreement allowing the temporary formal entry of workers, less than 50 Nicaraguans had entered Costa Rica using the scheme so far during this harvest season, which runs from October to March depending on the region, according to Víctor Carvajal, Costa Rica’s agriculture minister. Labour shortages are also exacerbated by changing migration patterns: whereas there was previously a significant flow of Nicaraguan migrants south to Costa Rica, many have instead chosen to migrate north to the US more recently, according to a May 2024 report by the US Department of Agriculture (USDA)’s Foreign Agriculture Service (FAS).

Labour shortages mean that coffee goes unharvested and producers have less to sell, affecting their income. In response, Costa Rica’s coffee institute (Icafe) has launched a campaign urging students and other informal workers to consider temporary work in the sector. Farmers are offering higher rates of pay than normal due to labour shortages, but attitudes towards agricultural work have changed in recent decades.

Although coffee prices have risen to record levels this year, Costa Rica’s coffee sector is facing long-term structural issues. Production has fallen in recent decades and producers are also struggling with the effects of climate change, such as unpredictable weather patterns and the increasing incidence of diseases such as coffee rust. 

Other issues include the increased cost of agricultural inputs such as fertiliser, and volatile prices on the international market and a worsening exchange rate. The Costa Rican colón has weakened against the US dollar, reducing spending power and making imported products such as equipment and fertiliser, which are bought in dollars, even more expensive.

In an effort to address this issue, Icafe and Costa Rican leading commercial bank Banco Nacional announced on 20 January that an agreement had been reached to offer an improved exchange rate for coffee producers. In an article published 21 January, Gustavo Jiménez, executive director of Icafe, told local media outlet Delfino that the deal would allow coffee producers to exchange their income into dollars at a better exchange rate than the bank normally offers. “This means better prices for producers and a positive impact on the whole coffee value chain,” said Jiménez.

However, while this measure may provide some small benefit to coffee producers, it will not help to deal with the wider issues at play. According to FAS, coffee production in the 2024/2025 market year will remain around record low levels as a result of labour shortages and weather-related challenges. The FAS forecasts production of 1.185m 60-kilo bags, around the same as 2023/2024.

There is also a question of changing political priorities affecting the sector. For decades, Costa Rica relied on agricultural products such as coffee and bananas to drive economic growth, but successive governments have been working to build out high-tech manufacturing capabilities. The country has succeeded in developing a large and growing medical devices industry, and it is looking to become a regional hub in the semiconductors supply chain. As a result, supporting coffee producers is less of a national priority than it was in the 20th century.

The coffee sector has been adapting to this changing reality, focusing on high quality beans rather than mass production. It has also developed a focus on sustainability, as well as the European market, which now accounts for almost 40% of coffee exports, according to Icafe. 

Efforts to improve sustainability, such as better data collection and traceability, mean that Costa Rican producers are better prepared for proposed European Union (EU) rules banning products linked to deforestation than its regional peers. In fact, Costa Rica exported its first batch of deforestation-free coffee to the EU in March 2024, an achievement hailed by José Vicente Troya, the United Nations Development Programme (UNDP) representative in the country.

Icafe president Guillermo Trejos Soto believes that these early efforts to ensure compliance with the new EU rules will favour the country’s exports. “I believe Costa Rica is one of the pioneer countries worldwide,” he told international non-profit Preferred by Nature, which is headquartered in Denmark, in an article published January 2024.

On the other hand, the FAS has said that “it does not appear that the majority of growers supplying beans to the EU in any given year could be compliant with the requirements.” Increasing the number of producers that are able to comply with the proposed EU rules would help to maintain market access, but doing so will not be easy as many may not have the technical capacity to use, or the capital necessary to invest in, the kind of technology needed to satisfy the regulations.

As a result, the outlook for the coffee sector is bleak. Even if a solution to labour shortages can be found, which appears unlikely in the short term, producers are being squeezed by high prices of inputs and the cost of complying with new EU regulations. This will likely push up coffee prices, meaning only premium, speciality products remain viable and leaving the majority of coffee producers out of work.

Deforestation-free coffee

“Costa Rica is ahead of its time, ensuring the preservation of a crucial commercial avenue for coffee,” said José Vicente Troya, the United Nations Development Programme (UNDP) representative in the country in response to Costa Rica exporting its first batch of deforestation-free coffee to the European Union in March 2024. In a UNDP statement at the time, Troya said “this accomplishment underscores the nation's institutional structure and productive capability, rooted in a tradition of sustainability that encompasses economic, social, and environmental dimensions.”