CATALYZE Peru Builds Partnerships to Mobilize Financing in the Peruvian Amazon

Small and medium-sized businesses drive job creation and economic growth. Yet COVID-19 disruptions in supply chains and workforces pushed many small businesses to the brink of collapse, particularly those in the agriculture, tourism, education, and manufacturing sectors. In Peru, COVID-19 took a toll on the country’s coffee sector leading to a 13.8% drop in exports from 2019 to 2021.

“In 2020, we didn’t have enough workers for the (coffee) harvest or logistical support. Unharvested coffee beans fell from the trees and the little bit we did collect was left in warehouses, unable to be exported,” explains a weary Teodomiro Melendres. 

Melendres is the CEO of CENFROCAFE, a cooperative serving a network of 3,000 small coffee producers in 84 locations across Peru, including the Amazon, which has been working for 20 years to increase the quality, production, and exports of coffee from Peru.

One of the greatest barriers to growing his business has been obtaining the financing needed to compete with larger coffee producers, a problem further exacerbated by the COVID-19 crisis. With adequate, timely, and competitive financing, Melendres CENFROCAFE could produce more coffee on less land and export a more sustainably produced product. 

The United States Agency for International Development (USAID) CATALYZE Peru Activity is helping businesses like CENFROCAFE CATALYZE and its suppliers access private capital to expand productivity and jobs in sustainable ways across Peru’s Amazon. Implemented by Palladium, CATALYZE Peru is 3.5-year activity under the global eight-year USAID CATALYZE,  which will mobilize $2 billion in blended finance over eight years (through 2027) for development. CATALYZE focuses on building a sustainable supply of private capital in under-financed sectors and frontier markets to create jobs, expand sustainable social services, optimize supply chains, and advance inclusive growth.

While the Peruvian Amazon accounts for 94% of the country’s forests and 65% of the country’s land mass, the productivity and economic growth of the region is lagging behind the rest of Peru. The region accounts for only 3.7% of all financial system lending and 1.9% of deposits; it also has lower rates of public expenditure and GDP per capita than the national average. Working with partners like CENFROCAFE, CATALYZE Peru has committed to mobilizing $106 million in private financing to strengthen the economy of the Peruvian Amazon. In the case of CENFROCAFE, the value of financing needed for the cooperative and for its suppliers is estimated at a minimum of $20 million.  

CATALYZE Peru cultivates strategic partnerships with large-scale anchor firms, providing technical assistance on business models and financing and connecting them to financing opportunities for both themselves and the smaller partners in their value chains. The project also incentivizes financial institutions to provide more financing to small and medium-sized enterprises. Moreover, CATALYZE Peru supports the development of digital information systems that increase partners’ competitiveness and access to finance. 

Partnerships on CATALYZE Peru are co-designed between the anchor firm and the project team to channel “bespoke” technical assistance and financing support structured in a way that pays assistance providers upon achievement of concrete financing and business improvement results. In the case of CENFROCAFE, the strategic partnership will provide technical assistance to help it restructure its financing and investment systems so it can obtain $20 million in financing for storage, processing, and sales activities, support 1,350 suppliers’ access to financing to improve productivity and processing for coffee on their existing 2,000 hectares of coffee plantations, help the company appropriately manage these new resources, and put in place a traceability system that tracks coffee from the farm to harvest to the processing site and to the point of export. 

“I have been concerned about having the liquidity to pay members of the cooperative for their products. We really need technical assistance so we can reach investors that trust in us and will provide us with the capital we need,” says Melendres as he reflects on the pressures he has been facing.

Now, Melendres is starting to feel optimistic. “Working with CATALYZE Peru fills us with hope that we will reach our goal of obtaining $20 million in capital financing and continue to grow.”