Tag Archives: El Salvador

Property Rights and Coffee in El Salvador

In this week’s New Yorker,  Kelefa Sanneh details the work of Aida Batlle, a Salvadoran entrepreneur. (Unfortunately only part of the article is available online, but the entire story is a great read). Batlle is a pioneer in the world of high end coffee, growing beans that eventually go into cups of coffee that retail for up to $7 in Brooklyn. From an economics perspective, her story is interesting because she succeeds as an entrepreneur in the face of very poorly defined property rights.

Batlle grew up in the United States where she worked as a restaurant manager and caterer, developing insight into the demands of American foodies. Upon returning to El Salvador as an adult, she used this perspective to see the potential for a coffee crop that is treated with care typically reserved for heirloom tomatoes. Most coffee farmers send their entire harvest to be roasted and mixed in with other farmers’ yields, but she treated her crop more selectively. She accepts only properly ripened fruit and keeps the beans from all of her farms separate to preserve their unique flavors.

Sanneh explains the tacit knowledge that facilitates Batlle’s entrepreneurial awareness:

Plenty of farmers have great land and great cherry, but almost none of them share Batlle’s keen understanding of what her customers want to drink, what they want to hear, and what they’re willing to pay.

As she travels between her farms, Battle brings along two armed bodyguards at all times. This expense is a waste of resources; in an environment where Rule of Law prevails, spending money to protect against crime is unnecessary. An anecdote about one of Batlle’s farms brings to light the conditions under which entrepreneurs work in El Salvador:

The rising [price of coffee] has also made coffee more valuable to thieves. One day this spring, armed pickers arrived at Finca Kilimanjaro: they held the farm manager at gunpoint while they cleaned out the plants. “Kilimanjaro had the highest yield this year,” Batlle says. “But it turned out to be the lowest, because we had two days of non-stop theft. It was awful!” No doubt her beans were blended and sold as generic high-elevation coffee. To Batlle, the thought of this adulteration is more painful than the theft.

If Batlle and coffee farmers like her could focus their energies into their business rather than loss prevention, high end coffee could perhaps be available to those of us who would never spend $7 on a cup of coffee. While trade is a positive-sum game for everyone involved, this type of plunder is a negative-sum game because it diverts productive resources toward defending against theft.