production exists, but data are not available for these types of transactions. Exporters and intermediaries sometimes agree that a farmer’s coffee trees are adequate collateral to guarantee short-term production loans. Interest rates vary widely. Some coffee producer associations and cooperatives have tried over the years to provide credit, but this has not been widespread nor have these institutions been sustainable sources of financial services.

The CRMG survey showed that only 20% of the largest and medium-sized coffee producers received production credit, compared to around 13% of the smallest-scale producers. An econometric analysis (using CRMG survey data) of credit uptake by coffee producers found that producers who received a large share of farm income from coffee (i.e., they were more specialized in coffee production) and those that belong to producer associations were most likely to receive loans. Land holding size and household head’s education were not significant determinants of credit uptake (CRMG, 2003). These results suggest that membership in a producer association may be an effective way of promoting more short-term credit among coffee producers.<sup>39</sup> Also of interest was the result that surveyed coffee producers who claimed that weather related risks were very important were more likely to obtain credit.

# _Environmental impacts of coffee_

Coffee production can play an important positive role in the protection of natural resources in Dominican Republic, especially plantings located at the head of the major watershed and main rivers in the country. Coffee plantations are located in the highest zones of the main mountain ranges in the country, in areas where the cloudy tropical rainforest dominate. These areas are critical for sustaining rivers and water quality in general, and susceptible to soil erosion if not properly managed.

Hwang (1992) found that in Central Dominican Republic, continuous coffee cultivation was associated with soil loss rates of 27% and 7% compared to traditional maize on 12% and 28% slopes. Substantial on-farm productivity effects from soil conservation together with the external costs associated with water quality and dam maintenance indicated that more widespread coffee production was a least-cost means of achieving improved environmental quality.

When coffee is produced using an integrated system of coffee and shade trees, soil erosion is reduced.<sup>40</sup> Organic production technologies can further limit problems related to agri-chemical run-off. Trends towards more input-intensive coffee production systems with fewer shade trees and higher rates of fertilization and chemical applications are less consistent with improved environmental quality. There is a need to monitor these changes and design programs and projects that provide incentives for more environmentally benign and/or beneficial coffee production systems.

Wet processing can, however, have negative environmental impacts (Varangis, Siegel, Giovannuci, Lewin, 2003). Wet milling requires large amounts of water (about 200-500 liters to produce 46 kg of green beans). The process is the same whether it takes place in big mills or by individual coffee farmers. Given the large amounts of water used, mills tend to be situated near rivers. Water used in milling is highly contaminating, containing sugar from the pulp and residuals from the fermentation. Discharging the water directly in the stream or river pollutes the

> 39 In fact, access to credit (and especially subsidized credit) has historically been a major motive for producers joining associations and cooperatives.

> 40 See Varangis, Siegel, Giovannuci, Lewin (2003) Chapter IX, pages 54-63 for an overview and references on environmental aspects of coffee production

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