45105 - GWFP Mercon 2021

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Summary of Investment Information

Project Number

45105

Company Name

MERCON B.V.

Date SPI Disclosed

Mar 25, 2021

Country

Latin America and the Caribbean Region

Region

Latin America and the Caribbean

Projected Board Date

Apr 25, 2021

Environmental Category

B - Limited

Status

Active

Last Updated Date

Jun 12, 2021

Department

Regional Industry - MAS LAC

Industry

Financial Markets

Previous Events

Approved : Sep 21, 2010
Signed : Apr 29, 2021
Invested : Apr 30, 2021

Sector

Commercial Banking - Trade and Supply Chain

Additional Project Attributes

Blended Finance

Project Description

Headquartered in the Netherlands, Mercon Coffee Group (“Mercon”) is a vertically integrated global green coffee supplier. Mercon is among the leading coffee suppliers in the world and has extensive experience in farming, production, trading, marketing, logistics and risk management in the coffee industry.

With 65 years of experience, Mercon sources green coffee from major coffee-producing regions and merchandizes and supplies it to leading coffee roasters on a global basis.

This proposed investment consists of a revolving credit facility of up to US$60 million by IFC (the “Facility”), which includes up to US$18 million from the Private Sector Window of Global Agriculture and Food Security Program (GAFSP) with focus on Nicaragua in favor of Mercon. The proposed investment aims to support the coffee sector value chain from production and storage in IDA countries in Central America (Nicaragua, Honduras) and other producing countries (Brazil, Guatemala, Vietnam) to commercialization in multiple destinations.

Associated Advisory Engagement

IFC Advisory Services Project #604064 (approved on September 2020) is a program that centers on avoiding conversion of natural areas and implementing best agricultural practices to increase the supply, productivity and quality of 835 Robusta coffee producers. The 3-year program is expected to enhance the existing technical knowledge for Robusta production in the Caribbean Coast of Nicaragua.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	50.0
Loan	150.0
Equity

Development Impact

Access to finance and markets: The project will continue to have significant positive impacts on the main stakeholder groups, and especially on coffee farmers and surrounding communities. The farmers should continue to benefit from reliable access to markets and in select cases access to finance and training provided by the group, particularly in regions where financing has become challenging. The Company's activity is benefiting the producers directly as it purchases their products and provides them with financing, certification, logistics, and forward price fixing. Inclusive: With more than 20% of Mercon's global supply from farms of less than 5 hectares, the investment is classified as inclusive in terms of reach to smallholder farmers. IFC expects the project, through the complimentary IFC Advisory Services project (#604064), to help farmers in Nicaragua improve their Robusta coffee production, with better quality and higher yields. This is also expected to introduce practices to strengthen the sustainability of coffee production. Integration: IFC expects the facility, through the demonstration and replication channel, to contribute to the strengthening of financial integration of the coffee value chain, in the markets where Mercon operates. This is essentially achieved through maintaining connections between several private sector financial institutions and coffee farmers, cooperatives, suppliers and aggregators.

Non-Financial Additionality - Non-commercial risk mitigation, including trusted partnership: IFC's presence in the Facility is considered as very valuable by commercial lenders. IFC's expected increased exposure to the Origin Countries with GAFSP support, which will help to mobilize existing commercial lenders and new DFI lenders. - Standard-setting, provider of expertise in environmental and social standards: Advisory Services Project #604064 centers on avoiding conversion of natural areas and implementing best agricultural practices to increase the supply, productivity and quality of Robusta coffee producers in Nicaragua. The IFC intervention - in coordination with Mercon - is piloting the establishment of 2 collection centers to provide farmers with access to international markets and technical/logistical support that would otherwise have been unavailable.

E&S Category Rationale / Risks and Mitigation

This is a Category B based on IFC’s 2012 Policy on Environmental and Social Sustainability. The E&S risks and impacts associated with this project are limited, site-specific, and can be readily addressed through generally accepted mitigation measures described in this document. Mercon is aiming for sustainably managing its farming, milling, warehousing and sourcing operations in compliance with applicable countries’ legal and regulatory requirements, IFC’s Performance Standards (PSs), WBG EHS Guidelines (General, Perennial Crop Production, Food and Beverage Processing) and its own corporate policies.

Key E&S risks and issues associated with this investment relate mainly to (i) labor practices among smallholder farmers, including risks of harmful child labor, forced labor or significant supply chain safety issues and (ii) risk of ongoing conversion of natural and/or critical habitat to farmland used to produce the coffee. The E&S risk associated with the farms and mills’ operation relate mostly to occupational health and safety, resource efficiency and biodiversity conservation.

Contacts

For Inquiries About the Project, Contact

Mercon B.V.
Mr. Leonardo Morales
Chief Financial Officer
+1 (786) 254 2300
lmorales@merconcorp.com
Paleisstraat 1, 1012 RB Amsterdam, The Netherlands
www.merconcoffeegroup.com

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