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What happened to Cisa Exportadora and why didn’t the police take over its facility?

A month after Mercon Coffee Group filed for bankruptcy protection in the United States, uncertainty is growing for customers of its Nicaraguan representative, Cisa Exportadora, which sells about half of its annual coffee harvest abroad. In addition to the lack of information about the company’s future, police took over the company’s offices and benefits just days ago. It is unclear whether the seizure is part of an intervention procedure requested by Lafise Bancentro as a creditor or whether it was carried out by the state under the pretext of fulfilling the company’s commitments.

As Cisa Exportadora closes stocks in the production areas, small producers sell their harvests to other middlemen, who traditionally buy the grain in grape or parchment form and then resell it. On the other hand, medium and large companies that contract with Cisa, in order to avoid damage to the quality of their harvests, contract drying and grading services to obtain other benefits.

However, a big problem for middlemen and large and medium-sized producers is finding overseas buyers, as coffee is exported through future contracts that were signed before this crisis began.

Another related topic: “This mainly affects small producers.” Cisa Exportadora closure sparks concern in coffee-growing regions

CITIC Securities executives did not respond

By filing for Chapter 11 of the U.S. Bankruptcy Code in early December, Mocon Coffee Group was supposed to continue normal operations in the nine countries where it operates. Even in Nicaragua, they are asking employees to stay on the job. However, representatives of the organization did not show up again, so between four and six thousand of the more than forty thousand registered producers in Nicaragua were exposed to middlemen who took advantage of the situation to drive down prices, even lower price. Excellent condition.

But faced with the absolute silence of Cisa Exportadora executives and concerns over damaged harvests, in most cases they have no choice but to accept small sums of money from middlemen. For several days, LA PRENSA has been trying to understand the company’s situation and future plans, but company representatives did not respond to our questions.

Businessmen related to food production and export, who requested anonymity for fear of retaliation, said the suspension of operations at Cisa Welfare affected their customers, but that the most serious problem was not that, because in the production area, adequate equipment was installed . Ability to process grains. They even commented that the stage of the process that requires the most infrastructure is the drying and that Cisa does not own all the terraces used for this process but rents them out to neighbors for a profit each season.

Also Read: What is Chapter 11 Bankruptcy Mercon Filed for? What happens after declaring bankruptcy?

Will they find a buyer for their coffee?

They assure that most of the harvest has now been cut and processed, and the real serious problem is finding buyers on the international market. “The only way to access these resources is to contact coffee buyers mainly in the United States, and we have to find out if the exporters have these contacts or if these contacts are maintained only by Cisa,” one of the people said. Exporters were consulted.

Another producer explained that in the absence of Cisa Exportadora, middlemen are buying more coffee from small producers. But for mid-sized and large producers, the situation is more complex.

At the beginning of the crisis, welfare agencies refused to receive coffee contracted by Cisa. They believe the company paid for the production in advance because it provided what is known as a mandate to provide technical assistance and resources for agricultural work on the plantation that year, and the money was paid with the harvest. But when they see that the executives or owners of the company are no longer showing up, they start to accept it because not drying and processing the coffee within the stipulated time can negatively affect the quality of the grain.

You may also read: Four national banks among Mercon’s creditors declare bankruptcy

This coffee’s middlemen are at risk

Now, in exchange for paying fees charged to clients, some welfare agencies receive coffee agreed with Cisa. They dry it, process it, and otherwise sort it. However, since they are new customers, it is difficult for them to obtain these benefits to help them export grain, so they are looking for buyers themselves.

The biggest uncertainty, therefore, is who the middlemen and producers who are looking for a market for the coffee that accounts for half of total production will sell it to. That is, up to 1.5 million quintals, since in the last production cycle, exports exceeded 3 million quintals.

“In the coffee industry, contracts are signed in advance, so the question is what are these people doing to find buyers. This situation forces them to accept prices imposed by middlemen or even other buyers, because it is important not to lose the harvest,” said one manufacturer who received consultation.

You can also read: They advise Cisa Exportadora’s creditors to intervene in the company and resume operations to avoid a coffee crisis

Police take over Cisa facility

Furthermore, the producer explains, “While the international price is around $200 per quintal, people who buy this coffee have to pay less because they take a big risk. If they can’t find a purchase What will happen to the home? If they don’t sell it, they will lose a lot of money because if they get a contract to sell it next year, the coffee will be saved for the next harvest and they will have to pay a fee to the warehouse to keep the coffee. “It stores For many months, they may even be able to pay them when they sell. The price is lower because it is a remnant from a previous harvest,” he points out.

While the producer has made various efforts to reduce the damage caused by Cisa Exportadora’s suspension of operations, the police are still taking over the company’s welfare and offices, but so far it is not clear whether the police presence is part of the intervention process. This is the result of an embargo imposed a few weeks ago by Lafise Bancentro, a local banking entity that is Mercon’s main creditor.

There are also concerns that the Nicaraguan government is promoting the intervention under the pretext of ensuring that the company complies with its obligations to local and international customers. However, four days after the seizure, there has been no official statement on the operation.

You can also read: From the bankruptcy of Cisa until today Cordoba was frozen.These are the events that will outshine 2024 in 2023

Debt that leads to bankruptcy

According to a Chapter 11 petition filed by Mercon Coffee Group in New York federal court in early December, the inability to repay $363.34 million in debt was the cause of the financial disaster.

The group’s largest creditor is Rabobank, to which Mercon owes $202.25 million as part of a $500 million revolving credit facility. At the local level, the worst-affected bank is Banco Lafise, which owes $26 million.

The list of local creditors also includes Nicaragua’s BAC and Banco de Finance (BDF), which are each owed $2 million, and the state-owned Banco de Fomento de la Produccion or Proproductomos, which is owed $4.5 million. According to official documents, the funds are protected by active fixed funds.

You can also read: Ortega regime reacts to Cisa Exportadora’s bankruptcy and says it will make it comply with its commercial and financial commitments

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