Financial profitability in the renewal of coffee plantations, in Los Santos, Costa Rica

Abstract

The 35,2% of the costarican coffe park is more than twenty years, which brings productivity and management issues, in this lays the importance of making the change in the crops through renewal of the harvests. The study of the renewal has been done taking into consideration the costs and production of one coffee hectare based on Los Santos, Costa Rica, according to the data the producers of the place gave in the year 2015. The conditions of financing that are required for the renewal to the productive performance and of the income are shown in the cashflow of the activity. The return of the renewal is compared by adjusting the term of the financing under two scenarios, one to ten years and another to fourteen, under loan conditions granted with funds from the “Banca para el Desarrollo”. In the first case, a negative response was obtained with a NPV of -¢ 126.539,94 and an IRR of 13,47%, while for the 14-year financing term scenario, the NPV was ¢ 691,50 and a IRR of 17,43%, with the minimum required rate of return (Capital Cost) of 17,39%. Finally a probalistic risk analysis is developed applying the Monte Carlo methodology.