The Guardian January 22, 2003

Coffee Wars

Food shortages in Ethiopia are at a critical level. The crisis has been 
exacerbated by a drop in the world price of coffee to a 30-year low. Coffee 
is Ethiopia's main export. As Raisa Pages, of Granma International, 
reports, the fall in coffee prices also has an impact on countries in 
Central and South America, the Caribbean and Southeast Asia as well as East 
and West Africa.

Showing again the ruthless and inhuman nature of corporate profit-raking, 
transnational Nestli and 40 other companies are suing Ethiopia  which has 
a per capita income of $100 per year  for $500 million, claiming 
compensation for when their operations were nationalised by the then 
socialist-oriented government in 1975.

Said the chief executive of Nestli, Peter Brabeck, flaunting the arrogance 
his corporation is famous for, "We think it's important for the long-term 
welfare of the people of Africa that their governments demonstrate a 
capacity to comply with international law."

Every year an average of over 400 million cups of coffee are consumed 
throughout the world. It is the planet's favourite beverage. In fact coffee 
is the second most important raw material in commercial volume, following 

Coffee production employs 25 million people working in a small-scale family 
economy, where the entire farming production process is virtually done by 
hand, demanding a delicacy and expertise passed down by ancestral 

But today, behind every cup there is a story of poverty and death for 
coffee farmers in countries held hostage by blind market forces. On average 
coffee is priced at US $1.10 per kilogram, even though the production cost 
is more than US $1.76 per kilogram.

The drop in prices means a great crisis for small produces, especially in 
Central America and other areas of Latin America and the Caribbean, East 
and West Africa and Southeast Asia.

IMF and World Bank policies that fix market processes for basic products 
and prevent governments from regulating those prices or protecting their 
farmers, have resulted in calamity for coffee growers.

Ever since the International Coffee Agreement clauses were broken at the 
end of the 1980s, coffee producers have been left without any serious means 
of coordination or organising policy. Before this rupture policy was clear-
cut: neither banks, nor multilateral institutions, nor governments were 
authorised to promote expansion in coffee-producing areas.

"All this disappeared", said Jorge Cardenas, who presided over the first 
International Coffee Conference, held in London in 2001. "Every country set 
its own policy; everyone thought they could sell and trade on better terms 
than the others."

Central American exports have fallen by more than US$1 billion in the past 
two and a half years. In Costa Rica, where some of the best coffee in the 
world comes from, coffee producers are asking why the government allows its 
best cultivators to bleed to death and its farmers to be without work.

In Central America alone, almost 600,000 full-time and part-time jobs have 
been lost in the coffee sector over the past few years. According to a 
report from British-based charity Oxfam, many children in some coffee 
growing areas in Central America and East Africa are seriously 

Under the title "Mugged: Poverty in your coffee cup", Oxfam proposes that 
the main processing companies (Proctor & Gamble, Kraft, Sara Lee, Nestli, 
Starbucks and Tchibo) who together buy over half the world's coffee 
produce, should pay higher prices for the bean.

In 2000 coffee-producing countries received only 10 percent of their total 
profits, according to Jorge Cardenas. The rest was given over to 
distribution, commercialisation and transportation. Every day, marketing, 
promotion, local handling and product management costs more than the pound 
of coffee bought by consumers.

The most sensible thing for producer countries to do would be to coordinate 
the sale of coffee themselves. If each one makes its own policy alone then 
the long-term results are extremely negative.

The current low prices may also be due in part to better offers for 
Brazilian coffee and the strong emergence of Vietnam on the market. Some 20 
years ago Vietnam produced 5000 tonnes of coffee; now it produces 800,000 
tonnes. But Vietnam, where coffee cultivation was promoted to boost rural 
employment, has also experienced one of its worst years.

Production costs are almost double what the country currently receives for 
every tonne it exports.

Coffee is Tanzania's main crop and one of its most important exports, but 
since 1994 producers have suffered by the introduction of a free market. 
Under nationalisation farmers were assured of sales to cooperatives, but 
sale guarantees were lost with liberalisation of the market.

Production costs also went up. For example, chemical pesticide prices rose, 
increasing production costs by between 25-30 percent. For many farmers it 
is simply too high a price, especially if one takes into account the 
uncertainty of finding a buyer.

In Cuba, where the state guarantees buying the coffee harvest from growers 
and even raised prices for small farmers and workers in order to stimulate 
production, the price crisis has also affected exports. The difference is 
that Cuban coffee producers have not been harmed.

Cuba is looking to improve prices by promoting organic options, an 
experience that has been successful in diverse mountain areas.

While the situation of small farmers becomes ever more desperate, coffee 
transnationals are becoming increasingly richer. Starbucks tripled its 
profits between 1997 and 2000, while Nestli made a 26 percent increase in 
profits from its instant coffee alone.

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