Argentine tea and coffee report.

Argentine tea and coffee report

Tea exporters in Argentina are concerned that the undervalued dollar and increasing production costs, some fixed by government, will complicate marketing of the 1990/91 tea harvest.

In a dramatic about-turn, Argentina has changed in the last seven months from being one of the cheapest countries in the world, in dollar terms, to one of the most expensive. This has come about as a result of the government's determination to stabilize the economy with a neo-liberal approach in which the dollar floats against the austral. However, despite a relatively stable dollar, inflation has continued, although at a somewhat more leisurely pace by Argentine standards. It is calculated for October to be down to 7%, the first single digit monthly inflation since November 89's 6.5%. Inflation for the last 12 months, however, has been 1,800%.

Overvaluation of the austral and continuing inflation have led to recession, lack of investment, and a drop in exports. Recently value-added tax was increased from 13 to 15.56% to bail out debt-ridden provinces, but this has only served to contradict the government's privatization policies as it increases the tax burden as fast as it tries to shed companies.

Antonio Fernandez, president of Casa Fuentes, possibly now Argentina's largest tea producer, having bought out Aspitarte & Co. in October, says "Unless the austral is devalued, exporters of all commodities in Argentina are in for a very difficult time, and many tea producers might be forced to close temporarily because they are not covering production costs.

"All 1988/89 stocks were sold. In September 1989, prices of main grades began at 95 [cents]/kilo peaking at $1.30 to 1.50 in mid-October and gradually dropping to 90 [cents] in February 90. International price fluctuations further exacerbate Argentina's economic problems and, although we can sell our product with no problem, the tea business here has suffered."

Transport costs of tea, both nationally and internationally, are high. All of the tea plantations are in the northeast of the country in the provinces of Corrientes and Misiones, bordering Brazil, Uruguay and Paraguay. The processed tea is trucked 1,650 kms south to Buenos Aires where it is packed for local consumption or exported.

Abel Actis, export manager of Las Marias and head of the Argentine Tea Association, says the association is working particularly hard to find ways to reduce international shipping costs.

Tea consumption in Argentina runs between 6-8,000 tons. Some 40-42,000 tons of tea are expected from the coming season's crop. Around 85% of Argentina's total production is exported, which amounts to a little over 35,000 tons. The tea harvest in Argentina began two weeks later than normal on October 22nd because of prolonged later cold weather which delayed flushing.

USDA figures show that, in 1989, the United States imported 17,219 tons of Argentine tea while the U.K. imported 3,965 tons. Chile annually imports between 8-9,000 tons of Argentine tea, and Holland around 3,700 tons. Last year, significant sales were made to Poland and Russia, and exporters hope that these will increase.

Coffee consumption in Argentina is estimated at 40,000 tons, the major supplier of coffee during 1990 to Argentina was Paraguay, followed by Colombia with 138,248 bags, Brazil with 119,514 bags, and the remaining from Costa Rica, Ecuador, Bolivia and Peru, with tea at 6,000 to 8,000 tons.

Coffee and tea consumption take second place and third place, respectively, to yerba mate, a tealike beverage also very popular in Paraguay, Uruguay and southern Brazil. About 160,000 tons of yerba are consumed annually in Argentina, with exports of between 6,000 to 10,000 tons mainly to neighboring

countries, but some to as far as the Middle East, Switzerland, Japan and Taiwan.