Central America's coffee crisis: Guatemala report.

Carlos Enrique Arevalo couldn't ask for more beautiful surroundings in which to grow coffee. His 35-manzana coffee finca lies at the foot of the towering Volcan de Agua, in the Department of Escuitlan, about 40 kilometers from Guatemala City. Yet the spectacular scenery gives Arevalo little comfort; he's barely making ends meet.

"With current prices and production, I can survive for three or four years," the farmer said. "But if prices don't recover after four years, I'll be totally bankrupt. I won't be able to plant new trees."

Arevalo has been in coffee for 16 years. He's one of 40,000 coffee farmers in Guatemala, and like most of them, is discovering the effects of low world prices.

"Last year, we produced 5,400 quintales and received 60 quetzales ($12) per quintal. This year we'll get Q43 ($8.60)," he said. "In the first place, it's a crisis because there a less financing. I can't plant more trees. Second, I have to fertilize less because we can't afford it. We have 15 workers. Normally we'd have 50. Because of the low prices, we pay less to the campesinoa who pick the beans. Last year, we were paying Q15/qq. Now we're paying Q10-12/qq. The cost of production is the same, but unfortunately we're receiving less."

Guatemala, Central America's most populous nation with 10 million inhabitants, is also the only country in the region still at war with itself. A 30-year-old conflict between Communist guerrillas and the Guatemalan military has taken some 150,000 lives, according to human rights groups. Both sides are now negotiating an end to the fighting.

Yet at the moment, low world prices appear to be having a far more damaging effect on Guatemala a coffee industry than the fighting. Byron Dardon, editor of Anacafe's monthly newsletter, says Guatemala's leaders aren't taking enough interest in the problems of coffee growers.

"The government should pay more attention," he said. "We want them to reduce taxes or open lines of credit, as other countries have done. When coffee is generating lots of revenue for the country, the government is happy. Why don't they take concrete measures to help the coffee growers now?"

According to Dardon, Anacafe--which recently moved into a new building in a suburb of Guatemala City--was forced to lay off 40% of its 250-member staff in November 1992 because of a budget crunch directly tied to lower coffee prices. William Stixrud Herrera, chief of promotions at Anacafe, said in an interview in Guatemala City that his organization has been lobbying the Guatemalan Congress since August to provide "bonos" for coffee farmers, amounting to a one-cent subsidy per quintal when prices fall below 60 cents a pound. The total package Anacafe seeks comes to $75 million, and would also provide 11% loans to farmers with easy terms.

He said most of Guatemala's coffee is produced by 5,600 or so medium-size growers, who produce between 50 and 2,000 bags a season. Another 40,000 smallscale growers produce between one and 50 bags, while the 600 largest growers produce 2,000 or more bags.

"Our 1992-93 crop will be around 3.8 million quintales, compared to 4.3 million for the 1991-92 crop," he said, adding that 55% of Guatemalan coffee goes to the U.S., 25% to Germany, and the remaining 20% to Canada and Western Europe. The country has 269,000 hectares of coffee under cultivation in every one of Guatemala's 22 departments except Totonicapan. In those areas grow some 748 million coffee trees.

Last year, the coffee crop was valued at $267.9 million--about the same as bananas, sugar, and all other agricultural exports combined. Of that total, just over $5.1 million was paid in export taxes. That compares to the 1979-80 season--the best on record in dollar terms--when Guatemala earned $524.7 million from a crop of 3.07 million qq, and growers paid a record $153.1 million in export taxes.

Because of sinking prices, coffee now brings in only 28% of Guatemala's foreign-currency earnings, compared to 3537% in previous years. Non-traditional exports such as pineapples, melons, and assembled garments are now rising in importance.

Yet Stixrud says most coffee farmers will stick with coffee, a 150 year-old tradition in Guatemala.

"Since we've been born, all we've known how to do is coffee," he said. "It's very hard for us to change to other crops like asparagus, blueberries or oranges, because we've had three bad years. If we did, just imagine what would happen to prices for those commodities."

Stixrud has been in the coffee business all his life. His grandfather started the family finca generations ago, and today it produces 3,000 qq a year. He says coffee provides income for 1.8 million people, or about a third of Guatemala's active working population.

Arevalo, whose coffee trees grow at an altitude of between 4,600 and 5,000 feet, says "coffee is the most suitable crop for this zone. Some have tried to grow corn, beans and other crops, but it a not economical." Arevalo estimates that of the 25,000 inhabitants of Palin--the town nearest his farm--80% depend on coffee.

"Nobody's starving. Those who can't find work in coffee can work in cattle, they can always fall back on something else. But," he adds, "because of low prices, there are lots of unemployed people. They're buying only beans, corn, salt and sugar to feed themselves. In the local pharmacy, people are buying small packets of medicines, only what a absolutely necessary."

Is dumping coffee to push up prices the answer, or declaring a suspension of exports, as Costa Rica recently did? Stixrud says not. "I think countries have learned that if you dump coffee, prices will go down. That's what happened between the end of September and now," he explained. "Colombia exported almost two million bags more than the previous year, and that's ruining the harvest. I don't think the ICO can do any good at controlling prices."'

"The producers prefer a free market, because we look at a long term basis. The quota system is based on politicians who think on a short term basis," he said, adding that "we have had low coffee prices for three years. It could take another couple of years to get rid of all that supply--about 20 million bags worldwide."