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Despite economic chaos, Argentina remains top tea supplier to U.S. market.

Despite economic chaos, Argentina remains top tea supplier to U.S. market

Nobody claims Argentina grows the best tea in the world. Yet geographical and price advantages in recent years have catapulted Argentina - better known for meat, grain and leather exports - to the top of the list of tea suppliers to the U.S. market.

In 1989, according to industry statistics, this South American nation sent the United States 17,110 metric tons of tea, or 22 percent of all U.S. tea imports. Next place was China, with 20 percent of the total, followed by Indonesia with 17.2 percent and Kenya with 7.5 percent.

Antonio Fernandez is president of Casa Fuentes, which handles some 25 percent of that business. In a recent interview in Buenos Aires, Fernandez told The Tea & Coffee Trade Journal that while "Argentine tea isn't the best," its low price makes it an excellent value.

"While we accept that traditional countries like India, Sri Lanka and Kenya produce better tea, pricewise, Argentine tea is a better-value product," he said. "The quality of Argentine tea is perfectly suitable for the U.S. market, because 80 percent of the tea Americans drink is iced tea, Argentine tea is clear, and the taste is what the American market requires. And, we can place tea in the U.S. in no more than three weeks."

The company Fernandez heads, Casa Fuentes, was established in 1934 and began exporting tea in 1959. Like other producers, Casa Fuentes' tea estates are located in the northern province of Misiones, which juts out like a curled index finger into the crevice separating nearby Paraguay and Brazil. Not far away are the famous Cataratus de Iguazu, one of the highest waterfalls in the world.

Because domestic tea consumption is so low (less than seven metric tons a year) some 80 percent of Argentina's tea is exported. Besides the U.S., main buyers are Chile (9,600 tons), the Netherlands (3,700 tons) and Poland (1,700 tons).

This year, said Francois Clemente, president of F.J. Clemente y Cia., Argentina also expects to sell 4,000 tons of tea packed in jute bags to the Soviet Union, due to lingering effects of the Chernobyl nuclear disaster, which devastated Russia's most productive tea-growing regions. According to Abel Actis, export manager of Establecimiento Las Marias, Soviet tea production peaked at 122,000 tons in 1985, but dropped to 98,000 tons in 1988 following Chernobyl.

It is the Soviet Union, in fact, where Argentina's first tea seeds are believed to have come from. By 1938, some 4.5 hectares of tea bushes planted by Russian immigrants in the area of Tres Capones had produced their first output of black tea.

Today, Argentina's three largest tea producers, Casa Fuentes, Aspitarte y Cia. and Cooperativa Picada Libertad, export a combined 25,000 tons of tea, well over half the 38,000-ton crop expected this year.

Aspitarte Director Miguel Newell sells his tea to Kentea Ltd., which in turn sells it to Nestle, Lipton and other major U.S. buyers.

"They blend it with teas from other origins, such as Sri Lanka, India and Kenya, thus reducing costs," he said. "Argentine tea is fairly neutral in taste and has fairly good color, so they can use it in blends without interfering."

In a brief outline of the industry, Newell reports that "tea manufacturing in Argentina is based on continuous withering, rotorvanes, fermenting and drying, with relatively very little labor involved, except in leaf reception and subsequent conditioning prior to loading on the continuous withering machine, and the sorting and packing, which are more labor-intensive. Plucking is mechanical with the aid of a tractor, with cutters on the front, adjusted to the level of each row of bushes. If the area is small, it is replaced by a hand-driven plucker."

From Misiones, the tea is loaded onto trucks and transported to Buenos Aires, a 30-hour trip south. At Buenos Aires port, workers load the tea onto vessels belonging either to Ivacan, a Swedish line; Elma, the Argentine state-owned line, or to other companies, for the two-week trip to New York, New Orleans, Baltimore and other U.S. ports.

"If we were to have hand-plucking, we wouldn't be able to improve the quality that much," said Newell. "And if we did, would there be a market for it? Our tea already has a market niche as a price reducer."

Clemente, who came to Argentina 20 years ago from his native France, said around 5,000 people work in Argentina's tea industry. Factory workers earn the equivalent of $100 a month, while pickers earn $80. Their financial well-being, like that of the bosses, depends on two factors: one, the exchange rate of the Argentine austral, which at the moment trades for 5,200 to the dollar. The other factor is the price of tea itself, which has dropped considerably in the last year.

Said Newell: "Prospects for the future of the tea industry are fairly gloomy. Prices were at $1.30 to $1.40 a kilogram last November, and are now down to between 85 cents and $1. Everybody thought the market would remain quite firm, but it's just continued falling. Some of the producers have closed because of the economic situation."

Fernandez said the tea industry is more affected by international price fluctuations than by the domestic economic chaos that has led to an annual Argentine inflation rate of 20,000 - a world record.

"The tea industry in Argentina was and is affected by the economic problem, but the industry depends on international prices, therefore when the market is depressed, we have to suffer the consequences.

"The tea business in Argentina in the last four to five years hasn't been good, but that's due to the (low) international price levels, not because we have any problem selling out tea," he said.

Good news, however, could come from a faraway source - the Middle East. It seems Arabs in certain countries have taken a liking to yerba mate, a distant cousin of tea of which Argentina is the world's major producer, and of which Argentines, Uruguayans and Paraguayans are the major consumers. Currently, Argentina grows some 180,000 tons of mate a year, mostly for local consumption.

But Actis, of Establecimiento Las Marias, which cultivates tea, yerba mate, pine and eucalyptus trees on 6,000 hectares in Misiones and Corrientes provinces, says mate exports to the Arab world are growing.

In fact, claims Actis, mate is so popular in the Middle East that one Syria company in Damascus is actually labeling packets of fake Las Marias yerba mate from Corrientes province to be sold in 250-gram packets. "It's not really Argentine mate," he cautions. "We think it's a mix of Paraguayan and Brazilian mate."

PHOTO : Antonio Fernandez, president of Casa Fuentes, Argentina's largest tea exporters, in front of one of his company's delivery trucks.
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Author:Luxner, Larry
Publication:Tea & Coffee Trade Journal
Date:Aug 1, 1990
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