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Puerto Rico coffee industry faces uncertain future.

SAN JUAN, PUERTO RICO - One hundred years ago - before anyone had dreamed of tax exemptions to help poverty-stricken Puerto Rico - coffee and sugar were the undisputed kings of the island's economy.

Today, coffee still employs 13,000 people but brings in only $50 million a year. By comparison, the pharmaceutical industry employs 18,000 people and generates $5.7 billion in sales. Agriculture today accounts for less than 3% of the island's GDP of $23.6 billion, and coffe and sugar combined account for a miniscule 11% of that 3%.

Why? For starters, the local coffee industry is plagued with labor shortages which result in the loss of 10-30% of the crop. Experts say the island needs another, 6,000 workers in order to pick the estimated 77,000 acres of coffee under cultivation. This is ironic, considering Puerto Rico's unemployment rate of 18.1% - the highest in six years.

"Every day, there are fewer workers. Every day labor is more expensive, harder to find, and more inefficient," said the island's newly appointed agriculture secretary, Neftali Soto, a coffee grower whose company exports gourmet coffee to Japan under the Alto Grande label.

Yet another problem is the entry of contraband coffee into the island. Soto, in an interview with the Spanish-language newspaper El Nuevo Dia, said that "the entry of contraband impedes coffee sales in Puerto Rico" because the more coffee that comes in illegally, the greater the quantity of locally produced coffee left unsold in government warehouses. Soto estimates that 5 million pounds of green coffee enters Puerto Rico illegally every year to be mixed and produced into coffee for local consumption, which is estimated at 35 million pounds.

Some 6.5 million pounds of coffee from the 1991 crop sit in warehouses, according to the U.S. Customs office in San Juan. The agent in charge of incoming cargo from the Carribean, George McNenney, warns that "if this activity continues, it will eliminate the production of coffee in Puerto Rico."

Last month (March), Commonwealth and federal inspectors intercepted almost 200,000 pounds of illegally imported crude coffee valued at $500,000; the case is still being investigated. More than a dozen Customs and Agriculture Department inspectors have been assigned to the island's ports to watch for contraband coffee.

But the main reason coffee has declined so much in importance from the days when the Vatican would import only Puerto Rican coffee for the Pope to drink, is the island's transformation from an agriculture to a manufacturing-based economy. Tax incentives offered under Section 936 of the U.S. Internal Revenue Code have lured more than 2,000 factories to Puerto Rico, producing everything from electrodes to Ex-Lax.

At the same time, the area dedicated to coffee cultivation has declined dramatically. Visitors to the central mountain region, where coffee was once paramount, are today just as likely to see K-Marts and pharmaceutical plants as coffee plantations. The average pharmaceutical worker earns more than $10 an hour, compared to $4 an hour for the fastest coffee picker.

Even those who aren't working and are on welfare can make just as much or more staying home. All this gives Puerto Ricans few incentives to pick coffee - except for Dominicans and others willing to work long hours for low wages. Those people, however, are discouraged from coming to Puerto Rico, and illegal aliens are constantly being discovered in the coffee-growing regions and sent back home.

Perhaps the future for Puerto Rico lies in gourmet coffee exports to Japan and other pricey markets. Since 1989, the island has developed a lucrative Japanese market for local coffee. But this market remains very limited; in fiscal 1992, according to El Nuevo Dia, the two main gourmet coffee producers exported less than 200,000 pounds, partly because prices for Puerto Rican gourmet coffee are much higher than gourmet coffee from the Costa Rica or Colombia.

Better yields could help. According to Soto, growers currently get three quintales of coffee beans per acre, less than a third of the 10 quintales per acre which is considered to a productive level.

"It's very difficult," says Jaime Fortuno, president of Eacogido S.E., exporters for the Yauco Selecto brand. "The key is for coffee growers to increase their yield."
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Author:Luxner, Larry
Publication:Tea & Coffee Trade Journal
Date:Apr 1, 1993
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