Coffee Production and Sustainable Development

* A similar version of this article appears in the Latin American Studies Association (LASA) Forum, Vol. XXXV, No. 2 (Summer 2004), p. 5-7. The article was updated on April 5, 2007 to reflect new data collected on a recent trip to San Lucas Tolimán.

The recent collapse of world coffee prices has pushed millions of families in nearly 50 countries to the brink of starvation and economic ruin. Describing the decline of coffee prices as a “collapse” is an understatement. According to the International Coffee Organization (ICO), “green” coffee in 2003 sold at an average price of $.52/lb. Compared to the peak price for the entire decade of the 1990s, occurring in September 1994, $2.02/lb, it represents a 74% decline (ICO, 2003). According to the World Bank, (inflation-adjusted) coffee prices over the past couple of years are the lowest they have been in 100 years (2003).

In coffee producing nations, low prices have resulted in reduced wages, laid off workers, increased debt burdens, and bankruptcy. Coffee has been left to rot on trees, burned for fuel, or burned in protest. Worse yet, the low prices have led to homelessness, hunger, and malnutrition. Central America has been hit particularly hard with a “nutrition crisis” affecting as many as 700,000 people. The World Food Program has identified 6000 children in Guatemala alone who are in immediate danger of dying from acute malnutrition. Many exhibit symptoms seen on television reports from Ethiopia in the past—distended bellies and wrinkly skin (Elton 2002). In La Dalia, Nicaragua, former coffee workers live like beggars on the streets, their children scavenging garbage dumps looking for food. The workers’ former employer had reached a point where, not only could he not pay them a wage, he couldn’t even afford to pay them with food, a typical alternative (Social Justice Committee, 2003). Such circumstances force families to take desperate measures. In May 2001, 14 Mexicans died in the Arizona desert attempting to enter into the United States. They were among 300,000 coffee farmers in Mexico who had left their bankrupt coffee farms in search of better opportunities (Greenfield, 2002).

The reason for such dramatic price declines is an excess supply of coffee on world markets. The total stock of green coffee in the 2002/03 season was 160 million bags (one bag = 60 kilograms or 132.3 pounds), according to the ICO, while world coffee consumption was only 107 million bags, an overstock of 53 million bags (Prendergast, 2003, p.81). Production has grown dramatically in recent years, even in countries with existing high levels of output. Since 1995, Brazil has increased its production by 61%; Ivory Coast by 67%, and Indonesia by 36%. But the largest increases have come from Vietnam, a country hardly acknowledged as a coffee producer even 15 years ago. Since 1995, it has increased its production by 293%, making it the second largest producer in the world after Brazil (ICO 2003).

Lots of finger pointing has accompanied Vietnam’s rapid growth as a coffee producer. Many NGOs and consumer or producer groups have criticized the World Bank for financing Vietnam’s coffee program without concern for the impact on producers and farm workers around the world. See for example, Organic Consumers Association (2001), NicaNet (2003), Café Campesino (2003), and Murphy (2001). The World Bank (2003) denies this, admitting only the funding of general development projects. It suggests that the Vietnamese government is responsible, with subsidized expansion fueled by small farmers seeking the lure of cash crop profits.

Stein (2002), writing for Forbes magazine, suggests that assistance to Vietnam’s coffee industry has come from many sources; the former Soviet Union, French, German, and Swiss governments, as well as the World Bank. Furthermore, he argues that the world’s largest coffee trading firms have promoted the production of cheaper-quality, yet highly profitable Robusta coffee beans (Vietnam’s dominant crop) that are mixed with higher-quality Arabica beans into their blended roasts. In a market controlled by so few coffee traders, the switch to cheaper beans, while glutting the market and ruining farmers all over the globe, has not translated into lower prices for consumers, but instead has generated windfall profits for the traders.

A market that is controlled by giant producers and international financiers clearly works against the interests of consumers and small growers. The problem small growers face is that they have no control over any aspect of the coffee market except for their stand of trees. The stages that follow the picking of the berries off the tree are handled by others—the giant finca (plantation) down the road to whom they might have to sell at take-it-or-leave-it prices, large processors in-country, or multinational agribusiness giants. Every step, from processing the beans, to transportation, roasting, blending, packaging, advertising, and retailing, generates value added for someone other than the local farmer. For this reason, small growers receive just pennies from the sale of a cup of coffee at a coffee shop. Landless, contract day laborers working on the fincas make even less.

There are other problems with this arrangement. As more and more countries like Vietnam increase coffee production and prices fall ever lower, growers look for ways to increase yields at the lowest possible costs. In recent decades this has resulted in a movement away from traditional shade-grown production techniques in favor of sun-grown coffee that is heavily dependent on chemical fertilizers, insecticides, herbicides, and fungicides, and genetically modified seeds. The consequences of this shift are serious: deforestation, erosion, toxic run-off, poisoning of workers in the fields, elimination of wild bird and animal habitat, and dependency on multinational agribusinesses.

This all begs the question of sustainability. An activity is considered sustainable if it can be carried out within the bounds of the Earth’s carrying capacity. Taken literally, a sustainable activity could be undertaken forever. A system of coffee production that depends on the impoverishment of the smallest producers and workers and heavy applications of chemicals is neither economically sustainable nor ecologically sustainable. The International Forum on Globalization speaks of ten principles for sustainable societies. Among the more important principles are democracy, subsidiarity, and diversity (2002, pp. 56-77). Millions of small growers having no say in the production process beyond the harvest is undemocratic. The use of alien production techniques, including genetically modified seeds and chemical additives violates the subsidiarity principle that states that local production options should always be considered first. Under traditional coffee growing techniques, the use of leaf, bark, and fruit droppings from shade trees provide coffee growers with a low-cost, locally available organic fertilizer. The trees also provide shelter to a diversity of animal life that is clearly absent on sun-coffee farms.

The fair-trade movement has attempted to address such problems by having various alternative trade organizations such as Transfair, Global Exchange, Equal Exchange and others offer above-market prices to participating growers. Much, but not necessarily all fairly-traded coffee is organic, produced using traditional shade grown methods. Dicum and Luttinger (1999, p. 172) estimate that there are more than 500,000 small farmers in seventeen countries producing over 32 million pounds per year of fair-trade coffee. Unfortunately, that amounts to only about 0.2 percent of the entire market.

While the fair trade/organic movement is a critical step towards a more human and environmentally friendly way of producing coffee, it generally has a narrow focus—namely the assisting of isolated groups of coffee producers, but not entire communities or regions. What if there was an approach to development that was based on fair-trade and ecologically sound principles that could be used to address broader community or regional concerns? What might a society or economy look like that was based on such ideas?

It might look a lot like San Lucas Tolimán, Guatemala, a Mayan community in the central highlands, that has been practicing principles of sustainable community development for years. Of particular interest is the community’s coffee program. It is locally-based, human-focused, ecologically sustainable, and an alternative to the world of corporate-dominated coffee production. What follows in this paper is a case study of San Lucas’ coffee program. In the sections below, the following topics are covered: the role of coffee and community development, economic impacts, and an analysis of the program.

San Lucas’ coffee program is unique because of the role it plays in community-wide economic development. Coffee is but one program of many—including education, health care, housing, land development, job apprenticeship, honey bee farming, water delivery systems, fuel efficient stoves, reforestation, and experimental farming—that all work together to liberate families from the crushing poverty associated with work on the coffee fincas. The programs are the result of strong community leadership and a working relationship with the local Catholic parish. The parish is affiliated with the Diocese of New Ulm, Minnesota, a relationship initiated in 1963 with the arrival of Father Greg Schaffer. Father Greg brought with him an appreciation for the principles of sustainability and subsidiarity from exposure to the early works of E.F. Schumacher on the topics of appropriate technology and Buddhist economics.[2] These principles were consistent with progressive Biblical concepts circulating in the mid-1960s, as well as Mayan teachings that stress the importance of using individual talents for the betterment of the whole community.

The Buddhist, Biblical, and Mayan principles all stress liberation, rather than the attainment of material goods. Their tenets are consistent with the subsidiarity principle, which emphasizes the use of local resources so that economic impacts might circulate within the community. Schumacher emphasizes that agricultural populations should be engaged in more than simply the harvest of cash crops. The more stages of production that are performed locally, using culturally appropriate technology, the greater the local economic impact. Lastly, these principles demand that economic activities be sustainable. The coffee program embraces all of these principles.

The idea of having coffee serve as a commodity of community liberation and empowerment was a rather radical idea, because more often than not, coffee has served over the years to oppress the majority of Guatemala’s indigenous communities. Ever since the Spanish conquest of 1524, Guatemala has had an export-oriented economy; first gold, then indigo and cochineal organic dyes. When European synthetic dyes began offering stiff price competition in the mid-1850s, Guatemala’s leaders frantically searched for export alternatives. Coffee, long a favorite beverage of the Old World, was the chosen replacement. It quickly went from zero to 50 percent of all export sales (Handy 1984, p. 64).

Such explosive growth did not occur without problems. The work of planting, maintaining, and harvesting coffee was all done by hand, and the hands to whom the planters turned were invariably those of the indigenous Mayans. The Mayans, of course, preferred working their own lands, so the authorities enacted (or simply turned a blind eye to) a variety of measures to ensure a reliable indigenous labor supply; forced labor laws, debt peonage, payment of tributes or taxes, land seizures, and slavery. The conditions under which the indigenous labored both then and now are as oppressive as any labor arrangements in the world. The poverty and inequality is unimaginable. The average life expectancy among the indigenous is less than 50 years and the infant mortality rate is close to 80 deaths (per 1000 live births). 60 percent of the population is unable to meet minimal nutritional needs, and stunted growth has been observed in up to 95 percent of indigenous children. All the while, the top 20 percent of all income earners receive 63 percent of the nation’s income.[3]

It was against this depressing backdrop that San Lucas’ coffee program began in the early 1980s. At that time, coffee production in the San Lucas region was a microcosm of the rest of Guatemala. A handful of large-scale fincas produced a majority of the output, while poor farmers produced limited quantities on miniscule plots. The small farmers were in a race-to-the-bottom, competing against one another and the larger growers as well.

Discussions about the “coffee problem” began among a collection of small growers, community leaders, and parish leaders. The parish was willing to help with the initial funding and logistical support of a program that went far beyond typical concerns like price and market access, to focus more broadly on sustainable community economic development. A coffee program with a goal of economic sustainability needs four critical components to achieve success: 1) land, 2) a processing facility (beneficio), 3) access to consumers, and 4) just prices for the participating farmers. Success also hinges on achieving ecological sustainability, requiring careful attention to the use of land and resources.

Insufficient land was a vexing problem in a country where land connotes wealth and power. Property—at least the giant fincas—is rarely sold. On those occasions when land became available, a committee of community leaders, with parish assistance, would place a bid for purchase. Successful bids resulted in vast tracts of land that were subdivided among landless families in three-acre plots. Home construction followed the Habitat for Humanity approach: sweat equity, low interest rates, and long loan repayment periods. Approximately 2000 families have received land in this way.

The beneficio’s importance cannot be overemphasized. There are many processing stages involved—skin and pulp removal, washing, drying, inner skin removal—where much of the initial value of the coffee that eventually sells in a cafe for $3 per cup is added. A small inheritance Father Greg received from his parents, John and Ann Schaffer, for whom the coffee is named—Juan-Ana Café—was used to acquire land for a beneficio. The buildings and drying patios were constructed using local resources. The primary machines—a de-pulping machine (pulpero) and thrashing machine (triadorilla)—were made by a small foundry in Guatemala City. Like other decisions, these followed Schumacher’s concern for appropriate technology and the subsidiarity principle. If a resource isn’t produced locally, look to regional or national markets, before importing from abroad.

The operation of the beneficio is an interesting study of ecological sustainability. Its function is to prepare a very complex fruit—one with five separate layers that protect the coffee bean itself—for shipping or roasting. These protective layers constitute more than half of the bulk of the coffee berry. They consist of contaminants and organic matter that, if simply discarded, leach into nearby streams killing plant and animal life. As will be shown, though, environmental problems can easily be turned into environmental solutions. At harvest time families bring their 100-pound (quintal) bags to the beneficio weigh-in station. The berries are dumped into the pulpero for skin and pulp removal. Most of the farmers reclaim their discarded skins and pulp for use as compost. There is also a community compost pile on the experimental farm, which is adjacent to the beneficio. Unclaimed skins and pulp are taken there.

Skin and pulp removal reveals a layer of mucilage protecting the inner bean. Three washings are needed to remove this. The runoff water is either added to the compost pile or used for irrigating vegetables growing on the experimental farm. The beans are then dried in the sun for six to nine days. Two inner protective layers must be milled away prior to roasting. The sawdust-like residue from this process is used creatively as bedding or cage liners for chickens and rabbits on the experimental farm. The residue and the animal waste are eventually added to the compost pile. Finally, the beans are inspected for quality. Beans that are too small, or are of poor quality are added to the compost pile. During this entire process, no waste is generated.

A significant amount of value is added at the roasting stage. By performing this crucial step locally, that value stays in San Lucas. Along with the operation of the beneficio, the roasting results in the creation of a number of jobs that would not be available otherwise. Three full-time workers oversee the operation. At harvest time additional workers are employed from the ranks of the coffee growers themselves to operate the weigh-in station and pulpero, and serve as night-watchmen. Packaging and shipping create additional part-time jobs.

Roasting is a straightforward process, consisting of a simple roaster—manufactured locally—and an open fire. The roasted beans are hand-fed into 17-ounce heat-sealed, aluminum foil inner bags. The bags and heat-sealing machine were purchased from Guatemala City from a small manufacturer. The inner bags of coffee are inserted into attractive cloth outer bags with a silk-screen logo, manufactured locally.

A successful program needs customers. To attract them, a desirable product is required. Rich volcanic soil at an elevation of five thousand feet, in a subtropical climate creates the right growing conditions. Chemical pest control is rarely needed and few farmers use additives other than organic compost. Only the highest quality Arabica coffee is shade-grown following traditional practices. At harvest time, families make as many passes as necessary through the trees, gathering only the ripest, reddest berries, and avoiding stems and leaves. Such attention to quality and detail has earned the coveted “strictly hard bean” export license from Guatemala’s oversight agency, Anacafé. Given such a quality product, buyers are not hard to find. The coffee is sold to the public directly from the parish or through the Diocese offices in New Ulm, relying on word-of-mouth advertising by the many volunteers and visitors to the community and on Christmas brochures. This approach has allowed the program to grow to include 600 participating families.

The final requirement is that the farmers receive a just price. At the outset of the program in the early 1980s, growers were consulted as to what price was needed to cover their operating costs and make a fair profit. The consensus answer was 200 Quetzals (currently $25 US) per quintal. This was agreed to. Though this payment hasn’t changed over time, changes in the production process—namely the creative use of organic approaches to fertilization and weed control—have resulted in falling costs and increased yields. Under current market conditions, 200Q is more than twice the price on the street.

Conservative estimates regarding acreage and crop yields suggest a total output of 750,000 pounds of raw coffee. Total coffee yields of participating farmers is actually much higher, but according to Greg Schaffer, only the highest quality coffee is actually purchased by the parish. Roasting results in 100,000 pounds of coffee sold in $7 bags (of 17 ounces each), generating revenues of nearly $660,000. The most important expense is the 200Q/quintal payment to the 600 growers. This results in a direct injection into the community of nearly $238,000, or $333 per family, an impressive income in a region where a worker earning $800/year would be considered fortunate. The remaining expenses are approximately $422,000. They include factor payments to the workers at the beneficio, machine repair, packaging, shipping, and so on. Because the majority of these services are provided locally, nearly $290,000 of the expenditures stay in San Lucas circulating alongside the payments to the farmers for a direct expenditure impact of $528,000.[4]

It is assumed that the majority of these payments to farmers or service providers will be spent on food, clothing, education, and health care, but that approximately half of such spending will leak out of the community when non-locally produced items like medicines or processed foods are purchased. Given this leakage from the local economic circular flow, the economic multiplier effect will be modest, yet significant; possibly taking on a value of two. In other words, for every Quetzal paid directly to a coffee farmer, a second Quetzal will be spent locally on activities tangential to coffee farming. This implies a total community-wide economic impact (both direct and indirect) of $1.1 million (two times the direct impact of $528,000).

It would be difficult, but not impossible, for other communities to replicate San Lucas’ coffee program. First of all, such an initiative must be locally generated. Local leaders must be dedicated to the welfare of the overall community, rather than their own enrichment. Outside participants, according to Father Greg Schaffer, must exhibit patience, a long-term commitment, and a willingness to listen to the needs of the people.

San Lucas is fortunate to have had the assistance of the parish and its U.S. connection. In some respects, the parish is seen as a substitute for institutional support that is missing in poor communities in the developing world, namely, a responsible, representative government and an even-handed financial system.

The San Lucas program has demonstrated that a strategy of sustainable development is possible. From the tree to the roasted coffee bean, nearly every processing step takes place locally and with minimal impact on the environment. The majority of all proceeds flow back to the community, making a real difference in the lives of ordinary San Luqueños. Through adherence to the principles of subsidiarity and sustainability, families are making a good living selling the fruits of their labor. Not only does this put food on their tables, it also builds self-esteem, something missing when one’s options are limited to contract labor on the fincas. To Father Greg, this is the most important benefit of the program.

Abell, John (1997), Peace in Guatemala? The Story of San Lucas Tolimán. In the Economics of Conflict Resolution and Peace, Brauer and Gissy, eds. Brookfield, VT: Ashgate Publishing Co.

Abell, John (2002). Economic Theory and Reality: Evidence from San Lucas Tolimán and the Rest of the World. Journal of Interdisciplinary Education, Vol. 5, no. 1, July.

Dicum, Gregory and Nina Luttinger (1999) The Coffee Book: Anatomy of an Industry from Crop to the Last Drop. New Press.

Handy, Jim (1984). Gift of the Devil: A History of Guatemala. Boston, MA: South End Press.

International Forum on Global Diversity (2002). Alternatives to Economic Globalization: A Better World is Possible. Berrett-Koehler Publishers.

Schumacher, E.F. (1973). Small is Beautiful: Economics as if People Mattered. London: Blond and Briggs Ltd.

Social Justice Committee (2003), Drop in Coffee Prices Brings Misery For Some Nicaraguans. www.s-j-c.net/coffeeprices.htm

[1] The material that follows is the result of numerous author interviews with parish and community leaders in San Lucas Tolimán. For other accounts of San Lucas Tolimán, see Abell (1997, 2002).

[2] Schumacher’s early analyses culminated in his famous book, Small Is Beautiful: Economics As If People Mattered (1973).

[3] Original sources cited in Abell (2002).

[4] The primary cost leakage out of the local circular flow is the expenditure for air-shipping, approximately $132,000.