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In Cuba, once-proud coffee industry falls on hard times
The Tea & Coffee Trade Journal / September 2001

By Larry Luxner

HAVANA -- When José Gavinia was a little boy, his family owned a farm at a place called Hacienda Buenos Aires, just south of Tope de Collantes in the central Cuban province of Las Villas.

About a third of the Gavinias' 390 acres was planted with coffee, and the operation included both a dry and a wet mill. Cuban coffee was highly sought after, and the family business flourished.

"Whatever we exported would get a premium over the world market, and most of our coffee went to Holland and Germany," recalled Gavinia. "We didn't sell to the U.S., because the Americans wouldn't pay the price at the time. It was much better to sell the coffee domestically."

Then economic disaster struck. Fidel Castro and his band of guerrillas overthrew the Batista dictatorship in 1959 and promptly began nationalizing all Cuban industry. In 1960, the Gavinia family farm was confiscated and 14-year-old José Gavinia -- along with his parents and hundreds of thousands of other middle-class and wealthy Cubans -- fled the island, eventually ending up in the United States.

And the Cuban coffee industry has never been the same.

Observations made during a recent four-day trip to the island, and interviews with officials -- government bureaucrats, foreign diplomats and industry sources -- all lead to the conclusion that when it comes to putting Cuba on the world coffee map, the Marxists have really blown it.

"The industry is completely destroyed," says Gavinia, now based in Los Angeles. "The only good coffee that's coming out of Cuba these days is being exported to Europe. Before the revolution, most of the good-quality coffee stayed in Cuba. We had a very high per-capita consumption, and today there isn't even enough to go around."

According to historians, coffee was introduced into Cuba in the mid-18th century. At that time, forests still covered most of the island, creating the necessary environment of high humidity, undisturbed soils and fresh climate. These early coffee farms, supplanted by African slave labor, gradually spread over the western plains and smooth hills around Havana, the capital. By 1790, Cuba was already exporting 185,000 quintales a year to Spain. Later on, carried by French farmers fleeing the revolution in nearby Haiti, coffee farms expanded to cover the nearby mountain ranges.

By the 1820s, coffee production was an integral part of the Cuban economy, certainly more important than sugar. Between 1831 to 1835, Cuba's average coffee output was equivalent to 56% of the output of the best years of the 20th century (1956 to 1960), whereas sugar production in the early 1800s barely reached 1% of the level it achieved 150 years later.

Yet throughout the latter half of the 19th century, the Cuban coffee sector went through some dramatic ups and downs, and by 1877, only 192 coffee plantations were in production, down from 2,067 only 50 years earlier. This was partly due to disruptions caused by Cuba's battle for independence against the Spanish colonizers. Yet by 1895, production was once again up, and in that year, 153,800 quintales were exported.

In 1902, the year Cuban patriot José Martí declared independence from Spain, coffee production was once again undergoing a drastic reduction in favor of sugar cane and tobacco, though the imposition of tariffs in 1927 -- mainly against Puerto Rico -- sparked a rebirth. From 1900 to 1925, imports averaged 12,000 tons annually, though in the 1930s imports virtually disappeared and Cuba gradually began to export coffee. By 1956, the country was exporting over 20,000 metric tons of coffee beans valued at $21.5 million. In 1962, thanks to agricultural and industrial improvements, Cuba's coffee industry achieved a yield of 316.6 pounds per acre, its highest ever.

Unfortunately for Cuba, the Marxist revolution that swept Castro into power occurred at a time when coffee production was at its peak. During the 1950s, the industry's average rate of growth was 1.7% a year, in spite of a poor harvest in 1958 that was most likely related to the escalation of guerrilla activity by Castro's band of revolutionaries in the Sierra Maestra, Cuba's principal coffee-growing area.

Following Castro's nationalization of the country's coffee farms and everything else that had been in private hands, the Cuban coffee industry entered into a long and severe period of decline. New rules were imposed by the Communist government, and by the end of the 1960s, coffee output had fallen to levels comparable to the 1930s; by the mid-70s, the results were at levels similar to the dismal 1920s.

Finally, in the late 70s, a slight recovery began, and about 45,000 hectares were planted with coffee between 1979 and 1982. The effort was aimed at reducing imports -- which by then had surpassed 30,000 tons annually -- and to increase exports, which accounted for nearly half of the total harvest in those years.

The 1990 collapse of the Soviet Union, Cuba's main benefactor, devastated the Cuban economy and encouraged massive emigration to the cities, which only hastened the coffee sector's further decline. By the early 90s, average coffee yield had fallen to 135.7 pounds per acre, and mountain dwellers were fleeing to Havana, Santiago de Cuba, Holguín and other cities at a rate of more than 4% annually as coffee areas rapidly become depopulated and plantations were abandoned -- in spite of the building of hundreds of kilometers of new roads and the introduction of electricity, good schools and modern medical care to even the most remote areas.

But experts say the Soviet collapse wasn't the only factor. A misguided campaign in the early 60s had tried to create a coffee belt around Havana's barren plains, using volunteer labor exclusively.

"Despite the advice of specialists -- and common sense -- the project consumed millions of dollars before it was abandoned. Meanwhile, traditional farms in the mountains received less attention," reported the newsletter CubaNew s in January 1996. "In an effort to stimulate production, the government unveiled the so-called Turquino Plan under the direct supervision of Raúl Castro in 1989. Again, the agricultural infrastructure was improved, but even after building new homes for agricultural workers, the project attracted little response."

From 1986 to 1996, coffee exports averaged 12,600 tons a year, compared to only 11,200 tons exported in 1957 when the output totaled 43,600 tons. However, poor harvests in the late 1990s have taken their toll on exports, falling from 24,120 tons in 1994 to 6,400 tons in 1997 and recovering slightly to 8,400 tons in 1998. Today, export revenue from coffee comes to just 1% of the total value of Cuban exports, down from 3.9% in 1956.

"The loss of experienced workers has forced the government to rely on unpaid middle- and high-school students to harvest the coffee crop," reports CubaNews. "During the harvest, tens of thousands of students go into the mountains for several weeks to pick coffee. While they are reportedly earnest in their efforts, their lack of experience and stamina is one reason the sector continues to languish."

The difficulty in increasing coffee production has been the main reason the Castro regime cannot seem to boost exports significantly, though it manages to maintain exports partly by limiting coffee consumption among Cubans through rationing. And while Cubita-brand coffee sells for $6.10 a kilo in the dollar markets, the majority of Cubans don't have access to dollars and are therefore forced to make do with their ration of two ounces of coffee every two weeks per adult.

"While exporting its highest-quality coffee to Europe and Japan, the government reportedly imports cheaper coffee and mixes it with lower-quality domestic grades and some roasted wheat to supply local demand," says CubaNews. "Rationing and low availability of coffee reportedly have driven annual per-capita domestic consumption down from 12 pounds in the late 1950s to just three pounds now."

Today, Cuba's coffee plantations are located mainly in three regions. The most important is on the slopes and valleys between 1,000 and 2,000 feet located in the Nipe-Baracoa and Sierra Maestra mountains of eastern Cuba (in the provinces of Santiago de Cuba and Granma); the Escambray mountains near the center of the island (in the provinces of villa Clara, Cienfuegos and Sancti Spíritus) and, to a lesser extent, the Sierra del Rosario, close to the western tip of Cuba in the province of Pinar del Rio.

These locations provide a comfort zone for the coffee bean, with 55 to 70 inches of rain and moisture evenly distributed during the year, deep and rich soils, and temperatures ranging from 21 degrees Celsius in the winter up to 25 degrees Celsius in the summer.

Cuban coffees are classified as Crystal Mountain, Extraturquino, Turquino, Altura, Montaña, Cumbre, Serrano superior, Serrano corriente and Caracolillo (oval-shaped). The finest of these is Crystal Mountain, which is now being sold on the Japanese market.

As if government mismanagement and low commodity prices weren't bad enough, in 1997 and 1998 the island suffered from an unusually severe drought. Then, in September 1998, the industry took a further beating from Hurricane Georges, which devastated eastern Cuba, where 80% of the coffee crop grows.

Cuban sources say the coffee harvest ending in March 2000 came in at 18,000 tons, well above the 11,000 tons produced in the harvest that ended in March 1999. Of the 18,000 tons, about 16,000 tons came from eastern Cuba, where the vast majority of the coffee crop is grown. The central provinces produced around 1,500 tons, while Pinar del Rio province in the extreme west accounted for the remaining 500 tons. Coffee no longer grows in the deforested and exhausted soils in the plains and hills around Havana.

Cuba normally exports 60% to 70% of its coffee crop and imports cheaper, lower-quality beans for domestic consumption. However, in 1999 total exports came to 3,079 tons -- down dramatically from the 8,080 tons exported in 1998. Recently, complaints have surfaced over the fact that the amount of chicory added to coffee sold within Cuba has risen from 40% to 60%, while the quality of imported beans has fallen.

The government owns most of the coffee plantations in Cuba, though in the 1990s it began to reverse earlier policies and allowed farmers to lease land for the first time since the revolution. This policy, as well as new efforts to improve medical services and housing for agricultural workers, has convinced some of the 80,000 farmers who abandoned the coffee-growing zones in the 70s and 80s to return.

However, the government has not been able to reverse the decline in the total number of coffee workers, partly because growers with leased land are still obliged to sell their production to the government at fixed prices in relatively worthless Cuban pesos. Even swap deals are forbidden, according to sources. So far, only about 3,000 families are reported to have returned to the growing zones.

Since 1996, the Castro regime has been allocating to the coffee sector a percentage of the hard-currency income generated by coffee exportes to buy fertilizer and equipment.

At present, Japan and France are the top importers of Cuban coffee, accounting for roughly 5,000 and 2,500 tons respectively. Japan's Meiwa Corp. and France's Cafe Legal are the chief importers in those countries, buying 75-80% of Cuba's total coffee exports. The United States, of course, imports not a single coffee bean from Cuba and hasn't since 1962, when the Kennedy administration imposed an economic blockade against the island.

Unfortunately, Cuban Agriculture Ministry officials declined to be interviewed for this article, and neither director Wilfredo Díaz Hernández nor executive secretary Carlos Bustamante González of the Estación Central de Investigaciones de Café y Cacao in Santiago de Cuba could be reached for comment.

Gavinia doesn't mind commenting, however. Today, the 55-year-old is chief financial officer at F. Gavinia & Sons Inc., which was founded by Gavinia's parents, sister and three brothers.

"When we had our plantation, if we had a breakdown in one of the machines, we'd get that part, whatever and wherever it was," he said. "Now, that everything belongs to the government, people don't care that much. The only time you pay attention is when your pocket is being hurt. When you're picking coffee, you have to do it now. You cannot wait."

In February 1999, a group of coffee producers and importers from 15 countries met in Havana to evaluate the Cuban coffee industry and discuss ways to boost production. At that time, the Castro government vowed to boost production to 45,360 tons per year, though it's still unclear over what time period this is supposed to happen. Observers say the goal seems highly unlikely, considering the disastrous prices on the world coffee market this year, not to mention the enormous investments Cuba would need to achieve such an increase -- and the fact that the U.S. market, the world's largest, remains closed to Cuba.

"When we left the country in 1960, we though we were going to go back right away because we thought the U.S. government wouldn't allow a Communist country 90 miles from its shores," said Gavinia. "And here we still are, 41 years later."

During that time, the Gavinia family has built its business into a $60 million-a-year empire, selling 22 million pounds of coffee a year to McDonald's, Costco (formerly Price Club) and private labels. And even though he has permission to visit his homeland, Gavinia -- like many Cuban exiles living in the United States -- refuses to do so out of principle.

"I will never go to Cuba as long as Castro is there. We are in the U.S. because of him," he says. "Why would I give any money to a guy who destroyed my country? We really hate his guts."

Yet Gavinia -- unlike the vast majority of his compatriots in Miami and elsewhere -- concedes that Washington's anti-Cuba policies have been utterly counterproductive.

"If it weren't for the embargo, Castro would have been gone a long time ago," he said. "Throughout the years, he has used his conflicts with the United States to get rid of people who might have been against him."

That's an argument raised frequently by opponents of current U.S. policy on Cuba, a group that has traditionally been led by liberal Democrats but which in more recent years has included Republicans from farm states in the Midwest eager to promote grain sales to the Cuban government. If the embargo is lifted, Cuba -- which for years has built its economy around sugar, nickel and citrus exports -- could one day supply Maxwell House, Folger's and Nestle with coffee.

Even so, given the Bush administration's recent pronouncements on the issue (and the powerful Cuban exile lobby in South Florida that helped elect him), it appears unlikely that the U.S. embargo will be lifted anytime soon, despite recent changes to U.S. policy in 2000 that allowed food and pharmaceutical sales to Cuba for the first time since the embargo was enacted in 1962.

In the agribusiness sector, at least, the exiles don't have much to worry about for the moment. Foreign investment is limited to citrus -- where Israeli, Chilean, Greek and British firms have invested more than $50 million to improve the quality of Cuban oranges and grapefruits -- and, to a lesser extent, tobacco. Foreign investment has still yet to make a difference for Cuba's struggling sugar industry, which this year is bracing for its smallest crop in 50 years. Yet things could change rapidly with a warming of U.S.-Cuban ties.

"Agriculture is the key to the Cuban economy," said William Messina, executive coordinator of the University of Florida's International Agricultural Trade and Development Center. "Tourism is growing by leaps and bounds, but it still represents only 10% of the economy."

One company alone, Spain's Grupo Sol Meliá, accounts for one-third of Cuba's 38,000 hotel rooms. Its 19 luxury hotel properties from Havana in the west to Santiago de Cuba in the east make it the largest single foreign investor in the country. This year, some two million tourists are expected to visit Cuba -- up from 1.7 million in 2000 -- and that puts the Meliá chain in an ideal competitive position once the U.S. embargo ends and American tourists are allowed to visit Cuba freely.

In the coffee sector, however, foreign investment is almost non-existent, and most of Cuba's production remains in the hands of three state entities: the Cooperativa de Producción Agraria (CPA), the Cooperativa de Caña y Servicios (CCS) and the Unidades Basicas de Producción Cooperativa (UBPC). By the mid-90s, about 361,000 acres of Cuban farmland were dedicated to coffee, of which state-run farms accounted for 26%, the CPA 18%, the CCS 31% and the UBPC 25%.

On Cuba's overall potential, said Messina, "we know the embargo won't last forever, and there's a very good possibility that once the embargo is lifted, it will have more of an impact on U.S. agriculture than all the nations of the Caribbean Basin Initiative."

Even if the embargo isn't lifted, Cuba will continue to trade with other countries.

"There is no doubt that an expansion of sales of Cuban coffee on the international market will act as a stimulus to its cultivation and production," according to the government publication Business Tips on Cuba. "Another incentive could be external financing of coffee production to facilitate acquisition of fertilizers, fuels, herbicides and provisions. Cuba possesses the modern technology necessary to guarantee the agricultural and industrial processing of its coffee for export."

Asked if he'd consider investing in his homeland once Castro is gone, Gavinia -- the Cuban exile who hates Fidel with a passion -- doesn't hesitate. "Of course," he says. "We'd have to rebuild the country. And we're eager to do that."

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