The Tea & Coffee Trade Journal / February 1997
By Larry Luxner
GUATEMALA CITY -- When German-born coffee exporter Klaus Monkëmüller landed in Guatemala City on Nov. 30, 1960, he couldn't have possibly known that on the same day, leftist guerrillas would launch their armed struggle against Guatemala's CIA-backed military government, setting off Latin America's longest-running civil war.
Now, after 36 years of bloodshed, peace has finally broken out in this troubled nation -- leaving Monkëmüller and millions of others to wonder what will happen next.
The turning point came on Dec. 29, 1996, when President Alvaro Arzú and leaders of the Guatemalan National Revolutionary Unity guerrilla group signed a peace treaty at a ceremony attended by over a dozen Latin American heads of state and thousands of observers from around the world.
The positive development not only ends a war that has claimed between 100,000 and 140,000 lives since 1960, but also opens the way for massive development aid and renewed investor confidence in Guatemala, whose 10.3 million inhabitants make it the biggest nation in Central America.
Yet many Guatemalans worry that the imminent peace will also put thousands of soldiers out of work, which is exactly what happened in neighboring El Salvador after that country's civil war came to an end in 1992.
"Most people are afraid that even though hostilities may stop, robberies and assaults by uncontrolled groups will go on," said Monkëmüller, general manager of Unicom S.A. in Guatemala City. "Coffee growers have faced extortion by the guerrillas and by uncontrolled bandit groups which sometimes involve military and police. The coffee sector has been hit hard by attacks and occupations. Even now, with refugees coming back from Mexico, there have been invasions of well-managed farms."
Adds Manfredo Topke, whose 300-hectare finca exports coffee mainly to Germany and the United States: "The number of coffee farms that weren't affected by the war can be counted on the fingers of one hand."
One coffee importer who isn't very optimistic about the peace treaty is Chuck Jones of Dońa Mireya Inc. in Pasadena, Calif. His company employs 1,200 workers in the production of over a million pounds of gourmet coffee annually at Finca Dos Marias in San Marcos, a six-hour drive west of Guatemala City near the border with Mexico.
"It seems like things are going to get worse before they get better, in terms of integrating the guerrillas back into society without becoming outcasts," said Jones, whose great-great-grandmother started the family business back in 1870. "It's happened before, where the rebels lose their cause and they need to find a place for themselves."
There's no doubt the fighting has taken a huge toll on the Guatemalan economy and on its 44,000 or so coffee producers. Nearly 450 villages were destroyed in the army's campaign to wipe out communities sympathetic to the guerrillas, according to The Washington Post. Under the peace accords, the Arzú government has agreed to implement new programs that could cost up to $2.7 billion over the next three years. With an annual budget of about $1.85 billion, the paper reports, the government will need $1.7 billion in aid from such institutions as the World Bank, the International Monetary Fund and the Inter-American Development Bank.
"Once they sign the peace treaty, we'll see lots of economic help, but it won't last long -- maybe one or two years," Ricardo Santacruz told The Tea & Coffee Trade Journal. "What the country has to do is make intelligent investments so later on, it can live off its own resources. We've learned that value-added agricultural activities can offer benefits that coffee can't. Our goal is to diversify agricultural production."
Santacruz is director of the agribusiness subcommittee at Gexpront, Guatemala's association of non-traditional exporters. That organization -- which receives funding from the U.S. Agency for International Development -- aims to steer Guatemala away from its traditional dependence on coffee, bananas and cattle, and towards high-value exports such as pineapples, melons, baby vegetables and raspberries.
"We want to improve productivity and yields in areas we're already cultivating," he said. "Guatemala has relatively small areas where various crops can be cultivated. We want to provide small markets with specialty, value-added crops such as baby vegetables that command high prices."
In 1995, according to the Bank of Guatemala, the country exported $539.2 million worth of coffee, $238.2 million worth of sugar, $138.6 million worth of bananas, $30.3 million in sesame seeds, $21.4 million in shrimp, $12.4 million in melons, $10.4 million in broccoli and cauliflower, $9.0 million in snow peas and lesser quantities of mangoes, berries, plantains, okra, celery, onions and watermelons.
"Coffee, sugar and bananas are the largest exports from Guatemala. Broccoli is still mostly fresh, but the trend is toward frozen," said Todd Drennan, assistant agricultural attaché at the U.S. Embassy in Guatemala City. According to an October 1996 Agricultural Situation Report supplied by the embassy, Guatemala is in the process of installing another hot-water treatment plant in anticipation of increasing mango shipments overseas.
Gerry Brunelle, general manager of Bandegua, the Del Monte Fresh Produce Co. subsidiary in Guatemala, puts it bluntly: "There's growth in the banana, sugar and non-traditional sectors. Coffee and cardamom are pretty static, and cotton is just about dead."
Yet non-traditional exports have their own problems. In late 1992, Guatemalan snow peas were blocked from entering the U.S. market when it was discovered that pesticides not approved by the FDA were being sprayed on the crop. Exports resumed, but shipments are now being scrutinized at the port of entry for FDA violations. Likewise, Guatemalan raspberries were suspected as the source of a recent outbreak of cyclospora in 21 U.S. states, the District of Columbia and the Canadian province of Ontario.
Even if non-traditional exports continue their rapid growth, coffee will still be the mainstay of Guatemala's economy for a long time to come. At the moment, coffee represents 27% of the country's foreign-exchange earnings, and 39% of total export revenues from agricultural products. In terms of gross domestic product, coffee brings in 7% of GDP, rising to 10% of GDP in boom years.
Production in 1996-97 is projected to reach 3.5 million 60-kilogram bags, only slightly higher than the 1995-96 production estimate. According to Anacafé, the industry utilizes 262,500 hectares, or 2.4% of Guatemala's total land area, while providing employment to 11% of Guatemala's economically active population.
Anacafé itself doesn't sell, buy or export coffee, though its stated objectives are "to defend the interests of coffee producers; to cooperate in protecting the national economy as refers to the production and marketing of coffee; to provide technical assistance; to promote Guatemalan coffee nationally and overseas, and to issue and control coffee export permits."
In the 1995-96 season, 41.23% of Guatemala's coffee exports went to the United States, followed by Germany (16.29%), Japan (7.53%), Sweden (4.69%), Belgium (4.58%), Holland (3.91%) and Italy (3.62%). The season's total volume of 2,070,290 quintales or hundredweights represents an increase from the 1994-95 total of 2,004,248 quintales, though it's still far less than the 2,558,967 quintales exported in 1992-93.
According to the U.S. Embassy in Guatemala City, an estimated 300,000 bags of coffee entered Guatemala illegally from other countries, mainly Honduras, though "this number will fall over the next few years as economic conditions and export policies change in neighboring countries."
Currently, all but two of Guatemala's 23 departments produce coffee; in those areas grow some 748 million coffee trees. Workers -- mostly very poor Guatemalans who speak a variety of indigenous languages -- earn an average 20 quetzales (about $3.50) for every quintal of beans picked. Since the average worker picks around one quintal per day, that's more or less their daily wage.
In an October 1996 "Agricultural Situation Report" on Guatemala, the U.S. Embassy had this to say about coffee: "The regions where planted area has expanded are in the departments of San Marcos and Huehuetenango. Coffee price fluctuations during the 1995-96 season, however, have made producers and exporters cautious about expanding production any further. The 3-5 year outlook should reveal moderate growth in coffee pro-duction assuming normal rains and normal production cycles as non-bearing trees mature."
To increase recognition of Guatemalan coffee in its most important markets, Anacafé has been spending $500,000 of its annual $4 million budget on promoting its five regional gourmet coffee brands: Antigua, Huehuetenango, Fraijanes, Cobán and Atitlán. All are classified as Strictly Hard Bean, with requires coffee to be grown at altitudes of between 4,500 and 5,500 feet.
José Angel López, a director of Anacafé and one of 20 coffee growers on the orga-nization's executive board, enthusiastically supports that effort. López, a native of Huehuetenango, is also vice-president of Fundación para el Desarrollo Rural (Funrural), the social agency arm of Anacafé.
"During the years of conflict, coffee activities were affected not only from the point of view of damages to the coffee infrastructure, but also the loss of human life," he said. "We're talking about big farms and small farms, workers and exporters. I think this peace treaty is an opportunity to improve our levels of productivity. We can't do that in an atmosphere of violence and fear."
Despite the past setbacks, few doubt Guatemala's ability to attract investment once peace prevails. The question is how long the aid will last, and whether the presence of thousands of unemployed soldiers and guerrillas will turn out to be more destabilizing than the war itself.
"For years, Guatemala has had a reputation for violence," said Drennan. "The peace accords talk about finding land for refugees coming back. But unlike in El Salvador, the guerrillas didn't win. That's why it's been a lot harder here."
Adds Santacruz of Gexpront: "After the euphoria passes, jobs will have to be generated. I'm sure the agribusiness sector can contribute to the creation of jobs, but we can't solve everything. What this government must do is invest in infrastructure. If there are roads, telephones and electricity, investment opportunities will come."