Coffee Switch

The U.S. has sharply reversed its policy on Latin America's most important export: coffee. Traditionally, the U.S. has maintained that coffee marketing should operate solely on the basis of supply and demand; in times of high prices, the coffee-growing nations cashed in happily, but in the all-too-frequent years of sagging prices and unwieldy surpluses they had to bear the losses and hope for better days. Even before Vice President Nixon's tour of Latin America, the U.S. was considering shifting its position. Last week, as part of the post-Nixon new look in U.S.-Latin American relations (TiME, June 2 et seg.), the U.S. agreed to join an international study group to seek a means of ending destructive coffee price fluctuations; State Department officials were making informal, embassy-by-embassy visits in Washington to discuss coffee problems.

At bottom, the problems rest on two statistics. World consumption of coffee is increasing an average 500,000 bags a year; production, ballooned by a worldwide planting spree during the Korean war, is increasing at the annual rate of 5,000,000 to 7,000,000 bags. Hardest hit is the world's No. 1 producer, Brazil, which last year earned 61% of its foreign exchange by exporting 14.3 million bags* worth $935 million. This year, with much of the world's coffee selling for less than Brazil's rigidly fixed prices, the most optimistic export prediction is 13 million bags, worth $800 million. The Brazilian government has already paid for 15.4 million bags of surplus coffee it now holds, and the new 22 million-bag crop now pouring in could boost the surplus another 9,000,000. Next year's estimated crop: 24 million bags.

With Brazil priced out of the market, the No. 2 coffee country, Colombia, is not so badly off. It has only a little more than 3,000,000 bags in storage, and most of this is the result of an agreement reached last year between Latin America's seven biggest producers to hold some coffee off the market in an effort to prop prices. Just the same, Colombia's exporters are grumbling that holding back only encourages rival African producers to enlarge their share, now about 20%, of the world market. Pegged prices, they insist, allow African producers to undersell them.

Both Brazil and Colombia want the U.S. either to set minimum prices for coffee and establish import quotas for each coffee-growing nation or begin stockpiling. The U.S. is not yet ready to go that far. It is willing to grant stopgap aid, e.g., a $103 million loan to Colombia a fortnight ago. And it is willing to work jointly on plans for more orderly marketing. "The U.S. finally has admitted that the problem is mutual," said one Latin American ambassador in Washington last week. "That's quite a change."

*Down from 16.8 million bags in 1956.

This file is automatically generated by a robot program, so reader's discretion is required.