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Bolivian coffee struggles to break out of obscurity
The Tea & Coffee Trade Journal / July 1998

By Larry Luxner

LA PAZ, Bolivia -- Coffee growers in landlocked Bolivia hope their country will someday be known for quality coffee beans rather than for being one of the world's biggest producers of cocaine.

Nearly twice the size of Texas, this beautiful but desperately poor nation has only 7.1 million inhabitants and a per-capita income of under $1,000.

Last year, the United Nations Development Program gave Bolivia a "human development index" of 0.589 -- making it by far South America's lowest-ranking country in terms of life expectancy, adult literacy, per-capita income and basic purchasing power. But certain areas within Bolivia fall even below that, says the UNDP. The department of Potosí, for example, has an index of 0.373, meaning that conditions there are worse than in Nigeria, and only a little better than in Haiti or Bangladesh.

While Bolivia is famous for producing one-third of the world's coca (the raw material used to make cocaine), its coffee exports are less well-known. Bolivia's coffee industry is centered around Yungas, about 160 kilometers northeast of the capital city of La Paz. There, arabica coffee trees grow at an altitude of 600 to 2,200 feet above sea level.

According to the Comite Boliviano del Café (Cobolca), the department of La Paz grows 95% of Bolivia's coffee; the eastern department of Santa Cruz accounts for another 2.5%. The remaining 2.5% is divided among the smaller departments of Beni, Cochabamba, Tarija and Pando. Approximately 73% of the country's production is exported.

Yet -- unlike Brazil, Colombia, Guatemala or Costa Rica -- Bolivian coffee hasn't really made its mark on the world.

"The flavor is not of the very finest quality found nowadays, and has a tendency toward bitterness," writes Jon Thorn, author of The Coffee Companion.

Even Bolivia's minister of agriculture, Luís Freddy Conde López, tends to agree. "Bolivia's coffee is at least as good as Brazil's," he told us in an interview, "although not as good as Colombia's."

And unlike Colombia, coffee in Bolivia pales in importance compared to other exports such as gold, silver, textiles, natural gas and petroleum. Even within the agribusiness sector, coffee is rather insignificant. In 1997, total agriculture exports came to $423 million, of which soybeans were $207 million, wood products $86 million, cotton $41 million, tropical nuts $31 million and coffee just $25.8 million.

According to Cobolca, in volume terms that $25.8 million translated into 110,953 60-kilogram sacks. This compares to 123,443 sacks worth only $16.5 million in 1996 -- an irony easily explained by sharply higher coffee prices in 1997. Interestingly, in 1993, Bolivia's coffee exports were worth less than $4 million.

Looking at the entire industry, Bolivia's 28 privately owned coffee firms exported $19.2 million worth of beans during the 1996-97 season, or about 73% of the total. And just over one in four of that volume was exported by one firm: Copacabana S.A. Other top exporters include Exibo Ltda., Anditrade, Emdex SRL, Soinca Ltda. and Cafedex SRL.

Bolivia's 14 coffee cooperatives -- dominated by Pacajes Ltda. -- accounted for the remaining 27% of exports. Both the private companies and the co-ops belong to Cobolca.

While coffee may not be that important in dollar terms, it does provide lots of jobs. The sector employs roughly 22,000 campesinos, with another 8,000 working in sales, transportation and other coffee-related industries.

During the 1996-97 coffee season, Germany was far and away Bolivia's best customer for coffee, taking $17.5 million worth, or nearly 67% of the total. In second place was the United States, with $2.5 million (9.5%), followed by Holland (8%); Czechoslovakia (3%); Poland (2.8%) and Spain (2%). In years past, Middle East nations such as Saudi Arabia, Jordan, Syria and Oman were big buyers of Bolivian coffee, but no longer.

"We used to export to Arab countries in large quantities, because they were willing to pay good prices," says Oscar Delgado Pabón, vice-president of Bolivia's Asociación Nacional de Exportadores de Café (ANDEC), which is itself a member of Cobolca. "Nowadays, these countries aren't willing to pay such prices. Now they buy from India."

Asked why Germany buys most of the Bolivian coffee crop, Delgado says statistics can sometimes be misleading, since most European-bound beans are shipped to the port of Hamburg. "That's where it enters," he says, "but not 100% of it goes to Germany. We don't know what percentage ends up in Switzerland, Belgium or Sweden."

Mauricio Virraroel Castro, general manager of Cobolca, told The Tea & Coffee Trade Journal that "the conditions are ideal to produce coffee of very high quality, but obviously not all coffee is high-quality. We have different varieties being mixed together, and this doesn't give us consistent quality. We just haven't made enough effort to enter the U.S. market as we should have."

Adds Delgado: "Since 1992, we have a lab that cups coffee. That's when the shipments are approved or rejected. If they're rejected, they have to be reprocessed. That's how we can assure that Bolivia will export, if not a consistent cup, at least a clean cup."

Castro says his agency is making efforts to market specific brands based on different altitudes and qualities -- much like Puerto Rico and Guatemala do with great success -- but that "it's going to take awhile. It's a long-term project."

In that regard, Cobolca is seeking funds from the U.S. Agency for International Development, though money seems to be in short supply at the moment. In the meantime, two organic coffee projects are underway in eastern Bolivia: one in Buena Vista, about 100 kilometers northwest of the city of Santa Cruz, the other in San Ignacio de Velasco, 500 kilometers east of Santa Cruz.

In another important development, Bolivia recently followed neighboring Chile's lead and became an associate member of Mercosur -- the powerful trade bloc that already includes Argentina, Brazil, Paraguay and Uruguay.

Under the accord, which took effect in early 1997, nearly 1,000 Bolivian products entering those four countries were immediately given tariff-free status; another 1,500 products will see a 30% tariff reduction over the next several years. In addition, 28 "ultrasensitive" products will hit the zero-tariff level by the year 2015; these include soya, sunflower, ground nuts, cotton, palm oil, corn, vegetable and sugar-cane products.

Charles Bruce, president of the Bolivian-American Chamber of Commerce, has no doubt that Mercosur membership will lure U.S. investment to Bolivia.

"It was a great decision to join," he said. "Bolivia has a very small commercial base, and now they'll be able to produce for a larger market." Bruce, who is also president of Bravo Gold Co., says this could benefit U.S. companies interested in agribusiness or transportation -- particularly with regard to the Hidrovia, a planned $1.3 billion waterway that'll link five countries along the Paraguay and Parana rivers.

"We're going to have a transcontinental highway from Brazil to Chile," he said. "With this being the center of gas distribution, Bolivia's going to boom. There'll be a lot of construction to do."

For the coffee industry, Mercosur can only be interpreted as good news.

"All the coffee that can be turned into instant coffee could go to other Mercosur countries that have factories, such as Paraguay or Uruguay," says Delgado. "Once we're [full] members of Mercosur, we can take advantage of duties. We can produce coffee more cheaply than Brazil can. I think we can be competitive because of logistics."

On another front, Cobolca is hoping that Bolivia's war against drugs may indirectly benefit the coffee industry. Since President Hugo Banzer's inauguration last August, the government has confiscated four tons of drugs, arrested 1,400 people for drug trafficking and destroyed thousands of liters of chemicals used in cocaine production.

On Feb. 27, 1998, the Clinton administration certified Bolivia's anti-drug efforts, thanks to the country's eradication of 7,026 hectares of coca plants in 1997 -- exactly 26 hectares above the minimum set by Washington. A U.S. Embassy official in La Paz said the country's drug enforcement efforts had scored above seven on a scale of one to 10. In early March, however, the U.S. government decided to slash anti-drug aid by 75% -- from $46 million in 1997 to $12 million this year. The State Department said the cut was due to pressure from Congress, and that it was "in no way a reflection of Bolivia's performance."

So what does all this have to do with coffee?

The answer is simple. Both Banzer and his predecessor, Gonzalo Sánchez de Lozada, have for several years now followed a program of paying coca farmers $2,500 per voluntarily destroyed hectare of coca.

"We began to give incentives for producers to abandon coca for other alternative crops," says Conde, the agriculture minister. "Apart from giving cash compensation, we gave technical assistance. We began to develop palmito plantations, pineapples and maracujá."

Despite the program, however, the amount of land cultivated with coca plants has remained the same for the last 10 years -- about 12,000 hectares in La Paz (where it is permitted for traditional, medicinal reasons), and 38,000 hectares in Chapare (in the department of Cochabamba), where coca cultivation is illegal because nearly all of it is used to make cocaine.

"We paid cash to eradicate coca, the campesino received his money, bought new coca plants and replanted, and kept the rest," says Conde. "It was a vicious circle."

That, says Castro, is because the Bolivian government has been encouraging farmers to grow delicate fruits and vegetables instead of commodities like coffee.

"The alternative crop idea has not been successful, because there's no market. It's a short-term solution," he said. "Coffee would be better, because it's more profitable for the farmer, even though he has to wait for the plant to begin producing. Also, in order to export fresh fruit, you need good roads and very expensive transportation. That's not the case with dried goods like coffee beans, which in two or three weeks won't lose their quality. Coffee is a lot more profitable than pineapples or bananas, and a lot less risky."

What's more, Chapare -- Bolivia's prime coca-growing zone -- receives just the right amount of rainfall and is the right altitude for producing quality coffee beans.

"Right now, the value of Bolivian coffee exports is only 0.17% of world coffee exports," says Castro. "With long-term planning, Bolivia could increase its coffee exports by 20% to 30%. And the more coffee we export, the better it is for the industry."

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