COFFEE INDUSTRY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83-00423R000600550001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: November 9, 2016
• Document Release Date: November 3, 1998
• Sequence Number: 1
• Publication Date: June 1, 1953
• Content Type: REPORT

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COUNTRY Guaeiala
SUBJECT Coffee Industry
PLACE ACQUIRED
(BY SOURCE)
DATE ACQUIRED
(BY SOURCE)
DATE (a 111.,;) Jun 53
Lr,17. L USE ONLY-
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SECURITY I TION
States, vith n
as ameaded. Ite
unauthorized persor Is prohibited by lay. The reproduction
prohibited.
tie
25X1A2g
BATE ______
aupplement to:
Responsive to
as information affecting the national defense of the United
8 ,iections pee and 794, of the Code,
to or receipt by aa
!,1sriSSiofl or reve
25X1A2g
ihi It doe:2 not warrant deeseeenation be eport. analysts.
u LI:IS:VALUAT Ig
ED KeMATION is surp r the possible interest of your
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'? Aspects of the Industrz,-
1. t. Within the a So any comeenies or brokers specialize le Guatenslan coffee or
Central American coffee, or do be all bue flem tarlous coantrien? Are there
any popular name brands whose market demaads Guatemalan coffee.) or could other
coffees be substituted?
A. :o far thta year we have purchased about U4300 thousand eore.h with the main
auctiens eV11 to come. The approximate average of Guatemelan coffee in our
bleed is 207. The only ether large direct buyer is 'erd Dablen of St ecis
who buys for Paxton-Gallagher of Omaha, Nebraska, General Grocery Company, eld
Judge Coffee Ceupsee, and the Duncan company of Houston. Our resident buyer
Is Jules 5aechez Latour.
Cne
the larcent US brokers is Medina and eo of New York City which imports
auatemalan coffee for General Foods (Maxwell House). Also in New York Is a
broker named Charles Mackey. The Nev York brokerage firm of Harden and Rand
also imports from Guatemala. Its Chairman of the Board owns large fincas there.
In New Orleans, Bright 8. Company are the only brokers buying Guatemalan coffee.
In Can Francisco, Otis McAllister (who operates Agencies Unidas In Central
America) is a ezeminent broker. Fe are the firms of S.F. Pellar and Ortega
and Emizh, also in San Francisco. In Los Angeles a John lack, doing business
as E.B. Aikerman & Co, buys considerable amounts of Guatemalan coffer. He is
owner of the large and prosperous fine* Uonap in Guatemala.
Aoee of the nsmic brand:: "demand" Guatemalan coffee as others can and have been
substituted without the consumer being able to tell the difference. The sub-
stitution of other highland coffees and a slight change in the blend and the
retailed coffee rtaec about the same. rsne year we bought coesidereble amounts
of coffee from the Belgian Congo. Their prices went up so we bought from
Mexico. No place is indispensable, but we do prefer the highland coffees from
Guatenala.
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SIERET
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the use within the USA of CIA and the Intel4lenc? nents of
etate, Army, !levy, not to be transmitted oVerseas wr .ut the
concurrence of the originating office t r Erector of the Ceffice
of Collection and Dissemination, CIA.
JUN -1 1952
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Information is desired on how the Ua price of Guatemalaa coffee is arrived
at. Is the Guatemalan crop considered as e_ separate entity or merely az
part of tae world supply of coffees having caaractetistice eleilar to the
Guatemalan eroduct? There is interest in knowing whether Guatemalan coffee
prices are alwaya set on the US market by the tree play of the law of supple,
and demand.
A. Guatemalan coffee prices in the UL are definitely set by supply and demand
and are based on the competitive situation coupared with other coffee growing
countriee for each grade of coffee. As the Central American countries are com
paratively email producers, they cannot ever get far out of line. At the
present time the price setter is Colombia. They are selling at a price lover
than the artificial Brazilian level and hence our purchases from that country
have. seen a relative- increase.
Before World War II the large German-held fences were able to start an active
demand for large bean Guatemalan coffees in Gereace and elaewhere on the conti-
nent. The postwar financtal recovery or Gereuna. has eeepceed that demand. The
German fincas were expropriated by the Cuateealan Governmeat and are now pro-
these large bean varieties. During the 'Addle of May 1953, the government
tried to sell coffees from these finest). Although all of tee beans would not
ell, some of the large beans were sold to Suropeans for a price well above what
we were willies to pay with the U market in mied.
. Is there an association of Ue buyers of Guatemalan coffee? Of Central American
coffee? What are the active associations and gruuea le the aa concerned, with
coffee, particularly Guatemalan or the mild coffeese
A. ao, there is eo such association for ea buyers of Guateealee or Central American
coffees. These categories all fail under the National Coffee Association.
? Who pays the insurance on Guatemalan stocks in the Ue in salpeide warehouses
and elsewhere before they reach the consignee?
A. The anewer to this depends upon whether it is ieported direceay, as our firm
tioes, or bought by regular import brokers. It all depends ueoa weea and where
title passes to the ultimate consignee. In our owe case, we buy parchment
coffee off the fiacas themselves and, therefore, get insurance fro a the tine
of purchase In Guateeala until delivery to our roasters. As far ar the US brokers
are concerned, they pay the insurance for coffee in the U4 if title has not
already passed to the roaster.
5. .% ?
Are large Guatemalan stocke held in the Ua or do the stocks tend to move to
the US on an as- :ceded, bases.
. There are no large eLocke of Guatemalan coffee in the U$. They aee purchased
as needed.
6. Q. Is there a localized sales areal' That is ie Guatemalan coffee particularly
pepular la a certain area.
A. The only factor determining where Guatemalan cofeees are sold in. the US is a
promotional one. In areas where the firms which buy Guatemalan coffee have done
successful selling jobs of their brand name, those areas are aaterally the biggest
consumers of Guatemalan coffees. Theme areas, er eouree, bee only the brand name
and not Guatemalan coffee per se. Considerieg the. above, the areas using the
most are the eideest and the west coast (et Louis, Kansas Cita, Omaha, and
Sae Francisco).
Guatlesslan Aaaeete of the industry
4. Domestic associations of finca operators and brokers. Their officers, locations
of headquarters, aims, atrength,
outside associations?
Do ally important grower e or brokers operate
A. The Assoclacion 4e Cteroa is open both to coffee growers and brokers and
many al Ow meMivers fall into both categories. rs I recall, this association
is quite "loose" in its organization and had been set up during the critical
time of the price rise of several years ago. The association was set up for the
mutual protection of its members and to get one another to fulfill contracte to
keep a check on each other's activities.
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In 1952 Guatemala VO3 deeply in debt to the Pan American Coffee Bureau and the
Mexican-Central American Coffee Federation. Is it still a member in good
standing in these organizations and if it is what is the status of the debts
A. I at not currently Wormed on Guatemala's debt situation to the PACS. I do
know that several efforts were made during 1952 to satisfy these claims, but
have not kept track of the outcome. As of April 1953, however, Guatemala was
still listed as a member on the letterhead of the PACE. As far as the Mexican-
Central American Coffee Federation (Fedecame) is concerned, I have not heard
that Guatemala was not still in good standing with them.
is the MexlcaneCentral American Coffee Federation separate from the Pan emerican
Coffee Bureau? If it is, give data on it along the lines requesten for the
domestic associations of growers and brokers.
A. I do not know About the connection between redecame and the PACB, but they are
probably separate or only aominalle connected. Fedecame was set up to exchange
agricultural ideas on the nroduction of coffee rather than to join together in
a price agreement type of sltuation. These countries cannot ever get together
on any kind of a price agreement. For one thing, they are too jealous of each
other, and for another thing they all grow different types of coffee, depending
on the altitudes. Costa Rica demands and gets higher prices for her highland
(four thousand feet and over) coffees and Guatemala gets only slightly' less
for her highland types. Sen Salvador, on the other hand, is penalized for her
lowland crops (below three thousand feet). It would be impossible for Central
American countries to set up a price front because of their dependence on world
market prices for nouth American coffees.
Information Is desired on the financing of the coffee crop. Are :ince operators
subvended by foreign buyers or domestic brokersi Do any growers deal directly
with foreign buyers Do they obtain loans from Guatemalan Government, or private
banks, or from foreign beaks, or are the large growers usually in a position to
operate without advances or loans?
A. As we are the largest direct coffee buyer in Guatemala, we have found it eecessary
to extend crop loans to many growers and many local and regional buyers. Of
these the buyers need and get the most financing as they need cash on band to
make purchases from the small fincas. Nearly every one of the local and regional
buyers are well enough off to finance their own crops but not to bun others.
Thus, the bulk of our direct financing is through short-term crop loans. Our
firm is the only Un roaster which finances growers or buyers with the exception
of Dahlen, who subeidizes them with his principal's money.
Below are examples for the pest seven months thawing the amounts advanced to
growers and buyers alike. These figures show the amounts of our current inves-
ments in Guatemala. Naturally, we would like to stop these loans but they have
proven absolutely necessary to volume purchasing.
September 1952
October
November
December
January 1953
March T,
11
April
us $ 831,000
1,500,000
1,000,000 -
500,000
600,00o /
380,000
177,000
The peak menthe for financing are in the fall. By December the coffee has been
sold, The above figures are lower than most years because our resident buyer
was advised in September 1952 to keep such investments down to an absolute
minimum. At this time we were especially worried about our friend Roberto Fanjul,
Finance Minister of Guatemala, to whom we had advanced considerable amounts but
who had reportedly lost liquidity of his assets fiee 00Be567817. Fanjul has
since recovered and paid up.
Our representative wrote us at that time on the subject of financing;
"As mentioned to you, I have been holding our loans to the minimum, but
it is, of course, imposeible to hold them to zero, or we would not buy any
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eoffee. For example, I bought five thousand quintals pergameno fecie
Mr Jose Francis, who had to have $2 thousand to keep the family going
In Guatemala City froa aow until the and of the year. That es a negligible
amount considering the amount of coffee that he sold us and his excellent
financial position, in that he does not owe anyteleg on his plantations
or on the crop itself, aed he still has funds in the plantations to take
care of the harvesting. About the only people to wbom we have given laxge
amounts of mower BO far are the euezadae; however, I would like to make
a few remarks about these people. They own the plaatation 'Rosario',
with a production of About three thousand quintals pergamiuo and do aot
owe a. single cent on the plantation. Furthermore-, tbee have a hardware
store In Guetemala City to supply planters, which has an inventory amounting
easily to 000 thousand and on that property, too, they de not owe a single
cent. One of the boys lives in. Retalhuleu and manages their big mill
over there- - one of the largest- in the Guatemalan Republic - end it is
also free from any debts. The other boy is conetantly going from here to
Retalhulen. and back, and takes care of all the accounting and financial
side, ebile Eduardo, as you know, perseaally handles the buying office
here in Guatehala City. They work with a very small overhead, =deb a
large part of their own financing, probably more than oneehalfe with their
own funds.'s
Although we are the fatale Ue roaster who does direct fiaanc, -, resident coffee
export firms in 3uatemala City also make crop loans. The ones who make the
?
most loans are listed as follows;
a) Agencies: Valdes branch office with headquarters in costa Rica. This firm
is owned by btis eicAllester of San Francisco.
b) Balvadore Delgado & Cia are agents for Aedina & Co of New fork City, who
buy for General Foods.
Juan Erkelena, agent for Ferd Dahlee.
d) Be Sola & Cie.
&Cie.
ia.
Most of the above make crop loans only, although a few hold mortgages on fincas.
The banks are used for both crop loans and mortgages and our peyments are often
made out to the BAN (Banco Agriculture Mercantil) or to the BOL (Bank of London)
although the loan had been made through soae of the above listed firms.
Naturally, there are many individual investors among the Guatemala= and between
the finca owners. themselves. The common Interest rate on crop loans is only
two percent wimple Interest.
Although- the larger growers and bueers make enough money to pay off- the debts
and then finauce their own operations, the tendency is to go out and buy more
land. Here they need larger advances aed. in that way they keep gettiug further
Into debt.
The section around Antigua is so rich and eroductive that it is an exception to
tee general financiag picture for the country as a whole. Very few loans are
ever sought frew this area.
eo the best of my knowledge,no non-US buyers 4o any financing.
11. e. Roe stringent are the regulations on export of dollars earned on coffee sales?
most of the large growers and brokers maintain US bank accounts?
A. If such restrictions exist- they cannot Le very otrict because I know several
who keep fairly large bank balances in the US. Often our cheeks are made puee
able directly to their accounts in the US banks. I would estimate that about
half of the largest brokers and growers have US bank accounts.
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12. e. Jame the largest growers and brokers.
A. The best way to illustrate this is to take a significant monthly payment
sheet and list the names of the sellers for that month and the amounts paid
to them. The size of the payments are fairly good indicators of the size of
the production, as often we buy entire crops. The month chosen was Januar,' 1e53
as this is a peak month and payments are at their highest. The only omission
in this is the crop from Antigua, which io usually sold in early March. The
payments total over US$2,500,000 for the chosen month, including about US*220
thousand in export duties and US413 thousand in fiscal stamps. Hate that some
of these names appear several times. jbotosts.ts of list described above are
attached at and of the report .7
Included in the attached list is the name of Jos 4 Fella, who is one of the
Antigua growers. Other rich growers from Antigua whose crops were not yet
in are Carlos and Salvatore Herrera. Carlos Herrera is about the wealtbiest
of all the coffee growers and has many outside financial interests. The
Antigua growers got together and tried to market their combined crops as a
unit. I believe they succeeded in doing this but we bought none of their crop.
The followieg is a complete list of active coffee brokers in Guatemalee
) Golsen
W n Dieseldorff
Miguel Torrebiarte
b) Guatemala. C14
Agenfeas lnidas
Carlos Aviles & else Ltda.
Fredrico Boef & Cia
edmonde Brel
Cia Rolandesa
Fanjul & Cia (one business enterprise of Roberto Fanjul, Minister of ii
Haehle & Cia
Herrera-Cordon
Lind & Cia
Oscar eoralea
Wm Penningtoe
L Peterson
Gordon emith-
Juan Waelti e Cie
Angel Zardetto
Maeateeaege
GuieilerMo eche y Hijo
d) Retalhulen
Pedro euezada Suce
13. e. What are the prospects for the new Guatemalan crop?
A. From what I have heard the new Guatemalan crop will be about the same as
last year's but will probably be slightly larger. There are no indications
of a possible price drop.
l4. e. re there ane prospects for increasing Guatemalan Government control of
coffee production?
A. yes, there is alwaes that possibility, however, we do not feel that this is
the wish of President 7.rbenz. If ane thing, there has been an attempt to
lessen control. Last /ear the Ofieina Central planned to discontinue the
control of auctions of coffee from goveiument fincas. be 00e-57058:7
Although le,2 was to have been the last year, they Intend to centinue the
auctions through the 1953 season. The government land and mills would be
leased to local or foreign private interests as sale of such government land
is unconstitutional. Although we are watching developments along these line
very carefully, I so far doubt that these leasings will be carried out in the
near future because of public opinion. If facilities are leased, it will be
necessary for us to lease our awn reill and buy coffee cherries directly from
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both large and small farmers. There would be some interesting meneuvering
around who ems going to control what.
At present the Oficina Central records every sale taking place from the producer
to the exporter. in this way they get ideas of the markups prevailing and then
proceed to put goverment coffee on the market in competition with private
interests. It is possible to get an Oficina official to bid for you on the
coffee and in that way circumvent the required 25% cash deposits on purchases
which is normally required. This, of course, requires a fee paid to the
official. 25X1 X6
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A tsched are photostats of payments for Guatemalan coffee
n January l hi
e53. Behind t . s are the contract numbers, and
behind those are the names of the types of coffee purchased. The horizontal
dashes to the left of the date numeral on the far left-head side of the page
indicate that those items are not coffee purchases. When one check mark (.-e)
precedes the draft number aad name of payee this designates a man or group oi
men who operate as a miller or local coffee buyer only. When two check marks
appear (ee) tr, ;see Is not only a local buyer or mill owner but also a finca
owner and operator. Where no check mark appears the payee is merely a grower or
finca owner.
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