Mexican Coffee Crisis The Economic Effects December 2009
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In 1989, coffee prices dropped dramatically because of the collapse of the International Coffee Agreement (ICA), which had a devastating effect on Mexico’s economy. The ICA was an agreement made in 1960 between countries that imported and exported coffee. Under the ICA, countries that imported coffee agreed to pay higher prices for it to help farmers and governments in poor, developing countries that grew and exported coffee. Basically, wealthy nations that consumed a lot of coffee were aiding the poor countries’ development by paying more for coffee than it would have been worth in a free market. Another reason that the ICA collapsed was that coffeegrowing countries that were not part of the agreement were producing coffee at prices that made it hard for ICA countries to compete against them. Without the ICA, in the new free-market economy, coffee became so cheap that it cost more to produce than a grower was earning in return and all the coffee-growing communities in South America went on a downward spiral (Jaffee, 42). Because Mexico’s economic system depended more on coffee production than almost any other country in the world, the coffee crisis hurt the whole country as well as growers and farm workers. The worst economic effects of the coffee crisis in Mexico are evident now that twenty years have passed since the collapse of the ICA. They are an increase in poverty, a rise in malnutrition, migration out of coffee-growing states, the takeover of these areas by narco-farmers and traffickers, and even a revolution in the state of Chiapas, where most of Mexico’s coffee is grown. From 1980 to 2000, coffee prices fell by 64.5%. In 2001 coffee cost one-third what it had been during the 1960s (Eakin, 164). This caused the average income in Mexico to drop 70% after 1989 (Jaffee, 43). From 1989 to 1996 the impoverished
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population in Mexico rose from 39% to 43% (Alvarado, 78). Moreover, since 1989 there has also been a rise in the Gini coefficient meaning that there is a growing gap between classes (Alvarado 79). Coffee growers especially struggled to keep their heads above the water. Since the price of coffee plummeted, farmers had to sell the coffee for less than it took to grow the coffee plant. Statistics show that in 1994 and 1995 13% of the total coffee industry’s revenue went to the growers while in the years prior to the coffee crisis, the 1970s and 1980s, 20% of the total coffee revenue was reaching the growers (Nevins, 235). The drop in coffee prices meant that growers earned less in the short term; it also cut into their long-term income because farmers no longer had the money to plant new crops (Luttinger, 103). Often they were unable to sell the coffee. A lot of time the raw coffee was stored in warehouses for years until it was sold, which was devastating to a coffee- growing family and they became indebted. Families had to sell the land that the coffee is grown on in order to pay off debts. By selling the land the family lost its only source of income. Another negative side-effect of selling farm land in order to pay off debt was that the family unit often disintegrated (Fellner, 50). As the people of Mexico became unemployed and sold off all valuables to pay off their debts, a cycle of poverty started and more people became poorer. This led to other problems, such as higher malnutrition rates. After the price of coffee went down, the cost of all essential food groups increased from 1994 to 2001
(Sanchez, 3). Subsequently, it became harder to purchase food with the prices rising and family income decreasing. Many people in Mexico, especially people in the rural, coffee-growing regions began to suffer malnutrition. Ten-to-twelve percent of Mexicans
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are malnourished. The population most affected by malnutrition has been the children. Twenty-four of every thousand Mexican babies die before their first birthday, and throughout South America, including Mexico, the average size of a child has decreased since the start of the coffee crisis (Sanchez, 3). Clearly the physical and psychological effects of malnutrition are devastating and the long-term consequences in Mexico include not only worsening health in coffeegrowing regions, but also a rise in violence among adults who were malnourished when they were children because poor nutrition in childhood is linked to maladjustment in later life. The communities where mass poverty and malnutrition occurred became desperate, and the people who lived there were willing to take extreme measures in order to survive. They began growing heroin, trafficking cocaine, and, more recently, producing methamphetamine. Growing and smuggling illegal drugs have been a problem for Mexico for many years, but since the start of the coffee crisis in1989, drug production and trafficking have increased. In the book Brewing Justice, Daniel Jaffee states that with the demand for coffee low and need for income high, many coffee growers switched to growing drug crops. In some cases whole coffee-growing communities cleared the land, planted heroin, and started smuggling this and other drugs. Now Mexico is a major supplier of these narcotics to the U.S. In 1996, the U.S. Department of State International Narcotics Control Strategy Report government described Mexico as the “second largest Latin American grower of opium poppy”
(Mexico, 1). Significantly, the report stated that “cultivation levels” of opium were among the highest in 1989. By 1994, approximately 12,400 hectares were planted with
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opium though the Mexican government “eradicated 6,600 hectares, leaving approximately 5,800 hectares under cultivation” (Mexico, 1). Many of these drugs went to the U.S., leading to violent crime there. According to Kimberly Brouwer et al., “An estimated 70% of U.S. cocaine originating in South America passes through the Central America-Mexico corridor. Mexico-based groups are now believed to control 70-90% of methamphetamine production and distribution in the U.S.” (707). She explains that Mexico became a “major player” in the drug trade in 1989, the same year that the ICA failed and the coffee crisis began. Since then Mexican drug cartels have controlled “the wholesale cocaine distribution in the west and midwest of the U.S.” (710). Shortly after that, in the 1990s, Mexican drug organizations began producing methamphetamine and smuggling it to the U.S. (Brouwer, 711). Not only has the rise in drug production affected the U.S., but studies show that as time goes by, Mexico is quickly becoming a drug-consuming country because narcotics are more accessible. Brouwer explains that “With the increased role of Mexico in trafficking and production of illicit drugs, the perceived availability of drugs has increased locally and has been associated with increased experimentation and continue use in Mexican adolescents” (712). Other researchers have found that drug use is rising in Mexico. Estela Rojas Guiot et al. report, “When use of any drug was considered, an increase in lifetime use from 1998-2005 was observed. . .” (14). With both narcotics trafficking and consumption rising in Mexico, the business of drugs has become extremely violent. Drug gangs and cartels control many rural states by bribing police and government officials or simply by using brute force against the
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local population. Often these cartels have their own armies and human rights reports claim that their members include local and federal law enforcement officers. The drug organizations kidnap, torture, or murder anyone who opposes them, and the “drug lords” even target children and women in order to terrorize the population into submission. For example, more than 500 women have been killed in drug violence in Ciudad Juarez since 1993. The 2006 Country Report on Human Rights Practices for Mexico states: Throughout the year there were numerous reports of executions carried out by rival drug cartels, whose members allegedly included both active and former federal, state, and municipal security forces. Organized military-style groups were also associated with the cartels, including a group of former special forces soldiers (known as the Zetas) as well as a growing presence of former Guatemalan special forces soldiers known as Kaibiles, trained in unconventional counterinsurgency tactics. More than 2,000 persons were killed in crime-related violence throughout the country. ("U.S. Department of State”) This violence, along with the increase in poverty in Mexico, led to a decline in the population of coffee-growing areas because workers and growers relocated. They sought different work and a better quality life. Lack of employment was usually the immediate reason that Mexicans moved away from coffee farms. According to the World Bank, seasonal employment in coffee is down 20% and permanent employment is down more than 50% since the coffee crisis began (Alvarado, 97). With such high unemployment rates, growers and workers had no choice other than migrating out of
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coffee-growing regions unless they want to continue to live in extreme misery. Some people moved to urban areas of Mexico and others immigrated internationally, usually to the U.S. For example, 50% of Veracruz’s population migrated out of the region between 1990 and 1995. This has become a continuous pattern in Veracruz. From 1995 to 2000, for example, 800,000 people migrated out of the state and then in 2002 the Veracruz Coffee Council officially reported that 30-35% of the coffee workers had migrated to the U. S. (Nevins, 237). This means that one out of every 20 households in Veracruz lost one or more members to the U.S. Other areas of Mexico where coffee is grown, such as San Juan Cabeza del Rio Oaxaca, also had high rates of migration. This made the situation worse in states where there had been many coffee farms. One National Public Radio reporter stated that when he visited the coffee farmers, there were not enough people to harvest the crops let alone supervise harvesting (Nevins, 237). Migration caused other problems, too. Unemployed coffee workers who travelled to the U.S. often died during the journey. For example, in a hearing in the U.S. Congress in July 2002, testimony included the story of 14 Mexicans who “died of dehydration in Arizona in May 2001 while trying to cross the Sonoran desert to a new life in the U.S.” (Eakin,164). While migrants risked death, the families that they left behind also suffered. Typically, men were the most likely family members to migrate, which left communities with few males. This is one reason that women in Juarez are targeted by narco-gangs. The gangs know that the women are easy to kidnap, rape, and kill. While migration, poverty, and drug violence affected all of Mexico’s coffeefarming areas, the state of Chiapas was plunged into war because of the crisis.
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Chiapas is the largest coffee-producing region in Mexico. It was an already a poor state before the coffee crisis but in 1989 when coffee transitioned to free market trading, Chiapas became even more impoverished. In 1994, as coffee prices continued to decline, indigenous people in Chiapas rebelled and the Zapatista Army of National Liberation (EZLN), often referred to as Zapatistas, declared war on the state of Mexico. The EZLN and its supporters rebelled against the Mexican government because of the poverty caused by the coffee crisis, according to the former Roman Catholic bishop of Chiapas, Samuel Ruiz, who has become internationally known for his work to bring peace and social justice to the area. When Bishop Ruiz met with Pope John Paul II in 1993, the year before the war started, the bishop explained how poverty in Chiapas affected the lives of indigenous people there: Indigenous people do not have a voice and live in painful silence and even desperation. There is widespread sickness and malnutrition as a result of poverty, and the indigenous people have little land on which to produce their food. There is general corruption among political authorities. There is no service of light or potable water. Health services are greatly diminished and alcoholism is rampant.
(Boots, 247)
Poverty was so extreme, said Ruiz, that he believed 15,000 people had died of hunger in Chiapas in 1993 despite the fact that the region is rich in natural resources, a “home of plenty” as the bishop described it (Rosen, 40). Four years later, in 1997, Ruiz made it clear that these conditions were caused by the coffee crisis, which he said was a main reason Zapatistas rebelled: “I can tell you. . .that one of the final events that pushed the situation towards conflict. . . was the drop the price of coffee…. The impoverishment that resulted from that price drop led some people in those areas to declare war”
(Rosen, 40).
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Another person who said the coffee crisis was connected to the war in
Chiapas was Gabriel Silva, the General Manager of the National Federation of Coffee Growers of Columbia. In 2002 he told the U.S. Congress that “Chiapas, the southern state where the notorious sub-commandant Marcos and his Zapatista Rebels operate, is the hardest hit” (Rosen, 38). The rebellion made life worse in Chiapas. In 1994 alone, between 600 to 800 indigenous people died. More than 5,000 people became victims of violence and 16,000 people lost their homes between 1994 and 2007. Another effect of the war was that there is a much larger percent of malnourished people in Chiapas than the rest of Mexico. The Mexican National Nutritional Survey reported that the national average of malnourished people is 17.8 % while in Chiapas 29.2% of the population is malnourished (Sanchez, 232). In 2007, another survey of children younger than five years old reported that malnutrition was so bad that over half were not growing at a normal rate: “…Overall prevalence of stunting was 54.1%” (Sanchez, 232). The scientists who conducted the survey said that malnutrition among children in Chiapas “resembled that in child residents of conflict zones in Afghanistan and Angola.” These extreme conditions in Chiapas do not exist throughout Mexico, but the coffee crisis is a problem that affects all Mexico one way or another. The collapse of the ICA is what set the coffee crisis in motion. Since 1989 when the ICA was not renewed, the coffee world has changed in many negative ways. Mexico was greatly affected then, and the problems caused by the crisis continue today. In Mexico the first devastating effects of the coffee crisis were that many people became unemployed because raising coffee cost more than growers could get when they sold their crops. This led to poverty. With poverty came widespread malnutrition in the coffee-growing
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regions of Mexico. Former coffee growers began to look for other options and turned to the drug trade or migrated out of their home states. When coffee growers and laborers began to migrate it worsened the conditions in Mexico. Mass migration left families and fields unattended. Growers who chose not to migrate often turned to illegal crops like heroin, which only worsened the situation. When illegal drugs came into the picture, drug cartels terrorized the population and took over whole regions of Mexico. Lastly, Zapatista rebels in Chiapas, supported by the area’s indigenous peoples, revolted against the government. To this day, the state of Chiapas remains devastated by the war, which both economic and religious authorities say was caused by the coffee crisis. All this shows that the coffee crisis is very real and has had horrible economic effects in Mexico, hurting its citizens and undermining the government’s authority in Chiapas and states that have been taken over by drug cartels.