Running head: INSTABILITY OF THE COFFEE INDUSTRY: COSTA RICA
Instability of the Coffee Industry: Costa Rica
Emma A. W. Gardiner
Western Washington University
INSTABILITY OF THE COFFEE INDUSTRY: COSTA RICA
1
Costa Rica is a country dependent on its production, trade and export of coffee. The Costa Rican
culture was not always this way. The coffee economy began in the 1840’s and developed incredibly over
the next century. This paper will look at the historical, environmental and social issues surrounding the
Costa Rican culture immersed in coffee production and the vulnerable groups particularly affected by
having a primary trade export. The world coffee market is a fluctuating, uncertain market. The coffee
industry’s instability (of income) affects the farmers, their environments and communities on many
levels.
Spanish explorers attempted to colonize Costa Rica in the early 1600’s. Due to environmental
issues this was unsuccessful until 1563 when a permanent settlement of Cartago was established in the
cooler, more fertile highlands, according to the CIA World Factbook (2013). Almost three centuries later,
in 1821, a handful of Central American provinces (including Costa Rica) jointly declared independence
from Spain (CIA, 2013). After 15 years, the United Provinces of Central America disintegrated and Costa
Rica claimed independence and solidarity in 1838 (CIA, 2013). Over the next century two different
periods of violence occurred and set back the country’s democratic development, leading to the
disintegration of Costa Rica’s armed forces in 1949 (CIA, 2013). Today the country uniquely remains
without a military, as a democratic republic, led by female President Laura Chinchilla Miranda (CIA,
2013).
Costa Rica has had more stable economic growth than other Central American countries, yet its
overall health continues to be affected by their reliance on agricultural exports. Coffee, for example, has
been produced in Central America for centuries, and “among the world's most heavily traded and
valuable commodities; millions of small farmers worldwide rely on coffee production to support
themselves and their families,” (Sick, 2008, p. 193). Predictably, as the popularity of coffee consumption
has increased around the world, the popularity of farming coffee plantations rapidly increased and
INSTABILITY OF THE COFFEE INDUSTRY: COSTA RICA
2
farmers became dependent on the increasing coffee economy. Increase in the international demand for
coffee beans during the 1950s, 1960s and 1970s boosted the search for greater returns per hectare and
with the technological intensification of coffee farming, the returns did increase significantly, (Danse &
Wolters, 2003, p. 38). “Major elements of the results of this development have been: a reduction in the
use of shade in the coffee farms, the use of new coffee varieties and an intensive use of agrochemicals,”
(Danse & Wolters, 2003, p. 38). The higher the level of productivity appeared to be, longer-term
environmental effects were seemingly more disregarded. With every positive impact the coffee industry
may have on Costa Rica, there seems to be a pairing negative impact, either environmentally, financially,
socio-economically, and socially. “Small-scale farmers must contend not only with the uncertainties of
Mother Nature and the boom-and-bust cycles in commodity prices but also with limited economic
resources and political power; they are typically at a disadvantage in global markets and often receive
relatively low prices for their products,” (Sick, 2008, p. 194). When market prices fall below the costs of
production, the result is farmers having to possibly sell their land or migrating in search of temporary
employment (Sick, 2008, p. 194).
Over the past few decades, as the coffee industry has grown, the producers have increasingly
begun to suffer and take the position of loser as the buyers wealth has steadily increased. “As more and
more farmers began producing coffee beans (estimates ranged from 750,000 to 900,00 farms in 1972),
prices began to steadily decline,” (Rothenberg, 2006, p. 494). Overproduction of coffee has been a
challenge for countries like Costa Rica, “coffee-producing families have been contending with a
fundamentally more competitive global market in which international coffee prices generally have failed
to cover production costs,” (Sick, 2008, p. 195). Millions of pounds of coffee bags have been lost as free
markets and multinational buyers rule the international coffee trade, (Rothenberg, 2006, p. 495). In the
1980’s buyers like Nestle, Philip Morris and Proctor and Gamble were racing to the bottom of the price
chain, looking to profit from buying the most inexpensive beans available (Rothenberg, 2006, p. 495). As
INSTABILITY OF THE COFFEE INDUSTRY: COSTA RICA
3
price per pound fell dramatically, those coming out on top were the big corporations like Starbucks and
Nestle… “As these corporations’ bottom lines fatten, rural poverty in the countries they harvest in is
growing almost exponentially,” (Rothenberg, 2006, p. 495). For example, in 2001, it was reported that
60 countries produced 132 million pound bags of coffee, but world markets consumed only 108 million
bags (Rothenberg, 2006, p. 495). The highs and lows of the coffee industry are clearly seen between the
impacts of the organizations involved in sales on the producing farms.
In hopes of stabilizing the coffee industry and finding a sustainable means of production, fair
trade organizations have been developed and implemented in many countries. The popularity of being a
fair trade coffee plantation increased as a desire for buying from a fair trade organization spread
worldwide. Co-operatives were established in Costa Rica to help plantation farmers support one another
and keep the country’s coffee export alive. Fair trade attempts to improve the quality of life for the
Southern producer through trade where “producers are paid a ‘fair price’ and their organizations are
offered varying level of support services,” (Ronchi, 2002, p. 1). Fair Trade Labeling Organizations (FLO)
have guidelines that manage the production of food commodities. The FLO model of Fair Trade
stipulates certain minimum criteria that the trading process must fulfill in order for a product to be
labeled and sold as ‘Fair Trade’ (Ronchi, 2002, p. 3). FLO criteria includes: minimum price paid to cover
the cost of production, payment of a social premium for development purposes, for small farmers’ cooperatives: a democratic, participative structure, as well as partial payment in advance to avoid
indebtedness, and long term trade relations that allow proper planning and sustainable production
practices (Ronchi, 2002, p. 4). In order for a company to label their coffee ‘fair trade’ they must meet all
requirements and pay for the certification process.
Although the potential for incredible support after becoming a fair trade co-op or plantation is
there, the hoops they must jump through and price they must pay for certification turns Costa Ricans
INSTABILITY OF THE COFFEE INDUSTRY: COSTA RICA
4
away. Thus, the farmers who are less well off or may need more support are unable to meet the
standards to qualify for fair trade certification. This is not to say that the development of fair trade has
not had positive impact or down play the support it can provide. The point is that fair trade doesn’t
reach all, and leaves the most vulnerable communities in greater need than before the other plantations
were receiving the fair trade help.
This disruption of culture and community creates country wide tension between the different
farming plantations. Some are feeling left in the dust, such as this man (interviewed by Deborah Sick,
2006), a farmer in Pérez Zeledón who shared, "Coffee prices have been so bad that we can no longer
support ourselves. I don't want to divide my family by going away to the [United States] to work. Maybe
it is time to tear out my coffee and get dairy cattle like so many others are doing. But would raising dairy
cattle be any better? I am a coffee farmer; that is what I know, and love to do. We don't need a lot, if I
could just be sure of a certain income each year, that would be enough. It is this insecurity, not knowing,
that is intolerable." (Sick, 2008, p. 196). This farmer, like many others who live at lower elevations
(which means lesser quality coffee production) is unable to provide a living income, thrive in their own
community or feel a sense of stability. This example of local response to the issue is more common than
coffee industry ‘higher–ups’ may want to believe, but it is important to hear the farmer’s voice when
evaluating this issue holistically.
Barriers to sustainability are ever present behind the scenes of coffee-based agricultural
communities. In an effort to discover the barriers to sustainability M. A. Adams and A. E. Ghaly, scientific
engineering professors from Nova Scotia, Canada conducted and published a study of the overall
sustainability of the coffee industry in Costa Rica in 2007. They found that the focus of sustainability
strategies interwoven with fair trade or eco-friendly practices has been measured within a limited
scope. Left out of the picture were issues of eco-efficiency (beyond minimum efforts), the levels of
INSTABILITY OF THE COFFEE INDUSTRY: COSTA RICA
5
training available to workers, availability of financing for sustainable innovation and the efficacy of
existing institutional structures to support sustainability (Adams & Ghaly, 2007, p. 233).
Surveys of potential barriers to sustainability of the coffee industry were conducted in Costa
Rica (by Adams & Ghaly, 2007) with stakeholders of the industry including: farmers, processors,
exporters, government officials, industry associations, international organizations and academic
researchers. Resulting economic factors showed Costa Rica still has many characteristics of a developing
country, especially in regards to its regulatory ineffectiveness and its inefficient financial structure. Low
prices for raw resources that do not reflect the associated environmental costs (such as the use of
firewood) influence the level of economic return for improved efficiencies and reduced environmental
impacts. Clear socio-economic factors center around the impact of The Instituto del Café of Costa Rica
(ICAFE). ICAFE controls the entire coffee export process and national coffee consumption, as well as
determines the final price that processors pay producers, based on many considerations but not
including quality. “Although the government claims that the fixed price system guarantees the producer
a fair price for coffee, it is also very rigid because it does not stimulate the production and
commercialization of high-quality, environmentally sustainable coffee. Coffee is viewed the same
regardless of the social or ecological conditions of its production,” (Adams and Ghaly, 2007, p. 234).
Result of the tight trade regulations, only 12 exporting companies account for 95% of total
exports. The underlying goal is to sell quantity, resulting in Costa Rican coffee as a somewhat generic
product. This phenomenon has put the country at a disadvantage as these large players are not
necessarily interested in promoting environmentally sustainable coffee in Costa Rica (Adams and Ghaly,
2007). Producers do not have the opportunity to promote sustainably grown coffee because it is
blended with coffee from other producers and becomes indistinct. All this information as found in the
INSTABILITY OF THE COFFEE INDUSTRY: COSTA RICA
6
Adams and Ghaly study is eye opening and raises more questions about unintentional issues that fair
trade and product certification may cause.
The underlying message is that some Costa Rican people are being swept away with the tide,
unable to choose the type of agriculture they want to be a part of and many are left fending for
themselves if they can’t achieve fair trade status. Additionally, the instability and insecurity of the
fluctuating global coffee market can mean wealth one year and poverty the next. As seen in the early
2000’s coffee crisis, if a country is reliant on one primary crop to keep them a float, they must place
their bets on the ever increasing popularity of their crop, and sometimes they may lose. “The most
positive options emerging from the coffee crisis is the development of a marketing strategy that is based
on economic, ecological and social sustainability and a high-quality product,” (Danse & Wolters, 2003, p.
50). Much more can be investigated regarding the systems impacted by the coffee industry in Costa
Rica. Let the voice of the farmer be heard.
INSTABILITY OF THE COFFEE INDUSTRY: COSTA RICA
References:
Adams, M. A. & Ghaly, A. E. (2007). Determining barriers to sustainability within the costa rican coffee
industry. Sustainable Development, 15, 229-241. doi: 10.1002/sd.314
CIA. (2013). The world factbook: Costa rica. Retrieved from
https://www.cia.gov/library/publications/the-world-factbook/geos/cs.html
Danse, M. & Wolters, T. (2003). Sustainable coffee in the mainstream: The case of the suscof
consortium in costa rica. Greener Management International, Autumn, 37-51. Retrieved from
http://www.iscom.nl/publicaties/danseprf2.pdf
Ronchi, L. (2002). The impact of fair trade on producers and their organisations: A case study with
coocafe in costa rica. Poverty Research Unit at Sussex, 1-31. Retrieved from
http://www.sussex.ac.uk/Units/PRU/wps/wpll.pdf
Rothenberg, P. S. (2006). Beyond Borders: Thinking critically about global issues. New York: Worth
Publishers. p 493-497.
Sick, D. (2008). Coffee, farming families, and fair trade in costa rica: New markets, same old problem?.
Latin America Research Review, 43, 193-205. Retrieved from
http://lasa-4.univ.pitt.edu/LARR/prot/fulltext/Vol43no3/08_43.3.Sick.pdf
7