April 2, 2001

Honduras coffee growers debate rescue plans

                  TEGUCIGALPA, Honduras (Reuters) -- Honduran coffee producers and the
                  government are at loggerheads over how to bail out the ailing industry, suffering
                  along with other coffee-growing nations from low prices.

                  The debate revolves around a spattering of proposed rescue plans, all being
                  examined and re-examined by desperate producers and the Honduran
                  government within the walls of the National Coffee Council, which has
                  representatives from both sides.

                  The debate has already discarded a proposal that Honduran President Carlos
                  Flores apply to global financiers for some $100 million in emergency credit.

                  Another proposal, to impose an additional tax on cigarettes and liquor and use the
                  proceeds to help coffee growers, has met similar resistance.

                  A more accepted plan has been to use a 80 million lempiras ($5.2 million U.S.)
                  Coffee Fund, meant to help build infrastructure in coffee regions, to give
                  growers about $5.50 for each 46-kilogram bag of coffee they produce in free
                  subsidies to make up for international prices that are lower than the costs of

                  But coffee growers say even if such a subsidy were to be paid, it would not be
                  enough. International emergency aid is, for some, the only answer.

                  "The government said it can't get involved in international credit, but neither will
                  it look kindly on the proposal to create additional taxes on liquors and cigarettes,"
                  Juan Osorto, who heads the Honduran Coffee Institute (IHCAFE), told Reuters.

                  "The only proposal it views kindly is the use of the Coffee Fund," he said.

                  "But the fund is needed to maintain access to the nation's plantations, to build and
                  repair secondary roads used by growers to move not only their coffee but other
                  products," said Juan Guzman, manager of the Honduras' largest growers'
                  association (AHPROCAFE).

                  Coffee is a major source of local employment and international revenue for
                  Honduras, where as much as 80 percent of the nation's 6.5 million inhabitants
                  are said to live in conditions of poverty.

                  But getting more money out of the government will not be an easy task for

                  Honduran coffee producers already owe the government about 700 million
                  lempiras ($46 million U.S.) in credits paid out in 1998 and 1999. In 2001, the
                  government granted growers three years of grace on the debts because of the
                  worsening coffee crisis.

                  "The government is no longer able to provide aid to any sector," Finance Minister
                  Gabriela Nunez said recently.

                  Some growers say they should take what they can get now and worry about
                  fighting for more aid separately.

                  "We should use the only door that we can open," said Jose Savedra, who heads
                  Honduras' national coffee workers' association, in support of proposals to use
                  the $5.2 million Coffee Fund.

                  Osorto said it is crucial that a decision about how to bail out growers is reached
                  before the winter, by June if possible, so that growers can feed their families and
                  look after next year's crops.

                      Copyright 2001 Reuters.