October 22, 2001

Panama coffee growers warn of crisis

                 BOQUETE, Panama (Reuters) -- Price-rocked Panama coffee growers on
                 Monday warned of a round of bankruptcies, farm closures and deepening
                 poverty for coffee pickers, if the government did not step in with $6 million
                 in emergency aid.

                 "This is the third year of losses for Panama coffee producers," said Norberto
                 Suarez, the president of the National Coffee Exporters and Processors Association
                 (ANBEC). "If we do not receive $6 million in emergency loans, there will be social
                 and economic chaos."

                 Some 6,500 highland coffee growers shared $4 million in government soft loans
                 during the 2000-2001 growing cycle, designed to bridge a sharp deficit between
                 production costs pegged at US94 cents a pound and market prices hovering around
                 US50 cents.

                 But a further downward lurch in prices at the start of the 2001-2002 harvest,
                 which stretches from October to the end of May, would compound losses, and
                 farmers are concerned that they will not be able to afford to harvest their coffee.

                 "The 40 cents to 44 cents a pound currently paid by the market doesn't cover even
                 half the costs of production," Suarez told Reuters in interview Monday.

                 "Without immediate aid, 20 percent of small-to medium-scale producers could
                 disappear this season...and thousands of coffee pickers will suffer the
                 consequences," he added.

                 The official said troubled highland growers called on Panama's Agricultural
                 Development Ministry (MIDA) last week to provide $6 million in sector-wide soft
                 loans to address the market price shortfall.

                 Suarez said growers needed to receive 5-percent, seven-year loans in monthly
                 installments during the harvest to avoid a round of bankruptcies and worker job

                 Panama is Central America's smallest coffee-growing country, producing some
                 270,000 100-pound (46-kilogram) bags in the full 2000/2001 season -- around the
                 equivalent of one month's production in neighboring Costa Rica.

                 Some 30,000 poor Indian families, who depend on seasonal coffee-picking wages
                 to supplement traditional subsistence agriculture, face hunger from plummeting
                 prices, Suarez said.

                 "The indigenous area has unemployment rates of around 95 percent, and levels of
                 child malnourishment of around 52 percent...according to Health and Education
                 Ministry figures," the official said.

                 "The coffee sector provides the community with around $4 million a year in
                 salaries. Without that support, levels of unemployment and malnutrition are going to

                 Local coffee pickers, around 90 percent of whom are Guaymi Indians from the
                 highlands of western Chiriqui and Bocas del Toro provinces, received between $1
                 and $1.25 for every five pounds of coffee cherries harvested in the 2000-2001

                 But as the 2001-2002 season gets underway with historic price lows, Panamanian
                 wage levels have fallen by up to 50 percent, to between 60 cents and 75 cents a
                 pound, Suarez said.

                 "For the indigenous workers who don't have a parcel of land to grow food crops,
                 hunger is going to cause explosive social problems," he added.

                 Premium prices paid for Panama's highly rated gourmet coffees helped boost
                 across-the-board national green-bean export prices to some 83 cents a pound in

                 But far from being recession-proof, Panama specialty coffee growers say
                 deepening losses recorded in international markets are hauling down prices for
                 gourmet beans.

                 "The continuing fall in prices directly affects specialty coffee growers," said Plinio
                 Ruiz, acting manager of Casa Ruiz, Panama's largest gourmet coffee exporter.

                 Coffee prices on the C contract on New York's Coffee, Sugar and Cocoa Exchange
                 -- which have declined steadily from a high of $3.05 a pound in May 1997 -- closed
                 on Monday at historic lows of just 42.50 cents a pound.

                 "Prices paid for premium specialty coffees are linked to the benchmark laid down
                 by the New York C contract," the official told Reuters in an interview at the family
                 firm's Boquete warehouse. "When it falls, they follow."

                 Ruiz said prices paid for one of the firm's top arabicas plummeted to $1.50 in the
                 2000-2001 season, down from the $2.20 paid for the same coffee two years

                 "Brokers from the United States are telling us that this situation is likely to continue
                 for another three of four years," Ruiz said. "We have to prepare for that."

                    Copyright 2001 Reuters.