Uncommon Grounds: The History of Coffee and How It Transformed Our World

by Mark Pendergrast

  When former general Jacobo Arbenz Guzmán assumed the presidency in 1951, he vowed to transform Guatemala “from a dependent nation with a semi-colonial economy into an economically independent country.” The following year Guatemala passed the Law of Agrarian Reform, which called for the redistribution of public lands, those not actively farmed by the owner, and property in excess of 90 hectares (222 acres). Those forced to sell land would be recompensed based on tax assessments. The Arbenz government began to hand over more than one hundred former German coffee plantations to peasant cooperatives. The United Fruit Company was the hardest-hit foreign corporation, since much of its potential banana land lay fallow.85 Its land also had been undervalued to avoid taxation, so that the company was forced to sell land far below its fair market value.

  In 1954 land-hungry peasants began to occupy coffee plantations illegally, with some Guatemalan Communists encouraging them. “The land reform program has practically been taken over by communist agitators who exhort peasants to ‘invade’ private property,” the Tea & Coffee Trade Journal reported. “Owners have no recourse and objections only bring threats of fines and imprisonment on the grounds that they are ‘hindering the land reform program.’” The writer concluded that “if the present trend continues, the days of large privately owned and operated coffee Fincas are numbered.”

  As a private lawyer, the new Secretary of State John Foster Dulles had represented the United Fruit Company. His brother, Allen Dulles, the head of the CIA, had served on the United Fruit board of directors for several years. Even more than concern for the banana company, however, the United States perceived Arbenz as a threat to American influence in Latin America. Communism provided a convenient excuse to attack radical nationalist regimes. In August 1953 they convinced President Eisenhower to approve Operation Success, a clandestine CIA plan to overthrow the Arbenz regime. They installed right-wing diplomat John Peurifoy as the U.S. ambassador to Guatemala, and they planned to ram a resolution through the Caracas Organization of American States (OAS) meeting that would justify their planned intervention. This task would have been much easier if the coffee price crisis had not soured relations with Latin America, as journalist Patrick McMahon noted. He believed that the furor over coffee was “the greatest piece of sheer good luck that has fallen to the Communists since they opened their campaign to gain a firm foothold in the Western Hemisphere.”

  Like McMahon, most U.S. journalists accepted the cold war ideology that the Guatemalan government was communistic. In fact there were only four Communist deputies in the 1953-1954 Guatemalan Congress, and Arbenz never appointed a Communist to his cabinet. True, the Communists did support his regime and even exerted considerable influence, but Arbenz was a nationalist who sought long-overdue reforms, not an ideological Communist. “What is the real reason for describing our government as communistic?” asked Guillermo Toriello, Guatemala’s foreign minister, on March 5 at the OAS meeting. “Why do they wish to intervene in Guatemala?” The answer, he said, was obvious. The Arbenz policy was adversely affecting “the privileges of foreign enterprises” such as United Fruit.

  Though Toriello’s speech received thunderous applause, John Foster Dulles prevailed after two weeks of arm-twisting and threats to withhold aid. His resolution passed, though the only enthusiastic supporters were the worst Latin American dictators, such as Nicaragua’s Somoza. In June the CIA sponsored an invasion of Guatemala and overthrew Arbenz.

  Operation Success was a long-term disaster for Guatemala. The country’s new president, General Carlos Castillo Armas, had been handpicked by the CIA. He swiftly canceled the agrarian reform legislation, disenfranchised illiterates, restored the secret police, and outlawed political parties, labor groups, and peasant organizations. Within a year and a half, Castillo Armas had driven most of the peasants off the land they had gained under Arbenz.

  U.S. politicians turned a blind eye to the situation. The year after the coup, a seven-man congressional delegation toured Guatemala and met with Castillo Armas. Their report spoke glowingly of “the overthrow of the Communist-front government.” The U.S. politicians admitted that political parties had been abolished and that Castillo Armas ruled by fiat. The Guatemalan president assured them, however, that “it was the avowed program of the Government to use democratic processes to the fullest extent.” The report concluded: “Guatemala is the showcase of Latin America and has become a political, social, and economic laboratory.”

  Castillo Armas was assassinated in 1957. The country descended into three decades of repression, violence, and terror as governmental death squads and guerrilla bands roamed the countryside—a direct legacy of the U.S. intervention. The coffee elite continued to rely on cheap peasant labor, and even though many plantation owners deplored the violence under the repressive military regime, it allowed them to keep their land and status.86

  Suicide in Brazil

  Throughout the first half of 1954, the coffee price boom boosted Brazilian spirits. Through March, flush Brazilians bought 15 percent more American goods than in the same period the previous year. In June, Getúlio Vargas raised the minimum coffee export price from 53 cents to 87 cents a pound. Then, in July, coffee prices took a swift tumble. During the first half of 1954, the major U.S. coffee roasters bought heavily in anticipation of a shortage; so did the American housewife. As a consequence, the overstocked U.S. market of July was hesitant to buy more at high prices.

  To support the market, the Brazilian government was forced to buy up some of its own coffee. Vargas sent his representatives to ask the Federal Reserve Bank of New York for a loan to pay off his country’s growing debts, but the bank refused. Brazilian inflation threatened to spiral out of control, the free-market value of the cruzeiro having reached 60 to the dollar, which put increasing pressure on Vargas to officially devalue his currency. Brazil’s single biggest import expense was for fuel oil; the country would require an estimated $200 million for oil in the next six months, even at the low official exchange rate. Brazil had plenty of its own crude oil, but Vargas was determined not to allow U.S. firms to develop and exploit his country’s resources. The previous year he had created Petrobras, a state monopoly for petroleum exploration.

  Over the weekend of August 14-15, Vargas attempted a stopgap measure, as some American roasters cut their prices by 10 cents a pound. The Brazilian government allowed coffee exporters to exchange 20 percent of their dollar receipts at the free exchange rate, effectively lowering the minimum export rate by 20 cents and unofficially devaluing the currency. The following week, the U.S. coffee industry lowered prices by as much as 18 cents a pound.

  As the Brazilian economy slid into chaos, a political crisis also hit Vargas. Since his election in 1951, opponents had been carping at him for his populist leanings and support of labor rights. On August 5 an assassination attempt against Carlos Lacerda—editor of the right-wing paper Tribuna da Imprensa and one of Vargas’s most vocal critics—failed. Lacerda had been running in a congressional race against Vargas’s son Lutero, and a subsequent investigation linked the assassin to the head of the president’s personal guard. Cries for impeachment grew, just as the coffee situation became disastrous.

  On the morning of August 24, 1954, Getúlio Vargas, seventy-one, shot himself through the heart in his bedroom. “After decades of domination and plunder on the part of international economic and financial groups,” he wrote in his suicide note, “I placed myself at the head of a revolution and won.” Yet unnamed international groups had joined his domestic enemies in an attempt to subvert his campaign to create national wealth and autonomy. When he took office in 1951, he wrote, “profits of foreign companies were reaching as much as 500 per cent per annum.” Temporarily coffee had come to the rescue. “Came the coffee crisis and the value of our main product rose.” After this brief respite, however, “we tried to defend its price and the reply was such violent pressure on our economy that we were forced to give in. . . . There is nothing more to give you except my blood,
” Vargas concluded. “I have given you my life. Now I offer you my death. I fear nothing. Serenely I take my first step toward eternity and leave life to enter history.”

  It is not clear to what “international groups” Vargas attributed his downfall. He must have been aware of the U.S. role in deposing Arbenz in Guatemala only two months earlier. Nonetheless, he could not reasonably hold the United States responsible for the abrupt decline in coffee prices any more than U.S. politicians should have blamed the previous price hike on Brazilian machinations. In both instances the market price had responded—with a little help from speculators and panicky or angry consumers—to the basic laws of supply and demand.

  Vargas died a tragic figure, his fate tied, as always, to coffee. He had risen to power in 1930 in large part because Brazil was in economic crisis following a collapse in coffee prices. A quarter century later he took his own life under similar circumstances. His political life and his beloved Brazil’s history were intimately related to the coffee tree and its berry. “Many feel that Brazil’s capitulation on the coffee price was one of the things that led directly to President Vargas’ suicide,” wrote an American journalist in October 1954.

  Tensions between the United States and Latin America remained high. “The anti-American riots and demonstrations which periodically sweep one or another of the twenty republics do not actually reflect a hatred of the United States,” Andrés Uribe concluded in Brown Gold, his 1954 book about coffee. Rather they expressed “the exasperation of good neighbors with what they feel is United States indifference to their basic problems.” That exasperation would grow, as worldwide overproduction led to disastrously low coffee prices.

  14

  Robusta Triumphant

  There is hardly anything that some man cannot make a little worse and sell it a little cheaper.

  —Comment at 1959 National Coffee Association convention

  In studying the position of the coffee industry today, it seems to me that our outlook is exceedingly bright. I confidently expect that we are about to enter one of the periods of greatest growth in our history.

  —Edward Aborn, May 18, 1962

  Since the late 1800s, the boom-bust coffee cycle had whipsawed Latin American economies. The cycle’s consequences would be even more devastating in the cold war era, as more African and Asian countries came to rely on the bean. A long-predicted coffee glut commenced in 1955. During the first half of the 1950s, as coffee prices had risen, hopeful growers in the tropics planted new trees. Arabica trees produce four years after they are planted. Robusta trees, however, take only two years from seedling to harvest and produce more heavily. Encouraged by the popularity of instant coffee, many African colonies increased robusta growth dramatically.

  Out of Africa

  With the European powers weakened by World War II and natives eager to share in the wealth around them, the traditional method of rule—white Europeans applying an iron-fisted Bula Matari (“rock crusher,” in Kikongo)—clearly would not work anymore. As one African politician told the French National Assembly in 1946, “The colonial fact, in its brutal form . . . is impossible today. This historical period of colonization is over.”

  In 1947 the British granted independence to India, and pressure grew for Britain, France, Portugal, and Belgium to release the colonies they had carved out of Africa in the late nineteenth century. In 1951 Britain gave Libya its independence, and the next year a military coup in Egypt severed its ties to England as well. Issues of economic inequities, forced labor, racism—and coffee—played a major role in the independence movement in countries such as Kenya, Uganda, the Ivory Coast, Angola, and the Belgian Congo.

  In Kenya, native laborers first sabotaged crop harvests, but in 1952 many coffee workers joined other disenchanted Africans in what came to be called the Mau Mau Rebellion, which resulted in government suppression. By the end of 1954, detention camps and prisons held 150,000 people.

  At the same time, however, the British instituted land reforms and opened more coffee cultivation to African producers. By 1954 some 15,000 Kenyan natives grew coffee on tiny plots, totaling only 5,000 acres. Over the next few years Africans would come to dominate the Kenyan industry, producing some of the finest arabica beans in the world.

  Other African countries also produced limited amounts of arabica, but the largest source remained Ethiopia, coffee’s original home. Although there were a few plantations where trees were grown scientifically, most coffee still grew wild in the forests of the Kaffa provinces. As a result, Ethiopian coffees varied wildly in flavor, from awful to sublime.

  In 1954 Ethiopia exported 620,000 bags and Kenya 210,000 bags of arabica beans, but over 80 percent of the nearly 6 million bags that left Africa that year were robusta beans. Angola had been the leading producer of robusta, with just over a million bags, but the tiny Ivory Coast—about the size of New Mexico—surged past it that year to export 1.4 million bags of coffee. For the first time coffee provided more of that country’s income than cocoa.

  In the Côte d’Ivoire, as the French colony then was known, coffee had been harvested by forced labor since the 1920s. After World War II, African coffee grower Félix Houphouët-Boigny, elected to represent the Ivory Coast in the French Assembly, sponsored a bill to abolish forced labor in the French colonies. With its passage he became a hero. Houphouët-Boigny saw gold in coffee. “If you don’t want to vegetate in bamboo huts,” he said in a 1953 speech, “concentrate your efforts on growing good cocoa and coffee. They will fetch a good price and you will become rich.” Small native coffee farms developed throughout the Ivory Coast. Its crop had always gone to France, where it was protected by favorable tax laws. With coffee prices up and U.S. roasters desperate for cheap robusta, however, the Ivory Coast exported coffee to North America (at 57 cents a pound) for the first time in 1954.

  Other important robusta exporters were Uganda, Madagascar, Tanganyika, and the Belgian Congo. Asia produced robustas in India, Indonesia, and French Indochina (Vietnam), but an insignificant amount in comparison to Africa. In 1951 African coffee had accounted for 4.8 percent of U.S. coffee imports; by 1955 the figure had risen to 11.4 percent.

  Hot Coffee, Cold War

  By February 1955 falling coffee prices had yet again panicked Latin America. Following Vargas’s suicide, a group of U.S. banks loaned Brazil $200 million, but the country was forced to devalue the coffee cruzeiro anyway. Despite Brazil’s attempt to bolster the market by holding back 9 million bags, prices continued to drop. American roasters allowed their stocks to dwindle, anticipating even lower prices. The Colombian government slashed imports and ordered a partial devaluation.

  The head of the Colombian Coffee Federation tried to convince other Latin American countries to hold coffee off the market to boost the price, or at least keep it from sinking further. By June 1956 nineteen Latin American countries had agreed, only another frost in Paraná put the quota plans on hold. A report from the Economic and Social Council of the Organization of American States (ECOSOC) to the Latin American heads of state predicted a growing surplus that threatened to bring a “disastrous slump” in coffee prices unless governments set quotas and stockpiled coffee.

  The report contained no startling news. What was surprising was that Harold Randall, the U.S. State Department’s representative on ECOSOC, signed it. Why did the State Department’s stance against “cartels” suddenly soften? The cold war, rather than a warm heart, drove the shifting U.S. policy toward coffee. “A steep price fall might bring on dangerous economic and political crises,” one journalist observed, “with tempting opportunities for local strongmen or Communist mischief-makers.” But when unseasonable Colombian rains created a temporary shortage in mild coffees and prices spiked briefly in 1956, the State Department pulled back.

  While the African share of the coffee market continued to swell, economists predicted that Brazil would owe a whopping $1.1 billion in debt and interest payments over the next few years. In October 1957 the Brazilians joi
ned six other Latin American coffee-producing countries in an export quota scheme.

  In January 1958 the United States sent an “observer” to a meeting in Rio de Janeiro, where Latin American and African growers joined in the 1958 Latin American Coffee Agreement with the ostensible aim of promoting increased consumption. Although the Africans were unwilling to limit their exports, Brazil agreed to withhold 40 percent of its crop, Colombia 15 percent, and other countries a smaller percentage.

  In May, due to “evidence that the Soviet Union is intensifying its economic and political offensive in many parts of the world, including Latin America,” according to a State Department official, Vice President Richard Nixon undertook a South American “good will” tour. In Peru and Venezuela, Nixon was booed, spit at, stoned, and nearly killed amid cries of “Muera Nixon! ” (“Death to Nixon!”).

  In the wake of the Nixon incidents, State Department officials began to pay informal calls on Latin American embassies for coffee chats. Over 50 million bags were being processed for sale, while the world consumed only 38 million bags. In the United States the price of roasted coffee fell below 70 cents a pound. “An economic setback [to Latin American coffee growers] may . . . topple governments friendly to the United States,” warned Colombian coffee representative Andrés Uribe. “The forces dedicated to the overthrow of the entire free world would gladly take advantage of such a situation.”

  Regular Robusta

  Even with falling prices, the U.S. roasters locked themselves into coupon deals, premium offers, and price wars. Robusta crept into regular blends, with new bargain brands selling 20 cents or even 30 cents below the leaders and containing 30 percent or more robusta. “One hesitates to speak of these poorer coffees as ‘blends,’” wrote a coffee expert. “It seems almost like a form of deception to pack low-quality coffees in the expensive vacuum tins.” In response to the cheaper blends, General Foods began adding a small percentage of robusta to Maxwell House, and soon the other major brands followed suit. By the end of 1956 robustas accounted for over 22 percent of world coffee exports. In 1960 the New York Coffee and Sugar Exchange abrogated its long-standing ban on robusta.