Mexico Returns

by

Features

After a century of building one of the strongest and most productive coffee sectors in the world, Mexico, the sprawling northernmost country in Latin America, saw it fall off a cliff in the first decades of the millennium.

Today, Mexico is the world’s eighth largest coffee producer, up from 11 just two years ago, and it is developing its specialty and certified sectors. Only five years ago, things looked pretty dire for Mexico as a coffee origin, and there were doubts about whether it would recover. Several factors, including radical changes in government policy in the late 20th century, left the coffee sector so vulnerable to climate change and the rust epidemics of 2000 and 2013 that it was nearly destroyed. Climate change, particularly extreme and sudden increases in rainfall did the rest.

But Mexico’s coffee is on the rebound lately, largely due to growers’ associations, NGOs, and world industry leaders working to improve productivity, quality, and market access — and, importantly, growers successfully pressuring the government to intervene more forcefully. Mexican coffee is typically characterized as mild and light-bodied, with nut-like flavor, and low acidity. Around 35% of Mexico’s coffee production area is prime for growing top-quality high-altitude coffee, located at 900 meters or more above sea level. About 7-8% of growers now cultivate certified organic coffee, mainly for export.

Where and how coffee came to Mexico and thrived as a major export crop in is still being debated. The first coffee plants are said to have come from Cuba via the port of Veracruz. In the 19th century, Italian Geronimo Manchinelli planted coffee in the south of Chiapas in the mountainous border with Guatemala. Coffee is still the main economic activity of that region, where roughly 36% of all of Mexico’s coffee is grown. Later, immigrants from Germany but also France, Spain, Italy, and the United States, built large coffee plantations in Chiapas and Veracruz, Oaxaca, and Puebla, also in the south.

In the early 20th century, government land-redistribution programs divided up most of the big colonial estates and distributed plots to plantation workers, as well as returning land to displaced indigenous peoples, on condition that they grow coffee. The Mexican Coffee Institute, INMECAFE, was created in 1958 to help spread coffee cultivation to new land, as it was seen as a good source of foreign income. Between 1970 and 1982, land devoted to coffee increased by 141,203 hectares to a total today of more than 600,000 hectares in 12 states. National coffee production grew by roughly 6,000 tons of green coffee per year during that period. INMECAFE brought technical training and assistance to help farmers achieve higher productivity and created successful structures to stabilize prices. It also encouraged the use of chemical fertilizers. Coffee production reached a high of 6.6 million 60kg bags in 1966 (compare to “optimistic” projections of 4.5-5 million bags for MY 2019 -2020), with internal consumption tripling over 10 years and coffee representing 20% of agricultural exports and 10% of total exports nationally. Mexico was active on the world stage, instrumental in brokering the first of many coffee trade agreements that preceded the first ICA.

But 1989 was a catastrophic year for Mexican coffee. Like many producing countries, it suffered from the dismantling of ICO, but in the same year, Mexico’s new government also abolished the Mexican Coffee Institute, INMECAFE, under pressure from the World Bank.

The damage report

The steep drop in international prices, the rust epidemic from 2013 to 2016, and the excessive rainfall of 2015 brought on the worst crisis in Mexico’s coffee production in four decades, according to both the Mexican Coffee Institute and the US Department of Agriculture.

And while internal consumption increased, briskly promoted by the government, the collapse of domestic production had, over time, led to mounting imports of lower-quality (largely for soluble) from Vietnam and Brazil. The production chains for this sector will not be easy to refill with home-grown coffee.

Mexican producers have pulled themselves up by their proverbial bootstraps to some degree, creating cooperatives of various sizes and strengths, notably the National Union of Coffee Producers (CNC), the National Coalition of Coffee Producers’ Organizations, and the National Coordinator of Coffee-Growers’ Organizations, and have, since the late 1990s, begun to tap into markets for Fairtrade and organic-certified coffees. Ironically, one silver lining of the demise of INMECAFE was that smallholders, who make up the vast majority of Mexican coffee producers, were no longer able to afford chemical fertilizers. As a result, Mexico is now the world’s biggest producer of organic coffee, though not all of it is certified as such.

Current topography

Today, there are about half a million small (two-to-three hectare) coffee-producing entities in Mexico, with more than five million people depending on coffee nationwide. The southern half of the country accounts for 90% of production, with 44% of those in Chiapas, where about one million people, or 30% of the state’s population, rely on coffee. Almost one-third (29%) of production comes from Veracruz; Oaxaca and Puebla contribute 11% each. Coffee from Chiapas and Oaxaca is identified as “altura,” or high-grown, and is considered very high-quality, among the best in the Americas. Harvesting usually begins in September and ends by March.

The US is still the biggest importer of Mexican coffee, though not of its specialty coffees, which tend to go to Europe, mainly Germany. According to the Mexico Statistics Bureau, INEGI, production in 2017 hit 858,039 tons, with exports going to 40 countries, with the US, Canada, Japan, Cuba, Germany, and Italy topping the list of importers. And internal consumption is looking better and better. Even despite higher domestic coffee prices and an inflation rate of 6.7% in 2017, consumption increased.

Since then, inflation has dropped to 3.8% in 2019, and domestic consumption increased from 2.28 million 60kg bags in 2018 to 2.75 million in 2019. The USDA 2018-19 projection for coffee production in Mexico was 4.5 million 60/kg bags, a substantial increase over the previous year’s 4.0 million 60/kg bags. As a sign that Mexico is becoming visible again, the Cup of Excellence held the competition in Mexico for the first time in 2012.

This kind of visibility contributes to growers gaining knowledge of specialty markets and raises awareness of Mexico’s potential among buyers. Since then, other private initiatives have been drawn to Mexico, the flashiest being Nestlé building its biggest processing plant in Veracruz in 2019, investing US$154 million in the state.

The importance of specialty coffee

On the coattails of the producer and industry initiatives, and with the realization that specialty coffee can trump low commodity prices, the Mexican government has started to pay attention. In 2006, it resuscitated the Coffee Institute now called AMECAFE, an umbrella for 25 private and public organizations responsible for the Sistema Producto Café. Its purpose is to coordinate the many other entities scattered through the states and in niches of government. The federal government has also issued many lengthy reports of varying quality and usefulness (one, from the Mexican Congress in 2019 heavily quoted data from 2012). However, USDA credits the Mexican government’s 2016 implementation of PIAC (Integrated Coffee Plan) for helping increase production from a low of 2.2 million 60/kg bags in marketing year 2015/16 to 4.0 million bags in MY 2017/18. The PIAC distributes technological packages including “nutritional inputs,” fungicides, and physical tools. In 2017, PIAC handed out more than 150,000 technological packages. But the wheels of government are slow, and producers feel there are more reports than action.

During the 2019 National Coffee Growers’ Forum, the growers’ main representatives publicly exhorted the government to do more — specifically, to provide more technical and financial support, a new regulatory board for coffee production, and most importantly, they stressed the need for an autonomous entity with the teeth and resources to defend the needs of the sector before state institutions. They also brought up the Price Compensation Fund, which has been discussed since the last administration and is not yet in place.

“The sector requires investment, inter-institutional agreements, accords with national industry, with exporters and retailers to raise prices,” said Santiago Arguello Campos, director of Agricultural development at the Ministry of Agriculture. “But we also need federal government authorities to act on the world stage where these issues are discussed.”