TED Case Studies

Coffee and The Environment




          CASE NUMBER:      135 
          CASE MNEMONIC:  COFFEE
          CASE NAME:      Coffee Exports from Costa Rica

I.        IDENTIFICATION

1.        The Issue

     Costa Rica's traditional primary export poses an
environmental dilemma.  Twenty years ago one could drink a cup of
coffee without any guilt concerning its affect on the
environment.  A new coffee plant that requires direct sunlight
and produces three times as much coffee as traditional coffee
plants has changed coffee farming in Costa Rica.  "Coffee
plantations in Costa Rica have developed a new type of plant that
can grow in direct sunlight, due to the loss of forest shade. 
Waste products from production are a serious environmental
concern there."  The result from increasing production has been
river pollution, soil erosion, and deforestation.

2.        Description

     Coffee is one of the primary industries in Costa Rica in
addition to bananas and tourism.  "Coffee remains the main
product among the traditional exports and Costa Rica is Central
America's most efficient producer."  A government policy that
promoted diversification in the 1980s did not lead to a reduction
in coffee production.  While coffee production increased between
1988 and 1992, the value of coffee exports (in dollars)
declined.  The increase in coffee production has led to further
environmental damage in Costa Rica.     

     Beginning in the nineteenth century government encouraged
coffee production.  "The Costa Rican government...in order to get
coffee going in Costa Rica was to give any person that wanted  to
25 coffee plants to harvest, and from there a plot of land on
which to harvest it."  A coffee plantation system developed as
a result of the government's policy.  "It was only with the rise
of the coffee barons that internal differentiation, inequality,
and political antagonisms developed for the first time."

     Coffee fundamentally transformed a colonial regime and
village economy built on direct extraction by a city-based elite
from a peasantry that was yet privatized to only a small degree. 
The replacement of this direct extraction by more subtle and
productive market-mediated mechanisms created a qualitatively
new, antagonistic relationship between the coffee elite of
processors-exporters and the thoroughly mercantile, landholding
peasantry.

     Coffee production has led to two environmental problems for
Costa Rica.  The first is the river pollution caused by producers
dumping waste products in the rivers and streams.  "Fifty-seven
percent of the coffee bean is made up of contaminants which, when
discarded destroy fauna in streams and rivers and harm people."
A new coffee plant developed approximately twenty years ago poses
an additional environmental problem.  The sun coffee plant, which
produces three times as much as a traditional coffee plant,
requires a lot of sunlight and has resulted in a loss of trees
and soil erosion.

     The rivers and streams are polluted as a result of the
separation process at the "beneficio" or mill.  "After the pulp
and beans are separated, the beans ferment in a water tank for 24
hours to break down the slimy gel that coats the bean.  Then the
beans are dried, either sun dried on outside patios, the
preference of the purist, or in mechanical driers."  By the end
of the season, there are enormous piles of pulp and the rivers
are filled with sugar water.  "This organic matter often ends up
in Costa Rica's once pristine streams, where it sucks away
oxygen, killing off all life in the water."  However, the Costa
Rican government is addressing this situation.  A new pollution
control law that took effect in January 1995 imposes regulations
on the proper treatment of solid and liquid waste.          

     Deforestation and soil erosion are additional environmental
problems associated with coffee production.  According to a
recent erosion and land degradation survey "two-thirds of Costa
Rica's land under pasture, and practically all of the land under
permanent crops, was subject to high to very high hydric erosion
risk."  A new coffee plant poses even more environmental
challenges by requiring more sunlight (see COSTBEEF case).  The
original coffee plants grew under shade and virtually created its
own ecosystem.  It is natural because "the shade and undergrowth
provide nutrients to the plants and immunities to the pests.  But
this new sun coffee plant, a mono-crop, requires clearing large
tracts of land."  The tropical rains wash the unprotected soil
into the rivers.    

     "The first wave of deforestation began in the 1830s with the
introduction of coffee cultivation in the meseta central, and
accelerated rapidly during the last decades of the century. 
Coffee was ideally suited to the soil and bio-climatic conditions
of the volcanic montane range of the meseta and it was during
those years that much of the hillside volcanic forests were
denuded to make way for the rapid spread of coffee cultivation in
response to soaring world demand.  However, beginning in the
1970s, annual rates of forest loss began to rise due to pasture
expansion and other pressures, and by the early 1980s, the
country was loosing nearly 4 per cent of its forests every year,
the highest loss rate in the western hemisphere including the
Amazon basin."

     By the late 1980s and early 1990s, coffee production
increased, from 158,000 tons in 1988 to 168,000 in 1992. 
However, coffee prices did not remain constant during the same
period, falling from $316 million in 1988 to $266 million in
1992.  The new coffee plant that requires direct sunlight has
led to deforestation.  When the coffee plantations cut down the
shade trees to make room for the new coffee plant, they lose
approximately 90 percent of the bird diversity.  According to
Chris Willey of Rainforest Alliance, the monoculture of coffee is
replacing the most diverse ecosystem on earth.  The old fashioned
coffee plantation is almost a natural ecosystem because the
plants are grown under shade.

3.        Related Cases

     COSTBEEF case
     BANANA case
     TEA case
     KENYATEA case

     Keyword Clusters

     (1): Trade Product            = FOOD
     (2): Bio-geography            = TROPical
     (3): Domain                   = North America [NAMER]

4.        Draft Author: Pamela Oakes

B.        LEGAL Clusters 

5.        Discourse and Status: AGReement and INPROGress

     There is agreement that additional measures need to be taken
to protect Costa Rica's environment.  The environmental
protection law that took effect January 1, 1995, is in addition
to a 1938 anti-dumping law that prohibits producers from
discarding pulp into rivers.  Both laws are enforced by the
national government and apply all coffee production.

6.        Forum and Scope: COSTA Rica and REGIONal

     The Costa Rican laws only apply to coffee production within
its national borders.

7.        Decision Breadth: 1 (Costa Rica)

     The new environmental law that took effect in 1995 applies
to all coffee production in Costa Rica.  Foreign owners are
subject to this new law as well as the 1938 anti-dumping law. 
Producers will be affected by having to modify production methods
to comply with environmental law.  Consumers will probably pay
for the new law in higher coffee prices for Costa Rican coffee. 
Demand could be lower as a result of higher prices and employment
levels could ultimately be affected.  

8.        Legal Standing: LAW

     Starting in 1991 the government of Costa Rica established
new laws and regulations to protect the environment and improve
the quality of life.  The environmental protection law (Ley
General de Vida Silvestre) took effect January 1, 1995.  "This
law requires that every industrial company producing solid and
liquid wastes must install special waste treatment plants in
their production facilities.  This requirement also applies to
coffee producers, whose sector is considered to be the main
pollutant of the Central Valley rivers."

C.        GEOGRAPHIC Clusters

9.        Geographic Locations

     a.   Geographic Domain   :  North America [NAMER] 
     b.   Geographic Site     :  Southern North America [SNAMER]
     c.   Geographic Impact   :  COSTA Rica

10.       Sub-National Factors: NO

     The "Ley General de Vida Silvestre" is a national law and
enforced by national governmental agencies.

11.       Type of Habitat: TROPical

D.        TRADE Clusters

12.       Type of Measure: Regulatory Standard [REGSTD]

     The government is strengthening environmental standards that
restrict "dumping" of coffee pulp and other residue in local
streams.

13.       Direct vs. Indirect Impacts: DIRect

14.       Relation of Measure to Environmental Impact

     a.   Directly Related    :  YES  COFFEE
     b.   Indirectly Related  :  YES  FISH 
     c.   Not Related         :  NO
     d.   Process Related     :  YES  HABITat Loss

     River pollution, deforestation and soil erosion are a result
of coffee production. 

15.       Trade Product Identification: FOOD

     Coffee beans processed for consumption.

16.       Economic Data

     Coffee is Costa Rica's number one export followed by
bananas.  Between 1988 and 1991 the value of coffee exports
declined, from $316 million to $266 million respectively.  The
agriculture sector employs 28 percent of the labor force and
comprises 20 percent of Costa Rica's GNP.  Production has also
increased from 158,000 tons in 1988 to 168,000 tons in 1992. 
There was an attempt by the International Coffee Organization to
maintain export quotas that would stabilize the price of coffee
worldwide. 

17.       Impact of Measure on Trade Competitiveness: LOW

18.       Industry Sector: FOOD

19.       Exporters and Importers: COSTA Rica and MANY

E.        ENVIRONMENT Clusters 

20.       Environmental Problem Type: HABITat Loss

21.       Name, Type, and Diversity of Species

     Name:          MANY 
     Species:       MANY
     Diversity:     12,119 higher plants
                    per 10,000 km/sq (Costa
                    Rica)

     The environmental problems associated with coffee also
create a diversity problem that involve many species of fauna and
flora. 

22.       Resource Impact and Effect: HIGH and PRODuct

     The pollution that has resulted from coffee production is
seriously damaging organisms in rivers and streams.

23.       Urgency and Lifetime: MEDium and 10-20 years

     Run-off kills river plants and fish; deforestation displaces
birds.  The lifetime is approximately 10-20 years for birds and
more that 30 years for certain types of flora and fauna.

24.       Substitutes:   LIKE

     There are coffee substitutes such as chicory.

F.        OTHER Factors

25.       Culture:  YES

     Coffee consumption is a part of U.S. and Latin American
culture.  "It all started back when America did, back when we
thumbed our nose at the British and tossed their blasted tea
overboard, and the Boston Tea Party gave birth to America's
coffee klatch.  Coffee's glory years were the 1950s and 1960s
when nearly 75 percent of us drank more than four cups a day, on
the average."  Today there is a rise of espresso bars in the
U.S. and in Latin America.  Coffee breaks are taken very
seriously in various Latin American countries, including Chile
where coffee time has its own name - onces.

26.  Trans-Boundary Issues:  NO

27.       Human Rights:  YES

     Pesticides used in coffee production are harmful to workers
if they are not adequately protected.

28.       Relevant Literature

Britt, Kent.  "Costa Rica Steers the Middle Course."  National
     Geographic.  July 1981.
Carriere, Jean.  "The Crisis in Costa Rica:  An Ecological  
     Perspective" in Environment and Development in Latin
     America (David Goodman and Michael Redclift, editors). 
     New York:  Manchester University Press, 1991.
Cable News Network.  "New Technology Being Used By Costa Rica 
     Coffee Industry."  Report broadcast on May 21, 1995.
"Earth Matters."  Television show broadcast by Cable News   
     Network.  May 21, 1995.
Faber, Daniel.  "Imperialism, Revolution, and the Ecological 
     Crisis of Central America."  Latin American
     Perspectives.  Winter 1992.
Gudmundson, Lowell.  Costa Rica Before Coffee.  Baton Rouge:  
     Louisiana State University Press, 1986.
Leonard, H. Jeffrey.  Natural Resources and Economic Development
     in Central America.  New Brunswick:  Transaction Books,
     1987.
Lorence, Maruicio.  "Japan Coasts to Costa Rica:  Coffee Trade."
     Tea and Coffee Trade Journal.  July 1994.
Loria, Jose.  "Coffee Poses Environmental Headache for Costa 
     Rica."  The Reuter European Community Report. 
     September 21, 1992.
Orlebar, Edward.  "Central America:  The Rocky Road to Recovery." 
     U.S./Latin Trade.  December 1994. 
Montes de Oca, Rocio.  Former official of the Costa Rican   
     government.  Personal interview.  June 12, 1995.
"Partnership Develops Certification and Green Label for Coffee
     Beans."  Business and the Environment. April 1995.
Rodriquez, Ennio.  "The Multiple Tracks of a Small Open Economy: 
     Costa Rica" in The Developing Countries in World Trade
     (Diana Tussie and David Glover, editors).  Boulder:
     Lynne Rienner Publishers, 1993.
Rojas, Rodrigo.  "The Pollution Control Equipment Market in Costa
     Rica."  National Trade Data Bank (Report prepared for
     American Embassy-San Jose, Costa Rica).  March 21,
     1995.
Thrupp, Lori Ann.  "Pesticides and Policies:  Approaches to Pest-
     Control Dilemmas in Nicaragua and Costa Rica."  Latin
     American Perspectives.  Fall, 1988.
Vogel, Jason.  "Carriage Trade Coffee."  Financial World.  
     April 25, 1995.
Walden Country Reports.  "Costa Rica."  January 30, 1995.
Weinberg, Bill.  War on the Land:  Ecology and Politics in  
     Central America.  New Jersey:  Zed Books Ltd, 1991.
Wilson, Edward O.  "Rain Forest Canopy:  The High Frontier."  
     National Geographic.  December 1991. 
Winson, Anthony.  Coffee and Democracy in Modern Costa Rica,  New
     York:  St, Martin's Press, 1989.

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1/11/97