Peru

Though coffee arrived in Peru in the 1700s, very little coffee was exported until the late 1800s. Until that point, most coffee produced in Peru was consumed locally. When coffee leaf rust hit Indonesia in the late 1800s, a country central to European coffee imports at the time, Europeans began searching elsewhere for their fix. Peru was a perfect option.

Interest in finding new locations for coffee production coincided with Peru defaulting on a loan from the British government. The Peruvian government gave England over 2 million hectares of land as restitution. The British quickly converted a full quarter of that land into agricultural production and contributed to increasing exports.

Between the late 1800s and the first World War, European interests invested significant resources into coffee production in Peru. However, with the advent of the two World Wars, England and other European powers became weakened and took a less colonialist perspective. Between 1914 and 1945, most European powers sold off the lands they owned in Latin America and removed many economic investments outside their own borders.

As in many previously colonialized countries in Latin America, most early coffee farms in Peru were expansive plantations owned by expatriates. These large landholdings soon gave way to smaller, independent farms that were established by indigenous Peruvians who had initially migrated from the highlands to work as laborers on those larger plantations. The abundance of fertile land made it relatively easy (compared to other countries) for migrant workers to begin their own farms. 

Following the wars, coffee farmers had much more independence and autonomy to produce coffee; however, as a result, the coffee industry became less structured. While farmers had more independence, they were also on their own when it came to processing and selling their coffees. This independence also meant that the responsibility for constructing and maintaining infrastructure such as roads or communal mills fell on individual farmers, which made organization and follow-through more difficult.

When the British and other European land owners left, their land was purchased by the government and redistributed to locals. The Peruvian government repurchased the 2 million hectares previously granted to England and distributed the lands to thousands of local farmers. Many of these farmers later grew coffee on the lands they received.

The government further encouraged coffee farming in the post-war decades of the 1950s and 1960s. In those years, many factors made coffee a high-potential crop for socio-economic growth in Peru. Growing demand for coffee was fueled by soldiers returning from war (who had developed a taste for coffee abroad), increased average incomes and a new generation of growing families. Because coffee can grow well on small plots and was lucrative enough to furnish a rural family with a sufficient annual income, coffee became a focus of the government’s economic plans.

Soon, a demographic shift was evident. Whereas coffee in the first half of the twentieth century was produced mainly by large plantations, by the mid-twentieth century, smallholder farmers produced the majority of coffee in Peru.

Under a series of military dictatorships in the early post-war period, coffee governance focused on forming producers into cooperatives. Cooperatives helped farmers increase their bargaining power and achieved greater economies of scale for processing, milling and transport. Throughout the 1970s, cooperatives exported a full 80% of Peru’s production, bringing in a significant export revenue for the country.

Unfortunately, the system was still flawed and much of the money made from coffee exports never made it back to farmers. Instead, corruption in early cooperative systems meant much of that money disappeared into individual bank accounts before most farmers ever saw it. Despite leakage in cooperative structures, farmers were still seeing enough income to keep coffee production profitable. However, if farmers at the time were receiving more money than they needed for day to day living, they did not choose to invest these profits in improving supply chain operations. Unfortunately, the breakdown of the International Coffee Agreement’s quota system in the 1980s led to a precipitous global drop in coffee prices that severely affected many of the country’s smallholders.

A variety of factors led to rough times for the Peruvian coffee sector in the 1980s. With the ultimate breakdown of the coffee quota system in 1989, the clouds of economic crisis began gathering on the horizons.

Alberto Fujimori, president of Peru from 1990 to 2000, instituted structural adjustment policies (SAPs) soon after taking office. These SAPs entailed cutting spending and privatizing public assets (such as energy companies, transportation infrastructure and more). They were, at the time, crucial measures to qualify for International Monetary Fund (IMF) loans, but they remain controversial for their potential to worsen poverty, especially for the most vulnerable groups. For Peru, SAPs entailed a large-scale divestment from coffee production. Fewer laborers could find work, and those who were hired faced longer hours and fewer protections in already degraded work environments. Smallholder farmers encountered more difficulties transporting their harvest to market due to dilapidating roadways and other infrastructural problems.

Compounding these factors was the government’s conflict with Shining Path guerilla forces. The conflict and ensuing violence lasted for more than ten years and disproportionally affected those living in rural areas. It was only when leader, Abimael Guzman, was captured and imprisoned in 1992 that rural lives began to normalize.

The growth of ‘ethical’ sourcing policies in the mid-to-late 1990s revitalized Peruvian coffee farming and provided much needed investment on farms and infrastructure. Brands focused on buying more fairly traded, ecological and humane coffees and, thus, funded a coffee-producing renaissance in Peru. Organic certification has been particularly popular.

Between 1995 and 2005, land under coffee cultivation increased from 163,000 hectares to 215,000 hectares. This explosion of new coffee growing land marks Peru as a global outlier who, along with Brazil, is one of only two countries to have increased land under coffee cultivation in the current period of historically low prices.

Organic farming also has a downside. The plague of Coffee Leaf Rust (CLR) that speed across Latin American beginning in 2012 has been even more destructive in Peru because organic farms are more limited in their choice of anti-fungals and herbicides they can use to combat the disease. CLR continues to be a major problem for coffee farms across Latin America.

One of the largest reasons that Peru has remained one of the largest producers of organic coffee in the world is because producers lack access to inputs. In the wake of the CLR crisis, it is uncertain if Peru will remain such a dominant organic coffee producer or, fearing the complete loss of their crop, if farmers will elect to take profit cuts and sell conventional coffee. Alternatively, some may turn to illegal coca farming to make ends meet.

Today, coffee production is widespread along the eastern slope of the Andes; however, production is concentrated in three main growing areas: Amazonas, San Martín and Chanchamayo. Coffee production previously was most pronounced in Chanchamayo (Central Highlands), which used to produce around 70% of the country’s total crop. The arrival of Coffee Leaf Rust (CLR) had a devastating impact on the region’s production, which has still not recovered.  

Currently, the northern highlands of the Amazonas and San Martín regions now account for around 47% of national production. In recent years, many warehouses and mills have opened in Amazonas, San Martín and Cajamarca, further reinforcing this trend.

Farmers in Peru usually process their coffee on their own farms using the Fully washed method. Cherry is usually pulped, fermented and dried in the sun. Traditionally, smaller farmers would use tarps laid on the ground or under the roof of their homes. Increasingly, cooperatives are establishing centralized drying facilities – usually raised beds or drying sheds where members are encouraged to dry their parchment. Some farmers are beginning to adopt these practices on their own farms, and drying greenhouses and parabolic beds are becoming more common as farmers pivot towards specialty markets.

After drying, coffee will then be sold in parchment to the cooperative. Producers who are not members of a cooperative often have the opportunity to sell on to cooperatives, as well.  

The remoteness of farms combined with their small size means that producers need either middlemen or cooperatives to help get their coffee to market. Cooperative membership protects farmers greatly from exploitation and can make a huge difference to income from coffee. Nonetheless, currently, only around 15-25% of smallholder farmers have joined a coop group.

Sucafina Specialty has long-standing, mutually supportive relationships with a wide range of coffee producers, cooperatives and exporters in Peru. We visit the country annually and work with our in-country partners to bring you an amazing range of delicious coffees. 

Our European sourcing focus lies on building strong ties with well-managed cooperatives that put the interests of their members first (El Palto) and with exporting partners that are respected members of the local community (Monteverde). For the EU, our strongest relationships are in in the North. Last year almost 100% of our Peru purchases for Antwerp were Organic certified.