DATELINE
COFFEE THE CORPORATE ROAST The dramatic increase in coffee prices from S1.50 to over S4.00 during the past year and a half has provoked charges, investigations, boycotts and congressional...
...In 1960, it cost about 160 bags of coffee to purchase one tractor...
...In fact, a cyclical pattern of low prices, a frost in Brazil, then high prices, followed by a new glut in coffee production and plummeting prices, has occurred at least four times in the past forty years...
...Angered over a State Department report criticizing human rights violations in Brazil, the Geisel government went even further to cancel the military assistance pact under which the United States has provided military training and cash sales of military equipment to Brazil for the last 25 years...
...In another surprising development, the military leaked a secret contingency plan for the event that Brazil and the U.S...
...Calmon de Sa is also thought to fall on the conservative side of the estatizacao debate raging in Brazil over whether or not the government should continue to expand the state sector of the economy...
...It is now true that governments in the developing countries are much more aware of the game...
...Although U.S...
...COFFEE THE CORPORATE ROAST The dramatic increase in coffee prices from S1.50 to over S4.00 during the past year and a half has provoked charges, investigations, boycotts and congressional hearings...
...policy-makers...
...The less flavorful "robustas" are produced in Africa and Indonesia...
...25-32), and U.S...
...PRODUCTION Of the third covering production, about 30 percent is profit for the landholder while the rest covers wages, machinery and other costs...
...To counter the cyclical boom and bust, International Coffee Agreements have been formed and reformed, but to little avail...
...Each agreement was plagued with disputes, in part encouraged by roast- ers who played off the various pro- ducing countries and their specialized types of coffee in an effort to gain the lowest prices...
...Like the marketing agents, the roasters also stockpile coffee...
...U.S.- based Anderson Clayton Company, for example, utilized its cotton and oil- seed empire in Brazil to become the largest private trading company there...
...In El Salvador, the top 20 percent hold 89 percent...
...About 100 such agents operate abroad to secure coffee for the U.S...
...market...
...Another U.S...
...The agents seek to undermine any international coffee agreement that would stabilize the coffee price and interfere with their profit margins...
...And each time the big coffee roasting firms and the international coffee traders increase their profits, while the large landholders in the Third World continue to make money at the expense of the peasants who harvest the beans...
...Large traders like General Foods often buy their coffee in private sales directly from producers at unannounced prices, and then use their inside knowledge to speculate on the futures market...
...Corporate Connection Drawn by M. Klare...
...of South Africa, Ltd...
...a wholly-owned subsidiary of the Lockheed Corp...
...government rarely monitors these arrangements...
...Since Geisel became president in 1972, he has represented himself as the liberal alternative to the hard liners grouped around former President Garrastazu Medici...
...Such ventures are authorized under Section 42 of the Foreign Military Sales Act...
...In fact, in several notable cases it can be shown that Italian firms are selling American technology or U.S.-designed military equipment to the Pretoria regime...
...The lobbying organization of the coffee roasters, the National Coffee Association, works closely with officials of the U.S...
...Following in the footsteps of Uruguay and Argentina, Brazil rejected S50 million in U.S...
...If the next scheduled elections for state governors and legislators are held as planned in 1978, it is very probable that the MDB would win in the key states of Rio de Janeiro, Sao Paulo, Minas Gerais, and Rio Grande do Sul...
...Agriculture, which accounts for 50 percent of Brazil's export receipts, grew at a sluggish rate of 4.2 percent, and the country's foreign debt increased to an astronomical S28 billion (the largest in the world...
...Currently, Consolidated Foods is holding acquisition discussions with Douwe Egberts, Holland's oldest trader with roots going back to 1753...
...U.S...
...A number of governments have substantially increased their export taxes recently to raise more exchange, and to protect their dwindling reserves...
...one year later the difference had risen to more than S1.00...
...Thus the public furor over increased coffee prices does not focus on the real culprits for the present disarray in the international coffee market - the multinational corporations...
...Arabicas and robustas are two basic types...
...Only after almost twenty years of discus- sions was an agreement concluded...
...bags) 15.5 7.3 2.6 1.9 1.8 1.0 % of Country's Total Exports 11 49 7 26 41 10 Source: U.S...
...Brazil's military government has once again shown its willingness to take an independent stance vis-a-vis the U.S...
...10-720 -A1A 8-cylinder piston engines used to power the AL-60's sold to South Africa...
...During the past ten years, these nations have faced price increases of more than 40 percent on essential imports, yet their coffee receipts have declined...
...The appointment of the former president of the Banco do Brasil, Calmon de Sa, as new Minister of Trade and Industry, will lend more cohesion to Brazil's economic strategy...
...Since 1959 Aermacchi has been partly owned by Lockheed Aircraft International, Inc...
...To understand how the international coffee trade functions, examine for a "moment the three key components of the coffee industry: 1) the production of coffee beans in the Third World...
...Theoretically the foreign firms involved are prohibited from selling US.-designed arms to any country on the U.S...
...However, the new minister is not expected to support government aid to the Sao Paulo industrialists who have been clamoring for help in the face of run-away inflation and vocally criticizing the military's heavy-handed economic and political measures...
...By Michael Klare Sources: Stockholm International Peace Research Institute, Arms Trade Registers...
...Wages are distributed among 20 million workers in the Third World for the difficult, labor-intensive cultivation and harvest...
...The shrubs generally demand careful cultivation, transplanting and pruning...
...Some of the most active overseas producers of U.S...
...27 TABLE II PERCENTAGE OF U.S...
...TNI/IPS, 1901 Q St., N.W., Washington, D.C...
...INTERNATIONAL MARKETING The second stage of the coffee system is controlled by marketing agents...
...Brazil's readiness to flex its growing political muscle in international affairs may be cause for concern to U.S...
...POLITICAL LIBERALIZATION...
...Each berry must be hand picked and pulped to remove the two green coffee beans...
...This arrangement provides the large landholders with a labor and supply buffer when prices are low...
...By Hank Frundt, a consultant on agribusiness for the Interfaith Center on Corporate Responsibility, and an assistant professor of sociology at Ramapo College, N.J...
...government in negotiations with the Third World coffee producing coun- tries...
...embargo list, but in practice it is relatively easy for them to get around this restriction since the U.S...
...The producing and consuming countries as a bloc can veto each other's decisions, but the United States is the only country which has enough votes by itself (400) to exercise veto power...
...military aid for fiscal year 1978...
...ARMS TRANSFER TO SOUTH AFRICA: The Italian Connection KEY: Direct Deliveries - Licensing Agreement...
...3. P-166S The Piaggio P-166S Albatross twinengined light transport plane used primarily for maritime surveillance work...
...THE MULTINATIONALS' NEW MAN The ousting of the Minister of Trade and Industry, Severo Gomes, in January represents a new feather in the cap of international capital...
...26 DATELINE * DATELINE The large plantation owners often purchase beans from subsistence farmers who cultivate a few plants to supplement their meager incomes...
...Let us look at each entry more carefully...
...multinationals for his clashes over the foreign financing of the "Brazilian economic miracle" advocated by Minister of Planning dos Reis Velloso and Minister of Finance Simonson...
...These are summarized in the accompanying chart...
...arms technology is considered a critical national resource whose dissemination must be tightly controlled, more and more US...
...It can carry up to 12 passengers, or a variety of surveillance gear...
...The International Institute for Strategic Studies further reports that the SAAF has ordered 41 C-4M Kudu utility planes from the domestic aircraft firm, Atlas Aircraft Corp...
...AMERICAN BLEND IN HOLLAND As the media focuses on the consumer coffee boycott, U.S...
...TABLE I MAJOR LATIN AMERICAN COFFEE EXPORTERS-1975 Country Brazil Colombia Mexico Guatemala El Salvador Ecuador Exportable Production (Millions of 132 lb...
...firms are selling their technical "know-how" to foreign arms producers or are participating in multinational arms ventures...
...firms' participation in the covert and illegal transfer of arms to South Africa (p...
...The AL-60 is, in fact, the Lockheed-60 and is produced by Aermacchi under license from the parent firm...
...International Institute for Strategic Studies, The Military Balance 1976-77...
...For fuller docu- mentation see TNI/IPS Special Report "U.S...
...National industrialists have been especially hard hit by inflation in the cost of imported inputs...
...The Economist (December 25, 1976), for example, recently reported that U.S...
...now it takes about 400 bags...
...None of these reports suggest that U.S...
...Should Congress be reconvened, this would allow ARENA (which controls only a simple majority) to make constitutional changes without MDB support...
...Solution to the disputes came only when the roasters, via the U.S...
...In the past five years, Latin America's share of the world market has dropped from 80 to 67 percent, with Brazil, the largest producer, suffering an even greater loss...
...Recent international press reports that the Brazilian military police systematically use torture to deal with common criminals as well as political prisoners has made the Geisel government particularly sensitive over the human rights issue...
...As the second largest international trade commodity by volume, coffee will account for more than S12 billion in trade in the coming year...
...The ability of the large landowners abroad to extract high profits from the peasants who work their lands is an additional issue which has been neglected...
...In 1976, inflation rose at a rate of 3.8 percent per month, reaching 46 percent by year's end...
...In November 1975 the difference between the price of imported coffee beans and the retail price for the consumer averaged 60 cents per pound...
...When the bean price rises, they too pass the costs on to the grocers, even though the beans are often purchased before the price increase occurs...
...It can be used for observation, training, liaison duties, and for general support of ground troops...
...Then the dried, hulled beans are sorted, sometimes washed, and packed in 132 pound bags for sale to marketing agents...
...Many coffee workers receive between S1.00 and S1.50 per day during the six weeks of berry picking, and much less during their other time on the plantation...
...Unless the protests are redirected, they will not challenge the ability of the transnational corpora- tions and the large landowners to continue benefiting from the cyclical price movements in the trade of coffee and other food commodities...
...Prill, sits on the Aermacchi board...
...The AL-60 is known in Rhodesia as the Trojan...
...U.S...
...Standard Brands recently acquired a majority interest in Van Nelle, a Dutch firm dating back to 1782, while American Brands took over Meindert Niemeyer (1819) four years ago...
...Thus, the roasters and retailers had raised their revenues by over 65 percent, a dramatic increase, unequalled by other sectors of the U.S...
...The Geisel government turned to West Germany after the U.S...
...But the recent shake-up in the Geisel cabinet should reassure U.S...
...General Foods reported profits in July that were 61 percent higher than the similar period a year earlier...
...Coffee beans grow on shrubs that mature in three to five years...
...and 3) the roasting and distribution of coffee by the food processing corporations...
...according to the Argus Research Corporation, "Inventory profits from anticipatory price in- creases on coffee account for a sizeable portion of [General Foods'] recent earnings...
...government refused to allow Westinghouse to sup- ply the technology that will enable Brazil to produce her own nuclear weapons...
...Calmon de Sa is bound to be a strong 28 IR1AZ IL SHIFTING GEARS DATELINE * DATELINE proponent of continuing the conservative policies of the Geisel government, including constant devaluation of the cruzeiro and a firm control on wages...
...For many years, the companies resisted Brazilian efforts to organize the coffee producing countries...
...29 ARMS SALES THE ITALIAN CONNECTION DATELINE * DATELINE According to the Stockholm International Peace Research Institute (SIPRI), the South African Air Force (SAAF) has acquired the following aircraft from Italy: 20 Aermacchi AL-60 light transports, 40 AeritaliaAermacchi AM.3C utility planes, and 20 Piaggio P.166S maritime patrol planes...
...The AM.3C is known in South Africa as the Bosbok...
...By Sherry Keith, who recently returned from Brazil where she was a visiting professor at the Federal University of Minas Gerais...
...Analysts estimate that speculation accounts for at least 25 percent of future contracts...
...aircraft firms, Italian aircraft firms, and the South African Air Force...
...In addition, the government confirmed that state gubernatorial and legislative elections scheduled for 1978 will be indirect...
...Coffee forms the major source of foreign exchange for a number of nations in Latin America and Africa - more than 30 percent in many cases (see table I...
...it can also be armed with a variety of rockets, bombs, etc...
...Marketing agents, who are often representatives of multinational corporations, operate within the pro- ducing countries and work with government marketing boards...
...With Brazil already producing 75 percent of her military equipment and importing much of the rest from Western Europe, these moves will have little impact on Brazil's impressive military capability...
...Also, like the AM.3C, it is powered by Avco-Lycoming GSO-480 piston engines produced under license in Italy by Piaggio...
...firms to enter into co-production agreements overseas (pp...
...multinationals that their interests will continue to be well protected...
...whose President, G.C...
...Although of Italian design, it is based on the Lockheed-60 and is powered by an Avco-Lycoming engine, the GSO-480-B1B6, produced in Italy under license by Piaggio...
...Known as the gadfly of the Geisel government, Gomes was very much disliked by the U.S...
...Arms Deliveries to South Africa: The Italian Connection," by Michael Klare from which the above article was excerpted...
...Many subsistence farmers also migrate to the plantations to work during the coffee picking season...
...Update As We Go To Press - On April 1 President Geisel indefinitely suspended the Brazilian Congress...
...military equipment is involved in these deals - but it is...
...2. AM.3C The AM.3C is a three-seat cabin monoplane produced in Italy by Aermacchi and Aeritalia...
...Unlike Gomes, he favors private rather than government enterprise...
...food processing industry...
...Unfortunately, the role played by the multinational corporations and the large landowners has received scant attention...
...Department of Agriculture, Foreign Agriculture Service...
...It is rumored that the Geisel government, anxious to head off that possibility, is currently preparing legislation to transform the 1978 elections into an indirect plebiscite, which would insure ARENA The following article updates two issues we raised in our January 1977 Report: the trend for U.S...
...DATELINE * DATELINE All decisions require a two-thirds vote of both groups...
...The finest grade arabica milds are grown in Colombia and Kenya...
...firm, the Avco-Lycoming Division of the Avco Corp., supplies the 400-h.p...
...These shifts in world coffee production are exploited by the multinational corporations which play the Third World countries off against each other...
...Traditionally, these less expensive coffees have been used as fillers for various blends, and for instant soluble coffee...
...The first International Coffee Agree- ment was arranged in 1957-59, and others were drawn up in 1962-64, 1968, 1970-71, and then in 1976...
...should break off diplo- matic relations at some future date...
...But producing nations have some difficulty in maintaining a united position against the large corporations and consuming nations led by the United States, which consumes 40 percent of world coffee exports and drinks more than 500 million cups a day...
...COFFEE MARKET CONTROLLED BY MAJOR FOOD PROCESSING COMPANIES-1975 Company Name Brand Names Regular Coffee (70%) Instant (30%) General Foods Maxwell House, Maxim, Sanka, Yuban 35 51 Proctor & Gamble Folgers 21 8 Hills Brothers Hills Brothers 8 1 Standard Brands Chase-Sanborn 4 2 Coca Cola Maryland, Butternut 4 0 Nestles Nescafe, Tasters Choice 0 30 Others 28 8 Sources: World Coffee and Tea, Advertising Age...
...With increasing demand for coffee of all types, the narrowing price differential between robustas and arabicas has placed Colombia and Brazil on the defensive...
...In addition to Anderson Clayton, such well known household names as Proctor & Gamble, General Foods, Coca Cola, Hills Brothers and A&P number among the ten largest international traders in coffee beans...
...Other milds are produced in Central America...
...For example, the typical agreement divides the 41 producing countries and the 21 consuming countries into two groups each with equal votes (1,000...
...efforts to undo the nuclear power agreement Brazil has signed with West Germany...
...The military was clearly hoping to avoid the negative publicity the State Department report would have caused if the aid issue had come to debate in Congress...
...The impressive 11 percent growth rate in industry was undercut by the continuing dependence of the industrial sector on imports of basic inputs and capital goods...
...With the rest of Geisel's economic advisors supporting an open door economy to attract foreign investment and loans, Gomes' inclina- tions to support the Sao Paulo indus- trial and commercial community over the interests of foreign capital made him unpopular with his colleagues...
...Consumer anger with Brazil and other producing countries is growing...
...Each time the same charges have been raised, the same investigations and hearings have been held...
...One week after closing Congress, the government announced that from now on constitutional amendments will require only a simple majority, rather than twothirds...
...at least on the diplomatic front...
...While these policies have benefitted the multinationals, they have meant a steady deterioration of the economic situation of most Brazilian businessmen and for the majority of Brazilian workers, whose purchasing power is constantly eroded by galloping infla- tion...
...These schemes usually involve the licensed production of U.S.designed arms by foreign producers, or co-production projects involving both continued control of the state govern- ment machinery...
...1. AL-60 The AL-60 is a single-engine cabin monoplane produced by Aeronautica Macchi (Aermacchi) of Milan...
...Backed by urban working and middle classes, the intelligentsia and some elements of national capital, the MDB won 67 percent of the votes in Brazil's 15 largest cities (in comparison with ARENA's 13 percent...
...arms are located in Italy...
...An increase of one cent per pound has meant S65 million in foreign exchange for the coffee producing countries...
...Jane's All The World's Air- craft, 196t-77 issues...
...We thus have several links between U.S...
...It is because of their ability to manipulate the market that the large coffee roasters have strengthened their position in the coffee industry (see Table II...
...They buy coffee from the producers and sell it to the roasters for flavor enhancement, grinding and packaging...
...Different countries produce dif- ferent types of coffee...
...PROCESSING More than 100 roasters operate in the United States, but during the past twenty years a handful of firms led by General Foods, Proctor & Gamble and Nestle have come to dominate the coffee processing industry...
...This marketing power is in part based on the pivotal role they play in negotiating International Coffee Agreements...
...4. C-4M The C-4M Kudu light transport plane is described as being a South African design, but it too is based on the AL-60...
...It can be armed with rockets, bombs, machine guns and napalm tanks...
...Unwashed" arabicas are the primary product of Brazil and Ethiopia...
...While many subsistence farmers grow some coffee on their small plots, coffee production is dominated by large plantations...
...The ostensible reason was the MDB's refusal to approve proposed constitutional reforms because they did not include the right to habeas corpus for political prisoners...
...As the Brazilian economic model continues to flounder, the divisions between the interests who support continuing military rule and those pushing for restoration of civilian government are becoming more defined...
...However, the Sao Paulo elite's recent demands for restoration of democracy are likely to fall on deaf ears...
...Traditionally, each part has accounted for about a third of the retail coffee price...
...food multinationals are quietly expanding their control over the commodities trade...
...Reportedly most or all of the SAAF's AL-60's have been given to the Rhodesian Air Force, which uses them to supply outlying anti-guerrilla army units...
...This article exposes the U.S...
...With Gomes' departure, the only vocal proponent of political liberalization has been removed from the cabinet...
...They usually are in permanent debt...
...Both of these diplomatic slights may be a partial response to U.S...
...But in the wake of last November's municipal elections, which were seen as a possible step toward restitution of a carefully monitored electoral system, Geisel may have had second thoughts about further liberalization...
...Although it too is an Italian design, it is powered by two Avco-Lycoming IGSO-540-AIC 6-cylinder piston engines...
...govern- ment, were assured of a dominant role...
...As in other commodities, speculation by the big traders drives up prices...
...transfer of arms to South Africa (and Rhodesia) through Italy...
...When asked whether coffee workers' wages are presently rising because of the tripling of bean prices, one official of the Brazilian Coffee Institute conceded that "there is no direct reflection in wages...
...20009...
...Aside from inventory speculation, the roasters and coffee retailers have been steadily increasing their earnings on every pound of coffee they sell...
...In Brazil, the top 20 percent of the growers account for 97 percent of all the coffee land...
...food processors are taking over Holland's coffee, tea and tobacco trading empires, some of which are two centuries old...
...Brazil, usually responsible for more than one-third of the world's export production, has only 332 votes...
...In spite of the overall victory of the government party, ARENA, the opposition Movimiento Democratico Brasileiro (MDB) scored impressive victories in the urban areas...
...2) the international marketing system...
...Some of these same firms are also deeply involved in arms sales to South Africa...
...This has fueled their opposition to the government's pro-foreign capital policies, and they have begun to pressure for a return to democracy where they might be able to lobby more effectively for their specific interests...
...Wide price fluctuations allow these agents to buy coffee at low prices, store it, and sell at high prices...
...and foreign firms in the joint production of a common system...
Vol. 11 • April 1977 • No. 4
