Mónica Dalila Pozuelos Arriaza
Guatemala is a country located in Central America with a population of around 17 million. The nation is known for its fertile land, with rivers, volcanoes, mountains, and generally favorable climate. When it comes to development, Guatemala faces significant challenges, with around 56% of the population living in poverty, particularly in rural areas, where one in every two children is malnourished and there are limited social and economic opportunities. Despite this, Guatemala has several industries, including mineral extraction, coffee, sugarcane, and cardamom, with cardamom being a major global supplier.
Minerals, including nickel, have been an important export product, though the focus has shifted to antimony, iron, silver, ore, lead, and gold. The development of open-pit mines for gold and silver has led to protests from indigenous communities and concerns from international human rights organizations. This paper for COGGS will focus on the coffee industry, examining its oligarchic control over decades and exploring potential alternatives for market diversification or changes in the power dynamics of coffee production.
Guatemala’s exports have visibly improved since its entry into the Free Trade Area of the Americas in 2004. The country primarily exports agricultural products, including coffee and sugar (over 37 percent of total exports), and textiles (over 14 percent). Other exports include iron, steel, plastics, and chemical products. The United States is Guatemala’s main export partner, receiving 33 percent of exports (Trading Economics, 2024).
How is the Coffee Industry in Guatemala?
Coffee production in Guatemala has undergone significant transformation over the past twenty years, driven by increasing demand for high-quality coffee and shifts in consumer preferences. To understand the system, it is essential to focus on the actors and how power is distributed. The international coffee industry is structured such that small coffee farmers often have no choice but to accept the prices set by intermediaries, who dictate what they are willing to pay. Typically, coffee farmers earn only a small portion of the money consumers spend on coffee, while wholesalers, roasters, and retailers earn much larger portions (Francis, 2006).
The lack of price control by small coffee growers creates income inequality, with intermediaries benefiting disproportionately from price fluctuations. Actors such as the Cafetaleros, who operate privately on plantations called fincas and rely on temporary migrant labor, exploit the needs of this population by paying the lowest possible wages.
Unfortunately, the coffee sector is dominated by an oligarchy (cafetaleros) that maintains its privileges and contributes minimally to the development of rural areas and the country overall.
Economic Aspirations in the Coffee Industry
What is the Role of the Cooperative Movement?
The cooperative sector offers a significant opportunity to develop the country, particularly within the coffee industry. This movement seeks to ensure equality among its members. However, “there are several intermediaries in the global coffee economy, including exporters, wholesalers, importers, roasters, and retailers, each of which gains increasing profit relative to the farmers. Sometimes, farmer cooperatives are able to eliminate some of these middle stages by taking on additional roles and pooling funds to purchase export licenses and equipment” (Bacon, 33, 2010).
Recent studies indicate that coffee cooperatives help level the playing field by providing high-value services such as credit and agronomic training at equal rates to both women and men. This has led to increased gender equality and greater opportunities for women.
In conclusion, cooperatives offer a viable solution for promoting equality and development in rural areas, which are most affected by poverty. They create opportunities for economic development even in the most impoverished regions. However, the success of cooperatives depends on collaboration with existing power structures (cafetaleros) to ensure broader economic benefits for the entire population. Investments in training and expanding opportunities in rural areas could also help reduce high migration rates in Guatemala.
[Mónica Dalila Pozuelos Arriaza is a Guatemalan academic, and specializing in Guatemalan Foreign Policy]
For submissions to COGGS, we invite experts and specialists from the Global South to send their contributions to ayan@thegeoeconomics.com.
Dr. Mónica Dalila Pozuelos, Author
