Country Context
Though it shares a border with Colombia and Brazil—the largest coffee producers in South America, and the third- and first-largest exporter of Arabica in the world, respectively—Peru’s status as a producer of high-quality Arabica remains relatively unrecognized in comparison with its neighbors. For the century following its introduction to Peru by Jesuit missionaries in the mid-18th century, coffee was grown primarily for domestic consumption. After defaulting on a bond to the British government stemming from expenses related to its war of independence against Spain as well as the War of the Pacific, Peru signed the Grace Contract in 1886. The Grace Contract retired Peru’s debt in exchange for granting Britain mining rights, control of Peru’s railway for a period of 66 years, as well as the transfer of 1.8 million hectares of highlands to the British government. Nearly a quarter of this land was developed by the British for agricultural purposes as a way to extract value from Peru—including the planting of large-scale coffee estates—leading to the growth of coffee exports beginning in 1887.
Indigenous peoples who lived in the highlands above the plantations provided the labor for the farms—either through debt bondage or in search of prosperity—and when the British withdrew from Peru, indigenous people took over use of the land or purchased it from the British, becoming smallholder coffee growers. The Agrarian Reform in the 1960s continued this process, transferring land from large estate holders to indigenous people and campesinos in the Cusco region as well as organizing farm workers into cooperatives. Those cooperatives produced over 80% of the coffee exported under the International Coffee Agreement’s quota system, delivering those revenues back to state-supported cooperatives. Reliance on the ICA’s framework, however, led to stagnation in the country’s trading system, undermining smallholder welfare and the strength of the cooperatives: “The cooperatives, with sales guaranteed, made no effort to improve their operations. The majority continued to be small and were often characterized by inflexibility, nepotism, and corruption.”
When the ICA fell apart in 1989, export prices collapsed. The neoliberal policies of Alberto Fujimori curtailed support of the markets in pursuit of free market principles and dissolved the Agrarian Bank. Without its own structure and mechanisms in place to replace the ICA, Peru’s exports suffered, trade routes fell apart and farmers in the rural countryside suffered. Economic insecurity led to the formation of the Shining Path movement. The violence unleashed both by Shining Path guerrillas and the government’s response caused the rural population to flee to the cities, further deteriorating trade routes, agricultural support services, credit, and agricultural production. Without strong export systems and without national support, many farmers—particularly the indigenous in Southern Peru—turned to the production of coca.
But where coffee production persisted, organic certification and certification through Fair Trade became a mechanism through which coffee growers could earn better prices for their coffee. While these certification schemes did not improve qualities, they did increase incomes, leading to the growth of the coffee sector and additional planting. Today, Peru remains the highest-volume exporter of certified organic coffee in the world with main production regions for specialty coffee in the north (Cajamarca , San Martín and Amazonias), central (Junín) and south (Cusco and Puno) of the country.
With elevations soaring above 2,000 meters, unique microclimates suitable for the production of high quality coffee and traditional varieties like Typica (over 70% of plantings) as well as exotics like Gesha from the FAO Mission to Ethiopia in 1964, Peru’s potential for quality is high. And while 75% of coffee in Peru is produced by its 223,000 smallholders whose farms are, on average, smaller than 3 hectares, just 25% of those smallholders are organized into formal cooperatives—many of which structurally lack motivation or leadership to adapt to new market conditions and create opportunities for their members. By providing market access and direct connection with quality-oriented roasters, Crop to Cup works to support the growth and development of the smallholder coffee sector in Peru.
