THE COFFEE INDUSTRY OF BRAZIL
The huge coffee industry in Brazil will not receive a great deal of space in this book for two reasons: the first is that the subject needs a special monograph to deal with it thoroughly, and there is an entire literature on the subject, especially excellent in French, Portuguese and Italian; the second reason is that coffee culture and marketing is so highly organized that there is little room for outside enterprise. Existing plantations are probably quite capable of taking care of what new planting may be required—and this likely to be in the immediate future: the drastic checks given to planting by the authorities after the terrible fright of the great over-production of 1906, that led to the much-discussed Valorization, have done their work so thoroughly that at the present, with the elimination of many thousands of trees owing to exhaustion, there is room for extended planting on São Paulo and Minas fazendas. Brazilians, to whom life on a fazenda is always pleasant, are large owners of coffee-producing lands, and are quite aware of economic conditions, as well as being experienced growers and exporters of coffee. I do not, therefore, advise any tyro to enter upon the business of a coffee fazenda; such plantations offer good opportunities for investment, but apart from that angle do not call for outside activity.
There are many foreigners in the coffee-producing business in Brazil, of course. Italians, besides supplying a very large percentage of the labour on the S. Paulo estates, are considerable owners of plantations; the Dumont Estates, English owned and operated, are world famous; and the greatest single owner of coffee trees in the world, possessor of thirteen million shrubs, is Francisco Schmidt, who began life in Brazil as a poor German immigrant.
The first coffee plants brought to Brazil were of the liberica variety and were planted in Pará at sea-level, a situation to which this kind is not averse. This was in 1727 and when in 1761 the Mother Country remitted taxes on coffee from her American possessions, cultivation was encouraged and spread south to Maranhão, Ceará, Espirito Santo, Minas and Rio, eventually reaching the red diabasic soils of São Paulo. The variety grown here is chiefly café arabica, preferring an upland habitat, but in the course of years Brazil has developed hardy hybrid varieties of her own.
A couple of sacks of coffee are said to have been sent out from the south early in the nineteenth century, but real business did not develop until after Dom João arrived and promulgated laws freeing Brazilian trade from its swaddling clothes. Between 1835 and 1840 export began in large quantities, the latter year recording 1,383,000 sacks sent abroad for sale; slave labour was used, and the interior was searched for the deepest blood-red lands, found in their richest belts in São Paulo State.
By the year 1870 Brazil was exporting three million sacks annually (of sixty kilos, or about one hundred and thirty pounds, each); before the end of the century the output was ten million sacks, but meanwhile Brazil passed through a severe labour crisis. Abolition of slavery in 1888 left the plantations without an adequate supply of workers: it was necessary to supplement the free negro element remaining at work with more “braços”—the eternal need of Brazil. Experiments had already been made in colonization by Dom Pedro, and these proved the excellence of the Italian labourer; prompt measures were taken by the State as well as by private fazendeiros to bring agricultural workers from North Italy, the breach was filled, and so successfully that today out of a population of three million people in S. Paulo State, one million are Italians. Disputes occurred in early years owing to the disparity of race, and partly the lack of experience of the planter in dealing with white labour, but the State Government took up the cudgels on the part of the immigrant, saw to it that he was paid justly and that his condition was economically sound—to the great advantage of coffee cultivation in Brazil. This was the work of the Patronato Agricola, a Brazilian invention which owes much to Dr. Sampaio Vidal; its successful operation was instrumental in contenting the immigrant who came to work on coffee plantations, and while it was at first regarded with suspicion by some fazendeiros, eventually received their cordial co-operation as a source of mutual benefit.
Not only São Paulo but the coffee-growing regions of interior Rio, Minas, and Espirito Santo, sought immigrants officially: in spite of efforts there was no section of Brazil so successful as the southern State. Colonos who were brought to Minas melted away to São Paulo, perhaps chiefly on account of the “sympathy of numbers.” São Paulo eventually remained the only State with an organized, active immigration system.
At the end of the nineteenth century big prices were paid for coffee: on a few occasions a sack fetched one hundred and thirty-five francs, and large quantities were sold at ninety-five and ninety-seven francs. Cost of production was about fifty francs, and sixty-six was considered a fair return on investment; the industry was greatly stimulated by these profits and planting began feverishly all along the lines of deposit of the richest red soils. These new plantations came into bearing four or five years later, and in the crop season of 1906–07 a staggering yield was ready for an overwhelmed market. The bounty of nature brought Brazil face to face with ruin.
São Paulo State harvested 15,392,000 bags; Rio de Janeiro State offered 4,245,000 bags; Espirito Santo and Bahia together had another half million. Altogether Brazil had over 20,000,000 bags of coffee for sale, to a world whose annual consumption was then not much more than 17,000,000 bags; and in addition to the new Brazilian crop there was a harvest from Mexico and Central America of 1,500,000 bags, from Colombia of 1,000,000, with another half million from the East and 400,000 from the West Indies—and the not to be ignored contribution of real Mocha coffee of 115,000 bags.
Nor was that all. There had been a big Brazilian crop in 1901–02, reaching the then unprecedented figure of 15,000,000 sacks, and with a world consumption at that time of only 13,000,000 there was a large surplus of this coffee left in hand, as well as stocks of other varieties. Prices went down, and the planter was only saved by the imminence of a fall in exchange which meant that although his coffee sold for less gold than normally, yet this gold brought so much more Brazilian paper when exchanged that he was able to pay operating expenses and still count a profit in national currency.
From a gloomy level of thirty francs a bag, coffee rose in 1904–05 to about forty and fifty francs; but the threatening feature of the situation was retention in world warehouses of a stock averaging 11,000,000 bags. When Brazil was confronted with 20,000,000 bags of the new 1906 crop she thus had to consider a market which already held seven-tenths of the coffee needed annually by the world, apart from other sources of new supply.
To throw her coffee upon Europe and the United States meant the ruin of the premier industry of Brazil. After a series of hotly debated discussions, which had begun with the menace of the big crop of 1902, the State of São Paulo, with the support of the Federal Government and in agreement with the States of Rio and Minas, decided upon the famous, greatly abused and passionately defended Valorization Plan. The methods adopted may be open to criticism, but some remedy had to be sought, and the plan had the merit of boldness as well as the sanction given by success; the fact that this success was partly adventitious would probably prevent recourse to like measures at future times. The “Taubaté Agreement” forming the base of the plan obliged the contracting states to sell their coffee at not less than a given price,[[11]] to prevent exportation of grades below Type Seven; to commence propaganda work abroad to increase coffee sales; to collect a surtax of three francs per bag on all exports; and to limit new planting of coffee. It was farther suggested that the surtax proceeds should be held by the Federal Government and used for the amortization of the loan to be made, creating a Caixa de Emissão e Conversão to deal with financial aspects of the Plan and to regulate exchange—an excellent measure which was eventually carried out.
Difficulties checked the original agreement and in the end São Paulo faced the situation alone—meanwhile the harvest was coming in, and the price of coffee dropped below thirty francs a bag—obtaining a preliminary loan of £1,000,000 on August 1, 1906, from the Brasilianische Bank für Deutschland, for a one-year term; in December £2,000,000 was obtained through J. Henry Schroeder & Company of London, and subsequently the National City Bank of New York negotiated another million sterling. The money was used to buy and store the coffee of the Brazilian plantations, and was rendered sufficient only by the co-operation of fazendeiros and exporting houses.
In June, 1907, São Paulo held 8,000,000 bags of coffee, buying only high types and through the sole agency of Theodore Wille and Company, a strong coffee exporting firm of Brazil. When Minas and Rio protested against the exclusion of their eight and nine type coffees from the stores, the Federal Government at last actively assisted, lending the State of São Paulo ten million francs for the purchase of the lower types. In July, 1907, S. Paulo stopped buying. She had acquired over 8,000,000 bags, one-third of the total purchase price of 400,000,000 francs coming from foreign loans and the remainder from advances by commission houses in Brazil on coffee consigned to their keeping. Subsequent sums for the redemption of this coffee were obtained: two million pounds sterling came from Rothschild’s through the Federal Government, and a similar sum was obtained by the lease of the (State) Sorocabana railway to the Farquhar syndicate.
With the exception of a few hundred thousand sacks all this coffee was sent to different world markets for storage until opportune sales could be made; for a whole year not one ounce of it was sold, and then, when the next Paulista harvest turned out to fill only five million bags, the preciously guarded coffee was dealt out warily to a firm market at an average price of sixty francs a bag. Without this action Brazilians say that the price must have fallen to twenty francs.
At the end of 1908 financial adjustments were made; older debts were covered by a new loan of £15,000,000 arranged with an international syndicate headed by Schroeder of London and the Société Générale of Paris. These houses took £5,000,000 each, and the remainder was distributed between Germany, Belgium and New York. The loan was guaranteed by the coffee surtax, raised to five francs a bag, and by the seven million bags remaining in international warehouses. Havre, with nearly two million bags, was the greatest holder of the valorized coffee, and it continued to be sold during the next five years only when the price offered profits.
When the European War broke out stocks of this coffee amounting to three million sacks still lay in the countries suddenly rendered belligerent—it should be mentioned here that coffee improves by careful keeping. The combined stocks in Hamburg, Bremen and Trieste totalling 1,200,000 bags were at once taken over by the Teutonic governments, and the price (about £4,500,000) paid to a Berlin bank; it got no farther because proceeds of the coffee sales being mortgaged to London bankers, transfer would “benefit the enemy.” Germany was in this case only following the same financial rules as other belligerents, but Brazil was placed in the invidious position of innocent bystander, and in 1922 was still trying a way out of the difficulty. Adding the value of the Antwerp stock also under German control (718,000 sacks) São Paulo was owed nearly seven million pounds sterling, and this sum together with the price of the Havre stock, 1,216,000 bags, was about equal to the foreign debt of S. Paulo.
Although payment for the seized coffee stocks was necessarily delayed, São Paulo was by this suddenly opened market for her coffee relieved of the anxious time that might otherwise have been hers after the 1914–15 crop was harvested. A large crop was once more the result of perfect climatic conditions following small colheitas (harvests) of one or two previous years.
Early in 1915 the Federal Government prepared to lend São Paulo one hundred and fifty thousand contos of reis with which advances were to be made to planters, enabling the retention of surplus coffee—a variant of the valorization plan which was more generally approved. But by good fortune sales of Brazilian coffee far exceeded expectation; the Scandinavian countries enormously increased their purchases and although a general idea prevailed that it was largely passed on to Germany, no objection was for a long time raised by the Allies.
| Country | 1913 | 1915 | 1920 | ||||
|---|---|---|---|---|---|---|---|
| United States | 4,914,730 | 7,061,319 | 6,248,000 | bags | of | 60 | kilos. |
| Germany | 1,865,632 | 545,000 | „ | „ | „ | „ | |
| France | 1,846,944 | 2,449,223 | 1,540,000 | „ | „ | „ | „ |
| Netherlands | 1,483,097 | 1,486,994 | 376,000 | „ | „ | „ | „ |
| Austria | 1,016,824 | 80,000 | „ | „ | „ | „ | |
| Belgium | 444,988 | 320,000 | „ | „ | „ | „ | |
| Argentina | 249,045 | 269,987 | 285,000 | „ | „ | „ | „ |
| Great Britain | 246,161 | 413,786 | 73,000 | „ | „ | „ | „ |
| Italy | 237,126 | 710,800 | 1,002,000 | „ | „ | „ | „ |
| Sweden | 212,034 | 2,333,386 | 386,000 | „ | „ | „ | „ |
| Spain | 108,928 | 106,329 | 145,000 | „ | „ | „ | „ |
| Total exports | 13,267,449 | 17,061,319 | 11,525,000 | „ | „ | „ | „ |
Prices, 1921—down to 7 m. bag; 1922 15816 m. In 1921 shipments were checked by the slump, and the Brazilian Government bought and held 4,500,000 bags. Prices, fallen to 7 milreis in 1921, recovered to over 15 milreis per 10 kilos in early 1922.
Agricultural maps of Brazil, freely and courteously handed to any visitor at the Escriptorio do Informações do Brasil in the rue St. Honoré in Paris, show a huge patch of green in the middle of S. Paulo State and extending to a point very near the frontier of Minas Geraes. This patch represents some seven hundred and twenty-two million coffee trees, covering a total space of over two million acres.
At least one hundred million pounds sterling is invested in coffee plantations, and, with an output of an average twelve million bags, income from crops is not less than twenty-five million pounds sterling a year.
Advancing into the interior when the advent of railroads made cultivation of the sertão a commercial possibility, the culture of coffee in Brazil and especially in São Paulo is carried on upon a large scale: the plantations are great businesses, scientifically operated. The number of trees on a good estate is likely to run up into millions, although no other single grower rivals Colonel Schmidt’s production of eleven or twelve thousand tons of coffee. Visiting a fine fazenda one is aware of seeing the inside of a commercial undertaking of striking magnitude, where activity is regularized, the whole life of the fazendeiro and the colonos subordinated to the supreme interest—at least during the rush season of the colheita. Looking from the windows of the fazendeiro’s residence, which is generally upon a little eminence, one sees an ocean of dark green shrubs, planted in perfectly even lines, stretching away in unbroken symmetry as far as the eye can see. The São Paulo land chosen for coffee very often lies in long gentle slopes, its deep purple-carmine tint in sharp contrast to the glossy emerald coffee leaves, and down and up over the undulations run the rows, often extending for eight or ten kilometers. The storehouses, pulping machinery, and great cement drying grounds where the coffee is laid in the sun, are frequently in the hollow where the indispensable river runs; rows of neat little houses of labourers, the Italian colonos who plant, cultivate and gather the coffee, stand within sight. In the background is the area of wild woodland, for “no fazenda can prosper unless it has a certain amount of matto,” say the Brazilians. In the flowering season a coffee estate is a lovely sight, the sturdy shrubs strewn so thickly with waxy white blossoms that it seems as if snow had fallen on them; the air is clean, cool and sunny, and bees hum over the sweet-scented flowers. The trees are larger than those seen in Central America, are unshaded, and generally three or four roots stand together to make the bush. The ground beneath the shrub is kept carefully weeded.
The S. Paulo Coffee Industry.
Labourers’ houses; the coffee harvest; drying grounds; view of coffee plantation.
When the round berries turn red harvesting begins. Men, women and children turn out, trained to strip the berries from the slender little branches without injuring the tree; the whole fazenda is in a bustle, the water-channels are racing with scarlet berries carried along in the stream, and the machinery house is noisy. When the berries are pulped and the twin beans freed and cleaned, the business of packing begins; day by day wagon loads of sacks leave the fazenda for São Paulo city, consigned to Santos, and thence to some country overseas. Brazilians appear to love fazenda life; the wife of a coffee fazendeiro will often take as keen and business-like an interest in the work as her husband does, discusses theories of planting with spirit, and will show you all the details of the new imported machinery. There is a true hospitality and geniality permeating the fazenda in Brazil; very large sums are often made, and while quantities of coffee money have been royally wasted on extravagances, there is a class of strong business men in plantation work who put profits into improvements, follow new ideas, and build up their estates from year to year in an admirable manner.
It is in São Paulo, and especially about Riberão Preto, Campinas, São Simão, S. Carlos, Dous Corregos, Botacatú,—all along the lines of the fans of railroad—that the great coffee estates are found. The original Coffea Arabica has some naturalized children in Brazil of great merit and hardihood; the Nacional or Commun, the delicate Bourbon, yellow Botacatú, the big aromatic Maragogype, all have their defenders. From these plantations come the hundreds of thousands of tons of coffee that have made Brazil the premier coffee country of the world, and brought her to this eminence in a remarkably short space of time. The development of coffee culture in Brazil, and the simultaneous development of public taste for its essence, is one of the great industrial stories of the nineteenth century.
The interior of Rio State, with its endless series of little round hills crowned with coffee shrubs, is an assiduous producer; farther inland Minas Geraes substituted cotton with coffee when the United States began to sweep world markets with her product, but is now going back to cotton here and there as the demand of her own factories brings unheard-of prices for native fibres; she is however a regular supplier of coffee, in common with her neighbour Espirito Santo, and the more northerly state of Bahia. North of Bahia commercial production ceases, but, as in the case of cotton, shrubs may be seen all along the Brazilian littoral, up to Maranhão and Pará—of an African variety which does not need hilly country.
The world is steadily drinking more coffee. Consumption was only able to take ten million bags in 1885: the estimate for 1922 is 22 million bags. It is this reflection which preserves the fazendeiro from having nightmare whenever he sees a fine colheita promising. Increased sales of coffee seem to be partly the result of greater world demand for non-alcoholic drinks, but have been undoubtedly developed wherever a systematic propaganda has been carried out. São Paulo State went deliberately and level-headedly into the advertising and demonstration business; the campaign was first started in Great Britain, by the São Paulo Pure Coffee Company, which roasts, packs and sells good grades of beans. Numbers of cafeterias were established in which strong, hot, sweet Brazilian coffee was perfectly served. Later on the plan was carried to other European countries—notably France, Germany and Austria, all good customers of Brazil—to North America and even to Japan.
Recently the São Paulo Pure Coffee Company was acquired by the Brazilian Warrant Company, an enterprising house established in Brazil, with branches in São Paulo city, Santos, and Rio de Janeiro, and headquarters in London: a specialty is made by this company of advances against coffee, as well as sugar, cereals and general merchandise, while they are also commission and consignment agents. Exporters of Brazilian coffee are legion, but it is instructive to note how large a proportion of the names listed are Brazilian; coffee is not one of the businesses which the South American leaves to the foreigner.
Coffee accounts for forty per cent of all the Brazilian export. As far as S. Paulo is concerned, coffee represents over ninety-seven per cent of her exports. In 1915 the state’s total exports were worth a little over 465,000 contos, and of this coffee was worth 453,000 contos. In S. Paulo city itself if one is not in business circles the predominance of coffee might escape the visitor but not so in Santos; here, in the coffee port, the apparatus of shipping has largely been constructed with coffee-loading as the aim: special mechanisms serve the ceaseless stream of laden coffee bags that arrive at the lines upon lines of armazens (warehouses) on the dock front. In the stony streets the scent of coffee prevails; at every doorway burly negroes are hauling out sacks of the aromatic bean; the cluster of banks down the main business street, some Brazilian and many branches of foreign houses, all live upon coffee. The dealers, commission men, shippers, roasters of coffee represent the commercial existence of the port.
The coffee industry is one which is a satisfaction to contemplate because it is a clean, wholesome business, from first to last; the conditions under which it is carried on are not only ably organized and in a prospering state, but the workers as well as the estate owners and shippers have a chance to make money and lead pleasant lives.