Coffee + Costa Rica = :) Happy Economy

Hola, amigos! It is officially the last week of the plus3 Costa Rica trip, and I am devastated. I plan on making the most of these last few days. Luckily for me, we started the week by going on two unique site visits, beginning at a Starbuck’s owned coffee farm and ending with a roaster called Café Reye. Both tours were very interesting and unlike anything I’ve seen yet; Starbucks is a research and development facility while Café Rey is more of a factory assembly line process. Hence, the firms are quite different from each other when we discuss operations and goals. Understanding their operations and goals helps us to realize multiple benefits of coffee production for the economy of Costa Rica.

Several hundred years ago, Juan Mora Fernandez (the nation’s first leader) changed the Costa Rican economy forever. As we know, he was the man who encouraged local Ticos to grow coffee in the mountains in return for land. Immediately, Costa Ricans noticed a stronger economy, most importantly, a strengthened middle class. This both shrinks the poverty line and decreases the disparity (inequality) between poor and rich. Since their coffee is so good, many other countries have decided that they want to import their Arabica coffee. As exports increase so too does overall GDP, which is another benefit to the Costa Rican economy.

With firms such as Starbucks, who own a plantation here in Costa Rica dedicated to research and development of coffee crops, we notice other benefits to the economy. Firstly, they have created a huge job market. Each time a new firm is created so too are more jobs. Starbucks gave us a statistic; “Each year, more than 440,000 workers are employed in higher than minimum wage positions.” This is incredible because if we think big picture, Starbucks is only one of hundreds (maybe thousands) of coffee plantations in Costa Rica. According to Café Rey’s export manager, “Most positions in plantations such as these are manual labor, which do not require any education because all training is on-the-job.” I then asked him about specialists, and he told me that only 4-5 persons on staff are technicians, meaning that less then 5% of workers are educated at a university level. This means that overall, unemployment should decrease around plantation locations because everyone has a somewhat equal opportunity to get a job.

Also, Starbucks shares all their research information about coffee with local farmers. They offer training and other informative techniques. This helps these local farmers to become more sustainable i.e. use less resources while producing better coffee. This benefits the economy in a self-explanatory way. Hand-in-hand with this idea, research and development stimulates competition within an industry such as coffee. Firms either work together or against each other to produce the best-tasting coffee and compete for both suppliers and retailers (both local and international). Over time, we can expect coffee quality to become better and more consistent because the margin for error will shrink. This is great for exports.

Further, I asked Café Rey’s export manager if they must pay an export tax on coffee. He explained that they do, only a small percentage, but it accumulates when we observe all of the firms that export coffee. This government revenue can be used on a series of reforms and policies to benefit the economy such as incremental increases to spending on education, for example. It also might increase spending for things such as subsidies (paying farms to conserve forests) to keep farmers in the coffee industry, which is very common.

Now, one interesting idea discussed today at Café Rey explained who drinks their coffee (their market). We’ve been to several plantations and some of their biggest consumers were not Ticos but international tourists or countries (Like for Britt). I could not believe this when I heard it; however, Café Rey is one of the coffee brands that Ticos love. Coincidentally, it is one of the better coffee plantations in the country generating “1.2million sales per year” per their export manager. Therefore, I do not necessarily worry that Ticos are not receiving top-of-the-line coffee if all the good stuff is exported. According to Café Rey, most of the coffee that Ticos buy is different than what international consumers buy because Ticos buy ground coffee, since not many own coffee grinders in the country. International countries normally buy whole bean, traditional coffee because it keeps the beans fresh longer, and they like the taste. I, personally, really like all of Café Rey’s flavors, more so than places like Britt, so Ticos still get great coffee despite the government (and firms, too) pushing for high-quality exports.

Thus, overall coffee has done much to stimulate economic activity in increasing exports, job creation, spurring competition between firms, and decreasing inequality. I give much credit to Juan Mora Fernandez for promoting such a brilliant idea and much credit to these firms who have been kind to workers and locals, differentiated their products in a variety of ways, and who have created brilliant ideas dealing with process enhancement and other decisions.

¡Pura Vida!


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