EL SALVADOR: FACING COFFEE LOSSES

Created: 10/17/1989

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EL SALVA

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IJ ^Salvador's ecxxwrny is uniquelyerablc to the fall in coffee prices caused [by ihe collapse of ihe Iniemaiional Coffee Agreement quota system. With other exports essentially stagnant and little or no upturn in foreign investment in sight, the loss of coffee earnings will leave the country even more dependent on US economic aid and onfrom emigrants. The loss will also tm-pehl Cristiani's export-led growth strategy and could weaken his hand in negotiating with the guerrillas, for whom destruction of (he economyop strategic goal.

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El Salvador is the Latin American country most heavily dependent on coffee exports and the least prepared to deal with the collapse of coffee prices. PrcUrrunary projections indicate that El Salvador'searnings, which0 millionouldillion rliis yearSO million inof the coffee-price collapse. This loss in foreign exchange will weaken El Salvador's balance ol* paymentsime when the Cristiani administration is encouraginginvestment, which will draw in

The loss of foreign exchange also.it_inore difficult for Elup with payments onelaicd !msoin export-tax0 millionaimed at casing thehunger, andLow coffee prices willand employment in rural Elincreasing discontent, andCristiani lo live up lo histo continue landincreasing the number

Over ihe past _dccade coffee.ounted for nearly iwo-tiiiitls Nflf El Salvador's export earnings, aboutrinTaVicultiiraJ output, and somef its gross domestic product. El Salvador sold off its coffee stocks7 to compensate for falling world prices. This season, strong spring winds cuirop by as much. Total coffee productionas less than El Salvador would have been allowed to export under ICA quotas.

Early prospects foroffee harvest are encouraging, bul with prices down Crisiiani_is_seeking_sjiejcia^ satory aid from ihe IMF,

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A decade of war with FMLN guerrillas has taken its toll on the Salvadoran coffee industry Coffee farms and their elile owners have been frequent targets ofattacks, and coffee acreage has been lost to armednesiic instabiliiy has discouraged investment in newuse of fertilizers, and insecticides. Many of El Salvador's coffee trees are nowemporary surge inby Salvador's wealthy coffee growers prompted by the March ARENA election victory may have been cut short by the July ICA coUapse.

Salvador's coffee industry sufferedblows under the Duane administration's corrupt control of coffee exports ihrough the government coffee marketing monopoly. INCAFE.uly supreme court ruling that foundonopoly io be illegal,coffee prices could hamper Cristiani's ability to keeparripaign.pnvatizc coffee exports Independent ex-

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