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Coffee is our national misfortune.
—Brazilian coffee grower, 1934
The world’s interlocking economic system pulled everyone down when it crashed in 1929. The story of how several million coffee growers, importers, and roasters survived the Great Depression offers a microcosmic look at how the economic chaos affected the globe. For some the crisis created opportunity; for others it meant bankruptcy, despair, or even death. But for billions of Brazilian coffee beans it meant a holocaust.
The Coffee Inferno
In Brazil the crash signaled the end of the country’s Old Republic and the domination of the coffee oligarchy. In 1930, after a rigged election put Julio Prestes in power, an October military coup replaced him with Getúlio Vargas, a politician from southern Brazil. Even the coffee kings of São Paulo welcomed the revolt, since the faltering government had failed to rally around coffee valorization at all costs. The price of coffee tumbled from 22.5 cents a pound in 1929 to 8 cents two years later. In 1930, 26 million bags of coffee sat in Brazilian warehouses—a million bags more than the entire world had consumed the previous year. In such a desperate situation, any change seemed good.
Vargas, a short, stocky lawyer with a ready smile and a pragmatic bent, was to rule Brazil for an unprecedented length of time. Chewing contemplatively on his ever-present cigar, he presented the facade of a calm, friendly listener who genuinely cared for his country and its problems. Unlike other Latin American dictators, Vargas generally practiced moderation rather than terror. He quickly banned new coffee plantings.
Vargas also appointed a military governor in São Paulo who immediately alienated the Paulistas by decreeing a 5 percent wage hike and distributing some land to revolutionary veterans. Vargas infuriated coffee shop owners by cutting the price of a cup of coffee in half. To conciliate the coffee growers and sellers, Vargas appointed José Maria Whitaker, a Paulista coffee banker, as his minister of finance. “It is absolutely necessary to return to unrestricted trading,” Whitaker announced, “first removing the nightmare of the formidable coffee stocks.” The government intended to burn the massive coffee surplus, but only so that the market could “revert to the time-honored law of supply and demand.” In the first year, the Brazilians destroyed over 7 million bags of coffee worth some $30 million—and they still had millions more bags clogging their warehouses.
Foreign journalist Heinrich Jacob first encountered the burning coffee from a low-flying airplane in the early 1930s. “An aromatic yet pungent odour was rising from beneath and permeated the cabin,” he wrote. “It dulled the senses, and was at the same time actually painful. . . . The smell by now had become intolerable, and the fumes had produced a ringing in my ears. It seemed to sap my strength.” Jacob subsequently met a distraught former coffee grower, now bankrupt, who declared, “Coffee is our national misfortune.” He produced a small box with a glass cover containing the broca do café, the coffee borer that had begun to attack beans about ten years earlier. “Nothing should be done to resist the onslaught of the broca,” he said. “If the government really wants to save the country, it will take up loads of the eggs of this beetle in airplanes, and strew them far and wide over the plantations.”
The Brazilians were desperate. Their scientists and inventors labored to find alternative uses for their surplus coffee. The minister of public works authorized a project to compress beans into bricks, to be used as fuel for the railroad. Other experiments sought to extract alcohol, oil, gas, caffeine, or cellulose by-products from coffee. A Rio newspaper suggested that nutritious bread “of excellent taste and appearance” could be made from flour milled in part from green coffee beans. Vintners made a passable white wine from the pulp, while perfume came from crushed coffee blossoms. A few years later one inventor created a new type of plastic from the beans.
The Brazilians also approached foreign governments with innovative coffee proposals. They would recognize Soviet Russia and trade coffee for Russian wheat or hides. They planned to open thousands of Brazilian coffee shops throughout Asia, creating new markets for their beans. Little came of most such plans, but they did trade coffee for American surplus wheat, beginning in 1931.51 Although the rich Brazilian terra roxa could have grown enough wheat for domestic consumption, the country grew only an eighth of its requirements—another result of the short-sighted devotion to coffee monoculture.
The coffee-wheat swap caused trouble, though. American shippers complained that Brazilian shipping lines were carrying all of the wheat and coffee. Argentineans, who had previously supplied wheat to Brazil, objected. American coffee men didn’t like the government getting into the coffee market with cheap coffee that might lower the price. U.S. flour companies were upset when they learned that the deal involved an embargo on flour imports into Brazil.
In July 1932, just as the Grain Stabilization Board began to sell the coffee it had received in exchange for wheat, the frustrated Paulistas rebelled against Vargas, demanding a restoration of constitutional government. The port of Santos was closed. “Breakfast Without Its Cup of Coffee Looms,” an August New York Times headline warned. Although the alternate ports of Rio and Victoria hastened to export more coffee, the huge supplies of better-grade beans from São Paulo were suddenly unavailable. In the United States the Grain Stabilization Board held over a million bags of coffee but was contractually restricted to sell only 62,500 bags per month. As a result, it looked as if there would be a coffee shortage, but the Paulista revolt fizzled after three months and coffee prices again declined.
“São Paulo warehouses full, refusing further consignments from interior,” a cable from Brazil advised toward the end of November 1932. “Nowhere to deposit. Basements, houses being used for storage. Situation cannot continue. . . . Cannot cope with avalanche from interior. Burning going on rapidly.”
Dictators and Massacres in Central America
The Great Depression and its low coffee prices also brought revolution, dictatorships, and social unrest to Central American countries. The crash of 1929 exacerbated already difficult conditions for laborers, and except in Costa Rica, the threatened coffee oligarchies hastened to install strong-arm leaders to restore “order and progress.” All of the dictators continued to rely on foreign capital and support from the United States, while crushing any protests. In the wake of the 1929 crash, the coffee elite gobbled up smaller farms through foreclosure and purchase, further widening the gap between haves and have-nots.
In El Salvador the military ousted the elected president and installed dictator Maximiliano Hernández Martínez late in 1931. For the next twenty years he ruled El Salvador with an iron fist and increasingly bizarre policies. Known as El Brujo (the witch) owing to his belief in theosophy and the occult, Hernández Martínez shared his visions with the populace over the radio. “It is good that children go barefoot,” he told his audiences. “That way they can better receive the beneficial effluvia of the planet, the vibrations of the earth.” He claimed that he was protected by “invisible legions” in direct telepathic communication with the president of the United States. The dictator believed in reincarnation for human beings, but not insects. “It is a greater crime to kill an ant than a man, because a man who dies is reincarnated while an ant dies forever.”
By the 1930s coffee accounted for over 90 percent of El Salvador’s exports. Indians worked ten-hour days for 12 cents. They suffered, as a Canadian observer wrote at the time, from “low wages, incredible filth, utter lack of consideration on the part of the employers, [under] conditions in fact not far removed from slavery.”
Unable to meet mortgage payments and nominally in default, the plantation owners slashed wages, postponed routine maintenance, and fired many permanent workers. Coffee trees were left unharvested. “There came a time,” one worker later told a journalist, “when we were not given land or work. . . . I had to abandon my wife and children. I did not get enough work to be able to give them food, still less clothing, or to educate them. I do not know where they are. Misery has separated us forever. . . . For this I became a Communist.”
On January 22, 1932, urged on by charismatic Communist leader Agustín Farabundo Martí, Indians in the western highlands (where most of the coffee was grown) killed nearly one hundred people, mostly overseers and soldiers.52 Armed only with clubs, slingshots, machetes, and a few rifles, the rebels stood no chance against encroaching government troops. Hernández Martínez authorized a brutal reprisal, while ordering the creation of Civic Guards, composed primarily of upper-class citizens.
The bloodbath that followed came to be known as La Matanza, the Massacre. The military, aided by the outraged and terrified ruling class, killed indiscriminately. Groups of fifty men were tied together by the thumbs and shot in front of a church wall. Others had to dig mass graves before machine guns dropped them into the holes. Bodies littered the roadsides. Anyone dressed in traditional Indian clothing was killed in what approached genocide in some regions. Putrifying bodies were left for pigs, dogs, and vultures to devour. Farabundo Martí died before a firing squad.
Within a few weeks some 30,000 people were dead.53 The Communist Party was virtually wiped out, along with any resistance for years to come. The memory of the massacre would influence Salvadoran history for the rest of the century. “We were all born half dead in 1932,” one of their poets would write.
In a July 1932 edition of its journal, the Coffee Association of El Salvador commented on the uprising and subsequent massacre. “There have always been two essential classes in every society: the dominators and the dominated. . . . Today they are called the rich and the poor.” This division, they asserted, was inevitable, and efforts to end class divisions would “break the equilibrium and cause the disintegration of human society.” Thus the Salvadoran coffee power elite justified the prolonged misery of the campesinos. Convinced that factories only provided fertile ground for Communists, Hernández Martínez passed laws discouraging industrialization. El Salvador turned even more firmly to coffee as its primary source of revenue.54
In Guatemala, Nicaragua, and Honduras, dictators also came to power during the depression, clamping down on any signs of peasant unrest. When Jorge Ubico Castañeda took over in Guatemala in 1931, he quickly moved to squelch any opposition through imprisonment, assassination, execution, or exile. Recognizing the need to placate oppressed Indian laborers, he abolished debt slavery but instituted a vagrancy law that amounted to nearly the same thing. Nothing changed the appalling poverty of the Guatemalan peasant or the country’s reliance on foreign capital and coffee exports. After 1933, when Ubico had a hundred trade-union, student, and political leaders shot—and issued a subsequent decree allowing coffee and banana plantation owners to kill their workers with impunity—coffee peons didn’t dare rebel.
General Anastasio Somoza García came to power in Nicaragua in 1934, following the assassination of guerrilla leader Augusto César Sandino, which Somoza himself had arranged.55 Officially elected in 1936, Somoza built a family dynasty based largely on massive coffee holdings, including forty-six plantations. Through intimidation and graft, Somoza became the largest property holder in the country. He too ordered massacres of suspected rebels.
In Honduras, Depression-era dictator Tiburcio Carías Andino proved less ruthless than his counterparts. He encouraged more coffee production, so that Honduras joined other Central American countries as a coffee power, though bananas remained its major export.
In Costa Rica and Colombia, the Great Depression and its lower coffee prices also created problems, though legislative compromises through democratically elected governments helped resolve conflict. In Costa Rica, where predominant smallholders worked their own fincas, there were few labor issues, but the farmers were forced to sell their ripe cherries quickly to centralized processing centers that set very low prices during the Depression. In 1933 the state finally intervened with regulations that forced processors to pay a decent price for the coffee berries.
Colombian farmers, who generally processed their own beans, struggled with high interest rates from financial institutions and a price squeeze from foreign exporters—A & P’s American Coffee Corporation, Hard & Rand, W. R. Grace—who dominated the Colombian coffee industry.56Labor protests on the large haciendas escalated. Colonos and tenants refused to pay outstanding debts, contending that the land belonged to them. Squatters, known pejoratively as parásitos, claimed unused lands on haciendas. The Colombian legislature passed laws making vacant land subject to expropriation, leading to the decline of the large plantations. The wealthy coffee elite already were diversifying into industries such as cement plants, shoe factories, real estate, and transportation.
Colombian coffee continued to sell in ever greater amounts, however. The Federación Nacional de Cafeteros (FNC), the Colombian Coffee Federation, had been established in 1927 and quickly gained enormous political clout, becoming “a private State within a not-very-public State,” as one observer put it. In the United States the federation advertised Colombian beans as “Supreme Among Mild Coffees.”
Brazil Opens the Floodgates
Although the United States per capita held steady around thirteen pounds of coffee a year in the thirties, the origins of those beans shifted as the Depression continued. While Brazil burned more and more of its crop, Colombia, Venezuela, and the Central American producers were able to sell in proportionately greater amounts. In desperation, Brazil called a multinational conference in Bogotá in 1936. The participating Latin American countries agreed to fund a Pan American Coffee Bureau (PABC) that would promote coffee consumption in North America. Following the conference, Colombian and Brazilian representatives hammered out a price maintenance agreement: high-quality Colombian Manizales would sell for over 12 cents a pound, with mediocre Brazilian Santos at 10.5 cents a pound.
In 1937 Brazil burned an astonishing 17.2 million bags at a time when total world consumption was only 26.4 million bags. Only 30 percent of Brazil’s coffee harvest reached the world market that year. Yet Colombia did not maintain the agreed-on price differential, announcing that it was “too burdensome”; Manizales sold for 11.6 cents a pound. With such a slim price premium over the inferior Santos, Colombia had no trouble selling its coffee.
The incensed Brazilians called yet another conference, held in Havana in August 1937. In his keynote address, Brazilian representative Eurico Penteado told the other growers that “few of the resolutions voted at Bogotá have been carried out and nothing remains of the price agreement.” Unlike Brazil, other countries continued to export their inferior grades. “As to price defense, only Brazil continues to bear the whole burden.”
At the onset of the Depression, Brazil had provided 65 percent of U.S. coffee imports. By 1937 it made up just over half, while Colombia had snared 25 percent of the market. At the same time, however, Brazil’s dependence on coffee had lessened somewhat. In 1934 coffee had provided 61 percent of Brazil’s exports, and two years later it was only 45 percent. “Therefore, gentlemen,” Penteado concluded, “it will be seen that for the good of Brazil, while our capacity to go on destroying coffee has reached the point of exhaustion, we are really no longer confronted with the need of further sacrifice.” Unless other countries agreed to stop new planting, cease export of inferior grades, and agree to some price support system, Brazil would, he threatened, drop its entire coffee support program.
Yet no one truly believed Brazil actually would end a practice it had begun more than thirty years earlier with the first valorization. Nor were other Latin American producers eager to cease the exportation of their inferior grades, since cheaper African robustas were beginning to find their way to the United States and Europe. “A few years ago coffee brokers were loath to taste a cup of Robusta,” one U.S. coffee expert observed in 1937. “After repeated sippings, however, one finds himself becoming accustomed to them.” The growers at the Havana conference feared that robusta would replace the bottom-grade Latin American exports.
Indeed, a primary reason for the Latin American countries’ willingness to consider a quota system was the increasing threat from the African colonies. During the Depression, the Kenyan growers of fine arabica beans established a coffee board and research bureau. They succeeded in establishing their own auction over the objections of London brokers, who previously had monopolized their trade. By the late 1930s the Kenyan plantations began to advertise extensively in American trade journals. Total African coffee production doubled in a decade, and Africa surpassed Asia to become the second largest continental coffee exporter. Little wonder then that Latin American producers pointedly left the African, Indian, and Asian producers out of their conference plans.57
The Havana conference nonetheless ended without resolving the issue of overproduction, though the participating countries did agree on a U.S. advertising campaign to be funded with a 5 cent per bag export tax, which duly commenced the following year. Reluctantly, they also agreed to limit export of some inferior grades. They referred the intractable problem of price differentials and export quotas to the Pan American Coffee Bureau in New York, which was given sixty days to find a solution.
When the time limit expired without a resolution, Getúlio Vargas shocked the coffee world in November by simultaneously declaring himself a benign dictator of what he called the Estado Novo, or New State, and announcing Brazil’s new policy of “free competition.” He vowed to open the coffee floodgates just before Brazilian representative Eurico Penteado was due to speak in New Orleans at the annual meeting of the Associated Coffee Industries of America (now renamed the National Coffee Association [NCA]). Penteado defended his country’s action, explaining that “Brazil was being displaced in an alarming manner from the world markets.” The U.S. media reacted favorably, reporting that “Brazil is tired of holding the coffee bag for other countries which won’t play ball.”
At first the frustrated Brazilian growers cheered the $2 per bag tax reduction. The new free trade policy represented “a ray of light in the darkness of a long night,” according to a São Paulo planter; but when prices plummeted to 6.5 cents a pound, the fazenda owners weren’t so sure. And when their credit dried up, they were frantic. The burning program resumed, though in moderation. In 1938 Brazil exported over 300 million pounds more coffee to the United States than the previous year—but received $3.15 million less for the total than in 1937.
Still, the Brazilians continued to flood the world with coffee, with an eye to the future. They were determined to win back their fair share of the market. In addition, if that ever-elusive international coffee cartel ever set a firm quota system, they knew that it would be based on a country’s market share over the past few years. Brazil’s efforts seemed doomed, however, considering what had happened during the previous three decades. In 1906 Brazil had grown over 20 million bags of coffee, with the rest of the world contributing only 3.6 million. By 1938 Brazil produced nearly 22 million bags, but other coffee producers now grew 10.2 million bags, most of which were superior to the Brazilian beans.
While Latin American growers struggled for minimal profits in a world of low coffee prices, the Great Depression brought new selling opportunities to many U.S. coffee roasters, who had finally learned the virtues of selling an image—and a sound.