Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

814.2333/11–2553

Memorandum of Conversation, by the Director of the Office of Regional American Affairs ( Cale )

confidential

[ Washington ,] November 25, 1953.

Subject:

• Guatemalan Coffee

• Participants: Mr. Jim O’Connor, President, National Coffee Association
• Mr. R. A. Medina, R. A. Medina Co.
• Mr. Phil Nelson, Ruffner, McDonnell & Burch, Inc.
• Mr. Harry H. Allen, Vice President, Otis McAllister Coffee Corp.
• Mr. John F. McKiernan, Executive Vice President, National Coffee Association
• Mr. Cabot, ARA
• Mr. Cale, AR

Mr. Cabot pointed out that the Department is faced with a very difficult problem as a result of communist influence within Guatemala. He said that in considering possible courses of action to meet the situation the question of economic sanctions has to be considered. In this connection, coffee, which supplies some 80 per cent of the Guatemalan foreign exchange, is obviously the most important single individual commodity on which action might be taken.

Mr. Cabot stated that he wished members of the group to understand that they had been invited to Washington not because any immediate action involving coffee is now contemplated but because he wishes to have the benefit of the advice of the representatives of the coffee trade in connection with our consideration of possible action.¹

Mr. O’Connor pointed out that the companies of Messrs. Medina, Nelson and Allen do the major part of the import business in Guatemalan coffee and that they are accordingly in an excellent position to advise the Department on the matter.

Mr. Cabot stated that the Department would like to have the group’s views as to the feasibility and mechanics of a Government embargo against or an industry boycott of Guatemalan coffee.

At Mr. O’Connor’s suggestion, Mr. Medina spoke first for the coffee representatives. He said that the group had had an opportunity to discuss the question in a preliminary fashion but that they had not considered the possibility of an industry boycott in the absence of action by the Government. Mr. Medina then called attention to the following considerations:

1. That it is often impossible to distinguish between Guatemalan coffee and coffee grown in nearby countries such as Mexico and El Salvador. Under these conditions, even if the United States Government should embargo Guatemalan coffee, it would be likely to find its way into this country through Mexico, El Salvador and other Latin American countries.

2. That American coffee importers, at any time, have large investments in coffee in Guatemala. Accordingly, an embargo on Guatemalan coffee would subject such importers to considerable financial loss.

To Mr. Cale’s inquiry whether it would be possible for the importers to avoid this loss, if they were informed several months in advance of the contemplated action, Mr. Medina stated that prior notice would be helpful. He pointed out, however, that the helpfulness of the notice would depend not only on the period of the notice but on the time of the embargo. Mr. Allen called attention to the fact that his company and certain other coffee importers advance rather large sums of money early during a crop year to finance the production and harvesting of the crop. The crop year in Guatemala, he said, begins around October 1st. If the Government were contemplating action, he said that June 1, with several months of advance notice, would probably be as good from the point of view of timing as any other date.

Mr. O’Connor pointed out, however, that, in view of the present tight market situation, such a date would be about as unfavorable as any that could be chosen from the viewpoint of its effect on price, since there is very little coffee available for sale and shipment during this period. It was Mr. O’Connor’s estimate that excluding the 800,000 bags of Guatemalan coffee which we normally import, if such exclusion were possible, would probably raise the price of all coffee to the United States consumer by as much as 10 cents per pound.

Mr. Allen called attention to another adverse effect of embargoing Guatemalan coffee, namely, the fact that it would force the Guatemalan Government to become much more involved in the coffee trade than it is at present. This, he said, he regarded as contrary to the long-run interests of the United States coffee industry.

Mr. Cale then inquired whether it would be possible for this Government to take action only against coffee now grown on the Government’s lands, which amounts to some 15 per cent of the total Guatemalan production. The group was of the opinion that even if United States importers did not buy coffee produced on these lands at the auctions at which it is now sold, such coffee would nevertheless find its way into the United States. They pointed out that this coffee is sold before it is fully processed and that there is no way of maintaining its identity.

Mr. Nelson referred to the fact that Mr. Cabot had spoken of a possible boycott on the part of the coffee trade. He expressed the view that this would simply not work, since the coffee business is highly competitive and since, in the unlikely event that all the present members of the coffee trade would cooperate, fly-by-night operators would appear to handle this part of the business. Mr. Nelson also called attention to the fact that even if Guatemalan coffee were excluded from this market, it would very probably be sold in Europe. Mr. O’Connor added that in this event it might very well end up in the United States. He pointed out in this connection that a considerable volume of Brazilian coffee is now being imported into the United States via Europe.

Mr. Nelson also expressed the belief that embargoing Guatemalan coffee would have a very adverse effect on our relations with the Latin American countries generally, since they are very sensitive to economic pressure of any kind by the United States.

Mr. Allen supported Mr. Nelson’s views in this regard, pointing out that there are very close family relationships throughout the Cental American area and that these would tend to heighten the reaction against the United States.

Mr. Cabot inquired as to the feasibility of levying an import tax on Guatemalan coffee. Representatives of the group said that this would be very dangerous since it might set a precedent for an import tax on coffee from other countries as well. They pointed out that there have been numerous proposals in the past for taxing the importation of coffee, all of which have so far been successfully resisted. They indicated, however, that the coffee trade, to a man, was fearful that an import tax on coffee might some day become a reality. They stated that this would, of course, be harmful to the coffee importers and roasters in this country as well as to the coffee producers in Latin America.

Mr. Cale inquired what the group’s views would be as to the feasibility of requiring that the consumer be informed whenever he buys Guatemalan coffee. Mr. O’Connor said that coffee purchased by the consumer is generally a mixture of several types and that all coffee would have to be labelled in order to show the consumer the proportion of Guatemalan coffee. He stated that this would greatly hamper the operations of the coffee roasters who change their blends often in accordance with availabilities of various types of coffee.

Mr. McKiernan pointed out, in addition, that the net effect of such a requirement might be to reduce coffee consumption generally. He feared, he said, that any action to get the American public to consume less Guatemalan coffee would result in a decline of consumption of all coffee.

Mr. Cabot thanked the representatives of the coffee industry for giving the Department the benefit of their views. They expressed their pleasure in being able to do so and stated that they regretted that they were not able to make any suggestion which they considered feasible whereby coffee might be used as a means of improving the situation in Guatemala, which they recognize as very serious.²

1. A previous conversation relating to possible action against Guatemala involving coffee took place at the Department of State on Feb. 27, 1952, between Mr. Mann, Mr. Cale, Mr. Siracusa, and a representative of the National Coffee Association; a memorandum of that conversation, by Mr. Siracusa, dated Feb. 27, 1952, not printed, is in file 814.2333/2–2752.
2. On Feb. 8, 1954, Senator Margaret Chase Smith (R.–Maine) introduced Senate Resolution 211, calling upon the President, inter alia, to take the necessary steps to institute an embargo against the importation of Guatemalan coffee into the United States; for text, see Congressional Record, 83d Cong., 2d sess., vol. 100 (pt. 2), p. 1475. Department of State files indicate that representatives of the Department advised Congress against taking such action.