Subject: Glut of coffee in East Timor is grounds for concern

San Jose Mercury News (San Jose, Calif.) Wednesday, April 11, 2001

Glut of coffee in East Timor is grounds for concern

By Mark McDonald

JAKARTA, Indonesia -- The weather has been minding its manners, the buyers from Starbucks have been placing their orders, and coffee growers in Indonesia will soon begin the harvest of yet another bumper crop.

Despite the abundance, however, growers all over Southeast Asia are facing huge losses this year. An oversupply on the world market has caused coffee prices to sink to their lowest levels in 30 years, and no place is likely to be more affected than the fledgling nation-state of East Timor.

"The harvest looks like it will be quite excellent this year, about 30 percent greater than last year, but we're going to be affected pretty drastically by the drop in prices," says Sam Filiaci, director of the National Cooperative Business Association, a collective of small growers in the East Timorese capital of Dili.

Nearly a quarter of East Timor's 800,000 people depend on the coffee business for their livelihood, Filiaci says.

East Timor, the former Portuguese colony that was invaded by Indonesia in 1975, finally broke from Jakarta in August 1999, voting overwhelmingly for independence. But marauding gangs of thugs who were opposed to independence managed to burn, loot and terrorize much of East Timor before fleeing the territory.

They didn't chain-saw the coffee trees or wreck the processing facilities, but they got almost everything else, right down to the growers' weighing scales and coffee bags. They also trucked off $1 million worth of coffee.

Since then, the United Nations Transitional Administration in East Timor (UNTAET) has been paving, nailing and wiring an infrastructure into place, doing everything from training a police force to rebuilding water plants and power stations. The post office is open, and the mail is going through. The port is operating, the phone system works reasonably well, and a new bank has opened.

But there's still not much of a local economy, and until royalties start to flow from the tapping of oil and gas reserves in the nearby Timor Gap, U.N. and World Bank economists are focusing most of their rescue plans on coffee, the nation's only cash crop.

East Timor, a half-island about the size of Connecticut, will always be something of a minor player on the world coffee stage, dwarfed by regional exporters such as Indonesia and Vietnam.

But the mild arabica coffee from East Timor does have a kind of special status _ it has been certified as organically grown, largely because no fertilizers or pesticides have ever been used on the rarely pruned and long-neglected trees. Happily, because of this chronic inattention, East Timor coffee now regularly earns a 40 percent premium from international buyers.

The coffee plantations of East Timor were started decades ago by Portuguese colonists. They were seized by the invading Indonesian military in 1975 and eventually came under the control of Denok, a military company that had been granted a monopoly by the government.

Under pressure from the U.S. government, which was angry over the massacre of 271 unarmed East Timorese civilians by the Indonesian military in 1991, Jakarta withdrew Denok's monopoly. In no time, the generals were out of the coffee business.

A $7 million grant from the U.S. Agency for International Development got the growers' cooperative going in 1994, and Filiaci now says business has never been better.

Still, there are problems.

Eroded dirt roads are making it hard for highland coffee growers to get their freshly harvested beans down to the processing plants in Dili.

The beans, known as red cherries, must be processed within 12 hours, before fermentation begins to ruin their taste.

Another hassle: Not enough trucks.

Many of the heavy trucks in East Timor have been bought, requisitioned or rented by UNTAET, the Red Cross and other relief groups. Donkey carts often are pressed into service to get the beans to town.

Then there's the matter of soaring labor costs.

Filiaci says coffee-pickers are now demanding and getting as much as 25,000 rupiah a day, about $2.50. That's not much, to be sure, but it's a quadrupling of what pickers were getting just two years ago.

Starbucks is not the biggest coffee buyer in East Timor. Filiaci says it's more likely one of the big German firms that buys in bulk, but the Seattle-based chain is expected to purchase 30 percent of Filiaci's harvest this year, about 3,000 tons. A company spokesman confirmed that Starbucks was buying East Timorese coffee, but he would not discuss amounts or prices.

Starbucks mixes low-acid East Timorese beans with stronger varieties to make its Cafe Verona blend, which Robert Gelbard, the outgoing U.S. ambassador to Indonesia, serves at his official residence in Jakarta.

Gelbard also keeps a stash in his office at the embassy.

"I drink it myself," he says, eagerly digging out a quarter-pound souvenir for a visitor. "I don't know why Starbucks doesn't market this as East Timorese coffee, but I think it's first-rate. Fantastic."

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