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How Coffee at the White House Perpetuates or Ends Poverty

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Vice President Joe Biden will be travelling to Guatemala to attend the inauguration of President Jimmy Morales on January 14th and to meet Presidents Juan Orlando Hernández of Honduras and Salvador Sánchez Cerén of El Salvador to discuss the “Alliance for Prosperity” for the three nations. Before his trip to Guatemala, the vice president will have a coffee at the White House and many more ‘cups of Joe’ at his official residence at the US Naval Observatory. Each coffee bean used for these ‘cups of Joe’ has a story to tell and an origin in a beautiful mountain region. Most of the 26 million coffee farmers and their families live in poverty or in extreme poverty, while the global coffee industry generates every year tens of billions of dollars in added value, taxes and profits in the United States and other developed nations.

 
 

Every coffee drunk at the White House contributes less than US$0.01 cent per cup to eradicate poverty in the communities that produce it, while there continues to be hunger in the coffee lands. (See the report of the SCAA, Specialty Coffee Association of America.)

 
 

The insignificant shared value for farmers is a reality unless the coffee at the White House is from Hawaii. According to Matt Viser, White House correspondent for the Boston Globe, the Obama White House sometimes serves Hawaiian coffee. The present price of the Hawaiian coffee brand the White House prefers varies from US$35 to US$45 per pound.

 
 

By comparison, the coffee farm workers in Guatemala, Honduras and El Salvador, or in Obama’s Kenya, receive on average less than US$1.30 per pound for their coffee beans. Small farmers sell their coffee to middlemen or cooperatives who consolidate larger volumes for the coffee buyers and exporters. The profits in coffee are reserved mostly for the exporters, traders, roasters and for the coffee shop chains, restaurants and hotels.

 
 

“Fair Trade” is not the solution

 
 

The premium to end poverty in what Americans and Europeans dare to call “fair-trade”, “ethical” or “sustainable” coffee represents less than US$0.003 (1/3 of a cent) per cup. It is not enough to eradicate poverty but just enough to alleviate it and to perpetuate a gentler “poverty light” that becomes a poverty trap for farmers and their families, a “kind” but also unacceptable form of modern slavery.

 
 

Since I can remember, the United States has claimed to be working to support trade and development in Central America through aid and trade initiatives. The region, like the states in southern Mexico, is once again in a profound economic and even humanitarian crisis, that is forcing hundreds of thousands to try migrating to the US due to coffee rust, drought, economic crisis and violence. Stopping migration is a priority for the US but the truth is most migrants would love to stay in their countries close to their families if only they could earn a decent living locally. Life in ‘El Norte’ is not the picture perfect dream for most.

 
 

CICIG: A watershed moment

 
 

The United States support for the CICIG (International Commission Against Impunity in Guatemala) has created a unique watershed moment by bringing to justice a few of the “untouchables” who had kidnapped Guatemala for personal profit. But there are hundreds of others still at large, and nothing similar yet exists in other nations.

 
 

Sadly, the most important measures for economic and social development are still pending, as evidenced by almost every cup of Guatemalan, Honduran or Salvadoran coffee sold by Starbucks, Keurig Green Mountain, McDonald’s, Tim Horton’s, Dunkin’ Donuts, Krispy Kreme, etc. This includes the coffee served at the White House, whose most prominent coffee drinkers, often heard advocating education for all girls and boys, may not fully appreciate that in too many of the coffee lands only one in twenty girls is able to graduate from high school due to the exploitative business model of the industry.

 
 

How the White House could change the world with shared value

 
 

Vice President Biden, Valerie Jarrett or the President should invite the leaders of the coffee industry (such as Howard Schultz, Chairman of Starbucks, Brian Kelley CEO of Keurig Green Mountain, Steve Easterbrook CEO of McDonalds, Nigel Travis CEO of Dunkin Doughnuts, and others in the business of hot beverages) for a coffee at the White House to evaluate and discuss the implementation of a transparent shared value system for eradicating poverty with 10CentsPerCup in the coffee lands, tea lands and cocoa lands in all continents with the participation of consumers, as proposed by CAFÉ FOR CHANGE.

 
 

Almost all coffee consumed by the US government today perpetuates poverty, in spite of its official claims and policies to support the Sustainable Development Goals.

 
 

The US, Canada and the EU should fast-track agricultural insurance

 
 

Most of the poor in the world are farmers. Hundreds of millions work in plantations that are not insured and where workers do not have social security or pension benefits even if they produce the food and beverages consumed by the people of the United States, Canada, the European Union and other developed nations.

 
 

The United States, Canada and the EU should work together with all other developed nations to ensure that comprehensive all risk insurance is provided to all plantations, farmers and their families to protect their own supply chain and “put wealth at the service of humanity,” as Pope Francis requested at the World Economic Forum in January 2014. Once again, this may require a coffee at the White House with the CEOs of the largest insurance companies and further discussions at the G7 and OECD to create a global task force to set up a transparent shared value system to protect all coffee plantations and their agricultural supply chain. This insurance mechanism would protect the United States from waves of migrants as a consequence of bad crops, drought, excessive rain, etc. It would also protect international and local banks from the risks of agriculture and even climate change.

 
 

Remittances are more important than aid

 
 

Remittances from migrant workers in the United States to their families in Central America and in other developing and less developed nations are far more important than ODA (Official Development Assistance). The Northern Triangle of Guatemala, El Salvador and Honduras received in 2015 close to US$14.5 billion dollars from its migrant workers, an amount that is nearly 20 times the not so significant US$750 million in US aid to the region approved by the US Congress for the “Alliance for Prosperity”, a plan that the Obama administration claims will transform these countries and stop migration.

 
 

Besides the fact that most official aid is not effective due to the wrong priorities, waste, mismanagement and corruption, all at both ends, it is important to note that the people of the Northern Triangle lose between US$1.1 billion and US$1.2 billion per year in the transfer costs of the remittances from the United States to the beneficiaries in these three countries.

 
 

This astronomical amount, considered for decades “a normal cost of transfer,” is the equivalent of the rich taxing the poor for working and supporting their families. Banks and others in the transfer business cheat migrant workers with high margins on the exchange rates from US dollars to local currency and also charge unacceptably high service and credit card fees. In the 21st century no one should pay more than 1% to transfer money to anyone anywhere in the world.

 
 

The breakdown for remittances per country in 2015 is estimated at US$4.5 billion for El Salvador, US$6.3 billion for Guatemala and US$3.8 billion for Honduras. Once again, if the White House wanted to liberate one billion dollars per year in purchasing power for the poor in these three countries perhaps they could have a coffee with people like Tim Cook CEO of Apple, Sundar Pichai CEO of Google, Daniel Schulman CEO of PayPal and a few others like James S. Henry, senior fellow at Columbia and former Chief Economist of McKinsey, to create a task force to bring the remittances business into the 21st century in the Northern Triangle, as well as in the rest of the world, in order to help eradicate poverty and stop the abusive transfer and banking practices in the North and South.

 
 

Dream of having a house and a job in their home country

 
 

It is well known by senior US government, World Bank, IADB and CABEI officials that the three Northern Triangle countries in Central America have a housing deficit of more than two million homes. This is due in part to absurd, corrupt and inefficient housing, land and credit policies. If the locals have access to credit, which is not common, the poor and the middle-class pay between four and seven times the interest rates in the developed word.

 
 

The Alliance for Prosperity and the policies of the governments of the Northern Triangle countries overlook this very important need, which is actually one of the greatest opportunities for creating hundreds of thousands of jobs for small and medium size local businesses related to construction. Any serious effort to develop and bring peace to the region must tackle the housing deficit and do this by creating opportunities for tens of thousands of small and medium size companies to participate in building their own countries.

 
 

When Vice President Biden has coffee with the Presidents of Guatemala, El Salvador and Honduras he should put the dream of having a house and a job in their home country on the agenda.

 
 

The question remains as to whether, in the future, the shared value in the coffee served at the White House will perpetuate or end poverty, not only in El Salvador, Guatemala and Honduras but also everywhere else where coffee is grown, including Kenya.

 
 

Mr. President, Ms. Obama, Mr. Vice President and Secretary Kerry — I am certain that 10 cents per cup is fair, while less than one cent per cup of coffee is not only unfair, it is exploitative. I look forward to your 10 cents…per cup and to any comments or questions.

 
 

Fernando@cafeforchange.org

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