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Nestle and local organizations collide in Mexico regarding a 154 million dollar Nescafé plant in Veracruz

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  1. Local producers and Nestle officials in Mexico face off in discussion regarding a 154 million USD plant being built in Veracruz.

The potentially largest foreign investment in Mexico’s coffee industry is facing resistance from a group of organizations of coffee producers that oppose the construction of a Nestlé processing plant valued at 154 million dollars. The organizations are accusing the Swiss multinational of paying low prices, as well as causing environmental damage and promoting the production of lower value strains of coffee. In Huatusco, Tezonapa, Zongolica and Coatepec resistance is evident as more than 4,000 organized coffee farmers opposed the transnational’s project last December, days after President Andrés Manuel López Obrador announced the investment in a meeting with Nestlé executives. Some of the producers claim that Nestle’s dependence on certain strains of coffee would affect not only local production practices but the environment as their dependence would require the preparation of thousands of hectares of land.

Crilio Elotlan, a representative for the Regional Coffee Council of Coatepec also claimed that Nestle’s practices are also to be blamed in part for the price crisis. Nestle’s soluble coffee depends mainly on Robusta which is traded at substantially at lower prices than other varieties such as Arabica. According to Elotlan, “flooding” the world market with this product has pushed toward producing strictly the types of coffee Nestle requires. In Huatusco, local producers have also organized to resist Nestle’s arrival.

Ruperto Régulo Cuacua, who initially posed for some Nestle photograph sessions is now opposing the Swiss company’s investment plans. The 63 year old farmer claims that they are only being paid 1,500 pesos for every 250 kg of raw coffee beans and that nearly half of that goes to the cutter who helps him harvest. The 250 kg of raw beans would eventually yield 18 kg of Nestle’s staple soluble coffee. “They did not give us anything for having gone out there,”, referring to a photo shoot, says the 63-year-old farmer, who claims to receive only 1,500 pesos for every 250 kilos of the cherry. Of these, he pays 625 pesos to the cutter who helps him. Of that amount, 46 kilos of green coffee are obtained, of which only 18 kilos of soluble coffee are obtained.

In a good year, two hectares may yield 5 tons of Robusta coffee beans which are delivered to Agroindustrias Unidas de México. The company processes it and then resells it to Nescafé. On average, the producer receives $6.00 MXN (approximately $0.35 USD) per kilo, so for an entire harvest a farmer could potentially receive around $30,000 MXN (approximately $1,750.00 USD) for a year’s work. Additionally, the National Union of Coffee Producers of the National Peasant Confederation (Confederación Nacional Campesina/CNC), Jose Julio Espinosa also made similar claims regarding the amount paid for coffee production by large companies.

Coffee growers from different regions of Veracruz oppose the construction of the Nestlé plant. According to Milenio more than 20 thousand coffee producers from all over Mexico have started to unite to form what will soon constitute the National Movement for the Defense of Mexican Cafeticultura (Movimiento Nacional por la Defensa de la Cafeticultura Mexicana). The organization will confront not only Nestlé but the current Mexican government.

On the other hand, Nestle’s CEO in Mexico, Fausto Costa, suggests that the plant could provide a positive impact for the entire region, bringing approximately 1,200 direct jobs and creating indirect opportunities in the area. In terms of volume, the Integral Plan for Attention of Coffee (Plan Integral de Atención al Café/PIAC) has focused on revitalizing coffee production in Mexico, which has struggled since a plant leaf rust epidemic in 2011/2012. According to Juan Pardo, director of the firms corporate affairs, stated that the company pays “5% above the international reference price” during an interview with La Jornada, rejecting the accusations regarding the new plant that is being built in Veracruz. During the interview, Pardo argued that misinformation against Nestlé prevails and that accusations regarding the companies practices. Regarding claims about types of coffee purchased, Prado responded that it purchases near 80 thousand tons of both Robusta and Arabica in equal parts to produce 35 to 45 million tons of soluble coffee. Pardo also claimed that the “so called” coffee growers have been making similar claims for over 19 years.

For 19 years, there are 3 people that I dare not call coffee growers, among them Fernando Celis – advisor of the CNOC-, who have made the same accusations without sustenance – Juan Pardo Fernandez, Director of Corporate Affairs for Nestle

However, according to Coffee Daily News, USDA reports coincide more with the stories of the local farmers than with the claims of Nestle’s CEO. While production is on the rise in Veracruz and neighboring states, the USDA’s reports indicated in early 2018 that the price of production was close to 30% higher than the average price paid to producers. Both the increase in volume and decrease in prices is likely related to the fact that Nestlé purchased close to 23,500 tons of coffee in the area and provided technical support to more than 5,000 producers through its Nescafé Plan Program.

Time will tell if Nestlé’s operations in the zone will actually translate into long term economic sustainability for local producers or only benefit the multinational, but both USDA’s reports and first hand chronicles seem to suggest they will not. According to Daily Coffee News, Nestlé has not replied to their concerns regarding how Nestlé’s plans would benefit the local producers in the supply chain.

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