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Economic Conditions Of Peru Dealing With Starbucks Research Paper

Peru Sbux Economic Conditions of Peru

The Peruvian economy is of modest size, with a GDP of $332 million that equates to a GDP per capita of $10,900. The GDP growth rate is 6.3% and this rate of growth has been slowing for the past couple of years. The country's unemployment rate is relatively low but over a quarter of the country lives below the poverty line. Agricultural accounts for 6.4% of the total economy of Peru (CIA World Factbook, 2013). Coffee is among the country's leading agricultural exports.

The Economics of Coffee in Peru

The coffee industry in Peru remains relatively unorganized, with most production coming from small landowners. The main growing areas are removed from markets and the transportation infrastructure is poor, with many farmers taking their goods to market by donkey. Such markets are often not sophisticated either, with only one or two buyers, meaning that coffee farmers often receive poor prices for their crops (EE, 2013). The market process is repeated later at the larger regional towns, before the coffee is blended with other coffees in warehouses and packed for shipping to the coast. There is a high level of disconnect between the farmers and the end product,...

Disease outbreaks have depleted the coffee supply by 25%, as leaf rust is having an outbreak. Peru's problems actually affect the price of coffee on the world market, since the country is the 9th-largest exporter. There is some government assistance for the farmers to help prop up the industry but since most farmers live below the poverty line on slim margins it is debatable how much good this assistance will do for the industry (Brown, 2013). Government support for coffee is strong because it is a substitute crop for coca, the production of which Peru is trying to reduce, with the support of both the U.S. And the European Union (Chase, 2013).
Despite the supply shortages, Peru is facing declining demand which has actually reduced exports. A main competitor, Brazil, has a weak currency at the moment and that is making Brazilian coffee more attractive on world markets. This is to the detriment of Peruvian producers (Perez, 2013). Thus, there are…

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References

Allison, M. (2010). Starbucks boosts coffee buying in Peru. Seattle Times. Retrieved December 3, 2013 from http://seattletimes.com/html/coffeecity/2010904523_starbucks_boosts_coffee_buying.html

Brown, N. (2013). Peru coffee output to drop at least 25% from roya outbreak, Prime Minister says. Daily Coffee News. Retrieved December 3, 2013 from http://dailycoffeenews.com/2013/08/13/peru-coffee-output-to-drop-at-least-25-from-roya-outbreak-prime-minister-says/

Chase, R. (2013). Peruvian government seeks to rehabilitate coffee industry. Peru this Week. Retrieved December 3, 2013 from http://www.peruthisweek.com/news-peruvian-government-seeks-to-rehabilitate-coffee-industry-100819

China Daily (2013). Waft of Yunnan coffee draws Starbucks, Nestle. China Daily. Retrieved December 3, 2013 from http://www.china.org.cn/business/2013-01/09/content_27630665.htm
CIA World Factbook. (2013). Peru. Central Intelligence Agency. Retrieved December 3, 2013 from https://www.cia.gov/library/publications/the-world-factbook/geos/pe.html
EE. (2013). History of coffee in Peru. Equal Exchange. Retrieved December 3, 2013 from http://www.equalexchange.coop/history-of-coffee-in-peru
Perez, M. (2013). Peru 2013 coffee exports tumble as demand declines. Bloomberg. Retrieved December 3, 2013 from http://www.bloomberg.com/news/2013-07-02/peru-2013-coffee-exports-tumble-as-demand-declines-chamber-says.html
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