HOW TO DEVELOP GUATEMALA IN ONE GENERATION

SmarTrade is a model of doing business created by us, right here at Fernando’s Kaffee in Antigua Guatemala.

The idea was -and still is-, to address the many problems that Guatemala faces.

OUR MISSION:

To reinvent how people buy a great coffee and chocolate while having full transparency of the positive impact of their action for the producing country, both for the farmers and the environment.

OUR VISION:

Our vision is to develop Guatemala in one generation, while bettering the environment, just by respecting the forest vocation of our country and growing coffee and cocoa under the canopy of trees.

At the same time, we can envision our country free of monocultures that not just destroy our biodiversity, but they are simple commodities unable to bring back enough money for our progress.

THE MAIN PROBLEMS

Guatemala is not using its land and resources in the right way. It’s been said that our country has an agricultural vocation, but our topography shows that our vocation is forest, due to our steep mountains. If we want to plant something, it has to be a crop that thrives under the canopy of trees. Fortunately, we have these crops.

Coffee in the highlands
Cacao in the lowlands

In the valleys we can grow a big variety of fruits and vegetables, but that is the minority of our land, as the following elevation map of Guatemala shows. The brown areas that we are looking for are about 1,500-2300 MSL, and with the right trees, perfect for excellent quality coffee production. The trees provide protection for the coffee trees and to prevent erosion of the land. Otherwise, the mountains will dump their eroded soil into rivers that will cause floods and mudslides. The green areas are between 300-800 MSL, and the same can be done there. Under the canopy of trees, cacao can thrive, while providing excellent income for people growing it.
Right now, most of the areas are being used to grow crops that just destroy the forest and won’t sustain the land from erosion (Mostly corn). The people doing that is because they must eat, and they really don’t have a choice. Unless we can provide with a different and better option, Guatemala will continue to lose the forest, the topsoil, and having big disasters from overflow rivers.
Right now, most of the green belt in the South is being used, and abuse by intensive farming of Cane Sugar, that started by destroying all the trees and biodiversity, while the crop is destroying the land every year that goes by. It is estimated that cane sugar production reaches close to 250,000 Hectares or 750,000 Acres. The green belt in the north, is being destroyed by African Palm. It is estimated that Guatemala has 200,000 Hectares, or 500,000 Acres.

These two crops have several things in common: Both are bad for the soil, by killing the top-soil life and the biodiversity. Both are mainly pure commodities, and no country has ever been able to develop with commodities.
We estimate that cane sugar should be reduced by 3/4. African Palm should be just terminated.

Both of these crops are in the hands of very few, inefficient, corrupt but very powerful people and companies. We would not regard them as entrepreneurs, but rather as dinosaurs. Still they are the ones responsible for the poisoning of our rivers (Especially the African Palm), while killing the fish with their toxic waste and pesticides.

Both have been responsible for diverting the rivers for their own benefit, leaving thousands, if not millions, without access to water.

Just like it happens in Brazil, killing ambientalists that oppose these abusive measures is not uncommon, and both industries (And to a certain extent the banana industry) are equally culprit.
The coffee and cocoa farmers -The weakest link in the chain-, are usually forced to sell really cheap, because the companies trading coffee are not trying to add value to their products, but rather selling them as commodities. This has got to stop.

SOLUTION IN PRACTICE

Typically, we pay the coffee farmers and the cocoa farmers US$ 2.00 per pound. We also buy some special coffee like micro lots, and then we pay more. But our biggest volume is coffee at US$ 2.00. Then we need to roast, and typically we lose 18% of the weight when we do so, but we sell 1 pounders, meaning that the money we sent to the farmers in the country equals US$ 2.36 per packed pound. We assume a cost of roasting, packing material, labor for packing, sealing, the cost of the display (Fernando’s Kaffee), financial costs and taxes at another US$ 2.36. We sell our pound of coffee at Q 53.00 that equals from US$ 6.80 to US$ 7.00 leaving the split of the money like this:

Farmer	Expenses	FK Profit +/-	Consumer pays
$2.36	$2.36	$2.28	$7.00

As we can see, the supply chain is really short, and according to us, that is a Smart distribution, and much better that the so-called Fair trade:

https://www.youtube.com/watch?v=aDkY5kaJ1m0

EXAMPLES

When we export coffee from Guatemala: When we ship Door to Door from Guatemala, our only option for transportation to the USA and Canada is DHL.

Farmer	Expenses	FK Profit +/-	DHL + PayPal	TOTAL COST	Consumer pays
$2.36	$2.36	$2.28	$8.70	$15.70	$16.00	From 5 to 9 pounds
$2.36	$2.36	$2.28	$6.70	$13.70	$14.00	From 10 to 19 pounds
$2.36	$2.36	$2.28	$5.30	$12.30	$12.50	From 20 and more pounds

Here we added DHL and PayPal, but they are both indispensable, and the price is still very affordable for those two markets.

CHOCOLATE

For chocolate sold in our store, we use the same concept. The only difference is that roasting coffee is the only step that we need to do, and to make chocolate we have to roast, winnow, pre-grind into cocoa paste, refine into cocoa liquor, add sugar to have unrefined chocolate, continue to have fully refined chocolate, conche the chocolate and finally temper the chocolate, Our mark-up in chocolate is higher than in coffee, but that is not just because of the complicated process, but also because we have been investing heavily in bigger and more efficient equipment, so we can buy larger amounts of cocoa beans, This will enable us to compete in the international market of chocolate, with companies like Valrhona, for example:

PRESENT AND VERY NEAR FUTURE

This challenging year of 2020 we bought a coffee shop in the Gotic part of Barcelona, just 200 meters from Santa María del Mar, and opened on September 18th, without much noise as it was not even posssible to travel

AFTER THAT

Once we secure some loans and/or sell some equity, we can do the same in North America, bypassing DHL from Guatemala (Because it is really expensive), ship by sea to Miami,

BRINGING BACK THE ADDED VALUE TO GUATEMALA

By selling as direct as possible our signature products, we will be able to return to Guatemala considerable more money than selling them here in our store or shipping door to door from Guatemala to the USA and Canada.