Coffee: The Epic of a Commodity (39 page)

The “ensaccadores” packed it for transport to the coast. Sack after sack left the plantations. Shading his eyes with his hand, the white-clad planter sat watching the daily exit of his goods. Could he be expected to understand that he was ministering to his own destruction? Had the world been stood upon its head? Had a curse been uttered upon the sowing and harvesting of coffee?

In the year 1906, matters seemed to have reached this pass. The new harvest was reckoned at twenty million sacks. According to the logic of facts, the shipment of this harvest would bring down the price of coffee to zero.

What was the use of attempting to sell coffee which had become worthless? It might just as well be given away. Should the harvest be brought to market, chaos would ensue.

Ninety per cent of the popular wealth was inherent in coffee-growing. In the whirlpool that would result, not only would the planters be ruined, but practically the entire population. It seemed likely that Brazil would be destroyed by the greatest revolution that had ever been known in the world.

At length insight and courage were found to build an economic dam. The Convention of Taubaté marks a memorable day in the history of economics.

The idea of “valorization” originated in the mind of an Italo-Brazilian from São Paulo, a planter and merchant named Siciliano. He had carefully calculated the chances. If a prohibition of fresh planting were enforced throughout Brazil, the state, so Siciliano believed, could, without great risk, present itself to the planters as middleman, sequestrating the entire harvest, to sell it again at some later date when market conditions should have become favourable. We see that Siciliano had read the story of Joseph and Pharaoh to good purpose.

The respective state presidents of São Paulo, Rio de Janeiro, and Minas Geraes now assembled in the little town of Taubaté, between Rio and São Paulo, and there, in accordance with Siciliano’s advice, arranged for a maintenance of prices, propaganda, strict regulation of the coffee-trade, and at the same time stabilization of the currency. But to Alves, the federal president of Brazil, state interference to the extent implied by stabilization of the currency seemed unduly bold. After lively disputes, he refused to sign the decree. All the planters of Brazil stood solidly behind the Convention. They regarded any delay in ratification as dangerous. The federal state of São Paulo, whose harvest had reached the fearful amount of fifteen million sacks, so that it was more interested than its neighbours in measures for the protection of the market, could not wait, and set about valorization alone.

In general, a state is supported by the financial strength of its citizens. Here, however, the state was supporting itself, at a great sacrifice, by saving its citizens from bankruptcy. The state did this by entering the market as a wholesale purchaser, and by buying their coffee from the planters at a price that could never have been maintained in a free market. Over-production had been so preposterous that, theoretically, coffee was not worth a farthing a pound. The state purchased the harvest and stored it away under lock and key. São Paulo was acting as Joseph had acted long before in Egypt when faced with a glut of grain. Joseph had withheld the superfluity from the market in order to release it by driblets in the later, lean years.

The planters stood behind the state and supported the measures adopted. Consumers were not so well content. Traders, above all, were disgruntled, declaring the governmental action to be nothing better than a commercial speculation. The authorities, they said, were trying to keep up the price of a commodity by artificial means, or, by an economic
coup de main
, to prevent the price from falling to its natural level.

Were these accusations justified? No. Who could tell whether, if the government, remaining true to liberal principles, had let matters alone, the market would have been left undisturbed to the interplay of supply and demand? Before this, speculators had effected a corner in coffee, releasing supplies into the market only when it suited their pockets. There could be little doubt that the same thing would have happened in the present case. In the year 1905, there had quietly been formed at Havre a syndicate to exert a permanent control over the coffee-market. The clamour for a free market was only a screen behind which financial groups and private capitalists wanted to play their own game with the chief product of a continent. Could these magnates of financial and commercial capital have had their way, the Brazilian planters would have been ruined, but the consumer would not have benefited in the least. What could it matter to consumers the world over whether the superfluity of coffee was kept away from the market by the São Paulo government or by a syndicate, or, in smaller quantities, by a few thousand coffee-dealers?

The government was not strong enough to do the work alone, and appealed for help to international capital. Help was given, for international capital was interested in the welfare of Brazil. Europeans had long since come to settle in Brazil as planters; European capitalists had made advances upon mortgage to Brazilian planters, and owned various Brazilian securities. Complete ruin of the coffee-planters of Brazil would have made shoes pinch in many other parts of the world. A revolution in Brazil—not one of the minor military revolutions that occur in Spanish America every ten years or so, but revolution on the grand scale, a war of social extermination—would have thrown back the country into a condition in which drought, the primeval forest, and the rivers would have come into their own once more. The purchasing power of the Brazilian market, so important to European producers, would have been destroyed for an indefinite period. If financial capital in the rest of the world now rallied to the help of Brazil, it was in order to avert the ruin of a country so gigantic that, as Albrecht Penck once said, “it will, perhaps, some day have a population of twelve hundred millions.”

Among all those to whom appeal for help was made, Hermann Sielcken, a Hamburg merchant with a large business, was the first to see clearly how far the disturbances were likely to extend if Brazil were allowed to go down to ruin. He combined with a few other capitalists to form a financial group which, through Henry Schröder in London as intermediary, provided the first loan to the state of São Paulo. At a cost of three million sterling, São Paulo bought two million sacks of coffee from its own planters. This “valorization coffee” was shipped to New York, Hamburg, and Havre, to be stored there under seal. The firms owning the warehouses made advances to the São Paulo government on the security of the goods, thus providing means for continuing to buy coffee.

When still more money was required, the state of São Paulo farmed out one of its railways for a further loan of two million sterling. Valorization went on briskly. In the year 1908, eight million sacks of coffee were being kept under seal in the financiers’ warehouses as security for their loans. To defray interest and other expenses, the São Paulo government made the exporters pay a duty of three francs per sack at the time of shipment.

But the state of São Paulo was still the owner of this coffee, wherever it might be stored, whether in Hamburg, New York, Havre, or elsewhere. Brazil had to be enabled to keep the coffee in store until there should be a favourable turn in the market. In December 1908, the Brazilian government raised a loan of five million sterling to defray all previous valorization commitments and to enable the buying process to continue. The great financiers of the world had so much confidence, by this time, that the loan was over-subscribed on the first day. The security for the loan consisted of seven million sacks of government coffee in the warehouses, the stocks being administered by a committee of financiers, merchants, and government officials, meeting on equal terms.

The harvest of 1906, which had nearly submerged the country with its waves of coffee, was thus artificially cleared out of the way. Experience had taught that after a bumper harvest, for two years in succession the crops would be comparatively small. Like animals, plants are likely to be weakened for a time by excessive reproduction, and must restore their energies out of the air and the soil. On this occasion, however, experience was given the lie. The ensuing seasons, as the Brazilian planters noted with anxious hearts, were exceptionally favourable, with the result that the harvests of the years 1907 and 1908 were more considerable than had been hoped, so that the process of valorization had to be greatly protracted. It was not until February 1913 that the last sacks of government coffee were released from the warehouses and put on the market.

Thus for seven years the government sequestrated by purchase the principal product of the country. The seven-year term makes the parallel with Joseph in Egypt closer than ever. But Joseph stored grain, which is food. Unfortunately coffee is not an article of nutrition. At best, the money paid for it can be used to buy food.

The Brazilians were not wise enough to learn from the menace that had hung so long over their heads. Instead of setting to work, by degrees, to plant some other crop than coffee, they continued on their old ways. The evil had not been cut at the root, but was only superficially and temporarily pruned. The root continued to flourish luxuriantly, with the natural result that a few years later the crisis was redoubled.

This time it took on a new face, one which had never been regarded as possible, the face of 1914.

For a while the world went crash—at any rate, that political world which the nineteenth century had bequeathed to the twentieth. The crash tangled other wires besides those which concerned the defence of coffee in Brazil.

The “defesa do café” aimed at regulating access to the market, and thus keeping up the price of coffee. No Brazilian ever contemplated the possibility that the very existence of the market might be threatened; that, for instance, the German market and the Austrian market might be closed to them by a blockade. Now, however, such a market crisis had come. Whither, then, was Brazil to export her coffee? Could France and Italy make good for the loss of Germany and Austria? Worse still, not only were the Central Powers blockaded by the Allies, but the Allies themselves were blockaded by the German submarine campaign. For a time, neutrals likewise were outside the market, the trade with Denmark and Sweden, to name two of the most important consumers of Brazilian coffee, coming to an end.

The Allies now turned to account this state of affairs that was so dangerous for Brazilian economics. In the year 1917 the French pledged themselves to buy two million sacks of Santos coffee. Simultaneously Washington purchased a million sacks for the American Expeditionary Force. Part of the bargain was that Brazil must declare war against Germany. To ship the requisite supplies, the Brazilians seized forty German steamships that were awaiting the end of the war in Brazilian ports. The loss of tonnage effected by the submarine campaign had greatly circumscribed the possibility of freightage. The temptation of playing upon Brazil’s need in this way was too much for the Allies.

Had there been any warlike mood in Brazil? Nothing of the sort. Here begins the tragedy of a very remarkable man, Lauro Müller, the Brazilian minister for foreign affairs, a German by birth, who was forced, in his new home, to work against his native country.

Lauro Severiano Müller was born in 1863 of German parents in the German colony of Itajahy. His grandfather owned a vineyard on the Moselle; his father Peter emigrated as a boy of fifteen, and in southern Brazil had married a woman named Anna Michels, from the Rhineland. The pair kept a small general store. Such were the mediocre circumstances amid which the man who was to be a noted statesman was reared. He became a student of engineering, and then, in his twenties, was involved in the storms of the revolution. In 1889, as Marshal Fonseca’s aide-de-camp, he took part in the attack upon Emperor Pedro II’s palace. The revolution having been successful, at the age of twenty-six he was appointed provisional governor of the province of Santa Catharina. In the National Assembly he was known by two nicknames, “Sabe tudo” (Know-All) and “Allemão-sinho” (the Little German).

Later, in 1902, he became minister of communications in the central government at Rio. Finding employment for the workers who were streaming into the capital from the plantations, he transformed the Brazilian metropolis to make of Rio de Janeiro the most magnificent seaport in the world. When Rio Branco, who had been minister for foreign affairs, died, Müller took over the vacant post. Two years afterwards, the great war began. At first the Germans in Brazil, who were very numerous in the province of Santa Catharina, tried to induce Lauro Müller to swing Brazil over to the German side. Müller, however, remained strongly in favour of Brazilian neutrality. His endeavours were fruitless, for coffee was stronger than he. Ninety per cent of the property in the country depended upon a market for this export. When, in April 1917, the United States declared war against Germany, the neutrality of Brazil became untenable, and Müller broke off relations with what had once been his fatherland. He probably hoped that matters would not go beyond this. But popular feeling was roused, the minister for foreign affairs was reviled as an “Allemão,” and was threatened with personal violence. On May 2, 1917, he resigned office, to be succeeded by Nilo Peçanha, who declared war against Germany. In 1926, Müller died at Florianopolis, highly respected by many of the citizens of his adopted country, but regarded harshly by others. His diary has never been published. Some day, perhaps, it will give a clue to much that has remained obscure in the Brazilian history of those days.

Thus Lauro Müller’s personal honour was tarnished by the coffee interests. But what did the individual matter? The country had once more been saved. Purchases of coffee by the Allies, financed in Paris and New York, gave Brazil a breathing-space. The stocks on hand having been cleared away, nature must now help to prevent a new glut. The Brazilian coffee-barons put their trust in the famous nocturnal frosts, which are, however, rare in Brazil. This time they came to the rescue, occurring at the right moment to nip the blossoms and destroy the expected harvest. The lean year coincided with the epoch when, after the war, European consumption was reviving, so that the planters were able to sell what coffee they garnered at prices far more favourable than had prevailed for a long time. They recognized again that, as the newspapers declared, “God was a Brazilian.”