DR. MARIO ARTURO RUIZ ESTRADA

87

REVISTA ACADÉMICA ECO (23) : 73-92, JULIO-DICIEMBRE DE 2020

6. The application of the National Coffee Production 

Function (NCP-Function) in the case of Guatemala

The national coffee production function (NCP-Function) of Guatemala was studied, 
covering the time period 1928 to 2018 and using secondary data from different 
coffee related databases and institutions. The NCP-Function is part of what is 
commonly known as cost-benefit analysis. It focuses primarily on performance and 
risks in the coffee market structure based on a new set of indicators and analytical 
tools. The NCP-Function has an important role supporting the performance of the 
four main players in the coffee market structure: producers, brokers, sellers, and 
consumers (buyers). The analysis of this structure concentrates heavily on evaluating 
the vulnerability of its four main players, both in the short and in the long run. The 
coffee market structure operates with common problems and conditions that share 
common characteristics: (i) producer adversities, (ii) higher broker speculation, and 
(iii) aggressive competition among coffee sellers to extend traditional and potential 
markets. The NCP-Function varies considerably in the spheres of producer, broker, 
seller and consumer behaviour, both in the short term and in the long term. However, 
they do exhibit a strong linkage in the four sub-functions.

The NCP-Function for Guatemala was higher (0.67) between 1928-1958 (see Figure 
4). Guatemala’s high NCP-Function rates are related to its long trajectory in the 
production of coffee. More specifically, the NCP-Function for Guatemala shows 
that between 1960-1985 it reached 0.71 (see Figure 5). Subsequently, the NCP-
Function rate increased to 0.81 between 1985-2005 (see figure 6). During recent 
years (2006-2018) the NCP-Function rate has been 0.68 (see Figure 7). This decrease 
responds mainly to the following circumstances: (i) the strong competition from 
neighbours such as Costa Rica, Honduras and El Salvador, (ii) the vulnerability of 
the international coffee prices, (iii) the surge of new producers in the international 
arena, specially from Southeast Asia, such as Vietnam and Indonesia, (iv) high 
broker speculation, and (v) the fast expansion of large sellers. On the other hand, 
the lack of trade with the Popular Republic of China decreed by Guatemalan 
authorities make it impossible to find potential niches in this large market.

The NCP-Function applied to Guatemala shows that, of the total output of 
coffee grown by national producers, 38 % is grown by large producers, 42 % by 
cooperatives and only 12 % by small producers (Villain, Hernández & Anzueto, 2008). 
Not surprisingly, responsible for the high degrees of speculation in coffee prices, 
American and European coffee brokers have been replaced by new mechanisms 
of negotiation at the different levels of coffee production (large, cooperatives and 
small producers). Indeed, the role of brokers in the coffee business considerably