Peru, the third largest South American country and over twice the size of France, is the world's sixth largest producer of coffee with an estimated 1.9% of total world production. It is the third largest producer in Latin America, which produces 60% of the world total coffee production of which 30% comes from.  Brazil and 10% from Colombia.

Almost 90% of Peru's coffee production is exported. In 1989/90 this totalled 1,369,000 (60 kg) bags the main markets, which were 44% to the U.S., 18% to Japan and 13% to Germany. Unfavorable exchange rates caused a drop in exports to around 970,000 bags in 1990/91 but should increase slightly to about 1,100,000 bags in 1991/92.

In total, an estimated 500,000 workers depend on coffee for a living and it is one of Peru's major exports. Average annual production runs at 1.2 million bags; the 1991/92 crop is expected to be in the region of 1.3 million bags up 13% from the previous year's total. While the crop has benefitted from favorable climatic conditions, it has been affected by low market prices, high production costs, lack of credit, competition from coca (from which cocaine is derived) and civil unrest. As a result and as in recent years, a large portion of the crop will not be reaped.

Coffee grows in three zones of Peru, all situated in the heavily forested north-eastern slopes of the Andes. The largest areas are in Jaen, Bagua and San Iganacio in northern Peru and in the Chanchamayo Valley in central Peru, while the smallest area is in Quillabamba in the south.

Producers are generally small growers who produce a mild Arabica. In central and southern Peru, picking takes place from April to October while in the north, it is from September to February. The producer pulps, ferments, washes and dries the coffee and sells the pergamino to Peruvian exporters. The buyers store the coffee in centralized warehouses from where it is trucked for processing in Lima.

There are 144 coffee exporters in Peru who have largely replaced the inefficient cooperatives of which only four remain.

Peru's transportation system faces the formidable challenge of the Andes and the complex Amazon River system, which add to the high production costs. Cash crops such as coffee and coca with a high value per unit of weight or bulk, must be raised; coffee and coca grow cheek by jowl. Peru is the world's largest producer of coca and receives a quarter of its US$ 4 billion in foreign exchange from it. Coca eradication measures have often sparked violent protests. As a result, the government attempts to persuade its peasant coca growers to grow profitable replacement cash crops such as coffee.

The Peruvian government has for 11 years been embroiled in a guerrilla war and, although it encourages the press to play this down, it continues to have serious effects. The sector of the coffee producers most affected by Peru's ongoing terrorist activities is that which comprises coffee growers of foreign descent who produced top quality coffee from small acreages. Many of these plantations have been abandoned by their owners and are now operated by remaining farm laborers with the resulting decline in quality.

Patricia Campos of Somecsa, one of Peru's leading coffee exporters said, "The main factor affecting coffee production and exports has been the economy which fortunately, is showing signs of stabilizing."

The economic distortions of 1989, when hyper-inflation reached almost 14,000%, appear to have been brought under control. President Fujimori, who took office in July 1990, introduced harsh economic measures to rebuild reserves and halt inflation which has dropped from 200 to 85% a month. Bridging loans have been obtained and finance is being channeled to, among other things, the improvement of the transport system. "In the long run this will obviously favor agricultural production and coffee producers," said Campos.

Export taxes were imposed in 1990 under President Fujimori's shock therapy; coffee carries a 3% tax.

There are two soluble coffee plants in Peru. Internal coffee consumption is estimated at around 5,000 tons annually. Coffee drunk in Peru is generally weaker than in other South American countries. Tea is more popular and is also produced locally.   {1}

Arabica coffee is grown on approximately 200,000 farms in Peru. Most of these farms are small, averaging less than two hectares (five acres) in size. Most coffee is then processed through cooperatives, and distributed through several intermediaries before being sold for export.

Coffee cultivation did not become common until the mid-twentieth century. In 1922, William Ukers noted in his book All About Coffee the lack of any substantial coffee industry, despite the fact that Peru is "possessed of natural coffee land and climate" . In the 1990s, coffee rapidly grew as an important crop as it was encouraged as a replacement for coca farming by several non-governmental agencies. More recently, however, prices in the coffee market have fallen, leading to a return of coffee farms to coca production. It is estimated that a coca crop can bring in ten times as much money as much money as a coffee crop.

Coffee growing in Peru is not limited to a particular region, but is common from the north to the south of the country, including the Machu Pichu region. Coffee grown in the central region of Chanchamayo is often the mosted noted variety of coffee in Peru. {2}





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Reference:
1. http://www.allbusiness.com/manufacturing/food-manufacturing-food-coffee-tea/286837-1.html
2. http://coffee.wikia.com/wiki/Coffee_industry_of_Peru