Possible Effects of Pausing Foreign Aid on Coffee-Producing Regions:

Latin America Analysis of Trump’s Economic Policy on the CPG Industry

By Samson Williams, Anthropologist-in-Residence, MilkyWayEconomy?

On January 28, 2025, President Donald Trump issued an executive order implementing a comprehensive freeze on federal funds, including foreign aid, with exceptions only for Israel and Egypt. This decision has significant implications for coffee-producing regions globally, particularly in countries like Brazil, Colombia, Honduras, and Guatemala. The suspension of aid, though paused by a Federal judge, nonetheless is poised to affect economic stability, social structures, and political dynamics within coffee producing countries.?

Global Impact on Coffee-Producing Regions

Foreign aid has historically played a crucial role in supporting agricultural sectors in developing countries. In coffee-producing regions, aid programs have facilitated improvements in farming techniques, pest control, market access, and infrastructure development. The sudden cessation of U.S. aid disrupts these initiatives, potentially leading to decreased productivity and economic instability.

Economically, the withdrawal of aid may result in reduced investments in sustainable farming practices and technological advancements. This could lead to lower coffee yields and quality, diminishing these countries' competitiveness in the global market. Socially, the loss of funding for community development projects may exacerbate poverty and inequality, as many rural communities depend on aid-supported programs for education, healthcare, and basic services.

Politically, the aid freeze could strain relations between the U.S. and coffee-producing nations. Countries affected by the suspension may seek alternative alliances and funding sources, potentially turning to U.S. competitors and adversaries. This shift could alter geopolitical dynamics and reduce U.S. influence in these regions.

Lastly, history has shown that when U.S. funding dries up or is halted, the void is often filled by gangs, organized crime syndicates, and terrorist organizations. These groups do not step in out of altruism but rather to consolidate power, control local populations, and establish recruitment pipelines for anti-American, radicalized or terrorist elements. By providing essential services in the absence of U.S. aid, they gain influence and legitimacy among vulnerable communities. Freezing aid to coffee-producing nations risks creating an environment where these actors thrive, further destabilizing already fragile regions and compounding the challenges facing both local governments and international stakeholders. In short, long term this policy runs the risk of developing Al-Qaeda Sur America.?

Country-Specific Implications

Brazil

As the world's largest coffee producer, Brazil's coffee sector is a significant contributor to its economy. While Brazil is less dependent on foreign aid compared to smaller nations, U.S. assistance has supported various agricultural and environmental programs. The aid freeze may hinder ongoing projects aimed at promoting sustainable coffee farming and combating deforestation. Economically, reduced support could slow advancements in farming practices, potentially affecting coffee output and quality. Politically, Brazil may reassess its diplomatic stance toward the U.S., especially if the aid suspension is perceived as part of a broader trend of disengagement.

Colombia

Colombia, renowned for its high-quality Arabica coffee, relies significantly on foreign aid to support its agricultural sector and rural development. U.S. aid has been instrumental in funding programs that assist coffee farmers in improving production techniques and accessing international markets. The suspension of aid threatens these initiatives, potentially leading to decreased productivity and economic hardship for small-scale farmers. Socially, the loss of aid could exacerbate rural poverty and may contribute to increased migration, as individuals seek better opportunities elsewhere. Politically, strained relations with the U.S. could prompt Colombia to strengthen ties with other nations, potentially altering regional alliances.

Honduras

In Honduras, coffee is a vital component of the economy, representing a significant portion of export revenues. The country has benefited from U.S. aid in areas such as agricultural development, infrastructure, and social programs. The aid freeze is likely to have severe economic impacts, particularly for smallholder farmers who depend on assistance to maintain and improve their coffee production. Socially, reduced funding could lead to increased unemployment and poverty in rural areas, potentially fueling social unrest and migration. Politically, the Honduran government may face internal pressure due to the economic downturn, and relations with the U.S. could become strained, especially if the aid suspension is prolonged.

Guatemala

Guatemala's coffee industry is a major source of income and employment, especially in rural regions. U.S. aid has supported various programs aimed at improving agricultural practices, enhancing market access, and supporting community development. The suspension of aid threatens these efforts, potentially leading to decreased coffee production and quality. Economically, the loss of support may result in lower incomes for farmers and increased poverty rates. Socially, the reduction in aid could exacerbate existing challenges, such as malnutrition and limited access to education and healthcare. Politically, the Guatemalan government may seek alternative partnerships to fill the void left by the U.S., potentially shifting its foreign policy orientation. To be clear, “alternative partnerships” is a polite way of saying “Make friends with China”.?

Impact on Major American Coffee Importers and Retailers

The United States is the largest importer of coffee in the world, relying heavily on suppliers from Latin America. The pause in foreign aid could lead to significant disruptions for the top three American coffee importers—Volcafe, Sucafina, and Louis Dreyfus Company—which source coffee from Brazil, Colombia, Honduras, and Guatemala. These importers operate on tight supply chain logistics, and any instability in coffee-producing regions—such as reduced production, farmer migration, or increased costs—will inevitably affect their operations.

1. Volcafe USA LLC : One of the largest coffee traders, Volcafe could face increased prices as reduced foreign aid weakens coffee production infrastructure. This may force the company to seek alternative suppliers or invest in direct partnerships with struggling farmers to stabilize its supply chain.
2. Sucafina : This Swiss-based coffee trader, with a strong presence in the U.S. market, may see increased transportation costs and logistical bottlenecks if political unrest grows in Latin America. Their reliance on sustainable and fair-trade coffee could also be jeopardized if aid-dependent sustainability programs collapse.
3. Louis Dreyfus Company : This major agribusiness player may shift its coffee sourcing strategy, hedging against potential shortages by diversifying suppliers or stockpiling coffee from more stable regions, potentially leading to price hikes.

For Starbucks, Dunkin’ Donuts, and Folgers, the impact of the aid freeze could manifest in multiple ways:

• Increased Costs: A reduction in foreign aid could mean higher production costs for farmers, leading to price increases across the supply chain. This would directly affect major coffee retailers, forcing them to either absorb the cost or pass it on to consumers.
• Supply Chain Disruptions: Unrest in key coffee-producing regions could lead to unpredictable supply shortages, affecting the consistency and availability of premium Arabica beans used by Starbucks and Dunkin’ Donuts.
• Shift in Sourcing Strategies: Companies may need to invest more heavily in direct-trade programs, cutting out traditional importers and working directly with farmers to ensure a stable supply. However, this approach would require significant infrastructure investment and long-term commitments.
• Consumer Price Inflation: Higher procurement costs will likely lead to price hikes for coffee consumers in the U.S., potentially reducing demand for premium coffee brands while benefiting lower-cost alternatives.

Conclusion

President Trump's decision to pause foreign aid has far-reaching implications for coffee-producing regions, the global coffee supply chain, and the businesses that rely on it. Economically, the aid freeze threatens the sustainability of coffee farming, potentially reducing production, increasing costs, and exacerbating poverty in Brazil, Colombia, Honduras, and Guatemala. Socially, the loss of aid funding could lead to rural instability, increasing migration to urban centers or even the U.S. Politically, this move could widen the door for Chinese and Russian influence into Latin America, as coffee and non-coffee producing countries seek funding and partnerships to shore up local economies.?

For American coffee importers and retailers, the consequences could be profound. Disruptions in supply, rising production costs, and potential political instability in Latin America could lead to price increases across the entire U.S. coffee market. Major corporations like Starbucks, Dunkin’ Donuts, and Folgers will be forced to reassess their sourcing strategies, either by absorbing higher costs or passing them on to consumers. If sustained, this policy shift could reshape global coffee trade dynamics, creating long-term instability and forcing both producers and buyers to adapt in ways that may permanently alter the industry.

In short, MWE sees a once in a generation, disruptive opportunity.?

Disclaimer?

Professor Samson Williams is Space Economist at the University of New Hampshire School of Law and Instructor at Columbia University in New York City. In addition he is an Anthropologist-in-Residence at MilkyWayEconomy. MilkyWayEconomy is an investor and advisor in Dope Coffee Company . As a firm focused on innovation, MWE sees a number of silver linings and profitable outcomes as POTUS 47 fundamentally disrupts the establishment in the CPG world, opening up new and exciting opportunities for those not handicapped by tradition to seize them. As a Marine Corps lead startup, MWE believes Dope Coffee Company is poised to substantially benefit from this disruption.?