Peru is South America's third-biggest coffee producer, but sector officials see output falling by at least 20 percent this year because of lower rainfall and plant disease.

Starbucks Latin American President Julio Gutierrez said the new Peruvian brand coffee, which comes from the southern jungle valley of Tambopata and has been developed with environmental group Conservation International, was proof of the company's fair trade credentials.

Gutierrez said Starbucks was paying around twice the average international price over the last year for its Peruvian coffee -- a sustainable crop that will benefit local communities -- "and that's something that reaches the farmer."

The benchmark KCZ3 December 2003 coffee contract closed down 0.10 cent at 62.15 cents in New York on Tuesday.

"We believe we are laying the foundations to pay good prices to farmers while providing consumers with a good coffee," Gutierrez told Reuters.

Starbucks hopes to sell the Peruvian coffee in other countries later this year.

Starbucks has similar projects with Conservation International in Mexico and Colombia. In Mexico it helps some 1,000 farmers. Gutierrez said he hoped to reach that level in Peru "in the next few years," and was open to working with other producers as well.

Peruvians actually drink little coffee -- around 1.5 lbs each per year compared to 8.8 lbs in the United States, Gutierrez said.

But the president of the Peruvian Coffee Chamber welcomed the arrival of the coffee emporium and said last month higher domestic consumption could help offset lower prices for coffee exports.

Lasino SA, the local firm with the Starbucks license, is part of Delosi, a group in which Vice President and Foreign Trade Minister Raul Diez Canseco is a shareholder. Delosi has brought other big name U.S. chains to Peru, including KFC and Pizza Hut, both owned by Yum Brands Inc. YUM.N .