Cold Economics For Colombia's Coffee Growers
The country faces dramatic debt levels among small-scale coffee farmers, as prices fall on world markets. Some have suggested a fixed minimum price for this key Colombian export.
BOGOTÁ — What to do about Colombia's coffee sector? The question arises at a time of low prices on global markets. For good reason, for a long time until the early 1990s, the Coffee Congress was considered almost as important as the National Congress. In those years coffee was by far the country's most important export — a place that has been taken by products like oil, minerals, and cocaine. Since that time, other big changes have occurred, including a shift in production areas from central and north-central zones like Antioquia, to the southern departments of Cauca, Huila, and Nariño. Also, more growers have joined the sector for whom coffee is not the main economic activity or source of income.
While coffee production was fundamentally the work of peasants until some 50 years ago, now many professionals living in cities have turned it into a secondary and often part-time activity or supplementary source of income. Half a century ago, the vast majority of rural families lived exclusively off the production of coffee and subsistence crops. But coffee growers are today fewer in number and are concentrated in the south of the country. One must consider these factors when analyzing policy options and aid to the coffee sector. In the face of low prices on world markets, the director of the Coffee Growers' Federation has proposed withdrawing Colombian coffee from the New York stock market or fixing a minimum sale price. This could be a very costly option and make Colombia lose market share.
The most urgent option is to restore an internal price stabilization mechanism.
The former finance minister, Mauricio Cárdenas, has suggested returning to a pact among producers like it used to happen until the early 1990s, though again its implementation would be very difficult. He has also proposed an interesting information tactic, to show consumers that producers like those in Colombia only receive 3% of the final price, even though they hold the most important position in the production chain.
Perhaps the most urgent option is to restore an internal price stabilization mechanism, like a stabilization fund that saves money in boom times and dispenses it when market prices drop. Two other options used in the past are to subsidize the internal purchase price and refinance or partly condone, the debts of growers. According to media, their debts to the Agrarian Bank stand today at 1.2 trillion Colombian pesos (a little over 338 million euros). As these options are also highly costly, they could be implemented if two objectives are met. One is to concentrate aid to peasant farmers and smallholders, and the second is aid against a program of increased productivity. As most production is now in the south of the country, these measures are also, ultimately, important in containing cocoa farming, which is also expanding in the southern departments.