Flatlander is affected by political rumblings in countries all around the globe when they influence supply and demand of our favorite commodity. Because of this, and since almost every country has its own unique methods of bringing coffee to market, we think these rumblings are really interesting. Right now, we've got our eye on Colombia since it's in the middle of some really big changes.
Michael Sheridan of the CRS Coffeelands Blog summed up the situation nicely on his blog, and we thought it fascinating enough to share. It reads more like a spy novel than a history of one nations's coffee industry with leaked documents, presidential orders, strikes by farmers, and even a little rioting. This glimpse into the lives that are drastically affected by your morning cup of coffee will make you appreciate it for more than just its deliciousness and caffeine, and it helps explain why Flatlander only buys coffee from reputable sources that can guarantee fair prices were paid to the farmers who produced it. Have a peak behind the scenes!
In an interview last week, SCAA Executive Director Ric Rhinehart held up Colombia as a shining example of a country in which public investment in the coffee sector has helped to make the coffee trade more inclusive, profitable and sustainable. This week, a presidential commission in Colombia asked to analyze the country’s coffee institutions and recommend reforms to make them more inclusive, profitable and sustainable issued its preliminary findings. Turns out, it wants to tear those institutions down to the studs and rebuild them with a leaner, more contemporary architecture.
The response has been fast and furious, the debate is charged, and the future of Colombian coffee hangs in the balance.
Colombia was roiled last year when a series of strikes initiated by Colombian coffee growers went national. News coverage focused mostly on the violence in the streets and the primary demand of the coffee growers: immediate relief from low market prices. When the government came forth with an extraordinary commitment to channel more than $400 million into a price support mechanism known as the PIC (Protección al Ingreso del Caficultor), the Finance Minister called the measure unprecedented in the history of coffee.
What got less attention was a minor policy decision by President Juan Manuel Santos to create a high-level commission to review the country’s coffee institutions and recommend reforms. TheComisión para el Estudio de la Política y la Institucionalidad Cafetera (Commission for the Study of Coffee Policy and Institutions) is headed by Juan José Echavarría, a trusted advisor to the president and former Finance Minister. The blue-chip presidential commission, or Misión del Café, as it is more commonly referred to in Colombia, includes representatives of independent growers (Oswaldo Acevedo), growers associations (Fernando Castro), growers movements (Teódolo Guzmán), industry (Dub Hay), central banks (María del Pilar Esguerra), development banks (Eduardo Lora), environmental organizations (Cristián Samper), and other stakeholders. And it has tapped a broad range of external experts to draft the 18 separate studies the Misión relied on in compiling its report.
President Santos has been here before. Back in 2002, when he was Finance Minister, Santos signed off on the final report of a different commission formed by a different Colombian president following a different crisis to review the country’s coffee institutions and recommend reforms. As a former employee of the Federación Nacional de Cafeteros, the president knows the country’s coffee institutions well. He loves them. And wants them to change. I first heard his calls for reform when I started working in Nariño in 2011, and since then they have only grown louder.
The report is long overdue. When President Santos convened the Misión in early 2013, he asked it to return its findings and recommendations by the close of the year. But in November, Juan José Echavarría told reporters its release would be delayed until February 2014. Then February came and went with no news of the report, and it became clear as the the country moved into presidential election season that the report wouldn’t be released until the second half of the year, after the country’s 560,000 coffee-farming families cast their ballots.
Even this week’s release of the report was more of a leak. The Misión published a preliminary version of the report earlier this week with instructions not to reproduce or cite it without the permission of the authors. But the 184-page report promptly appeared in its entirety on the website of a national daily newspaper, then its contents were presented in an all-day forum yesterday at a public university and live-streamed online, so its contents are something of an open secret.
Since so many of the key recommendations for institutional reform issued in the last commission report more than a decade ago were never implemented, it should come as no surprise that this commission picks up where that one left off, focusing primarily on the unfinished business from this 2002 report.
Some of the key items are these:
- Institutional Reengineering
The report argues that the consolidation of coffee trading and regulatory functions in a single institutional framework creates a structural conflict of interest that makes Colombia’s coffee institutions judge and jury at the same time. It also, according to the Misión, makes them inefficent, anti-competitive, opaque and just plain confusing. The finances of the Federación Nacional de Cafeteros and the Fondo Nacional de Café, which is financed by a tax on coffee exports to fund the work of the Federation, were separated in response to the 2002 recommendations, but the Misión wants to take things further and create two separate, independent and accountable institutions.
- Focus and Finances
As the earlier commission did in its 2002 report, the Misión is recommending that the country’s coffee institutions narrow the scope of their activities and begin living within their means, financing their operations through the contribución cafetera, a tax on coffee exports, and not relying on additional funding from the national budget. Specifically, it urges them to focus on the delivery of three public goods: agricultural extension to boost productivity, research to foster innovation and improved competitiveness, and promotion of Colombian coffee for internal and external markets in ways that are more responsive to market demand.
- Garantía de Compra
One of the most extraordinary instruments of Colombian coffee policy is the garantía de compra — the guarantee of Colombian coffee institutions to commit to buy every last bag of coffee grown by every farmer every year. It is the last remnant of the price stabilization regime the country established under the International Coffee Agreement.
Since the quota system collapsed in 1989 and Colombia allowed internal prices to float with the international market in 2001, this instrument doesn’t stabilize prices as much as it tries to stabilize farmer income by guaranteeing a market, setting a floor price and ensuring farmer liquidity. But the Misión objects to the mix of public and private purposes the garantía de compra serves and proposes to radically reduce its scope. What was designed as an instrument of public policy to protect smallholder growers has become a powerful source of competitive advantage for the Federation, its cooperatives and its coffee trading arm Almacafé, all of which have access to public resources to support their own commercial operations.
In addition to being a source of unfair competition, the Misión argues, it is not delivering the public goods it was set up to deliver–growers in communities not served by the Federation’s 513 buying stations earn more on average than those who are, and the Federation is delivering less of the export price to growers than many other countries.
The official response to the “release” of the report was fast. And furious.
The same article that published a link to the not-to-be-reproduced report also published links to two responses by the Comité Directivo de la Federación Nacional de Cafeteros: the full, 23-page version (no longer available online) and an executive summary of that document.
Both versions are charged.
They register the broad disagreement of the Federation with the content of the report. They accuse the Misión of being out of touch with the cultural context of coffee in Colombia and out of step with the back-to-the-future trend toward greater public investment in rural development. Of failing to advance serious or viable recommendations. Of proposing reforms that will benefit the big guys at the expense of the little guys and make the little guys more vulnerable. Of missing the forest for the trees. Ultimately, of failing to fulfill the mandate they were given.
The Federation’s rebuttal takes on each of the specific topics around which the Misión issued recommendations–garantía de compra, deregulation of the coffee sector, social capital in the coffeelands and the financial sustainablity of the Fondo Nacional de Café–and closes with a section describing in detail what it considers 11 specific inaccuracies in the report.
The news media know a controversy when they see one. The early coverage has played up the conflict between the Misión and the institutions it would reform with pugilistic language:
Se enciende la batalla entre Misión del Café y gremio de caficultores.
Misión Cafetera recibe duros reparos de la Federación.
Agarrón entre Misión Cafetera y productores del grano.
Los disparos al aire de la Misión Cafetera.
There are others. And this is just the opening salvo.
The Next Steps
The Misión is due to issue a final report next month. When that happens, we will publish a more detailed analysis of its contents and implications and interviews with key participants in the process.
And the public debate in Colombia will get started in earnest.