Late last week I published this post on the preliminary report of the blue-chip presidential commission assigned to analyze Colombia’s coffee institutions and recommend reforms. The following day, Juan José Echavarría, the former Colombian Finance Minister and trusted economic advisor to President Juan Manuel Santos who leads the Misión del Café, gave this interview to Radio Caracol in which he broke down the 10 key points of the commission’s work. I summarize them below.
- [1.] “Coffee is an important livelihood option in Colombia.
Mr. Echavarría reminded listeners that coffee was responsible for much of the growth of Colombia’s national economy during the 20th century and expressed confidence that, “Colombia’s coffee sector has an enormously rich future.”
- [2.] “Eradicating poverty in coffee-growing regions will only be possible with a profitable coffee sector.”
The logic here borders on circular, but it is an important point considering that for many of the country’s 560,000 coffee-farming families, coffee has not been profitable, or at least has not been proitable enough to pull the families who grow it out of poverty.
- [3.] “There is no single solution for coffee in Colombia.”
The former finance minister argues that there are three paths forward for coffee growers, and that these are not necessarily mutually exclusive: seeking opportunities in specialty coffee markets; diversification away from coffee; and increasing productivity. The first of these means more focus on coffee. The second means less. And the third is essential for all growers who seek to maximize the returns on their investment in coffee, regardless of how much they rely on it for their income.
- [4.] “We have to weaken the center and strengthen the regions.”
The presidential advisor argued that decentralization of the country’s coffee institutions is the only way Colombia will achieve the profitability the sector needs: “A profitable coffee sector will have to come from the regions.” My reading is that on the commercial side, the continued centralization of the country’s coffee sector has failed to respond to clear trends over the past decade among specialty buyers looking for something more specific than “Café de Colombia.” For coffees that bear the names of the regions where they were grown: Cauca, Huila, Nariño. Or even the community. Or farm.
- [5.] The State needs to reclaim its rightful role in the coffeelands.
For decades Colombia’s government has outsourced its role in the coffeelands to the country’s coffee institutions, which perform the kinds of functions and deliver the kinds of public goods that are generally the domain of the State: policymaking, infrastructure, rural development. Echavarría says it is time for Colombia to rein in its coffee institutions and resume these functions.
- [6.] “Colombia has to deregulate its coffee sector.”
The Misión del Café believes the regulation of the coffee sector has hobbled it in a competitive international marketplace, and is calling for deregulation. Echavarría cited Brasil–the world’s leading coffee producer and a frequent point of comparison in the Misión‘s preliminary report–as an example of a country whose competitiveness is related to its hands-off regulatory posture.
- [7.] “The conflict of interest between regulation and coffee exports in Colombia must be eliminated.”
Colombia’s coffee institutions are judge and jury: they make the rules they have to play by. As a result, Echavarría says, they enjoy an unfair advantage in the marketplace. He believes this was a useful arrangement under the International Coffee Agreement that expired in 1989, but says it has outlived its utility and has become a drag on Colombia’s competitiveness.
- [8.] “Public resources should not finance private trading activities.”
In a related point, the director of the Misión del Café argues that the taxes collected on coffee exports should not be used to finance the commercial activities of the country’s coffee institutions, but instead “should be used for public goods.”
- [9.] “An environmentally sustainable coffee sector requires the adoption of good agricultural practices.”
- [10.] “The garantía de compra should be maintained in those places where there is clear evidence of market failure.”
Finally, Echavarría argues that the garantía de compra is mostly used by Colombia’s coffee institutions as a public subsidy for their narrow commercial interests. He argues that the garantía de compra should be reserved exclusively for those coffee-growing areas where the lack of competition among buyers makes growers vulnerable. The perception of the Misión, clearly, is that these places are few and far between in the highly competitive Colombian coffee market. In the end, he argues that the garantía de compra should be used to achieve the social protection it was designed to deliver and not as a commercial instrument: we have to separate what is commercial from what is social, he concludes.