Bitter Brew.

Colombian coffee growers harvest hard times. Imports may make them worse.

DISTINCTIVE DARK-GREEN COFFEE bushes still carpet the steep slopes around Pereira, a city of 400,000 people at the heart of Colombia's coffee-growing district. But as Ciro Medina drives to Finca Tasmania, his coffee farm on the edge of town, he points to patches of grass and the occasional banana palm on the hillsides. "Those are all abandoned coffee farms," he says.

Such sights are increasingly common throughout the department of Risaralda, where Pereira is the capital, as well as throughout the neighboring departments of Caldas and Quindio. These three provinces, known simply as the "Zona Cafetera," produce more than a quarter of the country's vital coffee crop. The abandoned fincas, or farms, illustrate an industry ground down by depressed world prices, rising costs, crop diseases and fierce global competition. Even weather and natural disaster have conspired against Colombia's growers: Last year, a powerful earthquake wrecked homes and infrastructure.

Times have been correspondingly tough on Fedecafe, the national coffee growers' federation and the most powerful player in Colombia's coffee industry. It has been forced to sell many businesses and turned Bancafe, one of the country's biggest banks, over to the government after severe losses. Its ability to invest in the industry while maintaining its system of price supports to growers has eroded.

Even despite such problems, few growers were prepared for the news that Colombia may need to import coffee soon to cover domestic consumption--probably in 2001. After bad weather, production this year is expected to be the lowest on record: around 9 million 60-kilogram sacks, versus an average of 12 million to 13 million sacks last year.

For a country that has been exporting coffee since 1835 and claims to produce the finest-quality beans of any major producer, such a state of affairs is a body blow. "It affects our pride to say that we are going to bring in bad coffee for us to drink," Medina complains.

A little bit south of Pereira, on the porch of the small cottage he built 20 years ago next to his tiny plot of land, Octavio Bonilla talks pessimistically of the industry that has been his life. "Everything goes up except the coffee," he complains.

Bonilla was born only a few yards from here 65 years ago; his grandfather was the first to plant coffee in these parts. But now he is fed up with his tiny yields and the rising costs of pesticides and fertilizers. He is thinking of replacing half of his coffee trees with cacao and bananas. "I never thought that would happen," he says. "It seems that the coffee grower will disappear, little by little".

Vietnam roasts Colombia. In hindsight, Colombia's problems began a decade ago with the end of the global coffee quota system. In the early 1990s, Colombia claimed nearly 22% of the world market. It remains the world's second-largest producer after Brazil.

But while quality is good, production costs are correspondingly high, and cheaper, more aggressive producing nations such as Vietnam have begun to gobble market share. Without globally organized retention schemes to hold back increasing production, market prices have--aside from occasional weather-induced spikes--slumped.

Recent efforts to revive the quota-driven retention schemes may buoy prices, but will do little to help prevent imports. The problem, according to Ricardo Avellaneda, an adviser to Fedecafe, stems from the running down of the federation's stockpiles of cheaper, non-export quality coffee. Previously, Colombia's coffee roasters could buy reserves of this coffee at subsidized prices. But with these inventories likely to be exhausted soon, coffee roasters will likely turn to cheap imports, perhaps from Ecuador, Peru or Central America, rather than pay more for unsubsidized Colombian coffee.

"It is not that there is no coffee--just that there is no cheap coffee," Avellaneda says. "And there is not going to be any in the future unless the producers or the government subsidizes it--which they do not want to do."

So far, though, producers have failed to receive or understand that message. "Imports are not justified," says Medina, who contends that imports are for the benefit of the roasters, not the growers.

However touchy the subject of imports, it is just the tip of the iceberg as far as the growers' problems are concerned. All agree that the biggest factor affecting the industry is the low market price. The 30% to 40% price decline through the first four months of the year means making a living is ever harder for the country's 570,000 families who depend directly on the crop.

Medina, a civil engineer who went into coffee as a sideline 26 years ago, says his engineering work makes it possible to keep his 30-hectare finca. Life is even tougher for small growers like Bonilla, who make up the bulk of Colombia's growers (95% have fewer than 10 hectares). "It is only profitable for the biggest and those who use the most technology' Medina says. "For the little guys, it is impossible."

Weeding small farmers. Hence Pereira's abandoned farms, a phenomenon that is bringing more migration to urban centers and increasing social pressures and tensions. Other growers have found a standby in welcoming tourists to their picturesque farms.

Owners of small farms, like Bonilla, complain about the lack of credit and the impenetrable bureaucracy. "I went to the agricultural bank, but they demand so much paperwork, I gave up insisting," he says.

With the future not looking too bright for such small growers, the face of the Zona Cafetera is likely to change further. At Fedecafe, Avellaneda insists only the most efficient producers can survive. The land under cultivation has fallen from more than 1 million hectares to around 800,000 hectares in recent years, he says, yet Colombia has 20% more coffee bushes. "If we had the same productivity as Costa Rica, we would have 565,000 hectares," he says. "This is the same evolution that is taking place in agriculture all over the world. There used to be 6 million farms in the U.S. Now there are 2 million."

Not surprisingly, given Fedecafes guiding role in the industry, criticism of its leadership has mounted. A rival organization called National Coffee Unity has won supporters like Bonilla and has staged protest marches. But Medina praises Fedecafes technical assistance and commercial campaigns--its Juan Valdez figure is an advertising icon in the United States--but says many of its policies have taken the wrong direction. "We need and defend the federation," he says. "But if it is going in the wrong direction, then the course has to be corrected."

Fedecafes Avellaneda insists the criticism is unfair. "It is normal that people blame Fedecafe. We are a scapegoat, for better or worse," he says. His advice to embattled growers is simple: "Be good managers. Be highly productive. Get educated. Do not expect too much from your institutions--the federation can only defend prices so far."