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Colombia: for anti-drug aid, some pro-coffee aid should be expected.

Colombia: for anti-drug aid, some pro-coffee aid should be expected

Press reports that the International Coffee Association's coffee accord may be shortly resuscitated have been received with caution in Bogota. Colombian analysts stress that the basic issues that led to the July collapse of the ICA remain unresolved and that there is accordingly scant likelihood that the pact will be resurrected any time soon.

Hence, in Bogota little credence is accorded to newpaper reports that have suggested that the Bush administration would now welcome a rapid reintroduction of the ICA export quota system. The reports surfaced in Colombia during the offensive launched by the Barco government against the country's drug barons, who supply as much as 80 percent of all the cocaine smuggled to the United States from South America.

At first sight, an Andean cocaine war might seem irrelevant to both the ICA and the coffee trade as a whole. But for a time at least the two subjects were linked in Colombia, and in the following manner.

This summer cocaine barons unleashed a murder campaign in a bid to force the Colombian government to abandon its narcotics-control programs. The traffickers killed officials and a prominent Colombian politician, and they threatened to declare total war against the Bogota authorities if the latter extradited narcotics suspects wanted in the U.S.

But far from being intimidated, the colombian government hit back at the drug gangs. It arrested thousands of people and stated it would resume extraditions to North America. President Bush gratefully responded by granting Colombia $65 million in emergency aid for use against the traffickers.

But, as Colombians were quick to point out, the $65 million is an all but trivial amount compared to the $400 million or more that Colombia could lose next year because of the slump in coffee prices that has resulted from the collapse of the ICA. Many South Americans hold the U.S. primarily responsible for the foundering of the ICA, and it was thus little surprise that Colombian officials promptly raised the issue of the coffee pact when they were met with American representatives in September to discuss the drug war.

Essentially Bogota's message to Washington read on these lines: the U.S. has a major drug problem, and Colombia is now actively helping alleviate it by cracking down on the traffickers who are the backbone of the cocaine trade. But, the Colombians reportedly added, if we help you tackle your narcotics crisis in the U.S., then you for your part must help us solve our coffee problem by reviving the ICA.

In short, in return for cooperation in international anti-narcotics programs, the Colombians want better prices for their coffee exports. Washington got the message, and within days U.S. representatives were talking positively about the ICA, coffee prices, and the need to ensure producer nations a fair marketing deal.

Some Latin American journalists, over-reacting to the situation, quickly predicted that Washington would revive the ICA under Colombian pressure, and they implied that milds prices would recover accordingly. But the press reports were off the mark, it seems, and for several reasons.

First, it will take more than Washington alone to resurrect the coffee pact. The Brazilians and Central Americans, for example, also played a part in sinking the ICA this year, and they are still far from agreed as to what form a new accord should assume. So, until such differing national viewpoints can be reconciled, there can be no new ICA. It doesn't just depend on Washington.

Second, despite the reassuring noises now coming out of Washington, the Bush administration has apparently not modified its basic policy stand regarding the ICA. It is continuing to insist on fundamental reforms to the pact, and there seems little chance that such reforms will be rapidly acceptable to all parties.

Third, the feeling in Bogota is that Washington is in no undue hurry to return to an ICA-quota situation in which the U.S. importers would have to pay far more for coffee than they do today. Sympathy for Colombia in its fight against traffickers is one thing; economic reality another. The betting, then, in Colombia is that the ICA may remain a dead letter for for the foreseeable future and that prices will consequently stay depressed.

On the subject of the drug war, incidentally, the continuing fight against Andean cocaine traffickers should in no way affect Colombia's coffee output or exports. The drug gangs and their terrorists are not active in coffee-growing zones.

As for the export scene, Colombia's sales drive to boost Milds shipments to the Far East, to compensate for depressed world prices, is starting to reap results. It has been announced that coffee exports to Japan should roughly double, to around 1.1 million bags annually, within a year. Elsewhere efforts to expand markets in the Chinas, South Korea, and other nations in the region are continuing.

To date, Colombian ports have been standing up to the pressure posed by the increased level of Milds exports. In the absence of ICA quotas, Colombia's aim is to increase its annual Milds exports by as much as a third to up to 13 million bags.

Consignments to pact member-nations should, it is hoped, augment by 1.6 million bags a year, while shipments to non-ICA countries should be up by around 1.4 million bags. But with Milds tags as depressed as they are, the country will today earn less from exports of 13 million bags a year than it used to when, under the quota system, it shipped out some 10 million bags annually at firm prices.

On the brighter side, though, the planned increase in Colombian coffee exports will benefit the cooperative movement, which currently ships out only 200,000 bags a year to Europe, via Expocafe. Now cooperatives are to be given a greater share of the export trade; their consignments should rise to between 700,000 and 1 million bags in the 1990-91 season.

Cooperatives have long clamored for a greater role in the coffee export sphere. But prior to the demise of the ICA, the cooperatives' expansion possibilities were limited because of the quota system. The cooperatives are to be accorded favorable credit terms to enable them to garner a greater slice of the market, and they are expected to start exporting to North America.

Meanwhile, the Growers' Federation is confident that Colombia has sufficient stockpiles to enable it to increase Milds shipments generally in a sustained export drive. Warehoused stocks in September totalled some 8.6M bags. By September of next year, stocks are expected to diminish - but only to around 6.9 M bags.

Over the next three years, annual harvests should be at least 13 million bags, barring adverse weather conditions or other unforeseeables. But long-term, production could fall if world prices diminish further because some planters may decide, in those circumstances, that coffee-growing is no longer a paying proposition.

For the time being, though, the National Coffee Fund is using its accumulated reserves to buttress growers against the world price crisis. Planters are still receiving a fair return and can expect it for at least another 12 months.

In the meantime, officials have once again stressed the high quality of the coffee which the country is now holding on stockpile. On average, inventories are said to date back no more than 18 months. By contrast, in 1986 the mean age of Milds was 3.5 years.
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Author:Nares, Peter
Publication:Tea & Coffee Trade Journal
Date:Nov 1, 1989
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