[afro-nets] Coffee Crisis - Failed Development - Health Disaster

[Peter burgess <Profitinafrica@aol.com>]

Coffee Crisis - Failed Development - Health Disaster
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Dear Colleagues

The following "ON THE BRINK OF COLLAPSE" was written by Oxfam as
part of its global alert about the international coffee crisis
and in connection with its "Make Trade Fair" initiative. It is
very good.

But it does not explain just how it is that this has come about.
I have worked as a consultant to the World Bank several times
over the years since 1978, including some work in agriculture
and coffee and market economy reform. Though I have a lot to say
about analysis of development problems, I will limit myself to
one point.

Part of this crisis has its roots in the wrong projections of
coffee (and a lot of other commodity prices) that the World Bank
was making in the period 1978 to 1982. They had it absolutely
wrong not only based on the price information and trends that
ordinary eyeball analysis showed, but also because the invest-
ments they were implementing were going to add substantial pro-
duction and redefine equilibrium prices in the market. Part of
the problem was plain bad economic analysis, but part of it was
reliance on the new-fangled computers to do the statistical
work. The regression analysis results I saw at that time (almost
30 years ago) gave wrong results.... period. I have asked from
time to time to see these old data, but the history is now qui-
etly buried as far as the World Bank and the ODA community is
concerned. But for coffee growers they are living and dying as a
result of the bad analysis.

Now solutions

With regard to solving the problem, Oxfam is right when it says
that niche solutions like "Fair Trade" coffee will not solve the
problem. I can make the case that in fact it will aggravate the
problem for many while maybe doing something for a few. "Fair
Trade", "Organic", etc. are not mainstream solutions. For our
part we are looking to expand a program we call "Beyond Fair
Trade" where we are encouraging SOUTH companies to become fully
engaged in marketing and sales in the rich markets of the NORTH.
There are profits in the coffee industry.... big profits. But it
is not in growing coffee but in selling coffee! Do the arithme-
tic. Someone is laughing all the way to the bank, and it is not
the coffee growers.

But the development solution is not really coffee. It is getting
development finance to allow priority projects from the commu-
nity perspective to be planned, financed and implemented so that
the quality of life in the community starts to improve, and the
economic performance of the community starts getting some trac-
tion. The development experts need to help communities figure
out the best way to improve economic productivity at the commu-
nity level, and get the resources to let it be done. Most commu-
nities have not had ANY investment for productivity improvement
(for that read quality of life) in living memory though they
have seen economic stress and distortion over the past fifty
years on an enormous scale. The need is the community to earn
more economic surplus and grow their wealth and not for changes
that are based on our own value systems.

And where a community cannot succeed, then there should be mi-
gration to a more productive place. And that place ought not to
be the urban center, though it is at the moment because that is
where most international support resources reside.... and where
there is a sad trickle down into the urban slums that attracts
migrants but in no way helps solve the underlying economic prob-
lems and the critical productivity question.

I hate drugs and the drug culture with a passion. But I under-
stand the economic attraction of poppy and other drugs. And I
understand how Ethiopian coffee is being displaced by Khat. But
there are other ways to earn a living than through agriculture.
The SOUTH needs to build things, and it should not be necessary
to bring in international contractors to do it. Mexicans are do-
ing a lot of building in New York City, helped by suitable man-
agement and machinery. Local people and local companies all over
the SOUTH need to be helped to build things that are priority
needs in the local communities. These are the things that devel-
opment finance should be getting behind. There is fifty years of
catch up to do. It seems to me it is time to get going and fig-
ure out how to finance the real local priorities. The need is
not for more trade (that will in all likelihood be dominated by
the NORTH anyway) but simply finance that creates big enough
value adding in the SOUTH and enough surplus to reward the fi-
nancial community for helping. Make money. Do good.

Here is Oxfam's essay:

"ON THE BRINK OF COLLAPSE"

Oxfam fears that the 'coffee economies' of entire countries are
on the verge of entire collapse. Around 25 million families rely
on coffee for their livelihoods and millions of them would be
affected.

Countries most at risk include Burundi, Ethiopia, Uganda and
Rwanda in Africa and Colombia, Costa Rica, El Salvador, Guate-
mala, Honduras and Nicaragua in Latin America. Burundi, for ex-
ample, gets almost 80% of its export revenue from coffee.

In real terms, according to ICO president Néstor Osorio, the
price that growers are getting for their coffee is at the lowest
for 100 years. Niche markets such as Fair Trade are vitally im-
portant to encourage but, at only around 0.8% of the total mar-
ket, are too small to save everyone.

More must be done. There are reports of growing social unrest.
The crisis is hitting the commerce, transport, storage and bank-
ing sectors. Tax revenues are down, public spending under pres-
sure and foreign debt mounting.

In ten years, coffee-growing countries have seen income fall
from $12 billion to around $5.5 billion. Meanwhile the retail
value of this same coffee in rich countries has jumped from $30
billion to $70 billion.

Coffee growers in these countries might once have tried to swap
to corn, cocoa, sugar or cotton. But these crops are blighted
now too, protected by high tariffs in the rich northern coun-
tries who also subsidize their farmers to grow cheap produce
that is dumped into southern markets. Poor coffee growers were
given no help at the World Trade Organisation recently when its
rich country members failed to agree on reforms that might have
reduced these agricultural tariff barriers.


--
Peter Burgess
ATCnet in New York
Tel: +1-212-772-6918
mailto:peterb@afrifund.com
http://www.afrifund.com
http://www.afrifund.com/wiki/index.pcgi?page=DevelopmentDialog