By Carlos Camacho
CARACAS -- Economic distortions in Venezuela make for a bittersweet International Coffee Day in the oil rich nation: Coffee is scarce here and most Venezuelans can’t afford what was once the country’s main export crop, but that was well before petroleum was industrialized in the 1930’s.
Coffee production has dropped by 90% since 1998. The industry has seen heavy regulation under chavismo: coffee factories and farms have been taken over and the price for a cup of coffee at the bakery regulated.
“The regulated price is cheap but where you can find coffee at regulated prices?”, says Hermes, a house painter in East Caracas.
The government has nationalized, expropriated or just plain taken over practically every coffee-related company in the land: it now controls an 80% market share through 8 companies, including legendary brands such as “Fama de America” and “Café Madrid”, but their coffee is nowhere to be found, and certainly not at regulated prices. About the only coffee you can buy comes from the few, smaller private companies that have survived nationalization.
The “scarcity index” of the BCV central bank says coffee is missing in 84% of all shops.
The country that once exported tons of this other black stuff is now a net importer, according to trade groups.
Production for 2015 reached a historical minimum, 45,000,000 kilos of coffee beans, down from 92,000,000 kilos, the all-time record post-oil output figure, achieved in 2001, when the Bolivarian Revolution was in its infancy.
That is a drop of more than 50% of production in a decade and the worst, say those in the know, is yet to come: year on year the decline is of about 18%. “Those historical lows reveal an acute, structural crisis”, the largest farming association of Venezuela, Fedeagro, wrote in a 2015 report.
“Coffee continues the sustained fall in production initiated in the year 2001,” Fedeagro wrote. “Responsible for this decline are: the meager profitability of the item as a consequence of the prices imposed without any thought regarding production costs…and concentrating the harvested grain in government institutions.”
For the last 17 years, Fedeagro wrote “coffee is in negative acceleration: from century-old exporters of high quality coffee to net importers,” the report concludes.
Coffee production started declining in 2001 but, according to pro-transparency think tank “Transparencia Internacional”, it was in 2003 that the real problems started: when government takeovers of the sector started in earnest. Now, five of the state-owned coffee companies do not report financial results and two generate losses.
All of the companies, says “Transparencia”, have had to be bailed out by the government at some point.
And to think that “before the exploitation of oil, coffee was the main source of hard currency,” Transparencia wrote in a report critical of state handling of its 526 companies published Wednesday.
A kilo of coffee can cost Bs 44,000 and that price is a prime example of the current Venezuelan economic paradox: incredibly cheap if calculated in US dollars (slightly more than $1) but impossibly expensive in a country where 75% of the workforce makes around $10 a month.
And not anybody can purchase coffee: the East Caracas headquarters of the “San Antonio” brand is guarded by the military and they refuse to sell to individual citizens. You need to show proof that you own, or work at, a supermarket or bakery.
But in the bakery they are happy to sell you a kilo of the coffee they just bought at “San Antonio” for the subsidized price of Bs 900 at the above-quoted Bs 44,000, a markup of about 500 times.