Colombia

Colombian Coffee

Colombia has developed a comprehensive production, export and marketing system of coffee, its most important agricultural product. The system is directed by The National Federation of Coffee Growers, Federacafe, which oversees a wide range of functions with regard to the coffee sector, including operating a minimum price for growers, developing agronomic and technical research and extension, monitoring quality standards, processing coffee, and investing in rural infrastructure in the coffee growing regions. This institution encompasses/brings togetherall coffee farmers and has, as one of its most important objectives, the protection of farmers' incomes through a stabilization fund.

Coffee is also a major institution builder at all levels, including infrastructure and human capital. It is Colombia's engine towards development. Together with the Catholic Church, Federacafe is the institution that gathers more representatives of civil society than any other in Colombia. This characteristic in and of itself is an important attribute, given the importance and responsibility that civil society, in all its representations has in public policymaking, public resource allocation, and control in the whole development process.

Coffee
Colombia has a deep tradition as a coffee producing and exporting country. Coffee sector activity has laid the groundwork for the country?s economic growth and development. The production and marketing of coffee mobilizes important human and financial resources and activates an entire process of economic interrelations. Commercial growing dates back to the 1870s. In the 1920s, Colombia exported 2.3 million 70-kilo bags of coffee, valued at over $106 million. This total represented 65% of Colombian exports for that year. In 2001, with exports of over 10 million bags representing $1.4 billion in revenue, coffee continued to play a key role in the Colombian economy. As of 2001, Colombia produced 10% of the world?s coffee total exports.

Coffee, including growing and processing, is one of the most important legitimate industries in Colombia. As of 2000, coffee accounted for 3.5% of Colombian GDP and 13.5% of Colombian exports. The coffee industry provides employment for about 800,000 people, representing nearly a third of total rural employment. For more than one century coffee generated the majority of the country?s foreign income, and today its greatest economic and social importance lies in its capacity to generate employment, redistribute income, and promote regional development, supporting the social stability of the coffee zones.
Almost 90% of the coffee producers are very small farmers, with less than 3 hectares planted in coffee. These producers depend upon family work to support their crops. Social, cultural, and environmental characteristics further increase the diversity of coffee growers and production systems. Currently, around 560.000 families are small and medium farmers who depend directly on coffee production. Most are located in the central region of Colombia. An estimated three million people depend, in one way or another, on the different stages of the coffee industry (production and harvesting, transformation, marketing, etc.). Additionally, the country's coffee regions have achieved a faster, more consolidated level of development primarily because of the long tradition of cultivating coffee with a competitive advantage and also by the important role that the institutional arrangement of the coffee growers has played in the past.

The National Federation of Coffee Growers of Colombia
Since its birth in 1927, the National Federation of Coffee Growers has projected itself as an institution with solid foundations and specific programs, oriented not only toward the coffee sector, but also toward Colombia's general development process.
Federacafe?s efforts in the economic and social development of the coffee region are concentrated particularly on scientific research, agricultural extension, and diversification of coffee-related income, physical infrastructure, education, health, and cooperatives. Also there are efforts in the promotion of coffee (100% Colombian Coffee and Juan Valdéz), the orderly warehousing of production surpluses, and all stages of commercialization.
Federacafe has had important effects on the competitiveness of the country?s coffee industry. Its main instruments include:
* The growers? minimum support price that has given growers relatively stable prices and protection from international price fluctuations
* Investments that Federacafe has made in the social and physical infrastructure in coffee producing regions
* The deal holding system which has helped boost exports since 1989 and minimized the risk of supply problems to roasters
* The promotional campaign that has achieved a remarkable degree of consumer brand awareness and has assisted the expansion of coffee exports after 1989
* The quality control of Colombian coffee exports
* The research and extension program. Federacafe is one of the few producer associations in Colombia that has its own self-financed research program that responds to actual farmers needs.

Domestic and International Marketing
One Federacafe's accomplishments has been its involvement in the domestic and international marketing process of coffee. Federacafe, coffee growers' cooperatives, and private exporters handle domestic marketing, which operates at multiple points across the coffee region. International marketing is done by private exporters and by Federacafe, but with a strict volume and quality control of total coffee exports from the Federacafe
Federacafe, through its extensive network of representatives? offices, signs annual Supply Agreements with almost all international coffee roasters. These Agreements call for the roasters to purchase a minimum amount of Colombian coffee during the year. Supply agreements also call for the roasters to report to Federacafe all purchases of coffee from Colombian suppliers as they occur. This process allows Federacafe to ensure that roasters are purchasing the coffee they are committed to buy and verifies that exporters are shipping the product as agreed with the roaster. Currently, 93% of total Colombian coffee exports are governed by Supply Agreements. The remaining 7% are completed through "spot" sales. Colombia, through the Coffee Fund and private exporters, sells Colombian Coffee to virtually all of the significant coffee roasters in the world.

Promotion and Advertisement
Federacafe is responsible for creating and maintaining a favorable image for Colombian coffee around the world as well as promoting the consumption of Colombian coffee. Federacafe is committed to maintaining high quality standards, not only of the green coffee shipped to the roasters, but also of the final product sold to consumers through supermarkets and other sales points.
Federacafe develops marketing and advertising campaigns to promote consumption of Colombian coffee. Since 1959, Colombian coffee has been promoted though the popular advertising campaign featuring Juan Valdez. Today, according to surveys, 80% of the people in the United States are aware of Colombian coffee, and 85% can identify the logo. Another successful campaign has been the "100% Pure Colombian Coffee" slogan which seeks to identify those products made solely from Colombian coffee.

Federacafe seeks to increase the consumer awareness of the superior properties and taste of Colombian coffee. It entered into Promotion Agreements with several well-known multinational corporations, and in return for contributions to their advertising campaigns the companies agree to exclusively use "100% Colombian Coffee" products. Also, Federacafe informs customers that they are purchasing pure Colombian coffee, by allowing roasters to use the Juan Valdez logo on their packages. The Federation is also active in joint advertising campaigns with coffee roasters.

Because of this effort and the reliability of exports to clients, Colombia has sold its coffee with a price premium on average of $0.10/lb over coffee from its main competitors, the Central American countries.

Development of the Coffee Region
One major impact of Federacafe has been the furthering of the development process of the coffee region. The standard of living of this population, its education, family structure, and sense of community provide a good example of the success of the Federation and its ability to adapt to new realities. Federacafe, not only limited its actions regarding production, commercial, and the financial side of the industry, but also concentrated its efforts on providing services to rural families. In addition, Federacafe worked on regional development, such as building physical and social infrastructure (i.e. rural roads, water supply systems, schools, etc.), and investing in key non-coffee industries to achieve the necessary development linkages to obtain a higher level of wellbeing in the coffee regions. Since 1930, Federacafe has allocated more than $2 billion to physical and social infrastructure in the region.

Some of these accomplishments in infrastructure investment are the following:
-16,000 km of new roads
- 69,000 km of road Improvement
- 1,700 bridges
- 217,000 houses with electrification
- 4,000 villages with water supply systems benefiting 1.7 million people
- 15,900 classrooms and 5,400 houses for teachers benefiting 350,000 students
- 255 Health Units and 33 Hospitals built during the last ten years.

Research and Extension
Federacafe has also introduced the adoption of new technologies in the last three decades, which allowed the coffee sector to remain competitive and assured sustainability of small and medium farmers. The first major innovation was the adaptation and diffusion of "Caturra" variety with higher yields and cropping density. The second was introduction of the leaf-rust resistant variety , a biotechnological product that allowed Federacafe to control its potential negative impact to the sector. Currently, Federacafe is undergoing different research programs to find better ways to control the "coffee berry borer" ; a coffee plague, that has already caused significant financial burden to some coffee farmers. Its control requires extra production costs, but in addition the 'irregular-shaped' coffee bean resulting from the plague brings in only half the price of other coffee beans.

Federacafe´s research program is self-financed and demand driven and is a system in which the specific needs of farmers are taken into account when the research agenda is designed. Federacafe has been able to obtain important research results related to new producing and processing technologies with low environmental impacts. Furthermore, through its extension program, Federacafe rapidly transferred these technologies to coffee producers.

As a consequence, Federacafe has benefited coffee growers in different and significant ways. In the first place, its policies affect producer incentives. Its price policy without any doubt is the one that provides the strongest incentive to the coffee grower. There is a strong dependency on the farmer?s decisions in the domestic price of coffee, such as input use, farm investment, pest control, etc. In the second place, Federacafe influences the resource endowments of the sector through its traditional investment programs in social and physical infrastructure and environmental protection policies. Last of all, Federacafe policies that influence producer access to resources include agricultural credit policies, domestic marketing policies, regulations for input markets, export promotion policies, and policies for agricultural research and extension.

Institutional Attributes
There are some characteristics that make Federacafe special and important for Colombia. These attributes are:
-Most Consolidated Experience of Civil Society in the country
-Together with the Catholic Church, Federacafe is the institution that gathers more representatives of civil society than any other one in Colombia.
This characteristic in and of itself is an important attribute, given the importance and responsibility that civil society, in all its representations has in public policymaking, public resource allocation, and control in the whole development process.

Credibility
Federacafe is well known in the country for being an institution that knows how to execute projects, from the planning to the execution stages. It is particularly known for the quality of its projects, as well as for their cost-effectiveness. An example of this attribute was shown recently when Federacafe was assigned by the Government to reconstruct the rural infrastructure damaged by the earthquake that hit the coffee region in January 1999. In less than a year, Federacafe mobilized important resources to rebuild roads, houses, water supply systems, churches, productive infrastructure, as well as providing a safety net program quickly for coffee farmers.

Transparency
Additionally, the level of corruption within the institution is minimum. This characteristic has resulted in an unparallel image of transparency that has helped Federacafe to participate freely, without major imposed constraints, as an important actor in the development process of the country as a whole.

Knowledge and Experience in the Development Process of the Coffee Region
Federacafé and its regional and municipal offices have fostered rural development for over seventy years and thus are able to trigger local initiatives in the coffee zones such as the consolidation of many industries and clusters in the coffee region. Federacafe has accumulated a rich knowledge and experience of this region and its development process.

Capacity of Gathering Development Agents
One characteristic of Federacafe that makes this institution special and particular is its capacity to gathering development agents at all territorial levels to attain specific objectives. This phenomenon happens at the local level (project, municipality), at the regional level (departmental) and at the national level, and not necessarily with objectives directly related to the coffee sector. Some of the objectives have been, for example, the development of a particular industry or projects that required participation of several actors, such as, private and public sectors, other NGOs, and civil society in general.