PresentacióN Dalat Dic. 09 D.Pizano En

The Colombian Coffee Model

Diego Pizano,President 4C Association and advisor FNC

Dalat, December 3, 2009

Main challenges of small coffee producers

• Low prices and high volatility• Lack of rural credit;lack of organization• Commercialization problems(access,

promotion);storage problems;bad infrastructure• Lack of formal education and training• Low productivity;need for technical assistance and

scientific research• Lack of clarity on diversification options

paisaje

Precios reales del café colombiano

Precio Externo del Café Colombiano en Dólares Constantes de 20051821 - 2006

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$ L

ibra

Promedio de largo plazo US$ 2,8

Fuentes: Ocampo (1990) y FNC (2007)

Coffee as an engine of economic growth in Colombia

• Coffee and development are synonymous in Colombia

• In the XX century it was the principal contributor to export earnings and the main engine for growth

• Thrree million people live in the coffee growing areas;the sector employs directly 800,000 persons

FNC-response to market imperfections

• The FNC(National Federation of Coffee Growers) was created in 1927 as a non profit private entity to articulate the interest of growers and to stabilize incomes

• It has financed research, extension and diversification programas

• It has invested in health, education and in physical infrastructure(roads, bridges, aqueducts, electricity, telephone links).

• It monitors quality and supports marketing.

FNC

• FNC is one of the biggest agricultural NGO in the world.

• It is a private, non profit, non-partisan organization serving 500,000 coffee farmers and their families.

• Its governance structure is democratic.Farmers elect their coffee leaders st the town, regional and national levels.

FNC

• The activities of the FNC are financed with contributions of the coffee growers.A special ‘tax’ on coffee exports feeds the National Coffee Fund.

• The comparative advantage of coffee production in Colombia is derived from climate, topography, labour productivity, high quality but also from its coffee institutions.They have provided clear policies and a package of services to producers.

Distribution of Coffee Plots by Size

• Since 1970 there has been an increase in the number of coffee farms from 297,000 to 566,300 and a reduction in the coffee growing areas from 1.05 million to 870,000 hectares .

• In Colombia, 94.6% of the coffee farms have less than 5 hectares.It is a sector dominated by small holders.

Impact of the Coffee Crisis(1999-2004)

• Poverty and unemployment increased in a significant way.Threat from illicit crops.

• Migration to the cities and to other countries(Spain, USA) increased.

• Main social and economic indicators evolved in a negative way.

• Environmental indicators suffered.• Many growers could not invest in sustainability.

Responses to the Crisis

• With the support of the Government a program to increase productivity was implemented.

• Value added projects have been promoted:technical assistance programs were strengthened.

• Farmer’s debts were restructured.• The FNC was downsized and public infrastructure

programs are no longer financed exclusively by coffee growers.

Sustainability Policies

• Colombia’s strategy on sustainability is inscribed in the National Development Plan, which recognizes all three dimensions(economic, social and environmental) .

• Given the fact the country possesses the world’s second highest index of biodiversity, special attention to the preservation of natural resources has been rising over the past 20 years.

• At the ICO and at 4C meetings Colombia has stated that economic viability is the foundation for social and environmental sustainability.

• The FNC has participated in the 4C initiative because the organization believed that it was possible to draft a balanced and symmetrical code.All actors in the coffee chain should derive tangible benefits.

4C and Sustainability• The FNC is leveraging its track record on

sustainability to meet the goals of the 4C Association.

• A continuous improvement process has been framed within the FNC’s strategic plan(2008-2012) which seeeks to enhance the path towards sustainability.

• 4C objectives are aligned with the strategic plan.

FNC-Institutional Strenghts

• Purchase guarantee, extension service, research, information system, commercialization and quality policies.

• Traceability, support programs(education, competitiveness, infrastructure)

• Employees accredited as 4C instructors.

4C in Colombia

• More than 30,000 thousand farmers are working with the Code.2.4 million bags have been produced according to the 4C criteria.550 4C training workshops have been organized with farmers and extension experts. Educational materials have been prepared.

• Farmers are investing on waste management systems, warehouse farm infrastructure, washing stations and protection equipment(to handle pesticides).A typical farm may need to invest around US$1,000 to meet all the requirements of the Code.

Conclusions

• The FNC is an entity commited to sustainable development.”For Colombian Coffee farmers, sustainability is not a trend;it is a way of life”.

• FNC’s track record with the different sustainability initiatives and in particular with the 4C is facilitating a smooth transition from niche to mainstream.

FNC-External Evaluations

• Professor Robert Bates(Harvard):”The FNC has maximized export earnings,has provided valuable public goods,has improved quality and productivity and has reduced urban bias and transfers to other sectors”.

• World Bank(2002):”Coffee institutions in Colombia are not perfect but the National Federation of Coffee Growers is the most succesful coffee sector institution in the world”.

• The FNC is a dynamic and adaptable organization which tries to learm from experience.Coffee leaders in Colombia are commited to support this process of continuous improvement.

Coffee plants