Every week, along the way to my 8:30 class, I cannot resist stopping at Starbucks for my morning coffee. Coffee is a prominent part of people's daily lives. Around the world, more than two billion cups of coffee are purchased every day (Álvarez 2010:93). Clearly, I am one of many who indulge in this morning tradition. The global mass consumption of this hot commodity has directed my attention to question the impact of the coffee industry on local farmers in producing nations, specifically Colombia. The trading of coffee between North America and Colombia has produced a situation of dependency. Although there have been some economic benefits and fair trade initiatives occurring in the industry, they have not proven to be entirely effective due to bias interests of western companies and the lack of option for consumers. The following paper will examine how the coffee industry, through the acting of North American companies, has led to displacement of workers, economic hardship and a state of dependency in Colombia
Second to oil, coffee is the most valued trading commodity in the world. It is currently produced globally in more than one hundred countries (Topik 2000:145). In Colombia, coffee has continued to be an important crop, taking up 19 percent of land used for agricultural (Álvarez 2010:93). Coffee farming and consumption has historically held a significant place in Colombian society. Today, Colombia maintains its role as a consistent participant in coffee trade with a more than 8 million, 60-kilogram bags exported in 2009 alone (ICO 2010:2). 2009 also saw 1.3 billion dollars worth of merchandise traded between Canada and Colombia (Holden 2010:2). The mutual partnership in trade has established a good relationship between the two countries. In Canada, coffee makes up about 18 percent of its imports (Holden 2010:1). This makes it important to remain in good relations with Colombia and to support its growth and stability.
Thanks to is global popularity, coffee has been considered an important commodity for centuries. Consequently there has been a constant battle for control over the industry. When the market for coffee expanded, colonists were quick to assert control over coffee production. During this period, the Dutch East Indies Company, and various other colonists were imposing in coffee cultivating regions. Their goal was to generate income for the worlds developed countries through profits produced by numerous trading companies, at the expense of the local farmers (Topik 2000:147). During times of colonial domination, the standards of living for coffee farmers were poor. They were being heavily exploited through low returns on their harvests and lack of a voice in all matters regarding trading, prices and cultivation practices.
Today, the majority of the control over the coffee industry rests in the hands of four transnational corporations: Kraft, Nestle, Proctor & Gamble and Sara Lee (Topik 2000:145). Under the power exerted by these companies, domination of the coffee market belongs to the consuming nations; a radical shift from the traditional market of well balanced "producer-consumer relationships" (Topik 2000:147). The power exerted by these companies removes the producers' abilities to demand fair compensation. Furthermore, the instability of the market has had devastating effects on Colombians, including mass displacement of farmers. However, the corporations, tasked with protecting the interests of shareholders in consuming nations, have done little or nothing to help these farmers.
For a country that relies on coffee exports as a significant resource for trade, decline in selling prices or a hefty decrease in demand can lead to economic hardship. The most destructive example of this arose in Colombia in the1990's because of falling coffee prices. This crisis occurred due to a "deregulation of international prices in a new world scene", one that lacked an International Coffee Agreement to protect the interests of producing nations (Álvarez 2010:94). At the time, the International Coffee Agreement was used to regulate the supply of coffee on the world market. However, it collapsed in 1989 and by 2000 the profit paid out to farmers had dropped to its lowest in thirty years (Topik 2000:146). Before the price of coffee fell, Colombian farmers had enough money for food and various other necessities to support their family. However, their situation changed drastically with the fold of prices and civil war began to tare up the nation.
By 2000, the price of coffee had dropped significantly and the majority of the profits from production were being held in consuming nations (Topik 2000:147). The constant struggle for control over the industry had pushed the wellbeing of the farmers aside while Canada and other consuming nations took the resulting profits. A state of dependency arose as Colombia's economy saw further devastation and violence. All the while, the need for foreign currency became increasingly important. With production expanding in greater producing nations such as Brazil, Colombia struggled to overcome the devastation of fallen prices. This was exemplified by the GDP per capita in Colombia, which rose only $100 US through the ten-year period from 1990 to 2000, compared to the rise of $3000 US in the Canadian GDP per capita over the same period (United Nations 2008:1).
Colombian coffee farmers were still producing product, but were now being paid a great deal less for their harvests. The quantity of coffee on the international market was the same from 1992 to 1997 as it was from 2002 to 2006. However, despite the consistency of quantity, the value of the coffee exports dropped by 25 percent between the two five-year periods (Álvarez 2010:95). The drop in prices saw a considerable decrease in the standards of living for many coffee farmers in Colombia. The significant drop in income and rise of stagnation in the agriculture industry lead to the displacement of 3.5 million coffee farmers, which made up 7.5 percent of Colombia's population as of 2008 (Álvarez 2010:95). The farmers were forced to move to urban areas or abroad in search of work, usually settling for poor working conditions and low wages. The economic desolation left 63,000 families' coffee fields abandoned; an estimated 87,000 hectares of unused land (Álvarez 2010:95). This highlights the devastating outcomes that resulted from the fluctuation of unregulated international market prices, caused by capitalist ideologies imposed in the developed world. This situation further emphasizes Colombia's dependency on the coffee industry and the strength of prices to ensure stability of their economy.
Despite the overwhelming distress corporate control has forced on Colombia, there have been some improvements made in the protection of producing nations. Throughout the past decade, the rise in Fair Trade coffee sold on the market has led to increased profits for Colombian coffee farmers. Additionally, new trade agreements, such as the International Coffee Agreement, resigned in 2007, have provided opportunities for open dialogue among all coffee trading nations and serves to promote sustainable trade and development for all participants involved (TransFair 2008:2).
To date, Fair Trade coffee has been the most successful means to providing fair returns to coffee farmers. This in turn provides a wage sizable enough for decent living conditions for farmers and their families. The Dutch Fair Trade Organization was the first group to introduce Fair Trade coffee, in 1973 (Topik 2000:147). The main function of this process was to establish a "trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade" (Fairtrade Foundation 2004:2). Fair Trade agreements were created as "alternative trading regimes" to assist in seeing that exploited coffee producers received fair prices in exchange for their products (Raynolds 2004:1111). The market for Fair Trade products grew rapidly. Today, there are more than eight hundred producing organizations now involved in Fair Trade initiatives (Raynolds 2004:1110).
Coffee is currently the currently the largest Fair Trade commodity sold in Canada. There has been a substantial increase over the past decade, with more than 5 million kilograms of Fair Trade coffee sold on the Canadian market in 2008, compared to the meager twenty thousand kilograms of sold in 1998 (TransFair 2008:1). Although Fair Trade coffee is more expensive than regular coffee, many ethical consumers in North America are eager to purchase the more sustainable option. Almost 16,000 tones of Fair Trade coffee were purchase in 2002 (Raynolds 2004:1110). As a result, some growth was seen in coffee market and Fair Trading was responsible for a 50 percent sale increase seen in some countries (Raynolds 2004:1110). The new trading system put more control of the coffee cultivation and sales into the hands of the local producers. However, a huge issue still facing Fair Trade, is the inability to reach mass markets of consumers, which has made it difficult to attain consistent and adequate profits for farmers (TransFair, 2008:1).
In response to world food crises, there are a number of organizations now in place to oversee sectors of the coffee industry. These include Oxfam, the International Coffee Organization as well as TransFair, which ensure Fair Trade products are available on the Canadian market (Raynolds 2004:1111). These bodies serve to encourage fair, alternative options to importing consumers and increased profits to producing farmers. Furthermore, they have provided improved living conditions for coffee farmers in Colombia through sustainable development programs and financial aid initiated by these organizations.
One organization of particular importance with concern to protecting the interests of producing nations is the International Coffee Organization. Formed by the governments of importing and exporting nations, including Colombia but not Canada, the ICO stands to address challenges faced in the coffee industry (ICO 2010:1). This organization stimulates international cooperation through exchanging views on policies, initiating development projects and promoting market growth (ICO 2010:1). Together, its member governments embody 97% of world coffee producers and 80% of its consumers (ICO 2010:3). The main legislation backing the ICO is the International Coffee Agreement, which both Colombia and Canada have signed. Through this document, last resigned in 2007 after its collapse in 1989, the ICO has established many roles for itself. Some of it's most pressing tasks include pushing for sustainable trade, intergovernmental consultations to address issues regarding coffee, and establishing initiatives for development projects through assistance and funding from member nations (ICO 2010:1). Although there has been some progress made through corporate programs such as Nespresso ecolaboration by Nestle and the introduction of Fairtrade certified coffee to promote sustainable development (ICO, 2010:1), there have not been significant changes to the difficulties Colombian farmers face. Furthermore, some of the aid that arrives through organizations, especially ones involving governments, is tied to particular demands that serve the interests of the developed nations, rather than those of the developed world.
Through consistency in the quantity of exports, the use of comparative advantage and Fair Trade, Colombian coffee farmers have seen higher profits (Topik 2000:148). However, theses profits are still considerably lower than they were prior to the crisis of the 1900's. Until it becomes the priority of the controlling corporations to offer fair prices to producers, the initiatives made through Fair Trade will continue to fall short of making any substantial change in the lives of the majority of Colombian coffee farmers.
Additional advantages of the coffee industry for Colombian's are the benefits of job creation and infrastructure built to support the industry. Regardless of the negative aspects that arise from exploitation, Colombia still needs to maintain their coffee exports for foreign currency, otherwise their economy would suffer immensely. Even a farmer who has only five hectares of land must still hire many employees to work the fields. Colombian coffee farmers pay their staff about $7 US each day, including meals (Anonymous, 2005:1). Each year there are more than 600,000 jobs created through the coffee cultivation process in Colombia. (Balcazar Vargas, and Orozco, 1998:67). However, despite the steady jobs that have traditionally evolved from the industry, control by transnational corporations have not led to any significant change in reducing unemployment rates in Colombia, nor have they been able to provide decent working wages (Bose 1995:44). This is due in part to cheap labour found in other regions. However, it is mostly the result of dependency on the industry and the lack of political and economic power producing nations such as Colombia hold.
Canada has also participated in other initiatives to assist in the stimulation of Colombia's economy. Farmers require excellent land conditions and infrastructure, such as roads, training and processing equipment (Anonymous 2005:1). The need for materials to operate coffee farms and production plants have provided new opportunities for increased trade as well as stimulating local manufacturing in other industries. Through direct investment totaling approximately $739 million dollars, Canada has made attempts to encourage Colombia's economy. Furthermore, Canada has expended more than $355 million dollars of development assistance in Colombia through the Canadian International Development Agency (CIDA) since 1972 (Government of Canada 2010:1). Canada's investment in Colombia supports its pledge to encouraging sustainable development through development assistance, which it committed to with the signing of the International Coffee Agreement in 2007. However, despite an increase in investment, the positive effects of the investments were minimal. This argument is supported by a decrease in growth rate from 5.7 percent growth in 2005, down to 2.5 percent in 2008, which is the lowest growth rate seen in since 2000 (United Nations 2008:1). A huge problem is that the majority of the money invested by corporations through direct investment is cycled back to the developed world through the purchase of materials and avoidance of local taxes. Although infrastructure is constructed to run the industry, regions outside of Colombia provide most of the materials used in construction.
The coffee industry is a vital component of Colombia's economy. The production and trading of coffee employs hundreds of thousands of workers and provides millions of dollars in income to Colombia each year. However, today many problems remain for Colombians. Coffee Exports fell by 20.2 percent between 2009 and 2010, mostly a result of a poor harvesting season and the strength of Colombian currency (Azodi 2010:1). Furthermore, the coffee industry has been tainted by unfair prices and regulations. Control over the commodity has fallen into the hands of transnational corporations stationed in the developed world, leaving little precaution for the necessities of Colombia's people. Although the coffee industry has provided some economic benefits to Colombia, the unjust system has overshadowed these benefits and have left Colombia and its famer's poor, exploited and in a state of increasing dependency.
