STiR coffee and tea magazine

24 STiR coffee and tea | 2024 Issue 4 (August / September) A By Diana Jendoubi fter the dismantling of the coffee quota system in 1989, global production rates skyrocketed, and many producing countries opened their coffee sectors to liberalization and foreign direct investment (FDI). For some countries, like Vietnam, deregulation transformed their industry, while others experienced significant setbacks. Aware of the growing crisis for smallholder coffee farmers, many countries seek solutions to the issues caused by liberalization. Can coffee producers find a way to make liberalization work for them? Deregulation and the Coffee Paradox Benoit Daviron and Stefano Ponte used the phrase 'coffee paradox' in 2005 to describe the disparity between booming coffee-consuming countries and the crisis coffee-pro- ducing countries face. The International Coffee Agreement, signed in 1962, kept cof- fee prices high and stable by holding exporting countries to specific quotas. After the quotas were suspended, international coffee prices declined drastically as production rates soared. According to the International Coffee Organization (ICO), global production has increased by almost 60%, going from an average of 95.4 million bags at the beginning of the 1990s to an estimated 151.6 million bags by 2017. Sudden aggressive competition at a global scale caused producing countries to lose their influence on coffee prices in the international market. Prices declined almost 75% after 1989, from $177.25 per 60kg bag to $101.85 in 1995. Shifting price control from exporting countries to large corporations and changes in regulations and governance of the global value chain have detrimentally affected producers. Price volatility reduces a coffee grower's ability to invest in farming and production improvements, threatening sustainable coffee and global production. The Effects of Global Liberalization on Coffee Producers Workers from the Klasik Beans Coopera- tive in Puntang, West Java, sort coffee beans. | Photo courtesy Bandung Coffee Exchange Africa Post Deregulation Many producing countries turned to FDI and liberalization in an attempt to revi- talize and stabilize flatlining coffee sec- tors. Some were successful, others were not. In a 2017 report on Value Addition in the African Coffee Sector, ICO states that Africa's production rates declined by as much as 50% after 1990. "The conti- nent's share in global output decreased from 17.6% in 1990 to 10.8% in 2016… Over the same period, Africa's share in the total value of global exports fell by a greater proportion, from 21% in 1990 to only 9.4% in 2016." While issues such as civil war and po- litical unrest were partly to blame for the decline of some African-producing na- tions, the primary cause was liberalization. "An important pattern [in the decline of African coffee sectors] is the liberaliza- tion of the coffee sectors following the dismantling of the export quota systems under the International Coffee Agree- ment. Regulatory frameworks and na- tional coffee institutions, such as coffee boards, which were buying coffee from farmers at institutional prices to market the coffee in Europe and other centers of

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