Columbia Enters the Coffee Industry

Steve GSeptember 12th, 2007
By: Steve G

(Page 2 of 5)

thumb-beans.jpg

Farmers harvesting beans

Colombia made significant moves to be a major player in the coffee industry. Fueled by Brazilian success with coffee, many Colombians moved into the farmlands to develop their own coffee farms. For many people, coffee seemed like the fast track to fortune and prosperity. Coffee production in Colombia increased tenfold and coffee became a major issue in Colombia’s politics. Columbia created its own group, very similar to Brazil’s IBC, the Federación Nacional de Cafeteros (FNC). Whereas IBC believed in control and regulation, the FNC pushed for free market trading. Forcing itself into more expanding markets and producing more coffee beans, Colombia wanted the world to associate coffee with its country. Remember Juan Valdez and the Donkey? How about Yuban? These are all marketing schemes hailing from Colombia. Colombia aimed to undo all of the steps Brazil seemed to make. Colombia’s FNC would soon bump heads with Brazil’s IBC.

Colombia undid Brazil's business strategy
Colombia undid Brazil's business strategy

Colombia’s tactics frustrated Brazil. Brazil thought of the FNC as free riders; it was Brazil that did all the work to maintain coffee prices. While Colombia kept stimulating demand with unrestricted exports, Brazil had to minimize production to maintain price levels. After a long and vicious power struggle, the two countries came to a truce. Colombian coffee producers would limit supply through subsidies from the government, and therefore control and maintain prices.

Although Colombia stopped exporting so much coffee, other countries stepped up production to fill the void Columbia left. Ironically, Colombia was feeling the exact pain it had caused Brazil. By 1937, the accord eventually collapsed and Colombia’s aggressive market practices re-emerged. As a result, Brazil engaged in a trade war with Colombia and decided to flood its stockpiled coffee into the market, thus collapsing the prices. Soon World War II broke out, resulting in further depression in the coffee market. The coffee market would not recover until after the war ended.

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