Latin American regulation: Policy brief

In brief

The recent NAEB-IGC coffee conference in Kigali has highlighted two key priorities for the industry:

• Improve access to inputs and extension services for farmers
• Establish a regulatory framework to improve the relationship between farmers and coffee washing stations and ensure a reasonable share of the international prices reaches the farmers.

Lessons from the experience of Colombia and Costa Rica may prove valuable:

• The Colombian SICA (Sistema de Información Cafetera – Coffee Information System) includes a dynamic feature in the census. This allows storage of up-to-date information on the situation and needs of the farmers in each region, thereby improving the efficiency of input delivery by government and private sector alike.
• Integrate features of the Costa Rica Coffee Board (ICAFE, Instituto del Café de Costa Rica), regulating the relationship among actors at different stages of the coffee value chain.

Coffee is an important export cash crop with the potential to lift farmers in rural areas out of poverty and increase foreign exchange reserves. Growing, processing, and marketing coffee, however, requires well-functioning markets at all stages of the chain: from input provisions and pre-harvest farming technology, to post-harvesting contract enforcement with foreign buyers.

The Draft National Coffee Plan and the IGC research recently presented at the February conference in Kigali highlight that coffee washing stations should become the heart of the value chain, from which inputs and extension services flow upstream to farmers, and high quality coffee flows downstream to buyers and exporters. However, both the National Coffee Plan and IGC research highlight challenges faced by the stations in developing stable relationships with farmers, extending inputs and extensions services to farmers, accessing credit, etc.

This note presents lessons from Colombia and Costa Rica, with a century old involvement in managing the coffee chains. Both countries represent success stories in the coffee sector, having established  strong reputations for quality and an equitable distribution of rents along the chain.

We focus on two main ideas from these countries: the Live Farmer Census in Colombia and the System of Payment and Liquidation in Costa Rica. The Colombia Live Farmer Census allows for a real-time monitoring of farmers production decisions, which opens the door to a significantly more efficient distribution of inputs and extension services to farmers from both the government and private sector alike – a significant challenge in the current system. The Costa Rican system of Payment and Liquidation achieves efficient cash flow management and helps consolidate farmers’ trust in the financial strength of the coffee washing stations.