08 Mar 2013 06:53 EST DJ UPDATE: Colombia Coffee Farmers End Strike over
Falling Prices --Coffee growers agree to end protests; government agrees to hike subsidies
--Drop in global coffee prices have cut Colombia farmers' earnings nearly 40%
--Two-week strike included roadblocks that caused food and fuel shortages
By Dan Molinski
BOGOTA--Colombia's government signed a deal Friday with coffee farmers upset over falling bean prices, ending a two week strike which has included violent protests and highway blockades.
"I celebrate this agreement with coffee growers," President Juan Manuel Santos said on his office's website. The deal was signed by Agriculture Minister Juan Camilo Restrepo and other government negotiators, as well as
representatives of the protesters, including the group's most-vocal leader, Orlando Beltran.
Under the terms of the deal, the government will raise the subsidy for each 275 pound (125 kilogram) bag of parchment coffee to 145,000 pesos ($80). It already raised the subsidy to COP115,000 last week from COP60,000 in hopes that would end the strike, but farmers rejected it and continued to protest.
Local television images showed thousands of protesters beginning to clear roadblocks Friday morning after hearing the deal was finalized. The roadblocks led to food and fuel shortages in many towns and cities in the south. In the border state of Narino the government was forced to import fuel from Ecuador as some gas stations began price-gouging, reportedly charging up to $21 for a gallon a gasoline.
The strike began Feb. 25 as farmers became fed up with Colombian coffee export prices that have fallen nearly 40% since February 2012. The price paid Thursday for a 275 pound bag was COP520,000; farmers say production costs alone, including labor and insecticide, amount to COP550,000 per bag.
Colombia is one of the world's largest coffee exporters and Latin America's biggest producer of mild, washed arabica beans. Oil and coal long ago overtook coffee as Colombia's main exports, but the sector remains a national treasure and is the only source of income for about 560,000 families, most of whom pick
the beans by hand on small plots of land.
The government also said it would raise the subsidy to COP165,000 if prices fall below COP480,000, in response to concerns that prices may fall even further over the coming months. Conversely, the government will stop paying if the price climbs significantly. It has set a maximum price of COP700,000.
Coffee farmers originally demanded the government agree to a guaranteed "base price" for each bag of coffee of at least COP650,000. But the government, apparently concerned global prices could fall even further, refused to make such an offer. "There will be no base price," the president's office said in announcing the deal ending the strike.
The impact of lower prices has been worsened by the peso rising 10% against the U.S. dollar last year, further squeezing farmers' already tight margins.
Mr. Santos acknowledged that the subsidy, which now represents about 27% of the market price, will require an "immense fiscal effort" this year for about COP800 billion ($444 million).
Colombia is fiscally healthy following a years-long oil boom that has provided a huge increase in tax revenue and consistently strong economic growth. The government expects a 2013 consolidated public deficit of around 1% of gross domestic product.
Write to Dan Molinski at email@example.com