Maracaibo does not need your coffee

That's all folks!
The failure of chavismo agricultural projects is not to be demonstrated anymore: that a country, which 15 years ago was tending to a balance of sorts in its agricultural import/export, is now importing more than half its food can be only explained by war or a devastating natural catastrophe.  In Venezuela both are combined under the misrule of chavismo.  Today we learned that in addition to all of the ills reported regularly in this blog, we are also getting an actual decrease in land under cultivation, an astonishing 7.8% drop for 2011 alone.  The thing is that it is not enough to throw money at the country side, you also need to understand how that one works out to have a mere remote chance of success.  During my last stay in Caracas I got a fascinating example on how it is simply impossible for chavismo to ever, ever increase agricultural production.

One of my customers has on the side a small coffee farm.  We will call him "Happy Coffee".  The folks at Happy Coffee do not live off their crop, they use it as an excuse to develop the land around their farm, in the hope of collecting enough revenues to pay the expenses associated with a recreational farm of a few hectares in the mountain slopes.  For fun they even got registered as an organic farm, an expensive undertaking that was later abandoned when a few years ago Chavez not only forbade export of coffee (no market for organics in Venezuela yet) but controlled coffee price.  Since the coffee was already planted they kept producing, but limiting themselves to round up what was already planted.  See, with the charges associated to such a farm, increasing production implies increased labor and supplies costs .  The Happy Coffee people would have to work more at it, risking to get, unbelievably, yet a lower return!!!!  And this in spite of a rather technical operation which allowed them to sell directly the dry coffee bean ready to roast and package.

They were not the only folks in that situation.  In the Andes where the bulk of production used to take place, the only ones in the business are those who have ways to send a portion of their coffee to Colombia where it is sold at international prices.  The end result is that Venezuela who a century ago lived off its coffee exports, before oil was found, now has to import low grade coffee from Brazil and Nicaragua.

The solution is simple, even in a socialist ways: allow for market prices but keep forbidding exportation.  I can guarantee you that we can still within two years be self sufficient again and in a couple more of years export can be reopened.  But that would go against ALL that chavismo preached for the past 13 years, so it ain't not gonna happen no time not soon, no sireee!

But now, believe it or not, new hurdles are coming to make sure coffee production does not increase!

Happy Coffee used to sell its beans to a small private roaster, who only bought high quality beans to selected small providers.  We will call them "Helluvah Cup".  They did get away with higher prices for many years because their production was excellent, was small and limited to selected stores from Valencia to Caracas, and one in Maracaibo.  When coffee prices got fixed, quality coffee and crap started costing the same and sure enough Helluvah Cup was not that good anymore.  Still, in spite of having to buy shitty coffee from Brazil or Nicaragua, their faithful old clients still provided enough good beans that their coffee remained better than the crap now sold by the nationalized roasters of Venezuela, a tragic event for the existence of good coffee cups that happened a couple of years ago, if memory serves me well.

Happy Coffee called Helluvah Cup to sell its beans this year, a few weeks ago.  Harvest had been rather good and we are talking here of maybe three to four pick up truck loads of green beans.  The glimmer of a slight profit existed as coffee prices had been adjusted late last year.  "Sure", replied Helluvah Cup, "we are looking forward your great product.  But you need to register through SADA first"  "SADA what?" replied Happy Coffee?

Among the many attempts at controlling everything by chavismo, there is SADA.  At first SADA who I cannot even bother searching for the acronym, was designed to screw the Polar group accused of hoarding all sorts of stuff.  No charges of hoarding could ever be pressed against Polar of course, because as a good capitalist industry hoarding is of no economical interest.  But SADA remained.  With SADA, any significant transport of food items anywhere in Venezuela must be declared.  The truck, the merchandise, the driver, the dates of delivery, everything must be recorded previously if you want to make a delivery.  This could maybe justified by a paranoid government for large scale products, in a country which has experienced lock outs in the past.  But now it extends to anything that goes beyond your personal stock of food.

Helluvah Cup explained to Happy Coffee that even though their production represented no more than a couple % points of their needs they still needed to report it to SADA before Helluvah Cup could accept it.  That required an inspection of the land by the INTII (the guys that happily expropriate things around at will), the Nazional Guard (to make sure you do not do drugs in between coffee plants, I suppose) and of course the SADA people.

Happy Coffee, horrified by the prospect, has decided not to sell its crop preferring to absorb the economic shock, instead getting out occasionally a 25 kg bag of coffee for "personal use", roasted at home.  See, once SADA et al. know what is going on the lands of Happy Coffee, these gentle folks are under one of the following risks: a chavista official likes their land for his own usage and decides to expropriate it for some "colectivo" saving for himself and his friends the usage of the bucolic house and surrounding gardens (case La Carolina of Diego Arria); outright expropriation if you decide to stop production or refuse to increase it even if you lose money on it; and even if you play the game, if one day the regime runs out of coffee for its own nationalized companies, they know where you store the unsold portion of your crop and it can simply come and take it away from you.  Sure enough, the "law" mandates they will leave with a receipt that you can cash, some day, months or even years after the fact, at the Agriculture Ministry.  Preferably after some major devaluation so you end up losing at least half of your money.

And yet, this is not all.  Helluvah cup, thinking that this comment would make Happy Coffee feel better told them that SADA has forbidden them to sell their coffee grounds in Maracaibo.  The reason?  See, according to SADA Maracaibo has enough coffee for its needs so Helluvah Cup needs to find customers elsewhere.

Yes, that is right, Helluvah cup, which at the very most may represent 0.X% of Maracaibo coffee sales through its lone client there, is barred from making deliveries to Maracaibo.  Maracuchos will have to drink the coffee SADA sends their way, not the one they prefer.

This, my friends, is communism, the methodology used by communism that ends up in ration cards that cannot even be honored.  In Venezuela it has been going slowly because there has been enough oil to soften the momentum, but sure enough we are heading that way.  If you forgive me this instant of editorializing.


PS: Happy Coffee is studying the legal implications of the situation because it simply cannot afford the potential costs of registration and the bureaucracy that comes with it.  For example, the truck and driver must be registered and if by happenstance your driver gets sick and is replaced at the last minute, or your truck breaks down and you move your produce to another truck before it gets stolen by high way robbers, quite a frequent occurrence, a road block of Nazional Guard can confiscate the shipment.  So you risk not only to pay for the freight anyway, but also to lose it...

The option of stopping production cold turkey is not possible either because there are enough snitches and SADA creeps scouring the country for a fast blackmailing buck.

Right now the best option is to find a different provider than Helluvah Cup, a local one that buys the little bit coffee produced still here and there in the region and let them deal with SADA even if this means selling your coffee below market price so that the intermediary makes a little bit of money.  Conceivably you could deliver to that guy as a local, a few bags at a time, minimizing the risks of confiscation, avoiding SADA registration for a while.

In other words, Happy Coffee has shelved any plan for production increase until at least 2013......