Wednesday, March 21, 2012

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......


  1. Boludo Tejano5:26 AM

    Helluvah Cup,Helluvah story. As you point out, the Chavista desire to control as much as possible simply results in paralysis of production.

    I fear that Happy Expropriators are already aware of the existence of Happy Coffee.

    SADA : Sadismo Actual para el Derrumbe de Agricultura

    1. Oh yes, they are. They already tried to take over the neighbors. They failed for the time being but it is just a matter of time for their return.

    2. Cute acronym by the way..... in a sick way of course.

    3. Boludo Tejano6:19 AM

      But of course. What else can you expect from someone who was raised on Tom Lehrer, who created such inspirational songs as the Masochism Tango.

  2. So now Happy Coffee have to behave like drug dealers pretty much, walk softly, don't attract attention, sell it on the corner.

    "Psst buddy!, wanna buy some coffee?"

  3. Daniel, eso no es nada.

    Venezuela is importing black beans. Black beans! You drop black beans on your path in Venezuela and when you go back you see the plant growing, literally.
    And we import black beans from Nicaragua now. Venezuela was producing as much coffee as Colombia in 1910.

    I think the food import is much more than 50%+, but then it is harder to get reliable numbers in Venezuela now than in 1770. One of my cousins used to grow oranges, Valencia oranges...there is no point now because of the currency exchange and other stuff: better to import oranges from El Impeeeerio.

    To compare, look at an umbrella site from Flemish farmers:
    The data in English is just a tiny bit compared to what they have there in Dutch (logically, as it is primarily for the internal market). Farming makes less than 2% of Belgium's GDP.

    Flanders is one of the most densely populated regions on Earth.

    Es para llorar, Venezuela, no?

    1. Quite Frankly Kepler, we've been importing black beans since I can remember. I'll never forget going to the port and seeing 50KG sacks of Black Beans, from Michigan USA no less, being unloaded onto waiting trucks. This was in 1983. However, your point and Daniel's is super valid of course.

      As for Oranges, if they are imported from anywhere it would be from Brazil and not the US, which imports TONS of OJ Concentrate from Brazil.

  4. Pathetic. Unbelievable. Not to say I don't believe you, just that I cannot fathom the minds that invented these processes. They don't make sense on basically any level whatsoever. Expropriation makes more sense, because it assures you something today even as you screw up tomorrow. This plan just screws up tomorrow with nothing in return.

    By the way, is there a reason you picked HC as the initials of your two companies? Is there a political allegory here as well?

    And Tejano, kudos for bringing in Tom Lehrer. If this were a song of his, it would all make sense. Maybe the Socialism Tango? Not sure you'd have to change another word.

    1. HC, you got me! I was wondering if anyone would pick it up :) Bruni almost did but she was too dazzled by my name choices ;)

    2. Anonymous6:15 PM

      "Not to say I don't believe you, just that I cannot fathom the minds that invented these processes."

      It' isn't hard to guess the reasons: (1) to hassle any company so that the "evil oligarchs ™" that own it give up and either leave the country or give the government reasons to expropriate. And (2) to maximize the number of chavista loyals involved in the bureaucratic process so everyone can get some extortion money while they wait for the expropriation to happen.

    3. Anonymous, I'm not going to dispute either motivation. However, it seems like for the first one, there are far, far simpler methods. Second one, too, though adding layers of confusion creates additional incentives to quickly cut through the red tape. The only problem is, it seems to create incentives for sellers/buyers to pay the bribe to someone other than who made the policy. So I don't see the purpose there.

      Daniel, I read you like a book. (Maybe like a book written in Romanian.)

  5. Very interesting story Daniel, you should publish more of those because they show how screwed the system is.

    BTW, you should consider a career in publicity marketing, those product names were pretty catchy. Here are some slogans: "Happy coffee for happy hour","There is no coffee like Happy Coffee". I think that if I ever open a coffee shop, I'll name it "Happy Coffee"!

    Even in Spanish: "Tómate tu Café Feliz"...

    1. Well, Bruni, I am sure that if Happy Coffee could do it they would be delighted to furnish in exclusivity your café in Montreal. Maybe in 2013? start scouring for locations...

    2. There is a very popular Montreal coffee shop and bistro owned by Venezuelans that is called "Café République". I think they sell (or used to sell) Venezuelan coffee.

      When I was a coffee drinker I bought my Venezuelan coffee in "La vieille Europe" on St. Laurent. I could also find vzlan coffee in "La Brulerie St. Denis". I have not drank coffee for twelve years now, so I don't know much about the current trendy places, but surely they could start on those that I mentioned. Coffee is still very popular here.

  6. Island Canuck2:49 PM

    The whole craziness goes much further than agriculture.

    For those of us in the tourism industry we are watching the decay of a vibrant market that in past years brought thousands of foreign tourists to Margarita. That flow has dried up into a trickle. In the good times many posadas & hotels were built with the expectation of continued growth. Many of them now sit empty for most of the year.

    We can't survive on a national market that at most accounts for just 10 or 12 weeks per year and doesn't fill all the available rooms.

    For more than 20 years we never had less than 90% occupancy in February - this year it was 30%. I can tell how bad things are just by the volume of searches on Google for key terms related to Margarita that have dropped dramatically in the last 2 years.

    The few foreign travelers that do arrive tend to be "budget" travelers. Nothing wrong with that except they now have to break the law to get Bs. at a rate that allows them to continue to consider that it is a "budget" location. If they had to use Bs. at the official rate we would be more expensive than Aruba. Heaven help them if they didn't arrive with US$ in cash and have to use their debit or credit cards. Even with black market Bs. they still complain that things are expensive.

    The country is broken and needs to be fixed quickly or we are going to see a major collapse in the tourism market here on the Island that will affect everyone connected with the industry.

  7. Anonymous2:55 PM

    This story is almost deja vu for me. Actually, a friend had a small place in mountains and had 125 trees..anyway, they sold it (very cheap) couple of years ago. They left for several reasons-crime was number 1,but they were also expecting to be expropriated..
    Anyway, I felt sad because I hate to see the small farmers quit their businesses...

  8. Anonymous4:10 PM

    Este nos amarga el café, por esto a votar todos el 7 de Octubre en contra de El, sino nos quedamos igualito a los cubanos, estoy leyendo La Habana sin Tacones de Maria Elena Lavaud, vale la pena que lo lean todos los venezolanos para saber lo que los espera si no votan.
    La Maga Lee

  9. Seems like the only solution is to cut down the coffee trees and open up a red t-shirt cooperative.

    1. Anonymous8:11 PM

      China already has the Bolivarian red t-shirt contract until 2040. Chavez set the exchange at 1 barrel Vzla crude = 1 medium red t-shirt in 2010.

  10. Anonymous8:08 PM

    Chavez is following Castro. Castro forced the growing of sugar cane and ruined virtually all agricultural production in Cuba. Chavez is on track to destroy Venezuelan agriculture. Just threats and time will stop the remaining good farms.

  11. 1979 Boat People5:55 AM

    The problem is quite a fews of Venezueleans still believe that Thugo Chavez can turn rock into food with his magic after 12 long years under this regime.

  12. Anonymous10:58 AM

    I doubt it is a coincidence that Chavez arrives in Cuba at exactly the same time as the Pope will be in Cuba. I have a haunch that Chavez is making a rather large “contribution” to the Catholic Church (in gold) in order to buy
    a blessing for himself and Fidel Castro. We shall see, but, I would bet on it.
    And, I will never set foot in a Catholic Church again if this happens and I would urge others to consider doing likewise.

  13. Anonymous4:59 PM

    O.T. JVR just mentioned you on his TV show.
    Congrats Daniel they are talking about you

    1. What?!?!? Details, please!

  14. Boludo Tejano9:07 PM

    In reply to "Maracaibo Doesn't Need Your Coffee, Frank Sinatra sings The Coffee Song. One comment in a humorous tone: while the song says there is no tea in Brazil,southern Brazil has a lot of yerba mate.[Canarias brand, for example.]

    My favorite coffee was in Guatemala- from the farm's own trees. No comparison to what is in the store.I imagine that Happy Coffee is as good, if consumed nearby.

    Re Castro and sugar cane. In 1970 Fidel had a big campaign to harvest 10 million tons- which fell short by a million and a half tons. The slogan for the campaign was "Diez Millones Van." [Ten million on the way.] In looking at 50 years of Castro rule, the motto could also be, "Diez Millones Van- a Miami si Pueden." Last I checked, sugar production in Cuba was around 4-5 million tons.

  15. Boludo Tejano12:48 AM

    Venezuela is truly the land of Grace. It is soon to be blessed with Cuban ice cream. Chávez Strengthens Cuban Ties With Plan for Ice Cream Factory. Undoubtedly the ice cream will come from the descendants of Ubre Blanca, a.k.a. Wonder Cow.

  16. I am reading your blog in Vail, Colorado. Having experienced Margarita, Aragua, Guarico, Rio Chico, and many other beautiful places in Venezuela as a child, I long to share them with my wife and children. Regretfully, I cannot risk their welfare and travel to Venezuela only when extremely necessary, child's baptism.

    I am not Venezuelan, but have always always been proud to say I grew up there. I am saddened now to hear that it would be safer to vacation in Medellin than Caracas.

    I pray for a safe election.

  17. Anonymous6:45 PM

    Fui trabajador de Café Venezuela, S.A., he visto algunos de los comentarios hechos por camaradas y personas que intereso esta verdad es que el presidente de Café Venezuela ha mentido con esta información, el no es mas de los muchos corruptos escondidos en la revolución..les recuerdo que la planta principal de esta empresa queda en el estado Trujillo, Venezuela, la persona que inicio en 2003 esta planta y a pura eficiencia con una inyección muy poca fue la Ing. Alida Moreno con nosotros..Luego levanto la planta de Barquisimeto que pertenecía Corporación Venezolana Agraria, que estaba en quiebra, claro la dirigía gente de Elías jagua .el vice presidente de Venezuela, para ese entonces ministro de la cartera agrícola. En ese momento café Venezuela era del ministerio de agricultura y tierras, luego ella saco adelante esa planta de cva en Barquisimeto, recuerdo que Chávez hizo un a lo presidente en Bo****, para hablar de Café Venezuela y ninguno de nosotros pudo entrar al acto, claro Elías jagua se encargo que el se saliera con gloria como triunfo del cuando en verdad había quebrado cva café en Barquisimeto..a la postre quebró la corporación agraria.. Coincidencia no es...Este señor Fidel Ferrer miente vayan a Trujillo y se enteran de la verdad..Bueno hasta el punto que ella una persona que demostró con hechos eficiencia fue vulgarmente apartada inescrupulosamente por la gente de Elías jagua cuando en 2010 formaron la nueva corporación. Hoy día Venezuela importa más grano claro para ellos es lucrativo los negocios de importación por las comisiones en los negocios. Hoy día café Venezuela produce menos de lo que estima proyección que venía desde 2008. Café Venezuela sobrevive con créditos de la banca..También los han malgastado. Tienen de gerente general a un corrupto inhabilitado políticamente por Asamblea Nacional el señor Walter D”Orazio que participo en diferentes actos de corrupción con el pasado ex gobernador del estado que resulto ser un escuálido...Bueno hay les dejo eso mientras que los caficultores venezolanos abandona la siembra...claro Elías jagua quiere es importar coincidencia que Café Venezuela, este adscrita a la vicepresidencia y no a su ministerio natural…

  18. Anonymous4:45 PM

    Where can I buy Venezuelan Coffee beans in Montreal? Thanks.


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