Colombian Lawmakers Asks Government For Rescue Plan For Coffee Cooperatives
(Adds comments from the Finance Minister, Senators, general manager of coffee growers federation)
Coffee Network (Bogota)- The Colombian congress has requested the government to save the coffee cooperative De los Andes as well as two additional coffee cooperatives that have been intervened by the country’s Superintendency of the Solidarity Economy (Supersolidaria) amid sharp losses among cooperatives and the risks of bankruptcy of additional cooperatives.
Senate Juan Felipe Lemos, who cited a debate at the fourth commission of the Senate, requested top government officials including the Minister of Agriculture and the Minister of Finance, to save the net worth of the coffee cooperative De Los Andes as it is being liquidated.
The request also happens as the SuperSolidaria has also intervened in the assets and business of the coffee cooperative of Tolima COOPCAFITOLIMA and the coffee cooperative of Cundinarmarca – COODECAFEC because of high losses.
“We cannot continue transferring all the responsibility to the small and medium-sized coffee growers. This will end up putting a greater risk of not closing all the coffee cooperatives. A table between the federation, the government and the coffee grower needs to be formed. We request a rescue plan,” Lemos said.
Coffee cooperatives in Colombia recorded combined net losses of COP37.275 billion Colombian pesos (US$10 million) in 2021 as coffee growers failed to fulfill with the delivery of beans in the futures contracts.
A total of 59 coffee cooperatives that reported their financial statements to the country’s Superintendency of the Solidarity Economy (Supersolidaria), recorded combined losses of almost US$10 million, Supersolidaria told Coffee Network.
The coffee cooperatives that sent information as of December 31, 2021, they had Ps286.2 billion among accounts receivable. In addition, they had COP353 billion in debts to be paid.
The 59 coffee cooperatives had net assets worth COP1.24 trillion and liabilities worth COP868 billion. Their net worth was COP373.23 billion. The cooperatives employ 2,125 people and have 71,269 associates or coffee growers who sell to them.
The sharp losses of the coffee cooperatives, the risks of bankruptcy of additional cooperatives and the liquidation of the country’s second-largest De Los Andes cooperatives, prompted lawmakers to convene a hearing at the senate.
Sharp losses among coffee cooperatives are the combination of lower supplies and breaching contracts among grower when prices are high.
Colombian Finance Minister Jose Manuel Restrepo said during the hearing, the delivery of coffee beans in the futures contract must be fulfilled.
A total of 7,400 coffee growers breached contracts, which means 1.385% of total coffee growers are the ones who are unfulfilled with deliveries, putting at risk the institution of coffee.
“Futures contracts must be fulfilled when things go wrong, and must be fulfilled when things go well because they are contracts,” Restrepo said during the debate.
The government also launched a credit line for coffee cooperatives with the Banco Agrario, the state-controlled agricultural bank, but the coffee cooperatives did not send current banking information for the credit study.
“They had no interest in participating in that proposal,” Restrepo noted.
Meanwhile, the Ministry of Finance, the coffee growers federation FNC, SuperSolidaria, the state bank Finagro, Banco Agrario have formed a table to discuss the future of coffee cooperatives.
Senator Aida Avella requested the minister to stop the embargoes of land and farms among coffee growers, who did not fulfill with the delivery of beans. Avella also requested a rescue plan to coffee cooperatives to avoid the bankruptcy of more cooperatives.
Roberto Velez, general manager of the coffee growers federation, said FNC agrees to grant coffee growers more time to deliver their beans.
"We are saying coffee growers deliver one-third of your agreed contract today. One third tomorrow, and an additional one-third in the near future," Velez told lawmakers.
Reasons to breach contracts
Coffee growers have breached coffee contracts because of several reasons, Senator Lemos said. The pandemic affected productivity at coffee farms. In addition, Colombia’s coffee production fell to 12.6 million bags of 60-kg in 2021, down from about 14 million bags in the previous year. In addition, high cost of agricultural inputs and labor are hitting growers, Lemos cited.
The production cost of 125kg of parchment coffee today costs COP1.25 million Colombian pesos ($312.5), compared with COP811,405 pesos in 2021.
"It is unfair that growers have to fulfill with the delivery of beans when they sealed contracts with prices of around COP1 million pesos, but their production costs are higher than revenues," Lemos noted.
The lawmaker is also asking the government to grant growers, who had committed to deliver beans, more time to deliver beans.
De Los Andes Cooperative
De Los Andes cooperative will be liquidated due to low coffee volume of sales and the non-compliance with future coffee deliveries, which derailed earlier plans to save the cooperative.
The superintendence accepted a report from the intervening agent, Alejandro Revollo, who considered the future of this solidarity organization unfeasible, given the deterioration of its economic variables and the impossibility of signing agreements with creditors.
The coffee cooperative, the country’s second-largest coffee cooperative in terms of coffee purchases, was heavily impacted by the low volume of bean sales by the associates and by the non-compliance with future coffee deliveries.
"Coffee sales fell from 28 million kilos in 2020 to 11 million in 2021, that is, a decrease of more than 50%, which disarmed all the projections and the principles of agreement that we had elaborated with the creditors," Revollo told the local newspaper EL Colombiano.
According to the resolution of the superintendency, at the end of 2021, the percentage of unfulfilled futures coffee contract sales was 84%.
“The evolution of the cooperative has moved away from initial expectations and its current situation is precarious and, above all, worsens an already challenging scenario in which a debt restructuring had been negotiated,” Supersolidaria said.
To execute the liquidation of the cooperative, a period of one year was determined. José William Valencia was appointed as liquidator.
Roberto Velez said it is difficult to believe how the former general manager of De Los Andes cooperative mismanaged COP120 billion. He is also requesting the prosecutor office to move fast and bring the former manager to face the justice system.
By Diana Delgado
