Market Scene : Insects and Falling Prices Take Toll on Colombian Coffee : Farmers are not the only losers. Literacy, roads and utilities may suffer from the loss of revenue.

Coffee has always taken Arceseo Dominguez to higher places. Now it is dragging him down.

Born poor in the heart of Colombia’s rich coffee zone, Dominguez inherited a scrap of land, hauled coffee sacks by donkey down from the mountains for other growers and then used whatever he made to establish himself as a middleman. Buying and selling coffee, he poured his profits into huge expanses of land throughout the central cordillera of the Colombian Andes.

Today at 77, Dominguez is rich and famous, a survivor of three kidnapings by bandits and guerrillas, and this state’s largest coffee grower.

But as he walks down a patch bursting with full, green coffee bushes on one of his many mountain farms, Dominguez is grim about the future. “You take account of what you have,” he says, rubbing a thick red coffee berry in his fingers, “and you turn around and bury your farm. The majority of farmers here are broke.”

Dominguez’s woes are common throughout Quindio state, where 83% of the population depends on coffee, and throughout the 15 states of Colombia’s coffee zone. In all, more than 700 villages and 300,000 families are dedicated to the nation’s most famous legal export.

During the last three years, the once invincible optimism of Colombian coffee growers has vanished with a 45% drop in coffee prices--a result of the collapse of the International Coffee Agreement, which aimed to stabilize coffee prices through a system of world export quotas. A plague of insects called the coffee borer, or broca, which arrived about a year ago, has delivered another, near knockout blow, destroying thousands of hectares of prime coffee land.

The twin calamities have deeply wounded the collective psyche.

Towns and municipalities accustomed to having roads, telephones and electricity unequaled in any other rural area of the country now foresee a long period of deterioration. People who are accustomed to the nation’s highest indices of rural income distribution, literacy and access to services now fear for their futures.

“Thank God I haven’t gotten the broca yet,” says Luis Hernando Hoyes, as he sits on his terrace drinking a traditional mixture of sugar cane and coffee and gazing at the pigs he has bought to make ends meet.

“The costs of materials and labor have risen and prices are very low.”

A large grower on 30 hectares (74 acres) here could earn $20,000 in the good years, travel abroad and hope to send his children to top universities. Many growers are now operating at a loss.

A small grower on three hectares (7.4 acres) had the unique privilege, for a farmer in Colombia, of working for himself, of even owning a car. Today many such farmers are hiring themselves out.

Meanwhile, thousands of migrant workers are being driven off the farms and into the cities as farmers cut back on every possible expense, including fertilizing, weeding and fumigating.

“You can see it in the streets,” said Santiago Ospina, a farmer who sold his car, stopped fertilizing and eliminated half his labor force of 40 people.”You can see it in the holdups and robberies of farms that unemployment is causing.”

Most frightening for many farmers is the way their troubles seem to keep compounding. With fertilizer unaffordable and the broca wiping out huge tracts, Colombia’s 1992 harvest of 18 million sacks of coffee is expected to drop to 14.3 million this year.

Historically, Colombia insulated farmers from such disaster.

Colombia’s National Federation of Coffee Growers took obligatory contributions from coffee farmers in good times and accumulated a fund that it could use to help them out in hard times. The money not only maintained the internal price of coffee against the whims of the international market. It also built schools, hospitals and roads. And it provided farmers with low-interest loans.

But today, the fund is drying up. Low coffee prices mean greater demands on the fund even as they eat into the money available for new contributions. Money for infrastructure projects has vanished.

“The future is frightening,” said John Marulanda, a member of the coffee federation’s local committee in the nearby state of Risaralda. “Ten years ago we could supply all the municipal hospitals with X-ray equipment. Today we can’t supply even a single machine. We haven’t been able to invest in schools or in the training of teachers. . . . “

Coffee growers here heap much of the blame on the United States--the largest coffee consumer--and on a few big multinational buyers of coffee.

These, the growers claim, have profited from the drop in the price of Colombian coffee, which fell from $1.40 per pound to 55 cents per pound after the collapse of the coffee cartel in July, 1989. U.S. officials considered the agreement outdated and pulled out, dooming the whole arrangement. The big buyers have sabotaged any effort since to come to a new agreement, growers charge. The buyers argue they are simply following the rules of supply-and-demand: As long as there is plenty of coffee on the market, there is little reason for the price to increase.

The growers note that Colombia’s coffee income last year fell by $300 million--despite aggressive marketing and production efforts that increased Colombia’s share of the world market from 15% in the late 1980s to 21.5% today and that increased the volume of exports by 60%.

Coffee growers hold out hopes that the existing reserves of high-quality coffee will be depleted and that prices will rise as a coffee crisis in not only Colombia but also Brazil, Africa and Central America affects supply.

But most agree that this will not occur any time soon. And if prices do not rise and the broca continues to spread, the growers say, disturbing trends which are already beginning to appear will accelerate.

Small coffee growers who make up the majority of producers will lose their land to larger growers and to drug traffickers. Commerce in coffee-dependent states like Quindio will grind to a snail’s pace.

“In one year, if the crisis continues and hunger arrives, people here will be planting marijuana and cocaine, which at least are in demand,” said Oscar Barrera Echeverry, a coffee farmer and member of the planning department for Quindio state.

Cheaper Coffee

Prices fell sharply after 1989 when the International Coffee Agreement collapsed.

(Price Per Pound*)

1970: $0.44

1977: $2.38

1989: $1.06

1993**: $0.61* Note: Based on future contracts on the Ney York Coffee, Sugar and Cocoa Exchange ** Annual average as of April Source: International Coffee Organization