Tuesday, May 07, 2013

Coffee recovery plan's got just one little catch...

Coffee beans drying on a cement patio in Copan
Just when the smallest of bright lights appeared on the horizon for Honduras's coffee growers, a new problem has emerged - one that the government will understandably have little sympathy for.
Losses have been devastating this year for the country's small coffee producers, whose crops have been hit hard by a coffee fungus that reduced this year's yields by as much as 70 per cent in some regions. Those losses are expected to worsen in the coming two years, as the affected coffee plants have had to be cut back hard or even pulled out entirely and won't be producing at normal levels again until the harvest of 2016-17.
While slow to respond, the Honduras government is now offering 10-year loans at 10 per cent interest for producers who need to replant. Growers will be eligible for up to $1,500 in loans for each manzana (about 1.8 acres) they replant up to a maximum of five, and there's an additional $1,000 per manzana  for improvements elsewhere in their fincas to make plants more resistant to the fungus known as la roya.
In recognition of the three-year lag before plantations will be producing at normal levels again, the producers won't have to start paying money back until after 2016. The amount per manzana  isn't enough - growers say it actually costs $4,500 to replant that much coffee - but it's a heck of a lot better than nothing, which is what has been on offer up until now.
But......ah, isn't there always a "but" in Honduras? But to qualify for those loans, producers have to be able to show receipts of coffee sales from the last three harvests. And it sounds like there are very few who will be able to do that.
There's a practice in Honduras among coffee buyers of offering a higher price if the grower will forego a receipt. It's a way for the buyers to avoid paying tax.
Many growers are happy to oblige for a little more money in their pockets. Tax evasion is practically a national pastime in Honduras, and margins are tight enough on coffee sales - and on income in general for the country's 85,000 or so small producers - that even a little extra cash is a temptation that's hard to resist. Nor do you see much evidence of tax dollars at work down here, which no doubt fuels people's suspicions that  paying taxes accomplishes little beyond helping some well-paid minister get an even bigger salary.
I wouldn't count on the government to be won over by any of that, however. The country needs Honduran coffee producers to get back on their feet, but it's a reach to expect government to waive a key loan requirement because a producer conspired to cheat the country out of tax revenue for his or her own gain and thus has no receipts.
And even if government were moved to let a little thing like that go, how exactly do you prove that a grower has equity for the purposes of a loan if there's no formal evidence of sales? Foreign governments that wanted to help would face the same problem. Nobody gives out loans based on phantom sales.
When you see the tiny amounts of money that people get by on in Honduras, you can totally understand why someone might balk at losing any of it to taxes. Subsistence farmers in our region count themselves lucky if they earn the equivalent of $100 a month.
Coffee producers do a little better. But even so, most have no more than one or two manzanas and rely on their coffee crops to pay for every household expense, from books and tuition fees for their school-age children to medical costs, equipment repair, animal care and improvements to their fincas.
But honestly, people. Somebody has to get a little more serious about this country before it careens full speed ahead into failed-state status. How can it be that one of the most important industries in the country exists in such haphazard fashion?
There's something to be said for business practices in countries that go a little looser on the regulatory framework than we're used to up in Canada. Sometimes commerce just needs to be free. But then a crisis like this comes along and you see why we went to all that bother. 

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