World Economy

Venezuela Swaps Oil to Import Coffee Beans

Venezuela Swaps Oil to Import Coffee BeansVenezuela Swaps Oil to Import Coffee Beans

Venezuela, once a proud exporter of premium coffee, has been reduced to swapping crude oil for growing volumes of Nicaraguan coffee beans to make sure worsening economic turmoil does not prevent people from getting their caffeine fix.

For the first time on record, coffee imports this year will exceed the bean output of Venezuela’s centuries-old coffee industry, according to US government estimates. The South American country’s shift from net coffee exporter to substantial importer has altered flows in regional markets, boosting prices for some varieties of coffee, VoA reported.

It is also another sign of how the collapse in crude oil prices, and resulting pressures on an already deeply troubled Venezuelan economy, has forced the government of the OPEC member to take extraordinary measures to keep supermarket shelves stocked with basic goods.

Falling coffee production and near-record demand has forced it to buy more higher-priced foreign beans, according to Nicaragua’s export figures and interviews with producers and traders in Venezuela and Nicaragua.

The US Department of Agriculture expects Venezuela’s demand to reach 1.3 million 60-kg bags in the crop season, which ends in September, with the nation’s production withering to just 660,000 bags, its third-smallest crop on record since 1960/61. To make up the difference, Venezuela will have to import a record 685,000 bags, the USDA estimates.

  Disease Ravages Crops

A leaf disease has ravaged crops and low domestic retail coffee prices set by the Venezuelan government are prompting farmers to abandon coffee production. They are switching to cattle or leaving agriculture altogether and moving to cities, sources familiar with the Venezuelan coffee industry say.

Prices for key farming materials like fertilizer have skyrocketed due to the collapsing Bolivar currency and the resulting 68-percent inflation rate. As farmers are squeezed, the quality of beans they can produce suffers.

To keep up with rising demand, Caracas imported almost 70,000 bags of Nicaraguan beans in the last three months of 2014, more than any other country and more than 60 percent of the amount it brought in from Nicaragua in all of the 2013/14 crop year, data from Nicaragua’s Center for Export Processing (Cetrex) show.

The purchases are carried out under the Petro-Caribbean Agreement, in which Venezuela ships subsidized crude oil to political allies like Nicaragua in exchange for basic goods,traders and other sources familiar with the arrangement said.

Nicaragua received 27,000 barrels of crude oil and refined products a day from Venezuela in 2013, according to the most recent data from state-run oil company Petroleos de Venezuela.